<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 16, 1998
REGISTRATION NO. 333-62211
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ARCH COMMUNICATIONS GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4812 31-1358569
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL) (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
1800 WEST PARK DRIVE, SUITE 250
WESTBOROUGH, MASSACHUSETTS 01581
(508) 870-6700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
C. EDWARD BAKER, JR.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ARCH COMMUNICATIONS GROUP, INC.
1800 WEST PARK DRIVE, SUITE 250
WESTBOROUGH, MASSACHUSETTS 01581
(508) 870-6700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
EDWARD YOUNG, ESQ.
DAVID A. WESTENBERG, ESQ.
C/O HALE AND DORR LLP
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
(617) 526-6000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the effective registration statement for the same
offering. [_]
----------------
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.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 16, 1998
PROSPECTUS
SHARES OF COMMON STOCK AND CLASS B COMMON STOCK STOCK PURCHASE WARRANTS AND
TRANSFERABLE RIGHTS TO PURCHASE SUCH STOCK AND WARRANTS
OF
(LOGO)
ARCH COMMUNICATIONS GROUP, INC.
Arch Communications Group, Inc. a Delaware corporation ("Arch"), is offering
the securities described herein (the "Securities") to certain unsecured
creditors of MobileMedia Communications, Inc., a Delaware corporation ("MMC"
and, together with its subsidiaries, "MobileMedia") and MMC's parent company,
MobileMedia Corporation ("Parent"), in the manner described herein (the "Rights
Offering"), subject to certain conditions.
The nature, amount and pricing of the Securities will depend on whether or
not the average closing sales price, calculated in the manner described herein,
for Arch's Common Stock, $.01 par value per share ("Common Stock") during a
future 15 trading-day period (the "Subsequent Pricing Period") is not less than
$6.25 per share. If such average price (an "Arch Common Stock Price") is not
less than $6.25 per share, the Securities will consist of a maximum of
43,400,000 shares (subject to adjustment) and a minimum of 31,114,000 shares
(subject to adjustment) of Arch's Common Stock, a maximum of 12,286,000 shares
(subject to adjustment) and a minimum of zero shares of its Class B Common
Stock, $.01 par value per share ("Class B Common Stock"; together with the
Common Stock, "Stock"), for a total of 43,400,000 shares (subject to
adjustment) of such Stock, 2,239,000 Stock Purchase Warrants to acquire up to
2,239,000 additional shares of Stock in specified circumstances ("Warrants"),
and transferable subscription rights to acquire such Stock and Warrants (the
"Rights"). Each Right will entitle its holder to purchase, for $5.00(/1/) in
cash (subject to adjustment) (the "Subscription Price"), one unit (a "Unit")
consisting of one share of Stock and 0.0516 of one Warrant. Each Warrant will
entitle its holder to purchase one share of Stock for $8.19 (the
(continued on next page)
- -----
(1) It is assumed throughout this Prospectus that the Arch Common Stock Price,
calculated as described herein during an Initial Measurement Period (as
defined herein) which ends on September 22, 1998 will be at the lowest
point of the range for the Initial Measurement Period under the formula
described under "The MobileMedia Plan of Reorganization--Calculation of
Shares". See "Risk Factors--Uncertainties Related to the Transaction--Use
of Pro Forma Assumptions".
-----------
SEE "RISK FACTORS", BEGINNING ON PAGE 14, FOR A DISCUSSION OF CERTAIN FACTORS
(INCLUDING SUBSTANTIAL DILUTION) THAT INVESTORS SHOULD CONSIDER IN CONNECTION
WITH THIS OFFERING AND AN INVESTMENT IN THE SECURITIES.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
SUBSCRIPTION DISCOUNTS AND PROCEEDS TO
PRICE COMMISSIONS ARCH (2)
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<S> <C> <C> <C>
Per Unit................................ $5.00(1) None $5.00(1)
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Total................................... $217,000,000 None $217,000,000
</TABLE>
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(1) See note (1) above
(2) Before deducting offering expenses payable by Arch estimated at $ and
assuming that none of the Warrants is exercised. A holder of Rights or its
assignee need not exercise any minimum number of Rights. There are no
underwriting arrangements with any underwriter or broker-dealer or other
person with respect to any of the Securities offered hereby. The Standby
Purchasers (as defined herein) have entered into binding written
commitments to exercise Rights distributable to them to purchase a maximum
of 56,760,000 Units and to subscribe for up to an additional 51,740,000
unsubscribed Units. There are no other agreements or understandings
regarding the distribution of Rights and no agreements or understandings
regarding the exercise of Warrants by the Standby Purchasers and no
assurance can be given that any Warrants will be exercised.
Arch intends to issue certificates evidencing the shares of Common Stock,
Class B Common Stock and Warrants to subscribers as soon as possible after
consummation of the Rights Offering. It is expected that such consummation will
occur simultaneously with consummation of the Merger (as defined herein) and as
soon as practicable after the Expiration Date (as defined herein) and the date
that the FCC Grant (as defined herein) has become final, but in no event later
than June 30, 1999.
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
(continued from previous page)
"Warrant Exercise Price"), payable solely in cash. The Warrants will be
exercisable from date of issuance through September 1, 2001. The terms of the
Warrants and the other Securities are described in detail under "Description
of Securities".
If average closing sales prices for Common Stock, calculated in the manner
described herein, are less than $6.25 during the Subsequent Pricing Period,
the terms of the Rights will be adjusted (an "Adjustment") so that each Right
will entitle its holder to purchase, for a Subscription Price of $3.50(/1/) in
cash (subject to adjustment to between $2.00 and $4.99 per share), a Unit
consisting of one share of Stock and no Warrants. In such circumstances, the
Securities will consist of a maximum of 108,500,000 shares and a minimum of
31,114,000 shares of Common Stock and a maximum of 45,487,000 shares and a
minimum of zero shares of Class B Common Stock, for a total maximum of
108,500,000 and a total minimum of 43,470,000 shares of Stock, no Warrants and
a maximum of 108,500,000 and a minimum of 43,470,000 Rights.
MobileMedia and Parent, operating as debtors-in-possession (the "Debtors"),
have filed an amended plan of reorganization dated August 18, 1998 (the
"Amended Plan" or the "Plan") with the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"), proposing a reorganization of
MobileMedia (the "Reorganization") in connection with the pending insolvency
proceedings of MobileMedia and Parent (the "Insolvency Proceedings") under
Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code"). The
Plan contemplates a merger of MMC with a subsidiary of Arch (the "Merger") at
the time the Amended Plan becomes effective (the "Effective Time").
Immediately prior to the Merger, Parent will contribute all of its assets to
MMC, and MMC's subsidiaries will be consolidated into a single subsidiary
which will become an indirect wholly owned subsidiary of Arch as a result of
the Merger. The Merger is conditioned upon (i) entry by the Bankruptcy Court
of a Confirmation Order (as defined herein) for the Amended Plan
("Confirmation") (ii) receipt of all other necessary governmental approvals,
including approval by the Federal Communications Commission (the "FCC") in the
form of an FCC Grant (as defined herein) and (iii) satisfaction of various
other conditions (collectively, the "Closing Conditions"). As provided in the
Plan, each holder of a general unsecured claim against the Debtors (an
"Unsecured Claim") which is not disputed as of the Confirmation Date, as
defined in the Amended Plan (an "Unsecured Creditor") will be entitled to
receive a distribution consisting of one Right for each $ of Unsecured
Claims held by it, if no Adjustment is made, and between $ and $ of such
Unsecured Claims if an Adjustment is made (the "Distribution Ratio"). The
Subscription Price will be equal to 80% of the Arch Common Stock Price, which
will be the lower of (i) average closing sales prices for Common Stock on five
randomly selected trading days, with the highest and lowest prices
disregarded, during the Subsequent Pricing Period (provided that the Arch
Common Stock Price shall not be less than $2.50 nor more than $6.25 if
calculated on the basis of prices during the Subsequent Pricing Period) or
(ii) average closing sales prices for Common Stock on eight randomly selected
trading days, with the two highest and two lowest prices disregarded, during a
20 trading-day period commencing on August 25, 1998 and ending on September
22, 1998 (the "Initial Measurement Period"), provided that the Arch Common
Stock Price shall not be less than $6.25 nor greater than $10.63 if calculated
on the basis of prices during the Initial Measurement Period. The Subscription
Price will reflect a 20% discount from the Arch Common Stock Price and will
range from $5.00 to $8.50 if calculated on the basis of prices during the
Initial Measurement Period and from $2.00 to $4.99 if calculated on the basis
of prices during the Subsequent Pricing Period. See "The MobileMedia Plan of
Reorganization--Calculation of Shares".
The Rights will be evidenced by transferable certificates which will be
mailed to each holder of undisputed Unsecured Claims on the date described
herein promptly following the effective date of the registration statement of
which this Prospectus is a part (the "Registration Statement"). The Rights
will expire at 5:00 p.m., New York City time, on a date that is selected by
Arch and MobileMedia which is at least 15 days after the later of (i) the
- --------
(1) Based upon the midpoint of the range for the Subsequent Pricing Period
under the formula described under "The MobileMedia Plan of
Reorganization--Calculation of Shares". See "Risk Factors--Uncertainties
Related to the Merger and the Reorganization--Use of Pro Forma
Assumptions".
<PAGE>
last day of the Subsequent Pricing Period or (ii) the date on which all
Closing Conditions (other than the expiration of the Rights Offering, the
finality of the FCC Grant and other conditions which by their terms cannot be
satisfied until the Effective Time) are first satisfied or, if legally
permissible, waived (the "Expiration Date"). See "The Rights Offering--Terms
of the Rights Offering". Any Rights which remain unexercised at the close of
business on the Expiration Date will no longer be exercisable.
Certain Unsecured Creditors (the "Standby Purchasers") have entered into
binding written commitments (i) to subscribe for the full number of Units
subject to Rights which they are entitled to receive based upon their
Unsecured Claims (a total of 22,704,000 Units, assuming a Subscription Price
of $5.00) and (ii) subject to certain conditions, to act as standby purchasers
of any and all additional unsubscribed Units at the Subscription Price (a
maximum of 20,696,000 Units, assuming a Subscription Price of $5.00). See "The
Rights Offering--Standby Purchase Agreements". The Standby Purchasers who
purchase unsubscribed Units pursuant to such commitments may from time to time
re-offer the Securities underlying the Units through ordinary brokerage
transactions on the Nasdaq National Market, in negotiated transactions or
otherwise, at market prices prevailing at the time of sale or at negotiated
prices. In consideration of the Standby Purchasers' commitments, Arch has
agreed to issue to the Standby Purchasers at the Effective Time warrants,
which (unless an Adjustment is made) will be identical in all respects to the
Warrants offered hereby, to acquire a total of 2,239,000 shares of Common
Stock at an exercise price of $8.19 per share (the "Standby Purchasers'
Warrants"). If an Adjustment is made, the exercise price of the Standby
Purchasers' Warrants will be recalculated, using a formula based in part on
the adjusted Subscription Price, to an amount ranging from approximately $3.25
to approximately $8.11 per share, and the number of shares of Stock covered by
such Warrants will be subject to increase to a maximum of shares. Arch has
also granted certain registration rights with respect to the Stock to be held
by the Standby Purchasers at the Effective Time and the Stock underlying the
Standby Purchasers' Warrants.
Votes in favor of approval of the Amended Plan ("Plan Approval") are being
solicited pursuant to an amended Disclosure Statement dated August 25, 1998
(the "Disclosure Statement") which is expected to be mailed to the creditors
of MobileMedia and Parent on or about September , 1998 and which has been
filed as an exhibit to the Registration Statement and is attached hereto as
Annex A. The Bankruptcy Court has approved the Disclosure Statement as
containing adequate information with respect to the Amended Plan in accordance
with Section 1125 of the Bankruptcy Code.
Holders of Rights may subscribe for Units in the Rights Offering in the
manner described under "The Rights Offering--Method of Exercise of Rights".
All subscriptions will be irrevocable. Subscriptions for Units received by
Arch will be accepted subject to Arch's right, to the extent permitted under
the Merger Agreement (as defined herein) to reject any subscription and
subject to satisfaction or, if legally permissible, waiver of the Closing
Conditions and consummation of the Merger. Subscription documents and
subscribed funds will be held in escrow by The Bank of New York (the
"Subscription Agent") pending receipt of subscriptions for all of the Units.
If the Rights Offering is not fully subscribed, the Confirmation Order is not
entered by March 31, 1999 or the Merger does not take place by June 30, 1999,
the Subscription Agent will promptly return all subscribed funds to
subscribers without interest. Any and all interest earned on subscribed funds
will be remitted to Arch.
All purchasers of Units will acquire shares of Common Stock and (unless an
Adjustment is made) Warrants to purchase Common Stock, except that Standby
Purchasers or others will instead acquire shares of Class B Common Stock and
(unless an Adjustment is made) Warrants to purchase Class B Common Stock to
the extent described under "The Rights Offering--Standby Purchase Agreements"
if they would otherwise hold in the aggregate more than 49.0% of the
securities of Arch generally entitled to vote in the election of directors or
securities having more than 49.0% of the total voting power of Arch's
outstanding capital stock. Shares of Common Stock and Class B Common Stock are
identical except that holders of Common Stock are entitled to vote on the
election of directors and cast one vote per share on all other matters while
holders of Class B Common Stock are not entitled to vote on the election of
directors and are entitled to cast 1/100th of one vote per share on all other
matters. Shares of Class B Common Stock are convertible into shares of Common
Stock at a one-for-one ratio in specified circumstances. See "Description of
Securities".
The Common Stock, Class B Common Stock and Warrants included in the Units
will be transferable separately, commencing immediately after issuance. Arch
has agreed to use its best efforts to cause such
<PAGE>
Common Stock, Class B Common Stock and Warrants and the Common Stock and Class
B Common Stock underlying the Warrants to be approved for quotation on the
Nasdaq National Market. Prior to this Rights Offering there has been no market
for the Rights, the Units, the Class B Common Stock or the Warrants; it is
unlikely that a market for the Rights, the Units or the Class B Common Stock
will develop and uncertain whether a market for the Warrants will develop.
Arch's Common Stock is quoted on the Nasdaq National Market under the symbol
"APGR". On August 18, 1998 (the last day prior to public announcement of the
existence of negotiations regarding the proposed Merger) the high and low
reported sale prices for the Common Stock on the Nasdaq National Market were
$4.00 and $3.375 per share, respectively. On September 11, 1998 the last
reported
sales price for the Common Stock was $2.375 per share. The terms of the Rights
Offering, including the formulas and other methods for determining the
Distribution Ratio, the Subscription Price, the Arch Common Stock Price, the
number of Units and the Warrant Exercise Price have been determined by
negotiation among Arch, the Debtors and certain Unsecured Creditors and are
not necessarily related to Arch's assets, net worth, results of operations or
other recognized criteria of value, although Arch and such Unsecured Creditors
considered the trading prices of the Common Stock prior to August 18, 1998, as
well as recent operating results of Arch and MobileMedia, projected combined
operating results of Arch and MobileMedia and pricing practices customary in
transactions of this type, when negotiating the formulas and other methods for
determining the Distribution Ratio, the Subscription Price, the Arch Common
Stock Price, the number of Units and the Warrant Exercise Price.
The Amended Plan provides for distribution of additional shares of Common
Stock to Unsecured Creditors at the Effective Time as further consideration
for discharge of their Unsecured Claims. These additional shares are described
in the Disclosure Statement. Unsecured Creditors should carefully read this
Prospectus for an understanding of Arch's securities and the Disclosure
Statement for an understanding of other matters relating to the Amended Plan
and to Plan Approval. The Amended Plan also provides for the issuance of
warrants and (if an Adjustment is made) stock purchase rights to holders of
Arch's outstanding Common Stock and Series C Preferred Stock (as defined
herein). See "Prospectus Summary--The Merger and the Reorganization".
Rights, Units and the Stock and Warrants which comprise the Units may be
resold without registration under the Securities Act of 1933, as amended (the
"Securities Act"), by Unsecured Creditors and their assignees who are not
affiliates (as defined herein) of Arch or underwriters within the meaning of
the Securities Act. The Standby Purchasers and any other Unsecured Creditors
who acquire 10% or more of the Common Stock may be deemed to be statutory
underwriters with respect to the Securities they purchase. A person deemed to
be a statutory underwriter under the Securities Act may be subject to certain
liabilities in connection with the Registration Statement, including
liabilities under the Securities Act. Arch intends to file a separate
registration statement or statements covering exercises of the Warrants and
certain resales of the Stock and Warrants by affiliates, the Standby
Purchasers or others.
THE RIGHTS OFFERING IS NOT BEING MADE TO, NOR WILL ARCH ACCEPT SUBSCRIPTIONS
FROM, PERSONS IN ANY JURISDICTION IN WHICH THE RIGHTS OFFERING OR THE
ACCEPTANCE OF SUCH SUBSCRIPTION WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES
OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE RIGHTS OFFERING TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
OR THE ACCOMPANYING SUBSCRIPTION CERTIFICATE, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY ARCH OR ANY OTHER PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING SUBSCRIPTION CERTIFICATE, NOR ANY SUBSCRIPTION
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ARCH OR MOBILEMEDIA SINCE THE DATE
HEREOF OR THAT ANY INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO ITS DATE.
UNTIL , 1999 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
OFFERING TRANSACTIONS IN THE RIGHTS OFFERING MAY BE REQUIRED TO DELIVER A
PROSPECTUS IN CONNECTION THEREWITH. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS.
----------------
<PAGE>
AVAILABLE INFORMATION
Arch is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Parent and MMC are also subject to the
informational requirements of the Exchange Act but have filed only limited
reports since the commencement of their bankruptcy proceedings in January
1997. See "Business--MobileMedia--Events Leading up to MobileMedia's
Bankruptcy Filings". Financial statements included in Parent's and MMC's
periodic reports for all periods since February 1997 have not been prepared in
accordance with generally accepted accounting principles ("GAAP") due to
Parent's and MMC's inability at the time of such filings to determine the
amount of an impairment loss related to long-lived assets pursuant to
Financial Accounting Standard No. 121, are unaudited and have been revised
periodically based on subsequent determinations of changes in facts and
circumstances impacting previously filed unaudited financial statements. The
audited financial statements of MobileMedia included herein reflect
adjustments from the unaudited statements, including but not limited to an
impairment adjustment of $792.5 million recorded as of December 31, 1996. The
reports, proxy statements and other information filed with the Commission by
Arch and, to the extent available, by Parent and MMC, can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following
Regional Offices of the Commission: Seven World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material also can be obtained at
prescribed rates from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, Arch, Parent and MMC
are required to file electronic versions of these documents with the
Commission through the Commission's Electronic Data Gathering, Analysis and
Retrieval (EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Stock is traded on the Nasdaq National Market under the symbol
"APGR". Reports and other information filed by Arch can also be inspected at
the offices of the National Association of Securities Dealers, Inc. (the
"NASD"), Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
Parent's Common Stock is not currently traded on any exchange.
Arch has filed with the Commission the Registration Statement on Form S-4
under the Securities Act with respect to the Securities offered hereby. (The
term "Registration Statement" includes all amendments, exhibits, annexes and
schedules thereto. As permitted by the rules and regulations of the
Commission, this Prospectus omits certain information, exhibits and
undertakings contained in the Registration Statement. For further information
with respect to Arch and the Securities offered hereby, reference is made to
the Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof. Statements contained
in this Prospectus as to the contents of any contract or other document are
not necessarily complete, and in each instance reference is made to the copy
of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
COPIES OF ARCH'S FILINGS WITH THE COMMISSION MAY BE OBTAINED UPON WRITTEN OR
ORAL REQUEST WITHOUT CHARGE FROM ARCH, 1800 WEST PARK DRIVE, SUITE 250,
WESTBOROUGH, MASSACHUSETTS 01581, ATTENTION: INVESTOR RELATIONS, TELEPHONE
(508) 870-6700. COPIES OF PARENT'S AND MMC'S FILINGS WITH THE COMMISSION MAY
BE OBTAINED UPON WRITTEN OR ORAL REQUEST WITHOUT CHARGE FROM PARENT, FORT LEE
EXECUTIVE PARK, ONE EXECUTIVE DRIVE, SUITE 500, FORT LEE, NEW JERSEY 07024,
ATTENTION: SECRETARY, TELEPHONE (201) 224-9200.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PROSPECTUS SUMMARY........................................................ 1
The Companies........................................................... 1
Arch.................................................................. 1
MobileMedia........................................................... 2
The Combined Company.................................................... 3
The Merger and the Reorganization....................................... 3
Stockholdings Before and After the Merger............................. 5
Board of Directors of Arch upon the Merger............................ 5
Effective Time of the Merger.......................................... 5
Regulatory Approvals.................................................. 5
Certain Federal Income Tax Consequences of the Merger................. 6
Accounting Treatment.................................................. 6
Termination; Amendment and Waiver..................................... 6
Interests of Certain Persons in the Merger............................ 7
Risk Factors............................................................ 7
The Rights Offering..................................................... 8
FORWARD-LOOKING STATEMENTS................................................ 12
RISK FACTORS.............................................................. 14
Uncertainties Related to the Merger and the Reorganization.............. 14
Challenges of Business Integration.................................... 14
Certain Risks Associated with the Merger.............................. 14
Transaction Costs..................................................... 14
Substantial Amortization Charges...................................... 15
Use of Pro Forma Assumptions.......................................... 15
Risks Common to Arch and MobileMedia.................................... 15
Growth and Acquisition Strategy....................................... 15
Future Capital Needs; Uncertainty of Additional Funding............... 15
Competition and Technological Change.................................. 16
Government Regulation, Foreign Ownership and Possible Redemption...... 16
High Degree of Leverage After the Merger.............................. 18
Subscriber Turnover................................................... 18
Dependence on Third Parties........................................... 19
Possible Acquisition Transactions..................................... 19
Dependence on Key Personnel........................................... 19
Impact of the Year 2000 Issue......................................... 19
No Dividends.......................................................... 20
History of Losses..................................................... 20
Volatility of Trading Price........................................... 21
Risks Relating to the Unaudited Combined Company Projections.......... 21
Certain Federal Income Tax Considerations; Possible Loss of Corporate
Tax Benefits......................................................... 21
Risks Related to Arch................................................... 22
Arch's Indebtedness and High Degree of Leverage....................... 22
Lender Approval and Merger Cash Requirements.......................... 22
API Credit Facility, Bridge Facility and Indenture Restrictions....... 23
Possible Fluctuations in Revenues and Operating Results............... 23
Divisional Reorganization of Arch..................................... 23
Anti-Takeover Provisions.............................................. 24
Risks Related to MobileMedia............................................ 24
Disruption of Operations Prior to and Following Bankruptcy Filing..... 24
</TABLE>
i
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<TABLE>
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PAGE
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<S> <C>
Assumptions Regarding Value of MobileMedia Assets....................... 24
Risks Related to the Rights Offering..................................... 24
Market Risks in Exercising Rights....................................... 24
Absence of Trading Market for the Rights, Units, Class B Common Stock
and Warrants........................................................... 25
Dilution................................................................ 25
Class B Common Stock.................................................... 25
Possible Adverse Effect on Market Price of Common Stock of Shares
Eligible for Future Sale............................................... 25
Possible Inability to Exercise Warrants................................. 25
THE RIGHTS OFFERING....................................................... 26
Background.............................................................. 26
Terms of the Rights Offering............................................ 26
Standby Purchase Agreements............................................. 27
Subscription Agent...................................................... 30
Information Agent....................................................... 30
Method of Exercise of Rights............................................ 31
Payment for Units....................................................... 31
No Revocation........................................................... 33
Method of Transferring Rights........................................... 33
Procedures for Book Entry Transfer Facility Participants................ 33
Foreign and Certain Other Holders....................................... 33
Certain Federal Income Tax Consequences................................. 33
USE OF PROCEEDS........................................................... 34
DILUTION.................................................................. 34
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA--ARCH....... 35
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA--
MOBILEMEDIA.............................................................. 37
UNAUDITED SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA.................. 39
COMPARATIVE PER SHARE DATA................................................ 40
MARKET PRICE INFORMATION AND DIVIDEND POLICY.............................. 41
THE MERGER AND THE REORGANIZATION......................................... 42
Background of the Merger................................................ 42
Arch Reasons for the Merger............................................. 45
Interests of Certain Persons in the Merger.............................. 45
Accounting Treatment.................................................... 45
Certain Federal Income Tax Consequences................................. 45
Regulatory Approvals.................................................... 46
FCC Approval.......................................................... 46
State Approvals....................................................... 47
Antitrust............................................................. 48
Federal Securities Law Consequences..................................... 48
Nasdaq National Market Listing.......................................... 48
THE MERGER AGREEMENT...................................................... 49
The Merger.............................................................. 49
Effect of the Merger.................................................... 49
Representations and Warranties.......................................... 49
Certain Covenants and Agreements........................................ 49
Best Efforts.......................................................... 50
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Approvals, Consents.................................................. 50
Arch Not to Control.................................................. 50
Bankruptcy Covenants................................................. 50
Conduct of MobileMedia's Business Pending the Merger................. 51
Conduct of Arch's Business Pending the Merger........................ 51
Notice of Breaches................................................... 52
Exclusivity Provisions............................................... 52
Break-up Fee Provisions.............................................. 54
Nasdaq National Market Quotation..................................... 55
Delivery of Financial Statements..................................... 55
Full Access.......................................................... 55
Stockholder Approval; Special Meeting................................ 56
Preparation of Prospectus and Disclosure Statement................... 56
Application of MobileMedia Tower Sale Proceeds....................... 56
Fee Filing........................................................... 56
Indemnification; Directors and Officers Insurance.................... 57
State Takeover Laws.................................................. 57
Employees............................................................ 57
Effects of Arch's Rights Agreement................................... 58
Rights Offering; Registration Statement.............................. 58
Reimbursement of Arch's Expenses..................................... 58
Conditions............................................................. 58
Termination............................................................ 61
Amendment and Waiver................................................... 62
Related Agreements................................................... 62
Registration Rights Agreements....................................... 62
Warrant Agreements..................................................... 63
Related Matters After the Merger....................................... 63
THE MOBILEMEDIA PLAN OF REORGANIZATION................................... 64
The Amended Plan....................................................... 64
Executory Contracts.................................................... 66
Implementation of Plan................................................. 66
Conditions to Effectiveness of the Plan................................ 66
Discharge.............................................................. 67
Releases and Indemnification........................................... 67
Jurisdiction........................................................... 67
Calculation of Shares.................................................. 67
THE COMBINED COMPANY..................................................... 69
Overview............................................................... 69
Strategy............................................................... 69
Unaudited Financial Projections and Operational Cost Synergies......... 70
UNAUDITED COMBINED COMPANY PROJECTED BALANCE SHEETS...................... 72
UNAUDITED COMBINED COMPANY PROJECTED STATEMENTS OF OPERATION............. 73
UNAUDITED COMBINED COMPANY PROJECTED STATEMENT OF CASH FLOW.............. 74
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ......... 76
ARCH COMMUNICATIONS GROUP, INC. UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET.............................................. 77
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ARCH COMMUNICATIONS GROUP, INC. UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS.................................... 78
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.............................................................. 80
INDUSTRY OVERVIEW........................................................ 82
General................................................................ 82
Paging and Messaging Services.......................................... 83
Competition............................................................ 83
Regulation............................................................. 84
Federal Regulation................................................... 84
State Regulation..................................................... 87
Future Regulation.................................................... 87
BUSINESS................................................................. 88
Arch................................................................... 88
Business Strategy.................................................... 88
Paging and Messaging Services, Products and Operations............... 89
Investments in Narrowband PCS Licenses............................... 91
Subscribers and Marketing............................................ 92
Competition.......................................................... 93
Regulation........................................................... 93
Sources of Equipment................................................. 93
Employees............................................................ 93
Trademarks........................................................... 93
Properties........................................................... 93
Litigation........................................................... 94
Arch Management........................................................ 94
Directors and Executive Officers..................................... 94
Board Committees..................................................... 96
Indemnification and Director Liability............................... 96
Arch Executive Compensation............................................ 97
Summary Compensation Table........................................... 97
Executive Retention Agreements....................................... 98
Stock Option Grants.................................................. 98
Option Exercises and Year-End Option Table........................... 99
Compensation Committee Interlocks and Insider Participation.......... 99
Principal Stockholders................................................. 100
Stockholdings Before and After the Merger.............................. 102
Arch Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 103
Overview............................................................. 103
Shift in Operating Focus............................................. 103
Divisional Reorganization............................................ 104
ACE/USAM Merger...................................................... 104
Results of Operations................................................ 105
Liquidity and Capital Resources...................................... 109
Recent and Pending Accounting Pronouncements......................... 111
MobileMedia............................................................ 112
Business Strategy.................................................... 112
Paging and Messaging Services Products and Operations................ 112
Networks and Licenses................................................ 113
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Sales and Marketing................................................... 114
Competition........................................................... 115
Regulation............................................................ 115
Sources of Equipment.................................................. 115
Employees............................................................. 116
Trademarks............................................................ 116
Properties............................................................ 116
Events Leading Up To MobileMedia's Bankruptcy Filings................. 117
Litigation............................................................ 118
MobileMedia Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................. 121
Presentation of Financial Condition and Results of Operations......... 121
Overview.............................................................. 121
Pending FCC Action Against MobileMedia................................ 122
Results of Operations................................................. 124
Liquidity and Capital Resources....................................... 130
New Authoritative Accounting Pronouncements........................... 134
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS................................. 134
The Receipt of Rights by Unsecured Creditors for Unsecured Claims....... 135
Receipt of Rights by Holders of Unsecured Claims not Constituting
Securities........................................................... 135
Receipt of Rights by Holders of Unsecured Claims Constituting
Securities........................................................... 135
Sale of the Rights...................................................... 136
Expiration of Unexercised Rights........................................ 136
Exercise of the Rights and Acquisition of the Units..................... 136
Tax Basis and Holding Period of the Warrants and Stock.................. 136
Sale of the Warrants or Stock........................................... 137
Exercise of the Warrants................................................ 137
Lapse of the Warrants................................................... 137
Constructive Distributions with Respect to the Warrants................. 137
Distributions on the Stock Acquired Through the Exercise of Rights or
Warrants............................................................... 137
Backup Withholding...................................................... 138
DESCRIPTION OF SECURITIES................................................. 139
Rights.................................................................. 139
Units................................................................... 139
Warrants................................................................ 139
Common Stock............................................................ 140
Class B Common Stock.................................................... 140
Preferred Stock......................................................... 140
Series C Preferred Stock................................................ 141
Foreign Ownership Restrictions.......................................... 141
Anti-Takeover Provisions................................................ 141
Rights Plan........................................................... 142
Classified Board of Directors......................................... 142
Stockholder Actions and Meetings...................................... 143
Amendment of Certain Provisions of the Arch Certificate and Arch By-
laws................................................................. 143
Consideration of Non-Economic Factors in Acquisitions................. 143
Restrictions on Certain Purchasers of Stock by Arch................... 143
"Blank Check" Preferred Stock......................................... 144
Delaware Anti-Takeover Statute........................................ 144
Director Liability and Indemnification................................ 144
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Transfer Agent and Registrar........................................... 145
Registration Rights.................................................... 145
DESCRIPTION OF CERTAIN ARCH INDEBTEDNESS................................. 146
API Credit Facility.................................................... 146
Bridge Facility........................................................ 146
ACI 9 1/2% Notes....................................................... 147
ACI 14% Notes.......................................................... 149
ACI 12 3/4% Notes...................................................... 150
Arch Discount Notes.................................................... 151
Arch Convertible Debentures............................................ 153
LEGAL MATTERS............................................................ 155
EXPERTS.................................................................. 155
INDEX TO FINANCIAL STATEMENTS............................................ F-1
ANNEX A: DISCLOSURE STATEMENT TO DEBTORS' SECOND AMENDED JOINT PLAN OF
REORGANIZATION.......................................................... A-1
ANNEX B: AGREEMENT AND PLAN OF MERGER (COMPOSITE COPY)................... B-1
ANNEX C: DEBTORS' SECOND AMENDED JOINT PLAN OF REORGANIZATION ........... C-1
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PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in this
Prospectus. Reference is made to, and this summary is qualified in its entirety
by, the more detailed information contained in this Prospectus and the Annexes
hereto. Unless otherwise defined herein, capitalized terms used in this summary
have the respective meanings ascribed to them elsewhere in this Prospectus.
None of the financial or share information reflects the effect of a reverse
stock split that Arch has recently proposed for stockholder approval.
Prospective investors in the Rights Offering are urged to read this Prospectus
and the Annexes hereto in their entirety.
THE COMPANIES
ARCH
Arch is a leading provider of wireless messaging services, primarily paging
services, and is the second largest paging company in the United States based
on earnings before interest, taxes, depreciation and amortization ("EBITDA").
Arch had 4.1 million pagers in service at June 30, 1998. Arch operates in 41
states and more than 180 of the 200 largest markets in the United States. Arch
offers local, regional and nationwide paging services employing digital
networks covering approximately 85% of the United States population. Arch
offers four types of paging services through its networks: digital display,
alphanumeric display, tone-only and tone-plus-voice. Arch also offers enhanced
and complementary services, including voice mail, personalized greeting,
message storage and retrieval, pager loss protection and pager maintenance.
Arch has achieved significant growth in pagers in service and EBITDA through
a combination of internal growth and acquisitions. From January 1, 1995 through
June 30, 1998, Arch's total number of subscribers grew at a compound rate on an
annualized basis of 79.0%. For the same period on an annualized basis, Arch's
compound rate of internal subscriber growth (excluding pagers added through
acquisitions) was 56.1%. From commencement of operations in September 1986,
Arch has completed 33 acquisitions representing an aggregate of 1.7 million
pagers in service at the time of purchase. For the twelve months ended June 30,
1998, Arch's total revenues were $408.2 million, representing a compound growth
rate on an annualized basis of 61.7% since January 1, 1995. For the same
period, Arch's EBITDA was $136.2 million, representing a compound growth rate
on an annualized basis of 78.4% since January 1, 1995.
Arch's strategic objective is to strengthen its position as one of the
leading nationwide paging companies in the United States. Arch believes that
larger, multi-market paging companies enjoy a number of competitive advantages,
including: (i) operating efficiencies resulting from more intensive utilization
of existing paging systems; (ii) economies of scale in purchasing and
administration; (iii) broader geographic coverage of paging systems; (iv)
greater access to capital markets and lower costs of capital; (v) the ability
to obtain additional radio spectrum; (vi) the ability to offer high-quality
services at competitive prices; and (vii) enhanced ability to attract and
retain management personnel. Arch believes that the current size and scope of
its operations afford it many of these advantages and that it has the scope and
presence to effectively compete on a national level. In addition, Arch believes
that the paging industry will undergo further consolidation, and Arch expects
to participate in such consolidation.
Arch's operating objectives are to increase its EBITDA, deploy its capital
efficiently, reduce its financial leverage and expand its customer
relationships. To achieve its operating objectives, Arch: (i) has selected a
low-cost operating strategy as its principal competitive tactic; (ii) is
seeking to reduce its financial leverage by reducing capital requirements and
increasing EBITDA; (iii) has focused its capital and marketing resources on
one-way paging and enhanced services while taking steps to position itself to
participate in new and emerging services and applications in narrowband
personal communications services ("N-PCS"); and (iv) is pursuing new revenue
opportunities associated with its 4.1 million pagers in service.
A predecessor to Arch, also named Arch Communications Group, Inc. ("Old
Arch"), was incorporated in January 1986 in Delaware and conducted its
operations through wholly owned direct and indirect subsidiaries.
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On September 7, 1995, Old Arch completed its acquisition of USA Mobile
Communications Holdings, Inc. ("USA Mobile") through the merger (the "USA
Mobile Merger") of Old Arch with and into USA Mobile, which simultaneously
changed its name to Arch Communications Group, Inc. and continued in existence
as a Delaware corporation. In accordance with GAAP, Old Arch was treated as the
acquirer in such merger for accounting and financial reporting purposes, and
Arch reports the historical financial statements of Old Arch as its historical
financial statements. See Note 2 to Arch's Consolidated Financial Statements.
As used herein, unless the context otherwise requires the term "Arch" refers to
Arch Communications Group, Inc. from and after the USA Mobile Merger and Old
Arch prior to the USA Mobile Merger, in each case together with its wholly
owned direct and indirect subsidiaries. Arch's principal office is located at
1800 West Park Drive, Suite 250, Westborough, Massachusetts 01581 and its
telephone number is (508) 870-6700.
MOBILEMEDIA
Parent, through MobileMedia, operates one of the largest paging companies in
the United States, with approximately 3.2 million units in service as of June
30, 1998. Through its sales offices, nationwide retail distribution network,
company-operated retail stores and resellers, MobileMedia offers local,
regional and national coverage to subscribers in all 50 states and the District
of Columbia, including local coverage to each of the 100 most populated
metropolitan markets in the United States. MobileMedia markets its services
primarily under the MobileComm brand name. Parent's business is conducted
primarily through MobileMedia, and MMC and various subsidiaries of MMC hold the
FCC licenses and, where applicable, state public utility commission
authorizations that grant MobileMedia the authority to operate its paging
systems.
MobileMedia distributes its paging services using three primary distribution
channels: direct, reseller and retail. MobileMedia's paging and wireless
messaging services consist principally of numeric and alphanumeric paging
services, offering local, regional and national coverage. Parent and MMC were
each incorporated in Delaware in 1993. Unless the context otherwise requires,
references to MobileMedia refer to MMC and its consolidated subsidiaries. The
executive offices of Parent and MMC are located at Fort Lee Executive Park, One
Executive Drive, Suite 500, Fort Lee, New Jersey 07024 and their telephone
number is (201) 224-9200.
In January 1996, MMC completed the acquisition of Mobile Communications
Corporation of America ("MobileComm"). During 1996, MobileMedia experienced
difficulties executing its post-acquisition business strategy due largely to
problems encountered in integrating the operations of MobileComm and Dial Page
Inc. ("Dial Page"), which MMC had acquired in August 1995. Accordingly, during
1996 MobileMedia's financial position deteriorated. At September 30, 1996, MMC
was in violation of certain financial covenants under its $750.0 million senior
secured credit agreement (as amended, the "MobileMedia 1995 Credit Agreement"),
which resulted in the occurrence of "Events of Default" under that agreement
and precluded MobileMedia from borrowing additional funds thereunder. In the
fall of 1996, MobileMedia commenced negotiations with The Chase Manhattan Bank,
the agent (the "Pre-Petition Agent") for the lenders (the "Pre-Petition
Lenders") under the MobileMedia 1995 Credit Agreement, regarding the terms of a
possible financial restructuring. In addition, in the fall of 1996, MobileMedia
failed to make payments due to certain of its most important vendors, including
Motorola, Inc. ("Motorola"), MobileMedia's largest supplier of pagers and pager
repair parts. As a result, MobileMedia was unable to place orders with or
obtain shipments from Motorola and certain of MobileMedia's other important
vendors. In addition, MobileMedia disclosed in September and October of 1996
that misrepresentations had been made to the FCC by certain members of its
management (none of whom are now employed by MobileMedia) and that other
violations of law had occurred during the licensing process for as many as 400
to 500 authorizations, which authorizations relate to approximately 6% to 7% of
its approximately 8,000 local transmission one-way paging stations. MobileMedia
is still in the process of resolving these issues with the FCC. See "Business--
MobileMedia--Litigation" and "Business--MobileMedia Management's Discussion and
Analysis of Financial Condition and Results of Operations--Pending FCC Action
Against MobileMedia". On January 30, 1997 (the "Petition Date"), the Debtors
filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy
Code with the Bankruptcy Court. During the pendency of the
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Insolvency Proceedings, MobileMedia's management has continued to manage the
operations and affairs of the Debtors as debtors-in-possession under the
jurisdiction of the Bankruptcy Court. The Debtors filed an initial plan of
reorganization on January 27, 1998, which has now been superseded by the
Amended Plan.
THE COMBINED COMPANY
Arch, after giving effect to the acquisition of MobileMedia (together, the
"Combined Company"), would be the second largest paging operator in the United
States as measured by pagers in service, net revenues (total revenues less cost
of products sold) and EBITDA. On a pro forma basis (but excluding the impact of
expected operational cost synergies), at and for the six months ended June 30,
1998, the Combined Company would have approximately 7.2 million pagers in
service, net revenues of $403.5 million, EBITDA (before reorganization expenses
and restructuring charges) of $125.5 million and total debt of $1.3 billion.
Leverage for the Combined Company on a pro forma basis (but excluding the
impact of expected operational cost synergies), as measured by the ratio of
total debt to annualized EBITDA for the six months ended June 30, 1998, would
have been 5.3:1. See "The Combined Company" and "Unaudited Pro Forma Condensed
Consolidated Financial Statements".
Arch believes that the Combined Company will be well positioned to compete
effectively in the highly competitive paging industry for the following
reasons. The combination of MobileMedia's market presence in major metropolitan
markets with Arch's historical emphasis on middle and small markets will
significantly broaden the geographic scope of Arch's marketing presence and
should position the Combined Company to compete more effectively for large
corporate customers with diverse geographic operations. With a significantly
larger subscriber base, the Combined Company should be better able to serve
strategic distribution arrangements, as well as amortize marketing investments
over a larger revenue base. In addition, MobileMedia's third party retail
distribution agreements, which serve the more rapidly growing consumer market,
should complement Arch's over 200 company-owned retail outlets. Similarly,
MobileMedia's two nationwide paging networks (and the potential for higher
revenue nationwide services) should enhance Arch's local coverage and provide
the opportunity to take advantage of Arch's distribution platforms.
MobileMedia's plan to deploy its nationwide N-PCS spectrum over its existing
network infrastructure should permit Arch to market enhanced N-PCS services
(primarily multi-market alphanumeric and text messaging services) sooner than
it would otherwise be able to, and these services are expected to provide
higher revenue and more growth potential than basic paging services. Finally,
MobileMedia's investments to date in two national call centers should
supplement Arch's own call center and complement Arch's strategy of evolving to
"scalable" regional customer service centers. See "The Combined Company".
THE MERGER AND THE REORGANIZATION
The Debtors filed the Amended Plan, which constitutes the Second Amended
Joint Plan of Reorganization, with the Bankruptcy Court on September 4, 1998.
The Amended Plan provides for consummation of the Merger in accordance with the
terms set forth in the Merger Agreement dated as of August 18, 1998 among Arch,
MMC, Parent and Farm Team Corp. (the "Merger Subsidiary"), a wholly owned
subsidiary of Arch, as amended as of September 3, 1998 (as amended, the "Merger
Agreement"). Upon consummation of the Merger pursuant to the Merger Agreement
and the Amended Plan, MMC will be merged with and into the Merger Subsidiary,
which will be the surviving corporation (sometimes referred to herein as the
"Surviving Corporation"). Immediately prior to the Merger, Parent will
contribute all of its assets to MMC, and in connection with the Merger MMC's
subsidiaries will be consolidated into a single subsidiary which will become an
indirect wholly owned subsidiary of Arch as a result of the Merger. See "The
Merger Agreement" and "The MobileMedia Plan of Reorganization". The Amended
Plan also requires Arch to (i) contribute approximately $479.0 million for
distribution to certain secured creditors of Parent and MobileMedia in
consideration of the discharge of their
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claims against MobileMedia, (ii) issue 14,344,969(/1/) shares of Common Stock,
subject to adjustment, to the Unsecured Creditors in consideration of the
discharge of their claims against MobileMedia, which shares will represent
approximately 17.2%(/1/) of the total number of shares of Arch's Common Stock
(on an as-converted basis) outstanding immediately following the Merger (the
"Directly Distributed Creditor Stock Pool"), (iii) distribute the Rights to the
Unsecured Creditors and issue, pursuant to exercises of Rights or purchases
pursuant to the Standby Purchase Agreements (as defined herein), the Stock and
(unless an Adjustment is made) Warrants which will represent (unless an
Adjustment is made) approximately 52.1%(/2/) and 2.5%, respectively, of the
total number of shares of Stock outstanding immediately following the Merger on
an as-converted basis, in the case of the Stock, and in the case of the
Warrants on an as-converted basis and after giving further effect to the
issuance of Stock upon exercise of all warrants issued in connection with the
Merger and the Reorganization (a "Fully Diluted Basis"), (iv) distribute the
Standby Purchasers' Warrants, which will represent approximately 2.5% of the
total number of shares of Common Stock outstanding immediately following the
Merger on a Fully Diluted Basis, and (v) distribute to the holders of shares of
Common Stock and Series C Convertible Preferred Stock ("Series C Preferred
Stock") outstanding immediately prior to the Merger (A) (unless an Adjustment
is made) warrants having an exercise price of $8.19, to acquire additional
shares of Common Stock which will represent approximately 7.0% of the total
number of shares of Common Stock (on a Fully Diluted Basis) outstanding
immediately following the Merger or (B) if an Adjustment is made, such number
of stock purchase rights, having terms identical to the Rights ("Arch
Stockholders' Rights"), as is sufficient to enable such stockholders to hold
(together with their previous stockholdings, and assuming that all such rights
are exercised) 32.2% of the total number of shares of Common Stock (on a Fully
Diluted Basis) outstanding immediately following the Merger. To the extent that
any of such Arch Stockholders' Rights are not exercised, their holders will
receive warrants ("Arch Stockholders' Participation Warrants") to acquire one
share of Common Stock per unexercised Arch Stockholders' Right at a fixed
exercise price per share equal to the Subscription Price plus an amount
reflecting compounding, from the Effective Time until September 1, 2001, at a
20% per annum internal rate of return over the Subscription Price. Assuming a
December 31, 1998 Effective Date, such exercise price would range between $3.25
and $8.11 per share, depending on the amount of the Subscription Price.
The Amended Plan also provides that holders of pre-petition claims which are
entitled to priority in accordance with applicable provisions of the Bankruptcy
Code will be paid in full in cash on the date on which the Amended Plan becomes
effective (the "Effective Date") or be unimpaired under the Bankruptcy Code and
that all post-petition claims incurred by the Debtors in the ordinary course of
business or as authorized by the Bankruptcy Court will either be paid in full
in cash on the Effective Date or in accordance with the terms applicable to
such post-petition claims. The Amended Plan requires Arch to make sufficient
funds available to pay all such priority and administrative claims; provided,
however, that if the total required to be paid on account of priority tax
claims, professional fees (other than those paid monthly pursuant to orders
entered by the Bankruptcy Court in the Insolvency Proceedings), cure payments
due with respect to assumed executory contracts, bonus payments and amounts
required to pay the Dial Page 12 1/4% Senior Notes due 2000 (the "Dial Page
Notes"), payable by MMC, together with the costs and expenses of the Standby
Purchasers in accordance with the Standby Purchase Agreements, exceeds $34.0
million, the number of shares of Stock issuable to the Unsecured Creditors in
connection with the Merger will be reduced by a number of shares equal to the
amount by which such claims
- --------
(1) Based upon the lowest point of the range for the Initial Measurement Period
under the formula described under "The Merger and the Reorganization--
Calculation of Shares"; 14,344,969 and 14.1%, respectively, based upon the
midpoint of the range for the Subsequent Pricing Period as described above.
See "Risk Factors--Uncertainties Related to the Merger and the
Reorganization--Use of Pro Forma Assumptions."
(2) Based upon the lowest point of the range for the Initial Measurement Period
under the formula described under "The Merger and the Reorganization--
Calculation of Shares; approximately 60.8% if an Adjustment is made, based
upon the midpoint of the range for the Subsequent Pricing Period, as
described above." See "Risk Factors--Uncertainties Related to the Merger
and the Reorganization--Use of Pro Forma Assumptions."
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exceed $34.0 million divided by $25.315. Arch has also agreed to pay in cash on
the Effective Date loans outstanding under MMC's Revolving Credit and Guarantee
Agreement dated as of January 30, 1997 among MMC, The Chase Manhattan Bank and
other lenders who are a party thereto (as amended, the "DIP Credit Agreement").
The Merger Agreement provides that at the Effective Time the amount of loans
outstanding under the DIP Credit Agreement shall not exceed specified amounts.
See "The Merger Agreement". The Amended Plan will become effective on a
business day that is between seven and 10 business days after the day that all
conditions to closing under the Merger Agreement have been satisfied or waived,
other than the condition that the Amended Plan be confirmed (which condition
cannot be waived). See "The MobileMedia Plan of Reorganization".
STOCKHOLDINGS BEFORE AND AFTER THE MERGER
The number of shares of Stock and Warrants to be issued in connection with
the Merger will be determined by reference to the Arch Common Stock Price.
Based upon the capitalization of Arch at June 30, 1998, if the Merger is
approved and becomes effective, Arch stockholders who collectively own, on an
as-converted basis, 100% of the outstanding Stock immediately prior to the
Effective Time will own, on an as-converted basis, approximately 30.7% of the
outstanding Stock at the Effective Time (approximately 34.0% on a Fully Diluted
Basis), if no Adjustment is made, or approximately 17.3% to 30.7%
(approximately 32.2% on a Fully Diluted Basis) if an Adjustment is made, and
the Unsecured Creditors (including the Standby Purchasers), their successors
and assigns will collectively own, on an as-converted basis, approximately
69.3% of the outstanding Stock at the Effective Time (approximately 66.0% on a
Fully Diluted Basis), if no Adjustment is made, or approximately 69.3% to 82.7%
(approximately 67.8% on a Fully Diluted Basis), if an Adjustment is made. See
Note 11 to the Unaudited Pro Forma Condensed Consolidated Financial Statements
and "The MobileMedia Plan of Reorganization--Calculation of Shares".
BOARD OF DIRECTORS OF ARCH UPON THE MERGER
Edwin M. Banks, a designee of W.R. Huff Asset Management Co., L.L.C.
("W.R. Huff"), and H. Sean Mathis, a designee of Whippoorwill Associates, Inc.
("Whippoorwill"), will become directors of Arch at the Effective Time, and Arch
will be required to nominate for election as directors one designee of W.R.
Huff and one designee of Whippoorwill so long as W.R. Huff or Whippoorwill, as
the case may be, holds securities of Arch representing at least 10% of the
combined voting power of all outstanding securities of Arch (5% in the case of
the initial renomination of such designees). At the Effective Time, therefore,
the directors of Arch are expected to be: Edwin M. Banks, James S. Hughes and
Allan L. Rayfield, whose terms will expire at the annual meeting of
stockholders to be held after the end of the fiscal year ending December 31,
1998, H. Sean Mathis, John B. Saynor and John A. Shane, whose terms will expire
at the annual meeting of stockholders to be held after the end of the fiscal
year ending December 31, 1999; and C. Edward Baker, Jr., R. Schorr Berman and
John Kornreich, whose terms will expire at the annual meeting of stockholders
to be held after the end of the fiscal year ending December 31, 2000. In
addition, a designee of W.R. Huff will be granted observation rights at all
meetings of the Arch Board following the Merger. See "The Merger Agreement--
Related Agreements--Registration Rights Agreements".
EFFECTIVE TIME OF THE MERGER
The Effective Time will occur, and the Merger will become effective, upon the
filing of a duly executed Certificate of Merger (the "Certificate of Merger")
with the Secretary of State of the State of Delaware, or at such later time as
may be specified in the Certificate of Merger. It is anticipated that the
Merger will become effective as promptly as practicable after FCC approval has
been obtained, the Rights Offering has been fully subscribed and all regulatory
approvals and other conditions to the Merger set forth in the Merger Agreement
and the Amended Plan have been satisfied or, if legally permissible, waived.
Assuming all such conditions are met, the Merger is expected to be consummated
in the first quarter of 1999. See "The Merger Agreement--Conditions"and "The
MobileMedia Plan of Reorganization--Conditions to Effectiveness of the Plan".
5
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REGULATORY APPROVALS
Paging operations and the construction, modification, ownership and
acquisition of paging systems are subject to extensive regulation by the FCC
under the Communications Act of 1934, as amended (the "Communications Act"),
and, to a much more limited extent, by public utility or public service
commissions in certain states. See "Industry Overview--Regulation". The
consummation of the Merger is subject to certain regulatory approvals,
including FCC approval and the approval of various state regulatory
authorities. The Merger is also subject to the requirements of the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
rules and regulations thereunder, which provide that certain transactions may
not be consummated until certain required information and materials have been
furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the Federal Trade Commission (the "FTC") and certain
waiting periods have expired or been terminated. Arch and MobileMedia have
filed the required information and material with the Antitrust Division and the
FTC. See "The Merger and the Reorganization--Regulatory Approvals".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Arch will not recognize gain or loss for federal income tax purposes as a
result of the Merger. It is anticipated that (S)382 of the Internal Revenue
Code of 1986, as amended (the "Tax Code"), will limit the amount of income
earned by Arch after the Merger that may be offset by Arch's net operating loss
("NOL") carryforwards and other tax attributes. It is also anticipated that the
NOL carryforwards and possibly other tax attributes of MMC will be
substantially reduced as a result of consummation of the Amended Plan pursuant
to (S)108 and (S)382 of the Tax Code. See "The Merger and the Reorganization--
Certain Federal Income Tax Consequences".
ACCOUNTING TREATMENT
The Merger will be accounted for under the "purchase" method of accounting;
the purchase price will be allocated based on the fair value of the assets
acquired and the liabilities assumed. In accordance with GAAP, Arch will be
treated as the acquiror in the Merger for accounting and financial reporting
purposes, and Arch will continue to report its historical financial statements
as the historical financial statements of the Combined Company. See "The Merger
and the Reorganization--Accounting Treatment".
TERMINATION; AMENDMENT AND WAIVER
The Merger Agreement provides that Arch and MMC may terminate the Merger
Agreement prior to the Effective Date as follows: (i) Arch and MMC may
terminate the Merger Agreement by mutual written consent; (ii) either Arch or
MMC may terminate the Merger Agreement by giving written notice to the other in
the event the other is in material breach of its representations and warranties
or its material covenants or agreements contained in the Merger Agreement (with
certain bankruptcy-related exceptions); (iii) Arch or MMC may terminate the
Merger Agreement by written notice to the other, if the order of the Bankruptcy
Court confirming the Amended Plan (the "Confirmation Order") has not been
entered by the Bankruptcy Court on or prior to March 31, 1999, or if the Merger
has not occurred on or prior to June 30, 1999; (iv) MMC may terminate the
Merger Agreement if it has decided to pursue a Company Superior Proposal (as
defined in the Merger Agreement) by giving written notice to Arch, provided
that on or before such termination MMC will have paid to Arch the applicable
Buyer Breakup Fee (as defined herein); (v) MMC may terminate the Merger
Agreement by giving written notice to Arch if (A) the Arch Board does not issue
its recommendation prior to the special meeting of Arch's stockholders called
for the purpose of approving the Merger and related transactions (the "Special
Meeting") or withdraws or amends in a manner adverse to MMC such recommendation
or otherwise materially breaches its obligations with respect to soliciting
proxies from its stockholders for approval of transactions to be considered and
approved at the Special Meeting or (B) at the Special Meeting such transactions
are not approved by the requisite vote of Arch's stockholders and upon such
termination Arch must pay the
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MobileMedia Breakup Fee to MMC; and (vi) Arch may terminate the Merger
Agreement by giving written notice to MMC if MMC or any other Debtor files
either an amendment to the Amended Plan or any other plan of reorganization in
violation of the Merger Agreement.
If any party terminates the Merger Agreement, all obligations of Arch and MMC
thereunder will generally terminate without any liability of any party to any
other party, except for any liability of any party for willful or intentional
breaches of the Merger Agreement, and except for MMC's obligation to pay the
Buyer Breakup Fee (as defined herein), if applicable, and Arch's obligation to
pay the MobileMedia Breakup Fee (as defined herein), if applicable, which will
survive any such termination.
Arch, Parent and MMC may mutually amend any provision of the Merger Agreement
(in certain cases Parent and MMC may do so only with the consent of the
Official Committee of Unsecured Creditors (the "Unsecured Creditors
Committee")) or pursuant to an order of the Bankruptcy Court. The Merger
Agreement provides that no waiver by any party to the Merger Agreement of any
default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
MMC, on behalf of itself, Parent and MobileMedia, has agreed not to make any
material change to the Amended Plan or the Merger Agreement, exercise any
rights they may have to terminate the Merger Agreement or take any action which
could result in the termination of the Merger Agreement by Arch without the
prior written consent of the Unsecured Creditors Committee or the entry of an
order by the Bankruptcy Court. MMC has further agreed not to exercise its
rights to respond to or negotiate acquisition proposals received from third
parties without advising and consulting with the Unsecured Creditors Committee.
MMC also agreed that the Unsecured Creditors Committee could request MMC to
exercise its right to terminate the Merger Agreement, and if MMC does not do
so, the Unsecured Creditors Committee may seek an order of the Bankruptcy Court
to do so. The Unsecured Creditors Committee has undertaken with each Standby
Purchaser to provide copies of all notices, documents or information provided
to it by Arch, Parent or MobileMedia and to consult with such Standby Purchaser
prior to delivering any consent or exercising any right of the Unsecured
Creditors Committee under the foregoing agreement or under the Amended Plan.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Arch is unaware of any interests that any directors or officers of Arch have
in connection with the Merger that are in addition to the interests of the
stockholders of Arch generally. See "The Merger and the Reorganization--
Interests of Certain Persons in the Merger".
RISK FACTORS
In considering an investment in the Combined Company, participants in the
Rights Offering should consider, among other risks, the risks associated with
the proposed integration of the businesses of Arch and MobileMedia through the
Merger, the structure of the Merger and the Reorganization and financing the
future capital needs of the Combined Company following the Merger. Other risks
to be considered include risks of the Combined Company related to competition,
technological change, government regulation, subscriber turnover, reliance on
equipment suppliers, dependence on key personnel and possible volatility of
stock price. Each of Arch and MobileMedia has a history of operating losses.
Arch does not anticipate that it will make any cash distributions to its
stockholders after the Merger and expects to continue to have a highly
leveraged capital structure. Participation in the Rights Offering involves
certain market risks, illiquidity in certain of the Securities being offered
and substantial dilution. See "Risk Factors".
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THE RIGHTS OFFERING
Securities Offered..........
43,400,000 transferable Rights, if no Adjustment
is made, or between 43,470,000 and 108,500,000
Rights, if an Adjustment is made. Each Right will
entitle its holder to subscribe for and purchase
one Unit consisting of one share of Stock and
0.0516 of one Warrant if no Adjustment is made,
or one share of Stock, if an Adjustment is made.
Distribution Ratio..........
One Right for each $ of each Unsecured Credi-
tor's allowed Unsecured Claims in the Insolvency
Proceedings if no Adjustment is made; between
$ and $ of such Unsecured Claims if an Ad-
justment is made. No fractional Rights will be
distributed.
Allocation of Rights........ A total of Rights has been allocated and dis-
tributed on the basis of Unsecured Claims allowed
to date. If additional Unsecured Claims are al-
lowed prior to the Confirmation Date, additional
Rights will be allocated and distributed to the
holders of such Unsecured Claims; any unallocated
Rights will be sold by Arch for cash (or in such
other manner as Arch reasonably determines) for
the account of holders of Unsecured Claims al-
lowed thereafter, or as otherwise provided in the
Amended Plan.
Subscription Price..........
$5.00(/1/) per Unit in cash (subject to adjust-
ment) if no Adjustment is made; $3.50(/2/) per
Share in cash (subject to adjustment to between
$2.00 and $4.99) if an Adjustment is made.
Oversubscription None, except incident to the commitments of the
Privileges................. Standby Purchasers
Standby Purchasers..........
The Standby Purchasers have made binding written
commitments, subject to certain conditions,
(i) to subscribe for the full number of Units
subject to Rights which they are entitled to re-
ceive based upon their Unsecured Claims (a total
of 22,704,000 Units if no Adjustment is made; be-
tween 22,741,000 and 56,760,000 Units if an Ad-
justment is made) and (ii) to act as standby pur-
chasers of any and all unsubscribed Units at the
Subscription Price (a maximum of 20,696,000 Units
if no Adjustment is made; between 20,739,000 and
51,740,000 Units if an Adjustment is made). See
"The Rights Offering--Standby Purchase Agree-
ments".
Common Stock and Class B
Common Stock...............
All purchasers of Units will acquire shares of
Common Stock and (unless an Adjustment is made)
Warrants to purchase Common Stock, except that
Standby Purchasers or others will instead acquire
shares of Class B Common Stock and (unless an Ad-
justment is made) Warrants to purchase Class B
- -------- Common Stock to the extent
(1) Based upon the lowest point of a range for the Initial Measurement Period
under the formula described under "The MobileMedia Plan of Reorganization--
Calculation of Shares". See "Risk Factors--Uncertainties Related to the
Merger and the Reorganization--Use of Pro Forma Assumptions".
(2) Based upon the midpoint of the range for the Subsequent Pricing Period as
described above.
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described under "The Rights Offering--Standby
Purchase Agreements" if they would otherwise hold
more in the aggregate than 49.0% of the securi-
ties of Arch generally entitled to vote on the
election of directors or 49.0% of the total vot-
ing power of the outstanding securities of Arch.
Shares of Common Stock and Class B Common Stock
are identical except that holders of Common Stock
are entitled to vote on the election of directors
and cast one vote per share on all other matters
while holders of Class B Common Stock are not en-
titled to vote on the election of directors and
are entitled to cast 1/100th of one vote per
share on all other matters. Shares of Class B
Common Stock are convertible into an equal number
of shares of Common Stock in specified circum-
stances. See "Description of Securities".
Warrants....................
Each Warrant will entitle its holder to purchase
one share of Stock for $8.19, payable solely in
cash, if no Adjustment is made. If an
Adjustment is made, Warrants will not be offered
in the Rights Offering and the Standby Purchas-
ers' Warrants will have an exercise price equal
to the Subscription Price plus an amount reflect-
ing compounding from the Effective Time through
September 1, 2001 at a 20% per annum internal
rate of return over the Subscription Price, if an
Adjustment is made. The Warrants will be exercis-
able from date of issuance through September 1,
Equity Securities to be 2001.
Outstanding Following the
Rights Offering............
If no Adjustment is made, between and
shares of Common Stock (including for this pur-
pose Class B Common Stock), 250,000 shares of Se-
ries C Preferred Stock that are currently con-
vertible into 4,545,455 shares of Common Stock,
and warrants (including the Warrants) and options
to purchase shares of Common Stock; if an Ad-
justment is made, between and shares of
Stock, 250,000 shares of Series C Preferred Stock
and warrants (including the Warrants) and options
to purchase between and shares of Common
Stock.
Expiration Date.............
5:00 p.m., New York City time, on a date selected
by Arch and MobileMedia which is at least 15 days
after the later of (i) the last day of the Subse-
quent Pricing Period and (ii) the date on which
all Closing Conditions (other than consummation
of the Rights Offering, the finality of the FCC
Grant and certain other conditions which by their
terms cannot be satisfied until the Effective
Time) are first satisfied or, if legally permis-
sible, waived. Rights not exercised prior to the
Expiration Date will be void and will no longer
be exercisable by any Rights holder.
Subscription Agent.......... The Bank of New York will serve as Subscription
Agent for the Rights Offering.
Information Agent...........
Bear, Stearns & Co. Inc. ("Bear Stearns") will
serve as Information Agent for the Rights Offer-
ing.
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Method of Exercise of
Rights..................... Unsecured Creditors or their transferees may sub-
scribe by properly completing and signing the
Subscription Certificate evidencing the Rights
(each, a "Subscription Certificate"), and for-
warding such Subscription Certificate (or by fol-
lowing the guaranteed delivery procedures), to-
gether with payment in good funds of the Sub-
scription Price for each Unit subscribed for, to
the Subscription Agent, on or prior to the Expi-
ration Date. In forwarding Subscription Certifi-
cates by mail, it is recommended that insured,
registered mail be used. See "The Rights Offer-
ing--Method of Exercise of Rights".
NO REVOCATION............... ONCE A HOLDER OF RIGHTS HAS SUBSCRIBED, SUCH SUB-
SCRIPTION MAY NOT BE REVOKED. SEE "THE RIGHTS OF-
FERING--NO REVOCATION".
Exercise Through Others.....
Persons holding Unsecured Claims beneficially and
receiving Rights issuable with respect thereto,
through a broker, dealer, commercial bank, trust
company or other nominee, as well as persons
holding Rights directly who would prefer to have
such institutions effect transactions relating to
the Rights on their behalf, should contact the
appropriate institution or nominee and request it
to effect such transaction for them. See "The
Rights Offering--Method of Exercise of Rights".
Foreign Holders............. Subscription Certificates will not be mailed to
holders whose addresses are outside the United
States, but will be held by the Subscription
Agent for their accounts. To exercise the Rights
represented thereby, such holders must notify the
Subscription Agent and take all other steps which
are necessary to exercise the Rights on or prior
to 5:00 p.m., New York City time, on the Expira-
tion Date. See "The Rights Offering--Foreign and
Certain Other Holders".
Transfer.................... The Rights are transferable, although it is not
expected that they will trade on the Nasdaq Na-
tional Market, the Electronic Bulletin Board or
elsewhere. It is not expected that a market for
the Rights will develop or that, if a market de-
velops, the market will remain available through-
out the period during which the Rights may be ex-
ercised, or that the Rights will trade at any
particular price levels. See "The Rights Offer-
ing--Method of Transferring Rights".
Escrow of Funds............. Subscribed funds will be held in a segregated ac-
count pending conclusion of the offering. No in-
terest will be paid to subscribers on their sub-
scribed funds.
Federal Income Tax For United States federal income tax purposes
Considerations............. ("tax purposes"), Unsecured Creditors may recog-
nize income, gain or loss in connection with the
distribution of Rights to them, depending upon
their particular circumstances, including whether
their Unsecured Claims are properly treated as
securities for tax purposes, what items of income
and deduction they have previously taken into ac-
count for tax purposes with respect to such
claims, and whether their receipt of Rights is
treated as part of a "reorganization" for tax
purposes.
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<PAGE>
Unsecured Creditors generally will not recognize
any gain or loss in connection with the exercise
of Rights or Warrants. Unsecured Creditors may
recognize income, gain or loss upon the sale or
other taxable disposition of Rights, Stock or
Warrants or the receipt of distributions with re-
spect to Stock. See "Certain Federal Income Tax
Consequences."
Use of Proceeds............. Arch intends to use the net proceeds of the
Rights Offering to pay a portion of the cash con-
sideration payable to secured creditors of
MobileMedia pursuant to the Amended Plan.
Trading Symbol..............
Arch's Common Stock is traded on the Nasdaq Na-
tional Market under the symbol "APGR". Arch has
filed applications to have the Common Stock,
Class B Common Stock and Warrants that are in-
cluded in the Units and the Common Stock and
Class B Common Stock underlying the Warrants ap-
proved for quotation on the Nasdaq National Mar-
ket. No assurance can be given that such applica-
tions will be approved. Arch does not intend for
the Rights or the Units to be so quoted.
Resale......................
The Securities may be resold without registration
under the Securities Act by Unsecured Creditors
and their assignees who are not affiliates (as
defined herein) of Arch or underwriters within
the meaning of the Securities Act or Section 1145
of the Bankruptcy Code. The Standby Purchasers
and any other Unsecured Creditors who acquire 10%
or more of the Common Stock may be deemed to be
statutory underwriters with respect to the Secu-
rities they purchase. Arch intends to file a sep-
arate registration statement or statements cover-
ing exercises of the Warrants and certain resales
of the Stock and Warrants by affiliates, Standby
Purchasers or others.
Right to Terminate Rights
Offering................... Arch expressly reserves the right, in its sole
and absolute discretion, at any time prior to the
delivery of the Units offered hereby, to termi-
nate the Rights Offering if the Rights Offering
is prohibited by law or regulation or to the ex-
tent permitted by the Merger Agreement, Arch's
Board concludes, in its sole judgment, that it is
not in Arch's best interests to complete the
Rights Offering under the circumstances. If the
Rights Offering is terminated, all funds received
pursuant to the Rights Offering will be promptly
refunded, without interest.
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FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements that are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Any statements contained herein (including, without limitation,
statements to the effect that Arch, MobileMedia, Parent or their respective
managements or boards of directors "believe", "expect", "anticipate", "plan"
and similar expressions) that are not statements of historical fact should be
considered forward-looking statements. A number of important factors could
cause actual results to differ materially from those expressed in any forward-
looking statements made by, or on behalf of, Arch, MobileMedia, Parent or their
respective managements or boards of directors. Achieving the anticipated
benefits of the Merger and the Reorganization will depend in significant part
upon whether the integration of the two companies' businesses is accomplished
in an efficient manner, and there can be no assurance that this will occur. The
combination of the two companies will require, among other things, coordination
of administrative, sales and marketing, distribution, and accounting and
finance functions and expansion of information and management systems. The
integration process could divert the attention of management, and any
difficulties or problems encountered in the transition process could have a
material adverse effect on the Combined Company following the Merger. In
addition, the process of combining the companies could cause the interruption
of, or a loss of momentum in, the activities of the respective businesses,
which could also have a material adverse effect on the Combined Company. The
difficulty of combining the businesses may be increased by the need to
integrate personnel and the geographic distance separating the organizations.
There can be no assurance that Arch will retain key employees or that Arch will
realize any of the other anticipated benefits of the Merger. See "Risk
Factors".
The unaudited combined company projections (the "Unaudited Combined Company
Projections") contained herein have been prepared jointly by Arch and
MobileMedia as a projection of possible future results based upon the
assumptions set forth therein, and are dependent on many factors over which
neither Arch nor MobileMedia has any control. No assurance can be given that
any of the assumptions on which the projections are based will prove to be
correct. THE NUMBER OF SHARES OF STOCK TO BE ISSUED IN CONNECTION WITH THE
RIGHTS OFFERING, THE MERGER AGREEMENT AND THE AMENDED PLAN IS SUBJECT TO
ADJUSTMENT BASED UPON THE ARCH COMMON STOCK PRICE. SEE "THE MOBILEMEDIA PLAN OF
REORGANIZATION--CALCULATION OF SHARES". THE LAST REPORTED SALE PRICE OF COMMON
STOCK WAS $2.375 PER SHARE ON SEPTEMBER 11, 1998. FOR PURPOSES OF PREPARING THE
PROJECTIONS, ARCH HAS ASSUMED THE ARCH COMMON STOCK PRICE TO BE $6.25. IN THE
EVENT THAT THE ARCH COMMON STOCK PRICE AT THE RELEVANT TIME FOR DETERMINING
SUCH PRICE IS BELOW $6.25, ADDITIONAL SHARES OF STOCK, STANDBY PURCHASERS'
WARRANTS, ARCH STOCKHOLDERS' RIGHTS AND ARCH STOCKHOLDERS' PARTICIPATION
WARRANTS WILL BE ISSUED. THIS WILL HAVE THE EFFECT OF INCREASING THE NUMBER OF
SHARES OF STOCK OUTSTANDING ON AN AS-CONVERTED BASIS AND ON A FULLY DILUTED
BASIS. SEE "RISK FACTORS--UNCERTAINTIES RELATED TO THE MERGER AND THE
REORGANIZATION--USE OF PRO FORMA ASSUMPTIONS", "THE COMBINED COMPANY--UNAUDITED
FINANCIAL PROJECTIONS AND OPERATIONAL COST SYNERGIES". ARCH AND MOBILEMEDIA DO
NOT AS A MATTER OF COURSE MAKE PUBLIC ANY PROJECTIONS AS TO FUTURE PERFORMANCE
OR EARNINGS. THE UNAUDITED COMBINED COMPANY PROJECTIONS CONTAINED HEREIN WERE
NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH (I) PUBLISHED
GUIDELINES OF THE COMMISSION, (II) THE GUIDELINES ESTABLISHED BY THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS OR (III) GAAP.
ARTHUR ANDERSEN LLP, THE INDEPENDENT PUBLIC ACCOUNTANTS FOR ARCH, HAS NEITHER
COMPILED NOR EXAMINED SUCH PROJECTIONS AND, ACCORDINGLY, DOES NOT EXPRESS ANY
OPINION OR ANY OTHER FORM OF ASSURANCE WITH RESPECT TO, ASSUMES NO
RESPONSIBILITY FOR AND DISCLAIMS ANY ASSOCIATION WITH, SUCH PROJECTIONS. ERNST
& YOUNG LLP, THE INDEPENDENT AUDITORS FOR MOBILEMEDIA, HAS NEITHER COMPILED NOR
EXAMINED SUCH PROJECTIONS AND, ACCORDINGLY, DOES NOT EXPRESS ANY OPINION OR ANY
OTHER FORM OF ASSURANCE WITH RESPECT TO, ASSUMES NO RESPONSIBILITY FOR AND
DISCLAIMS ANY ASSOCIATION WITH, SUCH PROJECTIONS. WHILE PRESENTED WITH
NUMERICAL SPECIFICITY, SUCH PROJECTIONS ARE BASED UPON A VARIETY OF
ASSUMPTIONS, WHICH MAY NOT BE REALIZED, RELATING TO THE FUTURE BUSINESS AND
OPERATIONS OF ARCH AND MOBILEMEDIA AND THE INTEGRATION OF THEIR OPERATIONS AND
ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE
DIFFICULT TO PREDICT AND MANY OF WHICH ARE BEYOND THE CONTROL OF ARCH AND
MOBILEMEDIA. NEITHER ARCH, ON THE ONE HAND,
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<PAGE>
NOR MOBILEMEDIA OR PARENT, ON THE OTHER HAND, MAKES ANY EXPRESS OR IMPLIED
REPRESENTATION OR WARRANTY AS TO THE ATTAINABILITY OF THE PROJECTED FINANCIAL
INFORMATION SET FORTH IN THE UNAUDITED COMBINED COMPANY PROJECTIONS OR AS TO
THE ACCURACY OR COMPLETENESS OF THE ASSUMPTIONS FROM WHICH THAT PROJECTED
INFORMATION IS DERIVED.
FOR A DISCUSSION OF SOME OF THE FACTORS WHICH COULD CAUSE FUTURE RESULTS TO
VARY, SEE "RISK FACTORS".
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<PAGE>
RISK FACTORS
In evaluating the Rights Offering, prospective investors should carefully
consider the following factors, as well as the other information included in
this Prospectus and the Annexes hereto.
UNCERTAINTIES RELATED TO THE MERGER AND THE REORGANIZATION
CHALLENGES OF BUSINESS INTEGRATION
There can be no assurance that the expectations regarding the future
operations of Arch following the Merger described in "The Merger and the
Reorganization--Arch Reasons for the Merger" will be fulfilled. The success of
the Merger will depend in part on the ability of Arch to effectively integrate
the businesses of Arch and MobileMedia. The process of integrating the
businesses of Arch and MobileMedia may involve unforeseen difficulties and may
require a disproportionate amount of time and attention of Arch's management
and financial and other resources of Arch following the Merger. Although it is
anticipated that the Merger will provide the opportunity for synergies and
efficiencies, there can be no assurance as to the timing or amount of
synergies or efficiencies that may ultimately be attained. Certain of the
anticipated benefits of the Merger may not be achieved if Arch's and
MobileMedia's existing operations are not successfully integrated in a timely
manner. The difficulties of such integration may initially be increased by the
necessity of coordinating geographically separate organizations and
integrating personnel with disparate business backgrounds and corporate
cultures. There can be no assurance that Arch will be able to successfully
integrate MobileMedia's operations or, even if successfully integrated, that
Arch's operating performance after the Merger will be successful. If Arch is
not successful in integrating MobileMedia's operations or if the integrated
operations fail to achieve market acceptance, Arch would be materially
adversely affected. In addition, following the Merger, the implementation of
Arch's business strategy will be subject to numerous other contingencies
beyond the control of Arch, including general and regional economic
conditions, interest rates, competition, changes in regulation and the ability
to attract and maintain skilled employees. As a result, no assurance can be
given that the Merger will be successful or that Arch's business strategies
will prove effective or that Arch will achieve its goals after the Merger. See
"Business--Arch--Business Strategy".
CERTAIN RISKS ASSOCIATED WITH THE MERGER
Arch is party to various contractual arrangements, including, without
limitation, credit agreements and indentures, under which the consummation of
the Merger and the other transactions contemplated by the Merger Agreement and
the Amended Plan could (i) result in a breach, violation, default or conflict,
(ii) give other parties thereto rights of termination or cancellation or (iii)
have other adverse consequences for Arch. The magnitude of any such adverse
consequences may depend upon, among other factors, the diligence and vigor
with which other parties to such arrangements may seek to assert any such
rights and pursue any such remedies, and the ability of Arch to resolve such
matters on acceptable terms. Under the indentures governing notes issued by
Arch and its wholly owned subsidiary, Arch Communications, Inc. ("ACI"),
having an aggregate principal balance of approximately $719.5 million as of
July 31, 1998, Arch and ACI would be obligated to offer to repurchase such
notes at the aggregate principal amount of such notes, plus accrued and unpaid
interest and liquidated damages, upon a change of control as defined therein.
Arch believes that consummation of the Merger and the other transactions
contemplated by the Merger Agreement and the Amended Plan will not constitute
such a change in control. Although it is expected that the foregoing matters
will not have a material adverse effect on Arch, there can be no assurance
that the other parties to such agreements and indentures will not allege that
the Merger constitutes either a breach or default or a change in control of
Arch. See "Description of Certain Arch Indebtedness".
TRANSACTION COSTS
Arch estimates that it will incur direct transaction costs of approximately
$25.0 million associated with the Merger. This amount is a preliminary
estimate only and is therefore subject to change. In addition, if Arch
stockholders do not approve the Merger, Parent and MMC could terminate the
Merger Agreement and Arch may be required to pay a $32.5 million termination
fee to Parent. There can be no assurance that Arch will not incur significant
additional costs in connection with the Merger.
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SUBSTANTIAL AMORTIZATION CHARGES
A significant effect of the purchase accounting for the Merger will be to
record a substantial amount of goodwill and other intangible assets which will
result in substantial amortization charges to the consolidated income of Arch
over the useful lives of such assets. The incremental amount of such charges
is estimated to be approximately $37.7 million per year for ten years;
however, actual charges could vary significantly in the event the underlying
assets are impaired or the related useful lives are less than currently
estimated. See "Unaudited Selected Pro Forma Consolidated Financial Data".
USE OF PRO FORMA ASSUMPTIONS
The number of shares of stock to be issued in connection with the Merger
Agreement and the Amended Plan will be determined based upon the Arch Common
Stock Price over the Initial Measurement Period and the Subsequent Pricing
Measurement Period as set forth in the Merger Agreement. For purposes of
presenting the pro forma condensed consolidated financial statements included
in this Prospectus, Arch has assumed the Arch Common Stock Price will be
$6.25. On September 11, 1998, the closing market price of Common Stock was
$2.375. In the event that the Arch Common Stock Price during the Subsequent
Pricing Period is below $6.25, additional shares of Stock, rights and warrants
will be issued. This will have the effect of reducing stockholders equity,
loss per share and other important financial measurements as well as
increasing the dilution to Arch's stockholders. See "The MobileMedia Plan of
Reorganization--Calculation of Shares" and "Unaudited Pro Forma Condensed
Consolidated Financial Statements".
RISKS COMMON TO ARCH AND MOBILEMEDIA
GROWTH AND ACQUISITION STRATEGY
Arch believes that the paging industry has experienced, and will continue to
experience, consolidation due to factors that favor larger, multi-market
paging companies, including (i) the ability to obtain additional radio
spectrum, (ii) greater access to capital markets and lower costs of capital,
(iii) broader geographic coverage of paging systems, (iv) economies of scale
in the purchase of capital equipment, (v) operating efficiencies and (vi)
enhanced access to executive personnel.
Arch has pursued, and, if the Merger is consummated, Arch intends for the
Combined Company to continue to pursue, acquisitions of paging businesses as a
key component of its growth strategy. However, the process of integrating
acquired paging businesses may involve unforeseen difficulties and may require
a disproportionate amount of the time and attention of Arch's management. No
assurance can be given that suitable acquisitions can be identified, financed
and completed on acceptable terms, or that any future acquisitions by Arch
will be successful. See "Business--Arch--Paging and Messaging Services,
Products and Operations".
Implementation of Arch's growth strategy will be subject to numerous other
contingencies beyond the control of its management. These contingencies
include national and regional economic conditions, interest rates,
competition, changes in regulation or technology and the ability to attract
and retain skilled employees. Accordingly, no assurance can be given that
Arch's growth strategy will prove effective or that its goals will be
achieved. See "Business--Arch--Business Strategy" and "--Competition".
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
Arch's business strategy requires the availability of substantial funds to
finance the continued development and future growth and expansion of its
operations, including possible acquisitions. The amount of capital required by
Arch following the Merger will depend upon a number of factors, including
subscriber growth, the type of paging devices and services demanded by
customers, service revenues, technological developments, marketing and sales
expenses, competitive conditions, the nature and timing of Arch's N-PCS
strategy, acquisition strategies and opportunities. No assurance can be given
that additional equity or debt financing will be available to Arch when needed
on acceptable terms, if at all. The unavailability of sufficient financing
when needed would
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have a material adverse effect on Arch. See "Business--Arch Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources" and "Description of Certain Arch
Indebtedness".
COMPETITION AND TECHNOLOGICAL CHANGE
Arch and MobileMedia each face competition from other paging service
providers in all markets in which they operate, as well as from certain
competitors who hold nationwide licenses. Monthly fees for basic paging
services have, in general, declined in recent years, due in part to
competitive conditions, and Arch may face significant price-based competition
in the future which could have a material adverse effect on Arch. Certain
competitors of Arch and MobileMedia possess greater financial, technical and
other resources than will Arch following the Merger. A trend towards
increasing consolidation in the paging industry in particular and the wireless
communications industry in general in recent years has led to competition from
increasingly larger and better capitalized competitors. If any of such
competitors were to devote additional resources to the paging business or
focus on Arch's or MobileMedia's particular markets, there could be a material
adverse effect on Arch following the Merger.
Competitors are currently using and developing a variety of two-way paging
technologies. Neither Arch nor MobileMedia presently provides such two-way
services, other than as a reseller. Although such services generally are
higher priced than traditional one-way paging services, technological
improvements could result in increased capacity and efficiency for such two-
way paging technologies and, accordingly, could result in increased
competition for Arch and/or MobileMedia. Future technological advances in the
telecommunications industry could increase new services or products
competitive with the paging services provided by Arch and MobileMedia or could
require Arch or MobileMedia to reduce the price of their paging services or
incur additional capital expenditures to meet competitive requirements. Recent
and proposed regulatory changes by the FCC are aimed at encouraging such
technological advances and new services. Other forms of wireless two-way
communications technology, including cellular and broadband personal
communications services ("PCS"), and specialized mobile radio services, also
compete with the paging services that Arch and MobileMedia currently provide.
While such services are primarily focused on two-way voice communications,
service providers are, in many cases, electing to provide paging services as
an adjunct to their primary services. Technological change also may affect the
value of the pagers owned by Arch and MobileMedia and leased to their
respective subscribers. If Arch's or MobileMedia's subscribers request more
technologically advanced pagers, including, but not limited to, two-way
pagers, Arch or MobileMedia could incur additional inventory costs and capital
expenditures if required to replace pagers leased to its subscribers within a
short period of time. Such additional investment or capital expenditures could
have a material adverse effect on Arch and MobileMedia. There can be no
assurance that Arch or MobileMedia will be able to compete successfully with
current and future competitors in the paging business or with competitors
offering alternative communication technologies. See "Industry Overview--
Competition".
GOVERNMENT REGULATION, FOREIGN OWNERSHIP AND POSSIBLE REDEMPTION
The paging operations of Arch and MobileMedia are subject to regulation by
the FCC and various state regulatory agencies. The FCC paging licenses granted
to Arch and MobileMedia are for varying terms of up to 10 years, at the end of
which renewal applications must be approved by the FCC. In the past, paging
license renewal applications generally have been granted by the FCC upon a
showing of compliance with FCC regulations and of adequate service to the
public. With the exception of the pending FCC proceeding regarding
MobileMedia's qualifications to remain an FCC licensee, Arch and MobileMedia
are unaware of any circumstances which would prevent the grant of any pending
or future renewal applications; however, no assurance can be given that any of
Arch's or MobileMedia's renewal applications will be free of challenge or will
be granted by the FCC. It is possible that there may be competition for radio
spectrum associated with licenses as they expire, thereby increasing the
chances of third party interventions in the renewal proceedings. Other than
those renewal applications still pending, the FCC has thus far granted each
license renewal application
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that Arch and MobileMedia have filed. There can be no assurance that the FCC
and various state regulatory agencies will not propose or adopt regulations or
take actions that would have a material adverse effect on Arch or MobileMedia
or, if the Merger is consummated, on the Combined Company following the
Merger.
The FCC's review and revision of rules affecting paging companies is ongoing
and the regulatory requirements to which Arch and MobileMedia are subject may
change significantly over time. For example, the FCC has decided to adopt a
market area licensing scheme for all paging channels under which carriers
would be licensed to operate on a particular channel throughout a broad
geographic area (for example, a Major Trading Area as defined by Rand McNally)
rather than being licensed on a site-by-site basis. These geographic area
licenses will be awarded pursuant to auction. Incumbent paging licensees that
do not acquire licenses at auction will be entitled to interference protection
from the market area licensee. Arch and MobileMedia are each participating
actively in this proceeding in order to protect their existing operations and
retain flexibility, on an interim and long-term basis, to modify systems as
necessary to meet subscriber demands. The FCC has issued a Further Notice of
Proposed Rulemaking in which the FCC seeks comments on, among other matters,
whether it should impose coverage requirements on licensees with nationwide
exclusivity (such as Arch and MobileMedia), whether these coverage
requirements should be imposed on a nationwide or regional basis, and
whether--if such requirements are imposed--failure to meet the requirements
should result in a revocation of the entire nationwide license or merely a
portion of the license. If the FCC were to impose stringent coverage
requirements on licensees with nationwide exclusivity, Arch and MobileMedia
might have to accelerate the build-out of their systems in certain areas.
Changes in regulation of Arch's and MobileMedia's paging businesses or the
allocation of radio spectrum for services that compete with Arch's and
MobileMedia's business could adversely affect their results of operations. In
addition, some aspects of the Telecommunications Act of 1996 (the
"Telecommunications Act") may place additional burdens upon Arch and
MobileMedia or subject them to increased competition. For example, the FCC has
adopted new rules that govern compensation to be paid to pay phone providers
which has resulted in increased costs for certain paging services including
toll-free 800 number paging. Arch and MobileMedia have generally passed these
costs on to their subscribers, which makes their services more expensive and
which could affect the attraction or retention of customers; however, there
can be no assurance that Arch and MobileMedia will be able to continue to pass
on these costs. These rules are the subject of several judicial appeals. In
addition, the FCC also has adopted new rules regarding payments by
telecommunications companies into a revamped fund that will provide for the
widespread availability of telecommunications services, including to low-
income consumers ("Universal Service"). Prior to the implementation of the
Telecommunications Act, Universal Service obligations largely were met by
local telephone companies, supplemented by long-distance telephone companies.
Under the new rules, certain telecommunications carriers, including Arch and
MobileMedia, are required to contribute to a revised fund created for
Universal Service (the "Universal Service Fund"). In addition, certain state
regulatory authorities have enacted, or have indicated that they intend to
enact, similar contribution requirements based on state revenues. Neither Arch
nor MobileMedia can yet know the impact of these state contribution
requirements, if enacted and applied to Arch and MobileMedia. Moreover,
neither Arch nor MobileMedia is able at this time to estimate the amount of
any such payments that it will be able to bill to their subscribers; however,
payments into the Universal Service Fund will likely increase the cost of
doing business.
Moreover, in a rulemaking proceeding pertaining to interconnection between
local exchange carriers ("LECs") and commercial mobile radio services ("CMRS")
providers such as MobileMedia and Arch, the FCC has concluded that LECs are
required to compensate CMRS providers for the reasonable costs incurred by
such providers in terminating traffic that originates on LEC facilities, and
vice versa. Consistent with this ruling, the FCC has determined that LECs may
not charge a CMRS provider or other carrier for terminating LEC-originated
traffic or for dedicated facilities used to deliver LEC-originated traffic to
one-way paging networks. Nor may LECs charge CMRS providers for number
activation and use fees. These interconnection issues are still in dispute,
and it is unclear whether the FCC will maintain its current position.
Depending on further FCC disposition of these issues, Arch and MobileMedia may
or may not be successful in securing refunds, future
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relief or both, with respect to charges for termination of LEC-originated
local traffic. If these issues are ultimately resolved by the FCC in favor of
CMRS providers, then Arch and MobileMedia will pursue relief through
settlement negotiations, administrative complaint procedures or both. If these
issues are ultimately decided in favor of the LECs, Arch and MobileMedia
likely would be required to pay all past due contested charges and may also be
assessed interest and late charges for the withheld amounts. Although these
requirements have not to date had a material adverse effect on Arch or
MobileMedia, these or similar requirements could in the future have a material
adverse effect on Arch or MobileMedia. See "Industry Overview--Regulation".
The Communications Act also limits foreign investment in and ownership of
entities that are licensed as radio common carriers by the FCC. Arch and
MobileMedia own or control several radio common carriers and are accordingly
subject to these foreign investment restrictions. Because Arch and MobileMedia
are each individually parents of radio common carriers (but are not radio
common carriers themselves), Arch and MobileMedia are limited to having 25% of
their stock owned or voted by aliens or their representatives, a foreign
government or their representatives or a foreign corporation. The FCC has the
authority to waive this restriction unless the public interest would be served
by denying such waiver. In connection with the World Trade Organization
Agreement (the "WTO Agreement")--agreed to by 69 countries--the FCC adopted
rules effective February 9, 1998 that create a very strong presumption in
favor of such a waiver if the foreign investor's home market country signed
the WTO Agreement. Arch's and MobileMedia's subsidiaries that are radio common
carrier licensees are subject to more stringent requirements and may have only
up to 20% of their stock owned or voted by aliens or their representatives, a
foreign government or their representatives or a foreign corporation. This
ownership restriction is not subject to waiver. See "Industry Overview--
Regulation". The Arch Certificate permits the redemption of shares of Arch's
capital stock from foreign stockholders where necessary to protect FCC
licenses held by Arch or its subsidiaries, but such redemption would be
subject to the availability of capital to Arch and any restrictions contained
in applicable debt instruments and under the Delaware General Corporation Law
("DGCL") (which currently would not permit any such redemptions). The failure
to redeem such shares promptly could jeopardize the FCC licenses held by Arch
or its subsidiaries (including MobileMedia following the Merger). See "--High
Degree of Leverage After the Merger", "--Competition and Technological Change"
and "Industry Overview--Regulation".
HIGH DEGREE OF LEVERAGE AFTER THE MERGER
Each of Arch and MobileMedia is, and after the consummation of the Merger
Arch expects the Combined Company will continue to be, highly leveraged. At
June 30, 1998, Arch's total debt was $1.0 billion compared with total assets
of $971.5 million and latest six-month annualized EBITDA of $139.5 million.
MobileMedia's total debt was $1.1 billion compared with total assets of $596.4
million and latest six-month annualized EBITDA of $123.8 million at June 30,
1998. After giving effect to the Merger, the sale of MMC's transmission towers
and related real property (the "MobileMedia Tower Site Sale"), the elimination
of indebtedness of MobileMedia as contemplated by the Amended Plan and the
incurrence of additional indebtedness by Arch in connection with the Merger
and the Amended Plan on a pro forma basis (but excluding the impact of
expected operational cost synergies), the Combined Company would have had
long-term debt of $1.3 billion compared with total assets of $1.8 billion and
latest six-month annualized EBITDA at June 30, 1998 of $250.9 million. See "--
Risks Related to Arch--Arch's Indebtedness and High Degree of Leverage",
"Selected Historical Consolidated Financial and Operating Data--Arch", "--
MobileMedia", and "Unaudited Selected Pro Forma Consolidated Financial Data".
SUBSCRIBER TURNOVER
The results of operations of wireless messaging service providers, such as
Arch and MobileMedia, can be significantly affected by subscriber
cancellations. Since filing for bankruptcy protection, MobileMedia has
experienced a significant decline in subscribers. The sales and marketing
costs associated with attracting new subscribers are substantial relative to
the costs of providing service to existing customers. Because the paging
business is characterized by high fixed costs, disconnections directly and
adversely affect EBITDA. An increase in the subscriber cancellation rate could
have a material adverse effect on Arch or MobileMedia. See "Business--
MobileMedia--Sales and Marketing".
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DEPENDENCE ON THIRD PARTIES
Neither Arch nor MobileMedia manufactures any of the pagers used in their
respective paging operations. Arch and MobileMedia each buy pagers primarily
from Motorola and NEC America Inc. ("NEC") and therefore are dependent on such
manufacturers to obtain sufficient pager inventory for new subscriber and
replacement needs. In addition, Arch and MobileMedia purchase terminals and
transmitters primarily from Glenayre Electronics, Inc. ("Glenayre") and
Motorola and thus are dependent on such manufacturers for sufficient terminals
and transmitters to meet their expansion and replacement requirements. To
date, neither Arch nor MobileMedia (other than, in the case of MobileMedia, in
the period leading up to MobileMedia's bankruptcy filing) has experienced
significant delays in obtaining pagers, terminals or transmitters, but there
can be no assurance that neither Arch nor MobileMedia will not experience such
delays in the future. Arch's purchase agreement with Motorola expires on June
19, 1999, although it contains a provision for automatic renewal for one-year
terms. MobileMedia's agreement with Motorola will expire on February 6, 1999,
although it provides for automatic renewal for one-year terms. In addition, at
the Effective Time, MobileMedia will need to provide Motorola with credit
support in respect of MobileMedia's obligations to Motorola. There can be no
assurance that Arch's or MobileMedia's respective agreements with Motorola
will be renewed or, if renewed, that such agreements will be on terms and
conditions as favorable to Arch or MobileMedia as those under the current
agreements. Although Arch believes that sufficient alternative sources of
pagers, terminals and transmitters exist, there can be no assurance that Arch
would not be materially adversely affected if it were unable to obtain these
items from current supply sources or on terms comparable to existing terms.
See "Business--Arch--Sources of Equipment" and "--MobileMedia--Sources of
Equipment". Finally, Arch and MobileMedia rely on third parties to provide
satellite transmission for some aspects of their paging services. To the
extent there are satellite outages or if satellite coverage is otherwise
impaired, Arch and MobileMedia may experience a loss of service until such
time as satellite coverage is restored, which could have a material adverse
effect on Arch or MobileMedia.
POSSIBLE ACQUISITION TRANSACTIONS
Arch believes that the paging industry will undergo further consolidation,
and Arch expects to participate in such continued industry consolidation. Arch
has evaluated and expects to continue to evaluate possible acquisition
transactions on an ongoing basis and at any given time may be engaged in
discussions with respect to possible acquisitions or other business
combinations. The process of integrating acquired paging businesses may
involve unforeseen difficulties and may require a disproportionate amount of
the time and attention of Arch's management and financial and other resources.
No assurance can be given that suitable acquisition transactions can be
identified, financed and completed on acceptable terms, that Arch's future
acquisitions will be successful, or that Arch will participate in any future
consolidation of the paging industry. See "Business--Arch Management's
Discussion and Analysis of Financial Condition and Results of Operations".
DEPENDENCE ON KEY PERSONNEL
The success of Arch will depend, to a significant extent, upon the continued
services of a relatively small group of executive personnel. Arch does not
have employment agreements with, or maintain key man life insurance on the
lives of, any of its current executive officers, although certain executive
officers have entered into non-competition agreements and all executive
officers have entered into executive retention agreements with Arch. The loss
or unavailability of one or more of its executive officers or the inability to
attract or retain key employees in the future could have a material adverse
effect on Arch. See "Business--Arch Management".
IMPACT OF THE YEAR 2000 ISSUE
Arch is currently upgrading its information systems in a manner which is
also intended to resolve the potential impact of the Year 2000 problem on the
processing of date-sensitive information by Arch's computerized systems and
transmission equipment. The Year 2000 problem is the result of computer
programs being written using two digits (rather than four) to define the
applicable year. Any of Arch's programs that have
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time-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar customary business activities.
In 1997 Arch designated members of its Information Services and Engineering
departments to assess the impact of the Year 2000 problem on its information
systems and the information systems of its customers, vendors and other
parties that service or otherwise interact with Arch. Data processing for
Arch's major operating systems is conducted in-house using programs developed
primarily by third-party vendors. An assessment of inventory and Year 2000
readiness for all systems and applications has been substantially completed
and most third-party vendors who provide applications to Arch have been
contacted. Arch intends to bring its major operating systems and outsourced
applications into compliance with Year 2000 requirements through the
installation of updated or replacement programs developed by third parties or
by new and enhanced software programs developed internally. Arch currently
believes that it will be able to modify or replace any affected systems by
September 30, 1999 in order to minimize any detrimental effects on Arch's
operations.
Arch expects that it will incur costs to replace existing hardware and
software which will be capitalized and amortized in accordance with Arch's
existing accounting policies, while maintenance or modification costs will be
expensed as incurred. Based on Arch's preliminary estimate of the costs to be
incurred, Arch does not expect that resolution of the Year 2000 problem will
have a material adverse effect on its results of operations and financial
condition. Costs of the Year 2000 project are based on current estimates and
actual results may vary significantly from such estimates. The ability of
third parties with whom Arch transacts business to adequately address their
Year 2000 issues is outside Arch's control. If Arch, its customers or vendors
are unable to resolve Year 2000 issues in a timely manner, there could be a
material adverse effect on Arch.
While MobileMedia is aware that certain of its software and paging systems
require modification, it is in the process of determining the full extent to
which it will be required to modify or replace significant portions of its
software and paging systems so that its systems function properly with respect
to dates in the year 2000 and thereafter. At present MobileMedia does not have
an estimate of the cost that may be incurred to comply with the Year 2000
issue. If such modifications and conversions are not made, or are not
completed on a timely basis, the Year 2000 issue could have a material adverse
effect on the operations of MobileMedia.
NO DIVIDENDS
Neither Arch nor MobileMedia has ever declared or paid cash dividends.
Neither Arch nor MobileMedia intends, and if the Merger is consummated Arch
does not intend, to declare or pay any cash dividends in the foreseeable
future. Certain covenants in the bank credit facility (the "API Credit
Facility") of Arch Paging, Inc. ("API"), an indirect wholly owned subsidiary
of Arch, and in other Arch debt instruments, effectively prohibit the
declaration or payment of cash dividends by Arch for the foreseeable future.
In addition, the terms of the Series C Preferred Stock generally prohibit the
payment of cash dividends on Stock unless all accrued and unpaid dividends on
the Series C Preferred Stock are paid in full. See "Market Price Information
and Dividend Policy", "Description of Securities--Series C Preferred Stock"
and "Description of Certain Arch Indebtedness".
HISTORY OF LOSSES
Neither Arch nor MobileMedia has reported any net income since their
respective inceptions. Arch reported net losses of $36.6 million, $114.7
million, $181.9 million and $109.8 million in the fiscal years ended December
31, 1995, 1996 and 1997 and the six months ended June 30, 1998, respectively.
MobileMedia reported net losses of $41.1 million, $1.1 billion, $124.6 million
and $37.3 million in the years ended December 31, 1995, 1996 and 1997 and the
six months ended June 30, 1998, respectively, and has operated as a debtor-in-
possession under Chapter 11 from January 30, 1997 to the present. For the year
ended December 31, 1997 and the six months ended June 30, 1998, and after
giving effect to the Merger, Arch would have incurred, on a pro forma basis, a
loss before extraordinary item of $306.0 million and $150.5 million,
respectively.
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For both Arch and MobileMedia, these historical net losses have resulted
principally from substantial depreciation and amortization expense, primarily
related to intangible assets and pager depreciation, interest expense, the
impairment of long-lived assets (in the case of MobileMedia) and other costs
of growth. Substantial and increased amounts of debt are expected to be
outstanding for the foreseeable future, which will result in significant
additional interest expense which could have a material adverse effect on Arch
following the Merger. See "--Future Capital Needs; Uncertainty of Additional
Funding" and "--High Degree of Leverage After the Merger". Arch expects to
continue to report net losses for the foreseeable future, whether or not the
Merger is consummated. See "Business--Arch Management's Discussion and
Analysis of Financial Condition and Results of Operations", "--MobileMedia
Management's Discussion and Analysis of Financial Condition and Results of
Operations", Arch's Consolidated Financial Statements and MobileMedia's
Consolidated Financial Statements included elsewhere herein.
VOLATILITY OF TRADING PRICE
The market price of Common Stock is subject to significant fluctuation.
Between July 1, 1997 and September 11, 1998, the reported sale price of Common
Stock on the Nasdaq National Market has ranged from a low of $2.3125 per share
to a high of $9.50 per share. The trading price of Common Stock following the
Merger will likely be affected by numerous factors, including the risk factors
set forth herein, as well as prevailing economic and financial trends and
conditions in the public securities markets. During recent periods, share
prices of paging companies such as Arch and Parent have exhibited a high
degree of volatility. Shortfalls in revenues or EBITDA from the levels
anticipated by the public markets could have an immediate and significant
adverse effect on the trading price of Common Stock in any given period. Such
shortfalls may result from events that are beyond Arch's immediate control and
can be unpredictable. The trading price of Arch's shares may also be affected
by developments, including reported financial results and fluctuations in
trading prices of the shares of other publicly held companies in the paging
industry generally, which may not have any direct relationship with Arch's
business or long-term prospects. See "Market Price Information and Dividend
Policy".
RISKS RELATING TO THE UNAUDITED COMBINED COMPANY PROJECTIONS
The managements of Arch and MobileMedia have jointly prepared the Unaudited
Combined Company Projections contained herein in connection with the
development of the Amended Plan to present the projected effects of the
Amended Plan and the transactions contemplated thereby if the Merger is
consummated. The Unaudited Combined Company Projections assume that the
Merger, the Amended Plan and the transactions contemplated thereby will be
implemented in accordance with their terms. The assumptions and estimates
underlying such Unaudited Combined Company Projections are inherently
uncertain and are subject to significant business, economic and competitive
risks and uncertainties that could cause actual results to differ materially
from those projected, including, among others, those enumerated therein or
herein. Accordingly, the Unaudited Combined Company Projections are not
necessarily indicative of the future financial condition or results of
operations of the Combined Company following the Merger, which may vary
significantly from those set forth in the Unaudited Combined Company
Projections. Consequently, the projected financial information contained
herein should not be regarded as a representation by Arch, the advisors of
Arch, Parent, MobileMedia, the advisors of Parent and MobileMedia or any other
person that the Unaudited Combined Company Projections can or will be
achieved. See "Forward-Looking Statements".
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS; POSSIBLE LOSS OF CORPORATE TAX
BENEFITS
It is anticipated that (S)382 of the Tax Code will limit the amount of
income earned by Arch after the Merger that may be offset by Arch's net
operating loss carryforwards and other tax attributes. It is also anticipated
that the net operating loss carryforwards and possibly other tax attributes of
MMC will be substantially reduced as a result of consummation of the Amended
Plan pursuant to (S)382 and (S)108 of the Tax Code. See "The Merger and the
Reorganization--Certain Federal Income Tax Consequences".
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RISKS RELATED TO ARCH
ARCH'S INDEBTEDNESS AND HIGH DEGREE OF LEVERAGE
Arch is highly leveraged. At June 30, 1998, Arch and its subsidiaries had
outstanding $1.0 billion of total debt, including (i) $125.0 million principal
amount of ACI's 9 1/2% Senior Notes due 2004 (the "ACI 9 1/2% Notes"), (ii)
$100.0 million principal amount of ACI's 14% Senior Notes due 2004 (the "ACI
14% Notes"), (iii) $127.5 million principal amount of ACI's 12 3/4% Senior
Notes due 2007 (the "ACI 12 3/4% Notes" and, together with the ACI 9 1/2%
Notes and the ACI 14% Notes, the "ACI Notes"), (iv) $350.5 million (accreted
value) of Arch's 10 7/8% Senior Discount Notes due 2008 (the "Arch Discount
Notes"), (v) $13.4 million principal amount of Arch's 6 3/4% Convertible
Subordinated Debentures due 2003 and (vi) $287.0 million of borrowings under
the API Credit Facility. See "Description of Certain Arch Indebtedness".
Arch's high degree of leverage may have adverse consequences for Arch,
including: (i) if necessary, the ability of Arch to obtain additional
financing for acquisitions, working capital, capital expenditures or other
purposes, may be impaired or extinguished or such financing may not be
available on acceptable terms, if at all; (ii) a substantial portion of the
EBITDA of Arch will be required to pay interest expense, which will reduce the
funds which would otherwise be available for operations and future business
opportunities; (iii) the API Credit Facility and the indentures (the "Arch
Indentures") under which the ACI Notes are outstanding contain financial and
restrictive covenants, the failure to comply with which may result in an event
of default which, if not cured or waived, could have a material adverse effect
on Arch; (iv) Arch may be more highly leveraged than its competitors which may
place it at a competitive disadvantage; (v) Arch's high degree of leverage
will make it more vulnerable to a downturn in its business or the economy
generally; and (vi) Arch's high degree of leverage may impair its ability to
participate in the future consolidation of the paging industry. In April 1997,
Arch reordered its operating priorities to improve capital efficiency and
strengthen its balance sheet by placing a higher priority on leverage
reduction than subscriber unit growth. As part of its reordered operating
priorities, Arch has implemented various initiatives to reduce capital costs
while sustaining acceptable levels of unit and revenue growth. As a result,
Arch's rate of internal growth in pagers in service has slowed and is expected
to remain below the rates of internal growth previously achieved by Arch, but
Arch has not yet reduced its financial leverage significantly. There can be no
assurance that Arch will be able to reduce its financial leverage
significantly or that Arch will achieve an appropriate balance between growth
which it considers acceptable and future reductions in financial leverage. If
Arch is not able to achieve continued growth in EBITDA, it may be precluded
from incurring additional indebtedness due to cash flow coverage requirements
under existing debt instruments. EBITDA is not a measure defined in GAAP and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. EBITDA, as determined by Arch,
may not necessarily be comparable to similarly titled data of other paging
companies. See "Business--Arch Management's Discussion and Analysis of
Financial Condition and Results of Operations", "Description of Certain Arch
Indebtedness" and Arch's Consolidated Financial Statements and Notes thereto
included elsewhere herein.
LENDER APPROVAL AND MERGER CASH REQUIREMENTS
To fund the estimated cash payments required by the Merger of approximately
$347.0 million (consisting of $262.0 million to fund a portion of the cash
payments to MobileMedia's secured creditors and $85.0 million to fund
estimated administrative expenses, amounts to be outstanding at the Effective
Time under the DIP Credit Agreement and transaction expenses), API and The
Bank of New York (the "Bank"), Toronto Dominion (Texas), Inc., Royal Bank of
Canada and Barclays Bank, PLC have executed a commitment letter for a $200
million increase to the API Credit Facility (the "API Credit Facility
Increase") and ACI intends to issue $200 million of new senior notes (the
"Planned ACI Notes"). The API Credit Facility Increase is subject to approval
by all API lenders, and there can be no assurance such approval will be
granted. In addition, there can be no assurance that Arch will complete an
offering of the Planned ACI Notes on terms satisfactory to it, if at all. As a
result, ACI and The Bear Stearns Companies, Inc., TD Securities (USA), Inc.,
the Bank and Royal Bank of Canada have executed a commitment letter for a $120
million bridge facility (the "Bridge Facility") which would be available to
Arch in the absence of an offering of the Planned ACI Notes. The Planned ACI
Notes, the Bridge Facility and the Merger each require approval by the
Required Lenders (as defined in the API Credit
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Facility), and there can be no assurance such approval will be granted. See
"Description of Certain Arch Indebtedness--Bridge Facility". If API's lenders
do not grant the foregoing approvals, and Arch is not able to arrange
alternative financing to make the cash payments required by the Merger and
therefore could not consummate the Merger, and Arch's failure to perform its
obligations under the Merger Agreement is not otherwise excused, Arch will be
liable to pay a fee of $32.5 million to MMC (the "MobileMedia Breakup Fee").
See "The Merger Agreement--Termination".
API CREDIT FACILITY, BRIDGE FACILITY AND INDENTURE RESTRICTIONS
The API Credit Facility, the Bridge Facility and the Arch Indentures impose
certain operating and financial restrictions on Arch. The API Credit Facility
requires API and, in certain cases, ACI, to maintain specified financial
ratios, among other obligations, including a maximum leverage ratio and a
minimum fixed charge coverage ratio, each as defined in the API Credit
Facility. In addition, the API Credit Facility limits or restricts, among
other things, API's ability to: (i) declare dividends or redeem or repurchase
capital stock; (ii) prepay, redeem or purchase debt; (iii) incur liens and
engage in sale/leaseback transactions; (iv) make loans and investments; (v)
incur indebtedness and contingent obligations; (vi) amend or otherwise alter
debt instruments and other material agreements; (vii) engage in mergers,
consolidations, acquisitions and asset sales; (viii) engage in transactions
with affiliates; and (ix) alter its lines of business or accounting methods.
In addition, the Bridge Facility and the Arch Indentures limit, among other
things: (i) the incurrence of additional indebtedness by Arch and its
Restricted Subsidiaries (as defined therein); (ii) the payment of dividends
and other restricted payments by Arch and its Restricted Subsidiaries; (iii)
asset sales; (iv) transactions with affiliates; (v) the incurrence of liens;
and (vi) mergers and consolidations. Arch's ability to comply with such
covenants may be affected by events beyond its control, including prevailing
economic and financial conditions. A breach of any of these covenants could
result in a default under the API Credit Facility, the Bridge Facility and/or
the Arch Indentures. Upon the occurrence of an event of default under the API
Credit Facility, the Bridge Facility or the Arch Indentures, the creditors
could elect to declare all amounts outstanding, together with accrued and
unpaid interest, to be immediately due and payable. If Arch were unable to
repay any such amounts, the creditors could proceed against the collateral
securing certain of such indebtedness. If the lenders under the API Credit
Facility accelerate the payment of such indebtedness, there can be no
assurance that the assets of Arch would be sufficient to repay in full such
indebtedness and the other indebtedness of Arch, including the Arch Notes and
any borrowings under the Bridge Facility. In addition, because the API Credit
Facility, the Bridge Facility and the Arch Indentures limit the ability of
Arch to engage in certain transactions except under certain circumstances,
Arch may be prohibited from entering into transactions that could be
beneficial to Arch including the Merger, which is subject to the approval of
the Required Lenders (as defined under the API Credit Facility). Arch will be
incurring additional indebtedness in connection with the Merger and the
Reorganization. See "--Lender Approval and Merger Cash Requirements" and
"Description of Certain Arch Indebtedness".
POSSIBLE FLUCTUATIONS IN REVENUES AND OPERATING RESULTS
Arch believes that future fluctuations in its revenues and operating results
are possible as the result of many factors, including competition, subscriber
turnover, new service developments and technological change. Arch's current
and planned debt repayment levels are, to a large extent, fixed in the short
term, and are based in part on its expectations as to future revenues, and
Arch may be unable to adjust spending in a timely manner to compensate for any
revenue shortfall. Due to the foregoing or other factors, it is possible that
future fluctuations in Arch's revenue or operating results may not meet the
expectations of securities analysts or investors, which may have a material
adverse effect on the price of Common Stock. See "Market Price Information and
Dividend Policy" and "Business--Arch Management's Discussion and Analysis of
Financial Condition and Results of Operations".
DIVISIONAL REORGANIZATION OF ARCH
In June 1998, the Arch Board approved a reorganization of its operations
(the "Divisional Reorganization"). As part of such reorganization, which is
expected to be implemented over a period of 18 to 24 months, Arch plans to
consolidate its seven operating divisions into four operating divisions and
consolidate
23
<PAGE>
certain regional administrative support functions, resulting in various
operating efficiencies. Once fully implemented, the Divisional Reorganization
is expected to result in annual cost savings of approximately $15.0 million.
Arch expects to reinvest a portion of these cost savings to expand its sales
activities. In connection with the Divisional Reorganization, Arch (i)
anticipates a net reduction of approximately 10% of its workforce, (ii) plans
to close certain office locations and redeploy other real estate assets and
(iii) recorded a restructuring charge of $16.1 million in the second quarter
of 1998. The restructuring charge consisted of approximately (i) $9.7 million
for employee severance and benefits, (ii) $3.5 million for lease obligations
and terminations and (iii) $2.9 million for the writedown of related assets.
There can be no assurance that the expected cost savings will be achieved or
that the reorganization of Arch's business will be accomplished smoothly,
expeditiously or successfully. The difficulties of such reorganization may be
increased by the need to integrate MobileMedia's operations in multiple
locations and to combine two corporate cultures. The inability to successfully
integrate the operations of MobileMedia would have a material adverse effect
on Arch. See "--Uncertainties Related to the Merger and the Reorganization--
Challenges of Business Integration".
ANTI-TAKEOVER PROVISIONS
The Arch Restated Certificate of Incorporation (the "Arch Certificate") and
the Arch By-laws (the "Arch By-laws") include provisions for a classified
Board of Directors, the issuance of "blank check" preferred stock (the terms
of which may be fixed by the Arch Board without further stockholder approval),
a prohibition on stockholder action by written consent in lieu of a meeting
and certain procedural requirements governing stockholder meetings. Arch also
has a stockholders rights plan. In addition, Section 203 of the DGCL will,
with certain exceptions, prohibit Arch from engaging in any business
combination with any "interested stockholder" (as defined therein) for a
three-year period following the date that such stockholder becomes an
interested stockholder. Such provisions may have the effect of delaying,
making more difficult or preventing a change in control or acquisition of
Arch. See "Description of Securities--Anti-Takeover Provisions".
RISKS RELATED TO MOBILEMEDIA
DISRUPTION OF OPERATIONS PRIOR TO AND FOLLOWING BANKRUPTCY FILING
MobileMedia's business operations have been adversely affected by
integration difficulties following its acquisition of MobileComm and Dial
Page, by liquidity problems arising prior to its January 30, 1997 bankruptcy
filing and by the reluctance of some customers and potential customers to do
business with MobileMedia while it operates under Chapter 11. In addition, one
of MobileMedia's primary assets is its experienced employees, who have the
ability to leave MobileMedia and to deprive it of the skill and knowledge
essential for executing its business strategy. Any further deterioration of
MobileMedia's business, or the loss of significant numbers of key employees,
could have a material adverse effect on MobileMedia and, as a result, on Arch
if the Merger is consummated. See "The MobileMedia Plan of Reorganization" and
"Business--MobileMedia".
ASSUMPTIONS REGARDING VALUE OF MOBILEMEDIA ASSETS
For financial reporting purposes, the fair value of the assets of
MobileMedia must be determined as of the Effective Time. Although such
valuation is not presently expected to result in values that are materially
greater or less than the values assumed in the preparation of the unaudited
pro forma condensed consolidated financial statements and the Combined Company
Projections, there can be no assurance with respect thereto. See "Unaudited
Pro Forma Condensed Consolidated Financial Statements" and "The Combined
Company--Unaudited Financial Projections and Operational Cost Synergies".
RISKS RELATED TO THE RIGHTS OFFERING
MARKET RISKS IN EXERCISING RIGHTS
The Subscription Price and the Warrant Exercise Price have been determined
by negotiation among Arch, the Debtors and certain Unsecured Creditors and are
not necessarily related to Arch's assets, net worth, results
24
<PAGE>
of operations or other recognized criteria of value. There can be no assurance
that the market value of the Common Stock or Class B Common Stock and Warrants
comprising a Unit or the Common Stock or Class B Common Stock for which the
Warrants may be exercised will not be below the valuation therefor implied by
the Subscription Price, the Warrant Exercise Price and trading prices for
Rights, as the case may be, between the time a holder exercises a Right and
the time the holder takes delivery of the Securities or at any time
thereafter. Arch has reserved the right to extend the Expiration Date to as
late as , 1999. The exercise of a Right is irrevocable. Subscribed funds
may not be withdrawn and no interest will be paid thereon to the subscribers.
See "The Rights Offering--Terms of the Rights Offering".
ABSENCE OF TRADING MARKET FOR THE RIGHTS, UNITS, CLASS B COMMON STOCK AND
WARRANTS
Prior to the Rights Offering, there has been no market for the Rights,
Units, Class B Common Stock or Warrants and there can be no assurance that a
market will develop or if developed, that it will be sustained. The Stock and
Warrants are immediately detachable from each other, will be represented by
separate certificates and will be separately tradeable. Arch will not apply
for quotation of the Rights or Units on the Nasdaq National Market and,
although it is possible that some broker-dealers may seek to have such
Securities listed on the Electronic Bulletin Board or in the National
Quotation Bureau's pink sheets at some time in the future, such Securities are
not likely to be subject to regular quotation. Although Arch has applied for
inclusion of the Class B Common Stock and the Warrants in the Nasdaq National
Market, such inclusion depends upon the willingness of a specified number of
broker-dealers to make a market in the Class B Common Stock and the Warrants;
accordingly, there can be no assurance that the Class B Common Stock and the
Warrants will be quoted for trading on the Nasdaq National Market or on any
other market. If any market does develop, the market price of these securities
might be volatile. See "--Risks Common to Arch and MobileMedia--Volatility of
Trading Price".
DILUTION
The Subscription Price per Unit will exceed the net tangible book value per
share of Common Stock, which is a negative number. See "Dilution".
Accordingly, subscribers in the Rights Offering will experience immediate and
substantial dilution.
CLASS B COMMON STOCK
The number of shares of Class B Common Stock (if any) to be received by the
Standby Purchasers in lieu of Common Stock will depend on the number of Rights
which are not exercised by other Unsecured Creditors and cannot be predicted.
Shares of Class B Common Stock have reduced voting power in comparison to
shares of Common Stock and may only be converted into shares of Common Stock
upon the transfer of such shares to a non-affiliate of the Standby Purchasers.
See "Description of Securities--Warrants".
POSSIBLE ADVERSE EFFECT ON MARKET PRICE OF COMMON STOCK OF SHARES ELIGIBLE FOR
FUTURE SALE
Upon consummation of the Rights Offering, a total of approximately shares
of Common Stock will be issued and a total of approximately shares of Stock
will be issuable upon exercise of the Warrants, the Standby Purchasers'
Warrants and other outstanding warrants and options. The issuance of such
Stock, together with the issuance of Common Stock under other Arch
compensation plans, would result in the issuance of a substantial amount of
Common Stock, thereby diluting the proportionate equity interests of the
holders of the Common Stock. No prediction can be made as to the effect, if
any, that future sales of Common Stock, or the availability of shares for
future sales, will have on the market price of the Common Stock prevailing
from time to time. Sales of substantial amounts of Common Stock (including
shares issued upon exercise of warrants or options), or the perception that
such sales could occur, could adversely affect prevailing market prices of the
Common Stock.
POSSIBLE INABILITY TO EXERCISE WARRANTS
A current prospectus covering the Stock issuable upon exercise of the
Warrants must be in effect before Arch may accept Warrant exercises. There can
be no assurance Arch will be able to have a prospectus in effect when this
Prospectus is no longer current, notwithstanding Arch's commitment to do so.
See "The Merger Agreement--Related Agreements--Registration Rights
Agreements".
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<PAGE>
THE RIGHTS OFFERING
Arch is offering the Securities described herein to Unsecured Creditors of
MobileMedia through the Rights Offering in the manner described herein,
subject to certain conditions.
BACKGROUND
The Debtors have filed the Amended Plan with the Bankruptcy Court in
connection with MobileMedia's Insolvency Proceedings under Chapter 11 of the
Bankruptcy Code (case number 97-174 (PJW)). See "The MobileMedia Plan of
Reorganization". The Plan contemplates the Merger of MMC with a subsidiary of
Arch at the Plan's Effective Time. Immediately prior to the Merger, Parent
will contribute all of its assets to MMC, and MMC's subsidiaries will be
consolidated into a single subsidiary which will become an indirect wholly
owned subsidiary of Arch as a result of the Merger. See "The Merger
Agreement". The Merger is conditioned upon satisfaction of the Closing
Conditions, including (i) entry by the Bankruptcy Court of a Confirmation
Order and to the extent required by the Merger Agreement, such order has
become a final order, (ii) receipt of all other necessary governmental
approvals and expiration of all waiting periods under the HSR Act and (iii)
satisfaction of various other conditions. The Amended Plan provides for
distribution of cash to certain secured creditors and distribution of the
shares of Common Stock in the Directly Distributed Creditor Stock Pool to
Unsecured Creditors at the Effective Time. These shares are described in the
Disclosure Statement. The Amended Plan also contemplates the issuance and sale
of Securities in the Rights Offering for approximately $217.0 million in cash,
which will be used to fund a portion of the cash payment to secured creditors.
Votes in favor of Plan Approval are being solicited pursuant to the
Disclosure Statement, which was mailed to the creditors of MobileMedia and
Parent on or about , 1998 and which has been filed as an exhibit to the
Registration Statement. The Bankruptcy Court has approved the Disclosure
Statement as containing adequate information with respect to the Plan in
accordance with Section 1125 of the Bankruptcy Code. The approval of Arch's
stockholders to the Merger is expected to occur at the Special Meeting on ,
1998.
TERMS OF THE RIGHTS OFFERING
Each Unsecured Creditor will receive a distribution at a Distribution Ratio
of one Right for each $ of Unsecured Claims held by it, if no Adjustment
is made, or between $ and $ if an Adjustment is made (other than certain
holders of small Unsecured Claims who elect to receive cash). A total of
Rights (assuming that no Adjustment is made, and subject to proportionate
increase if an Adjustment is made) has been allocated on the basis of
undisputed Unsecured Claims allowed as of , 1998. If additional Unsecured
Claims are allowed prior to the Confirmation Date, additional Rights will be
allocated to the holders of such Unsecured Claims. The Distribution Ratio is
based upon the ratio which each unsecured claim bears to the sum of allowed
Unsecured Claims and an estimate of the amount for which disputed Unsecured
Claims and Unsecured Claims arising from the rejection of executory contracts
and unexpired leases (the "Disputed Claims") will be allowed. The Rights
allocable to Disputed Claims which are not allowed prior to the Confirmation
Date will be sold by Arch for cash (or in such other manner as Arch reasonably
determines) for the account of holders of Unsecured Claims allowed thereafter,
or as otherwise provided in the Amended Plan. When a disputed claim is
resolved, and to the extent such claim is allowed, the holder of such claim
will receive a cash payment in respect of the Rights the holder of such claim
would have been entitled to receive had such claim been allowed when the
Rights were distributed. No fractional Rights or cash in lieu thereof will be
issued; instead, Arch will round the number of Rights distributed to each
Unsecured Creditor up or down to the nearest whole number.
The Rights will be evidenced by transferable certificates which will be
mailed to each Unsecured Creditor promptly following the effective date of the
Registration Statement or, if later, the date of allowance of its Unsecured
Claims. The Rights will expire at 5:00 p.m., New York City time, on the
Expiration Date, which will be a date selected by Arch and MobileMedia which
is at least 15 days after all Closing Conditions (other than the condition set
forth in Section 5.1(e) of the Merger Agreement relating to the finality of
the FCC Grant,
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<PAGE>
expiration of the Rights Offering and certain other conditions which by their
terms cannot be satisfied until the Effective Time) are first satisfied or, if
legally permissible, waived. Any Rights which remain unexercised at the close
of business on the Expiration Date will no longer be exercisable and will
cease to have any value.
Holders of Rights may subscribe for Units in the Rights Offering in the
manner described under "--Method of Exercise of Rights". All subscriptions
will be irrevocable. Subscriptions for Units received by Arch will be accepted
subject to Arch's right (to the extent permitted by the Merger Agreement) to
reject any subscription and subject to satisfaction or waiver of the Closing
Conditions and consummation of the Merger. Subscription documents and
subscribed funds will be held in escrow by the Subscription Agent, pending
receipt of subscriptions for all of the Units. If the Rights Offering is not
fully subscribed by the Expiration Date, the Plan is not confirmed by March
31, 1999 or the Merger does not take place by June 30, 1999, the Subscription
Agent will promptly return all subscribed funds to subscribers without
interest. Any and all interest earned on subscribed funds will be remitted to
Arch.
All purchasers of Units will acquire shares of Common Stock and (unless an
Adjustment is made) Warrants to purchase Common Stock, except that Standby
Purchasers or others who are deemed to be part of a "group" with such Standby
Purchasers under Rule under the Exchange Act will instead acquire shares of
Class B Common Stock and (unless an Adjustment is made) Warrants to purchase
Class B Common Stock to the extent described under "--Standby Purchase
Agreements" if they would otherwise hold more than 49.0% of the securities of
Arch generally entitled to vote in the election of directors or 49.0% of the
total voting power of the outstanding securities of Arch. Shares of Common
Stock and Class B Common Stock are identical except that holders of Common
Stock are entitled to cast one vote per share while holders of Class B Common
Stock are entitled to cast 1/100th of one vote per share. Shares of Class B
Common Stock are convertible into an equal number of shares of Common Stock in
specified circumstances. See "Description of Securities". The Common Stock,
Class B Common Stock and Warrants included in the Units will be transferable
separately, commencing immediately after issuance.
STANDBY PURCHASE AGREEMENTS
Certain unsecured creditors of MobileMedia, comprised of W.R. Huff, as agent
for various discretionary accounts and affiliates, The Northwestern Mutual
Life Insurance Company, ("Northwest Mutual") acting for itself and its Group
Annuity Separate Account, the Northwestern Mutual Series Fund, Inc., Credit
Suisse First Boston Corporation and Whippoorwill as agent for various
discretionary accounts, have each entered into separate commitment letters
dated as of August 18, 1998 and amended as of September 3, 1998 (collectively,
as amended, the "Standby Purchase Agreements") to become Standby Purchasers
and, in such capacity, to purchase, in the aggregate and at the Subscription
Price per share, any and all of the remaining Units in the Rights Offering
that are not purchased by other Unsecured Creditors, for an aggregate purchase
price of up to approximately $217.0 million. Each Standby Purchaser is
obligated to exercise only the portion of the Rights allocable to it on
account of its Unsecured Claims. Obligations of the Standby Purchasers under
the Standby Purchase Agreements are several and not joint.
The Standby Purchase Agreements permit the Standby Purchasers to acquire or
dispose of Rights, as well as the underlying Unsecured Claims in respect of
which the Rights are distributed. However, any such acquisition or disposition
will not relieve the Standby Purchasers' commitments to purchase Units to the
extent they are not purchased by third parties.
The Standby Purchasers will be entitled to deliver the subscription price of
the Rights on the Effective Date, following notification as the number of
Rights exercised by third parties. Other holders of Rights will be required to
exercise Rights, if at all, prior to the Expiration Date.
The commitment of each Standby Purchaser is subject to a number of
conditions, including: (i) that the Confirmation Order, in a form reasonably
satisfactory to the Standby Purchaser, shall have been entered and shall have
become a Final Order (as defined in the Merger Agreement), provided that one
Standby Purchaser may not
27
<PAGE>
assert this condition if all other Standby Purchasers, acting in good faith,
shall have waived the requirement of finality; (ii) the satisfaction or, with
the written consent of the Standby Purchaser, the waiver of all conditions
precedent to the obligations of each of the parties to the Merger Agreement
and all conditions precedent to the effectiveness of the Plan, provided, that
the conditions contained in Sections 5.1(e) and (h), Sections 5.2(a), (b),
(c), (d) and (e) and Sections 5.3(a), (b), (c) and (e) of the Merger Agreement
(the complete text of which is set forth in Annex B) may be waived without the
written consent of the Standby Purchaser; (iii) the Shelf Registration
Statement covering the resale of Stock, Class B Common Stock and Warrants by
the Standby Purchaser shall be effective; (iv) Arch shall have executed the
Standby Purchaser Registration Rights Agreement; (v) any and all amendments or
modifications to the Merger Agreement or any consents or waivers delivered by
Arch or MobileMedia to the other under the Merger Agreement (other than
consents under Section 4.5 of the Merger Agreement or waiver of the conditions
specified in clause (ii) above), shall have been satisfactory to the Standby
Purchaser; (vi) the representations and warranties made in the Merger
Agreement by Arch and MobileMedia shall have been accurate; (vii) Arch shall
have obtained the necessary financing to consummate the Merger (other than as
a result of the Standby Purchaser not fulfilling its commitment) on certain
minimum terms; (viii) each other Standby Purchaser shall have fulfilled its
commitment; (ix) the Rights, shares of Common Stock, shares of Class B Common
Stock and Warrants shall be issued and distributed pursuant to an exemption
from registration under the Securities Act pursuant to Section 1145 of the
Bankruptcy Code or shall have been registered under the Securities Act, such
Registration Statement shall have been declared effective and no stop order
shall be in effect; (x) the FCC Grant (as defined herein) shall have been
issued by the FCC and it shall have become a Final Order (as defined in the
Merger Agreement), provided that a Standby Purchaser may not assert this
condition if each other Standby Purchaser, acting in good faith, shall have
waived this provision or if the reason that the FCC Grant shall not have
become a Final Order is a result of action taken by any present or former
officer of MobileMedia considered or determined by the FCC to be an alleged or
an actual wrongdoer for purposes of the FCC proceeding; and (xi) any
applicable waiting periods under the HSR Act shall have expired or been
terminated early. The obligation of the Standby Purchaser is also subject to
the condition that there shall not have occurred between June 30, 1998 and the
Confirmation Date (and between June 30, 1998 and the Effective Date if the
Effective Date is more than 90 days after the Confirmation Date), (i) any
event or events (other than those affecting generally the economy or the
industry in which Arch and MobileMedia conduct their respective businesses)
which has had or would have a material adverse effect on the business, assets
(including licenses, franchises and other intangible assets), financial
condition, operating income or prospects of the Combined Company, (ii) any
event or events involving a regulatory or statutory change and effecting
generally the industry in which Arch and MobileMedia conduct their respective
businesses which would materially and adversely affect the ability of the
Combined Company to operate its business, or (iii) an event or events
affecting generally the industry in which Arch and MobileMedia conduct their
respective businesses which would materially and adversely affect the ability
of Combined Company to operate its business (except that no single Standby
Purchaser may not assert such condition if each of the other Standby
Purchasers shall have waived this condition).
In addition, Arch and MobileMedia made certain representations and
warranties about itself to the Standby Purchasers, including (i) due
organization, valid existence and good standing, with all requisite corporate
power and authority to perform its obligations under such Standby Purchase
Agreement, (ii) subject to stockholder approval (in the case of Arch) and
Bankruptcy Court approval (in the case of MobileMedia) the execution, delivery
and performance of such Standby Purchase Agreement being duly and validly
authorized by all necessary corporate action, (iii) the validity and
enforceability of such Standby Purchase Agreement as against Arch and
MobileMedia, respectively, (iv) the compliance of the transactions
contemplated by the Standby Purchase Agreement with their respective
certificates of incorporation and by laws, certain contracts and applicable
laws, (v) the accuracy of the representations and warranties made by Arch and
MobileMedia, respectively, in the Merger Agreement, (vi) the accuracy of
copies of certain agreements given to each Standby Purchaser, (vii) the
accuracy of the information provided by each of Arch and MobileMedia, (ix) the
absence of any Buyer Material Adverse Change (as defined herein) or Company
Material Adverse Change (as defined herein), and (x) the due authorization,
valid issuance, nonassessability and absence of preemptive rights with respect
to the Stock issued in the transaction. Each Standby Purchaser represents (i)
as to its organization, qualification, corporate power and
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<PAGE>
authority to enter into and perform its obligations under the applicable
Standby Purchase Agreement; (ii) the taking of all required corporate action
on the part of the Standby Purchaser, (iii) the validity and enforceability of
the applicable Standby Purchase Agreement, (iv) the compliance of the
transactions contemplated by the applicable Standby Purchase Agreement with
its organizational documents, certain contracts and applicable laws, (v) the
accuracy of certain information provided by the Standby Purchaser to Arch and
MobileMedia, and (vi) the aggregate holdings of each Standby Purchaser of debt
securities of MobileMedia.
Each of Arch and MobileMedia also covenants to provide the Unsecured
Creditor Committee (as defined herein) notices of all information to be made
available to Arch by the Unsecured Creditor Committee. The Unsecured Creditor
Committee has undertaken with each Standby Purchaser to provide copies of all
notices, documents or information provided to it by Arch, Parent or
MobileMedia and to consult with such Standby Purchaser prior to delivering any
consent or exercising any right of the Unsecured Creditor Committee pursuant
to the Merger Agreement or under the Amended Plan. Each Standby Purchaser
and/or its counsel has the right to review and comment on the registration
statement to be filed on behalf of such Standby Purchaser. Arch has
undertaken, should the transaction close, to reimburse reasonable fees
incurred by each Standby Purchaser in negotiating and documenting this
transaction, up to a maximum of $100,000 per Standby Purchaser. In addition,
each Standby Purchaser has covenanted not to engage in any transactions that
would have an adverse effect on the market share price of Common Stock and has
committed to vote for acceptance of the Amended Plan all Unsecured Claims held
by it.
In consideration of their purchase commitments contained in the Standby
Purchase Agreements, the Standby Purchasers will be granted Standby
Purchasers' Warrants to purchase shares of Stock which will constitute
approximately 2.5% of all outstanding Common Stock immediately following the
Merger on a Fully Diluted Basis. The exercise price of the Standby Purchasers'
Warrants will be $8.19 per share if no Adjustment is made and will be equal to
the exercise price of the Arch Stockholders' Participation Warrants if an
Adjustment is made. The Standby Purchase Agreements require Arch to nominate
one designee of W.R. Huff and one designee of Whippoorwill to be elected as
directors of Arch for so long as W.R. Huff or Whippoorwill, as the case may
be, holds securities of Arch having at least 10% of the combined voting power
of all outstanding securities of Arch (5% in the case of the initial
renomination of such nominees).
Arch will enter into a Registration Rights Agreement with the Standby
Purchasers. See "The Merger Agreement--Related Agreements--Registration Rights
Agreements".
In the event that the purchases of Units by the Standby Purchasers would
cause the Standby Purchasers, together with any other person or entity that
may be an associate or affiliate thereof, in the aggregate, to beneficially
own, within the meaning of Sections 13(d)(3) of the Exchange Act, more than
49.0% of the securities of Arch generally entitled to vote in the election of
directors or more than 49.0% of the total voting power of the outstanding
securities of Arch, the Standby Purchasers will receive instead, proportionate
to their obligations to purchase Units and in lieu of shares of Common Stock,
shares of Class B Common Stock such that the Standby Purchasers, in the
aggregate, will hold no more than 49.0% of the securities of Arch generally
entitled to vote in the election of directors or more than 49% of the total
voting power of the outstanding securities of Arch. The Class B Common Stock
will be identical in all respects to Common Stock, except that holders of
Class B Common Stock will not be entitled to vote in the election of directors
and will be entitled to 1/100th of a vote per share with respect to all other
matters. See "Description of Securities--Class B Common Stock".
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<PAGE>
The several commitments of the Standby Purchasers to purchase Units, and
their entitlement to receive Standby Purchasers' Warrants, are as follows:
<TABLE>
<CAPTION>
COMMITMENT
RIGHTS AMOUNT PERCENTAGE
EXERCISE RELATING TO OF STANDBY
NAME AND ADDRESS OF STANDBY COMMITMENT UNEXERCISED TOTAL PURCHASERS'
PURCHASER AMOUNT RIGHTS COMMITMENT WARRANTS
- --------------------------- ---------- ----------- ---------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
W.R. Huff Asset Management Co.,
L.L.C., as agent for various
discretionary accounts and
affiliates..................... $ 39.27 $ 35.80 $75.07 34.60%
67 Park Place, 9th Floor
Morristown, New Jersey 07960
Claim Amount: $
The Northwestern Mutual Life
Insurance Company.............. $ 10.95 $ 9.97 $20.92 9.64%
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Claim Amount: $
The Northwestern Mutual Life
Insurance Company,
for its General Annuity
Separate Account............... $ 2.65 $ 2.42 $ 5.07 2.34%
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Claim Amount: $
Northwestern Mutual Series Fund,
Inc.--
High Yield Bond Portfolio...... $ .75 $ .69 $ 1.44 0.66%
Yield Bond Portfolio
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Claim Amount: $
Credit Suisse First Boston
Corporation.................... $ 29.48 $ 26.88 $56.36 25.97%
11 Madison Avenue, 4th Floor
New York, New York 10010
Claim Amount: $
Whippoorwill Associates, Inc.,
as general partner of and/or
agent for various discretionary
accounts....................... $ 30.42 $ 27.72 $58.14 26.79%
11 Martine Avenue
White Plains, New York 10606
Claim Amount: $
Total........................... $113.52 $103.48 $217.0 100.00%
</TABLE>
None of the Standby Purchasers is required to purchase more than the number
of Units identified as its Total Commitment set forth opposite its name above.
If an Adjustment is made and any of the Arch Stockholders' Rights are
exercised, each Standby Purchaser will have the right to elect to reduce the
number of Units which it is required to purchase by a number equal to its pro
rata share of the number of shares of Common Stock that are issued pursuant to
exercise of Arch Stockholders' Rights. The Standby Purchasers have 10 business
days, after receipt of notification from Arch as to the exercise of the Arch
Stockholder Rights, to elect to reduce their commitment.
SUBSCRIPTION AGENT
Arch has appointed The Bank of New York as Subscription Agent for the Rights
Offering. For its services in processing the exercise of Rights, the
Subscription Agent will receive a fee from Arch estimated to be $ and
reimbursement for all out-of-pocket expenses relating to the Rights Offering.
The Subscription Agent is also Arch's transfer agent and registrar.
INFORMATION AGENT
Arch has appointed Bear Stearns as Information Agent for the Rights
Offering. The Information Agent will receive a fee estimated to be $ and
reimbursement for all out-of-pocket expenses related to the Rights Offering.
Any questions or requests for additional copies of this Prospectus, the
instructions to the Subscription Agreement (the "Instructions") or the Notice
of Guaranteed Delivery may be directed to the Information Agent at the
following address and telephone number:
30
<PAGE>
Arch has not employed any brokers, dealers or underwriters in connection
with the solicitation of exercises of Rights in the Rights Offering, and,
except as described above, no other commissions, fees or discounts will be
paid in connection with such solicitation. Certain directors and officers of
Arch may answer questions or solicit responses from Rights holders, but such
directors and officers will not receive any commissions or compensation for
such services other than their normal employment compensation.
METHOD OF EXERCISE OF RIGHTS
Rights may be exercised by filling in and signing the reverse side of the
Subscription Certificate and mailing it in the envelope provided. In addition,
Rights may be exercised by delivering the completed and signed Subscription
Certificate to the Subscription Agent, together with payment for the Units as
described below under "Payment for Units". Rights may also be exercised
through a Rights holder's broker, or other nominee if such shareholder's
shares of Common Stock are held in such broker's or nominee's name. Such
brokers or nominees may charge a servicing fee for exercising such Rights.
Completed Subscription Certificates must be received by the Subscription
Agent prior to 5:00 p.m., New York City time, on the Expiration Date (unless
payment is effected by means of a notice of guaranteed delivery as described
below under "Payment for Units"). The Subscription Certificate and payment
should be delivered to the offices of the Subscription Agent by one of the
methods described below:
(1)By mail:
The Bank of New York
Tender and Exchange Department
P.O. Box 11248
Church Street Station
New York, New York 10286-1248
(2)By Hand, Express Mail or Overnight Courier:
The Bank of New York
Tender and Exchange Department
101 Barclay Street
Receive and Delivery Window-Street Level
New York, New York 10286
PAYMENT FOR UNITS
Holders of Rights who acquire Units may choose between the following methods
of payment.
(1) A subscription will be accepted by the Subscription Agent if, prior to
5:00 p.m., New York City time, on the Expiration Date, the Subscription Agent
has received a completed and executed notice of guaranteed
delivery by facsimile (telecopy) or otherwise from a bank, a trust company or
a NYSE member, guaranteeing delivery of (i) payment of the full Subscription
Price for the Units subscribed for and (ii) a properly completed and executed
Subscription Certificate. The Subscription Agent will not honor a notice of
guaranteed delivery if a properly completed and executed Subscription
Certificate and full payment is not received by the Subscription Agent by the
close of business on the third business day after the Expiration Date. The
notice of guaranteed delivery may be delivered to the Subscription Agent in
the same manner as Subscription Certificates at the addresses set forth above,
or may be transmitted to the Subscription Agent together with a completed
Subscription Certificate by facsimile transmission (telecopy number (212) 815-
6213; confirm by telephone (800) 507-9357).
(2) Alternatively, a holder of Rights can send the Subscription Certificate
together with payment in the form of a check for the Units subscribed for. To
be accepted, payment, together with the executed Subscription Certificate,
must be received by the Subscription Agent at its Tender and Exchange
Department, P.O. Box 11248, Church Street Station, New York, New York 10286-
1248 or its Tender and Exchange Department, 101 Barclay Street, Receive and
Delivery Window--Street Level, New York, New York 10286 prior to 5:00 p.m.,
New York City time, on the Expiration Date. The Subscription Agent will
deposit all stock purchase checks received by it prior to the final due date
into a segregated interest-bearing account (which interest will accrue solely
to the benefit of Arch) pending the consummation of the Rights Offering.
31
<PAGE>
A PAYMENT PURSUANT TO THIS METHOD MUST BE IN UNITED STATES DOLLARS BY MONEY
ORDER OR CHECK DRAWN ON A BANK LOCATED IN THE UNITED STATES. PAYMENT MUST BE
PAYABLE TO , AND MUST ACCOMPANY AN EXECUTED SUBSCRIPTION CERTIFICATE FOR
SUCH SUBSCRIPTION CERTIFICATE TO BE ACCEPTED. THE SUBSCRIPTION AGENT WILL NOT
ACCEPT CASH AS A MEANS OF PAYMENT FOR SHARES.
Whichever of the two methods described above is used, issuance and delivery
of certificates for the Units purchased are subject to collection of any
checks or money orders and actual payment pursuant to any notice of guaranteed
delivery. Payment of the Subscription Price will be deemed to have been
received by the Subscription Agent only upon (a) clearance of any uncertified
check, (b) receipt by the Subscription Agent of any certified check or bank
draft drawn upon a U.S. bank or of any postal, telegraphic or express money
order or (c) receipt of good funds in the Subscription Agent's account
designated above.
Holders who hold Rights for the account of others, such as brokers, trustees
or depositaries for securities, should notify the respective beneficial owners
of such shares as soon as possible to ascertain such beneficial owners'
intentions and to obtain instructions with respect to the Rights. If the
beneficial owner so instructs, the record holder of such Rights should
complete Subscription Certificates and submit them to the Subscription Agent
with the proper payment. In addition, beneficial owners of Rights held through
such a holder should contact the holder and request the holder to effect
transactions in accordance with the beneficial owner's instructions.
The instructions accompanying the Subscription Certificates should be read
carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES OR
PAYMENTS TO ARCH.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK
OF THE RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO
ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR 5:00
P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL
CHECKS MAY TAKE SEVERAL BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO PAY,
OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY
ORDER.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by Arch, whose determination will be
final and binding. Arch, in its sole discretion, may waive any defect or
irregularity, or permit a defect or irregularity to be corrected within such
time as it may determine, or reject the purported exercise of any Right.
Subscriptions will not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as Arch determines
in its sole discretion. Neither Arch nor the Subscription Agent will be under
any duty to give notification of any defect or irregularity in connection with
the submission of Subscription Certificates or incur any liability for failure
to give such notification.
Certificates representing Securities purchased will be delivered to the
purchaser as soon as practicable after the Effective Time and after all
allocations have been effected. It is expected that such certificates will be
available for delivery within business days following the Expiration Date.
If either the number of Rights being exercised is not specified on a
Subscription Certificate, or the payment delivered is not sufficient to pay
the full aggregate Subscription Price for all Units stated to be subscribed
for, the Rights holder will be deemed to have exercised the maximum number of
Rights that could be exercised for the amount of the payment delivered by such
Rights holder. If the payment delivered by the Rights holder exceeds the
aggregate Subscription Price for the number of Rights evidenced by the
Subscription Certificate(s) delivered by such Rights holder, any excess
payment will be returned to the Rights holder as soon as practicable by mail,
without interest or deduction.
Any questions or requests for assistance concerning the method of exercising
Rights or requests for additional copies of this Prospectus, the Instructions
or the Notice of Guaranteed Delivery should be directed to the Information
Agent, Bear Stearns, at its address set forth on the back cover page of this
Prospectus.
32
<PAGE>
NO REVOCATION
AFTER A HOLDER OF RIGHTS HAS SUBSCRIBED, SUCH SUBSCRIPTION MAY NOT BE
REVOKED BY SUCH RIGHTS HOLDER.
METHOD OF TRANSFERRING RIGHTS
Rights may be purchased or sold in private transactions. It is not
anticipated that the Rights will be quoted for trading on the Nasdaq National
Market or quoted by broker-dealers on the Electronic Bulletin Board or
elsewhere.
The Rights evidenced by a single Subscription Certificate may be transferred
in whole by endorsing the Subscription Certificate for transfer in accordance
with the Instructions. A portion of the Rights evidenced by a single
Subscription Certificate may be transferred by delivering to the Subscription
Agent a Subscription Certificate properly endorsed for transfer, with
instructions to register such portion of the Rights evidenced thereby in the
name of the transferee (and to issue a new Subscription Certificate to the
transferee evidencing such transferred Rights). In such event, a new
Subscription Certificate evidencing the balance of the Rights will be issued
to the Rights holder or, if the holder so instructs, to an additional
transferee.
Rights holders wishing to sell all or a portion of their Rights should allow
a sufficient amount of time prior to the Expiration Date for (a) the transfer
instructions to be received and processed by the Subscription Agent, (b) a new
Subscription Certificate to be issued and transmitted to the transferee or
transferees with respect to transferred Rights, and to the transferor with
respect to retained Rights, if any, and (c) the Rights evidenced thereof.
Neither Arch nor the Subscription Agent shall have any liability to a
transferee or transferor if Subscription Certificates are not received in time
for exercise or sale prior to the Expiration Date.
Except for fees charged by the Subscription Agent (which will be paid by
Arch as described herein), all commissions, fees and other expenses (including
brokerage commissions and transfer taxes) incurred in
connection with the purchase, sale or exercise of Rights will be for the
account of the transferor of the Rights, and none of such commissions, fees or
expenses will be paid by Arch or the Subscription Agent.
PROCEDURES FOR BOOK ENTRY TRANSFER FACILITY PARTICIPANTS
Arch anticipates that the Rights will be eligible for transfer through, and
that the exercise of the Rights may be effected through, the facilities of
Depository Trust Company ("DTC").
FOREIGN AND CERTAIN OTHER HOLDERS
Subscription Certificates will not be mailed to Unsecured Creditors or other
holders whose addresses are outside the United States, but will be held by the
Subscription Agent for each such holder's account. To exercise their Rights,
such persons must notify the Subscription Agent at or prior to 5:00 p.m., New
York time, on the Expiration Date. Such holders' Rights will expire at the
Expiration Date.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
For United States federal income tax purposes ("tax purposes"), Unsecured
Creditors may recognize income, gain or loss in connection with the
distribution of Rights to them, depending upon their particular circumstances,
including whether their Unsecured Claims are properly treated as securities
for tax purposes, what items of income and deduction they have previously
taken into account for tax purposes with respect to such claims, and whether
their receipt of Rights is treated as part of a "reorganization" for tax
purposes. Unsecured Creditors generally will not recognize any gain or loss in
connection with the exercise of Rights or Warrants. Unsecured Creditors may
recognize income, gain or loss upon the sale or other taxable disposition of
Rights, Stock or Warrants or the receipt of distributions with respect to
Stock. See "Certain Federal Income Tax Consequences."
33
<PAGE>
USE OF PROCEEDS
The net proceeds of the Rights Offering are expected to be $ million,
after payment of offering expenses in connection with the Rights Offering
(estimated at $ million). Such net proceeds will be applied in their
entirety towards payment of a portion of the amounts payable to creditors
under the Amended Plan. See "The MobileMedia Plan of Reorganization--The
Amended Plan".
DILUTION
Arch currently has a negative tangible net worth. The negative tangible net
book value of the shares of Common Stock as of June 30, 1998 was approximately
($829.9 million) or ($39.4 million) per share. This negative tangible net book
value would be ($ million) or ( ) per share after giving effect to
consummation of the Merger as if it had occurred on such date but without
giving effect to the Rights Offering. "Net tangible book value" per share
represents the amount of total tangible assets (total assets less intangible
assets) less total liabilities, divided by the number of shares of Common
Stock outstanding. After giving effect to the sale by Arch of shares of
Common Stock in the Rights Offering (treating shares of Class B Common Stock
as shares of Common Stock and ascribing no value to the Warrants for the
purpose of such calculation) for gross proceeds of $217 million, and after
deducting estimated offering expenses of $ million, the pro forma negative
net tangible book value of Arch as of June 30, 1998 would have been
approximately ($ million), or ($ ) per share, representing an immediate
and substantial dilution of ($ ) per share, in respect of the Subscription
Price for shares of Stock purchased pursuant to the Rights Offering. The
following table illustrates the per share dilution:
<TABLE>
<S> <C>
Subscription Price........................................... $5.00(/1/)
Net tangible book value per share before Rights Offering, as
adjusted for the Merger.....................................
Increase per share attributable to the Rights Offering.......
-----
Pro forma net tangible book value per share after Rights
Offering....................................................
-----
Dilution to persons exercising Rights........................
=====
</TABLE>
- --------
(1) Based upon the lowest point of a range for the Initial Measurement Period
under the formula described under "The MobileMedia Plan of
Reorganization--Calculation of Shares". If the Subscription Price is
greater than $5.00, the amount of dilution, calculated in the manner set
forth above, will be greater; if the Subscription Price is less than
$5.00, the amount of such dilution will be less.
34
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA--ARCH
The following table sets forth selected historical consolidated financial
and operating data of Arch for each of the two years ended August 31, 1994,
the four months ended December 31, 1993 and 1994, each of the four years ended
December 31, 1997 and the six months ended June 30, 1997 and 1998. The
selected financial and operating data as of December 31, 1994, 1995, 1996 and
1997 and for each of the three years ended December 31, 1997 have been derived
from Arch's audited Consolidated Financial Statements and Notes thereto. The
selected financial and operating data as of June 30, 1998 and for the six
months ended June 30, 1997 and 1998 have been derived from Arch's unaudited
Consolidated Financial Statements and Notes thereto. The following
consolidated financial information should be read in conjunction with
"Business--Arch Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Arch's Consolidated Financial Statements and
Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FOUR MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
AUGUST 31, (1) DECEMBER 31, (1) YEAR ENDED DECEMBER 31, JUNE 30,
------------------ ----------------- ----------------------------------------- --------------------
1993 1994 1993 1994 1994 (1) 1995 (1) 1996 1997 1997 1998
-------- -------- ------- -------- -------- --------- --------- --------- --------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF
OPERATIONS DATA:
Service, rental
and maintenance
revenues........ $ 39,610 $ 55,139 $16,457 $ 22,847 $ 61,529 $ 138,466 $ 291,399 $ 351,944 $ 171,978 $ 184,280
Product sales.... 5,698 12,108 2,912 5,178 14,374 24,132 39,971 44,897 22,290 21,305
-------- -------- ------- -------- -------- --------- --------- --------- --------- ---------
Total revenues... 45,308 67,247 19,369 28,025 75,903 162,598 331,370 396,841 194,268 205,585
Cost of products
sold............ (4,031) (10,124) (2,027) (4,690) (12,787) (20,789) (27,469) (29,158) (14,291) (14,690)
-------- -------- ------- -------- -------- --------- --------- --------- --------- ---------
41,277 57,123 17,342 23,335 63,116 141,809 303,901 367,683 179,977 190,895
Operating
expenses:
Service, rental
and
maintenance.... 9,532 13,123 3,959 5,231 14,395 29,673 64,957 79,836 38,111 40,409
Selling......... 7,307 10,243 3,058 4,338 11,523 24,502 46,962 51,474 26,632 24,244
General and
administrative.. 13,123 17,717 5,510 7,022 19,229 40,448 86,181 106,041 51,345 56,516
Depreciation and
amortization... 13,764 16,997 5,549 6,873 18,321 60,205 191,871 232,347 120,167 108,400
Restructuring
charge......... -- -- -- -- -- -- -- -- -- 16,100
-------- -------- ------- -------- -------- --------- --------- --------- --------- ---------
Operating income
(loss).......... (2,449) (957) (734) (129) (352) (13,019) (86,070) (102,015) (56,278) (54,774)
Interest and non-
operating
expenses, net... (2,861) (4,112) (1,132) (1,993) (4,973) (22,522) (75,927) (97,159) (47,715) (51,123)
Equity in loss of
affiliate (2)... -- -- -- -- -- (3,977) (1,968) (3,872) (1,812) (2,219)
-------- -------- ------- -------- -------- --------- --------- --------- --------- ---------
Income (loss)
before income
tax benefit and
extraordinary
item............ (5,310) (5,069) (1,866) (2,122) (5,325) (39,518) (163,965) (203,046) (105,805) (108,116)
Income tax
benefit......... -- -- -- -- -- 4,600 51,207 21,172 10,600 --
-------- -------- ------- -------- -------- --------- --------- --------- --------- ---------
Income (loss)
before
extraordinary
item............ (5,310) (5,069) (1,866) (2,122) (5,325) (34,918) (112,758) (181,874) (95,205) (108,116)
Extraordinary
item (3)........ (415) -- -- (1,137) (1,137) (1,684) (1,904) -- -- (1,720)
-------- -------- ------- -------- -------- --------- --------- --------- --------- ---------
Net income
(loss).......... $ (5,725) $ (5,069) $(1,866) $ (3,259) $ (6,462) $ (36,602) $(114,662) $(181,874) $ (95,205) $(109,836)
======== ======== ======= ======== ======== ========= ========= ========= ========= ========= ===
OTHER OPERATING
DATA:
EBITDA (4)....... $ 11,315 $ 16,040 $ 4,815 $ 6,744 $ 17,969 $ 47,186 $ 105,801 $ 130,332 $ 63,889 $ 69,726
EBITDA margin
(5)............. 27% 28% 28% 29% 28% 33% 35% 35% 35% 37%
Capital
expenditures,
excluding
acquisitions.... $ 20,853 $ 25,657 $ 7,486 $ 15,279 $ 33,450 $ 60,468 $ 165,206 $ 102,769 $ 56,444 $ 59,937
Cash flows
provided by
operating
activities...... $ 8,721 $ 14,781 $ 5,306 $ 4,680 $ 14,155 $ 14,749 $ 37,802 $ 63,590 $ 35,497 $ 43,909
Cash flows used
in investing
activities...... $(30,998) $(28,982) $(7,486) $(34,364) $(55,860) $(192,549) $(490,626) $(102,769) $ (56,444) $ (59,937)
Cash flows
provided by
financing
activities...... $ 11,268 $ 14,636 $11,290 $ 26,108 $ 29,454 $ 179,092 $ 452,678 $ 39,010 $ 22,650 $ 17,613
Pagers in service
at end of
period.......... 254,000 410,000 288,000 538,000 538,000 2,006,000 3,295,000 3,890,000 3,666,000 4,131,000
</TABLE>
- -------
(footnotes on following page)
35
<PAGE>
<TABLE>
<CAPTION>
AS OF
AUGUST 31, (1) AS OF DECEMBER 31, AS OF
--------------- --------------------------------------- JUNE 30,
1993 1994 1994 1995 1996 1997 1998
------- ------- -------- -------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets.......... $ 4,690 $ 6,751 $ 8,483 $ 33,671 $ 43,611 $ 51,025 $ 54,256
Total assets............ 62,209 76,255 117,858 785,376 1,146,756 1,020,720 971,549
Long-term debt, less
current maturities..... 49,748 67,328 93,420 457,044 918,150 968,896 1,003,357
Redeemable preferred
stock.................. -- -- -- 3,376 3,712 -- --
Stockholders' equity
(deficit).............. 1,563 (3,304) 9,368 246,884 147,851 (33,255) 117,429
</TABLE>
- --------
(1) On October 17, 1994, Arch announced that it was changing its fiscal year
end from August 31 to December 31. Arch was required to file a transition
report on Form 10-K with audited financial statements for the period
September 1, 1994 through December 31, 1994 and has elected to include
herein, for comparative purposes, unaudited financial statements for the
periods September 1, 1993 through December 31, 1993 and January 1, 1994
through December 31, 1994.
(2) Represents Arch's share of the losses of Benbow PCS Ventures, Inc. since
Arch's acquisition of Westlink Holdings, Inc. in May 1996. See "Business--
Arch Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources".
(3) Reflects extraordinary charge resulting from prepayment of indebtedness.
See "Business--Arch Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations".
(4) EBITDA is a commonly used measure of financial performance in the paging
industry and is also one of the financial measures used to calculate
whether Arch and its subsidiaries are in compliance with covenants under
their respective indebtedness, but should not be construed as an
alternative to operating income or cash flows from operating activities as
determined in accordance with GAAP. EBITDA, as determined by Arch, may not
necessarily be comparable to similarly titled data of other paging
companies. EBITDA does not reflect restructuring charge, equity in loss of
affiliate, income tax benefit, interest and non-operating expenses, net
and extraordinary items.
(5) Calculated by dividing EBITDA by total revenues less cost of products
sold. EBITDA margin is a measure commonly used in the paging industry to
evaluate a company's EBITDA relative to total revenues less cost of
products sold as an indicator of the efficiency of a company's operating
structure.
36
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA--MOBILEMEDIA
The following table sets forth selected historical consolidated financial
data of MobileMedia and Metromedia Paging Services ("Predecessor") for each of
the five years ended December 31, 1997 and the six months ended June 30, 1997
and 1998. The historical financial data presented under consolidated
statements of operations data and consolidated balance sheet data for each of
the five years ended December 31, 1997 have been derived from MobileMedia's
and the Predecessor's audited consolidated financial statements. The selected
financial and operating data as of June 30, 1998 and for the six months ended
June 30, 1997 and 1998 have been derived from MobileMedia's unaudited
consolidated financial statements. The following consolidated financial
information should be read in conjunction with "Business--MobileMedia
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and MobileMedia's Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
(UNAUDITED)
ELEVEN SIX MONTHS
MONTHS ONE MONTH ENDED
ENDED ENDED YEAR ENDED DECEMBER 31, JUNE 30,(9)
NOVEMBER 30, DECEMBER 1, ----------------------------------------------- ----------------------
1993 1993(1) 1994 1995(2) 1996(3) 1997 1997 1998
------------ ----------- ---------- ---------- ----------- ---------- ---------- ----------
PREDECESSOR MOBILEMEDIA
------------ ------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF
OPERATIONS DATA:
Total revenues........ $ 173,761 $ 15,058 $ 203,149 $ 252,996 $ 640,710 $ 527,392 $ 275,468 $ 228,903
Cost of products
sold................. (20,170) (522) (18,705) (26,885) (72,595) (35,843) (16,948) (10,774)
---------- ---------- ---------- ---------- ----------- ---------- ---------- ----------
153,591 14,536 184,444 226,111 568,115 491,549 258,520 218,129
Services, rents and
maintenance, selling,
and general and
administrative
expenses(4).......... 123,727 11,125 136,672 164,037 459,474 388,476 212,325 156,240
Impairment of long
lived assets(5)...... -- -- -- -- 792,478 -- -- --
Restructuring
costs(6)............. -- -- -- -- 4,256 19,811 10,952 9,250
Depreciation and
amortization......... 47,919 4,880 67,651 71,408 348,698 140,238 71,168 60,748
Parent company cost
allocations.......... 7,267 -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ----------- ---------- ---------- ----------
Operating loss........ (25,322) (1,469) (19,879) (9,334) (1,036,791) (56,976) (35,925) (8,109)
Other income (expense)
Interest expense...... (4,914) (1,461) (18,237) (31,745) (92,663) (67,611) (35,467) (29,113)
(Loss) gain on sale of
assets............... -- -- 1,049 -- 68 3 -- (47)
Other................. (405) -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ----------- ---------- ---------- ----------
Total other income
(expense)........... (5,319) (1,461) (17,188) (31,745) (92,595) (67,608) (35,467) (29,160)
---------- ---------- ---------- ---------- ----------- ---------- ---------- ----------
Loss before income tax
benefit.............. (30,641) (2,930) (37,067) (41,079) (1,129,386) (124,584) (71,392) (37,269)
Income tax benefit.... 7,328 -- -- -- 69,442 -- -- --
---------- ---------- ---------- ---------- ----------- ---------- ---------- ----------
Net loss.............. $ (23,313) $ (2,930) $ (37,067) $ (41,079) $(1,059,944) $ (124,584) $ (71,392) $ (37,269)
========== ========== ========== ========== =========== ========== ========== ==========
OTHER DATA
EBITDA(7)............. $ 22,597 $ 3,411 $ 47,772 $ 62,074 $ 108,641 $ 103,073 $ 46,195 $ 61,889
EBITDA margin(8)...... 14.7% 23.5% 25.9% 27.5% 19.1% 21.0% 17.9% 28.4%
Units in service (at
end of period)....... 1,196,079 1,205,233 1,447,352 2,369,101 4,424,107 3,440,342 3,973,760 3,241,740
Capital expenditures.. $ 31,480 $ 3,250 $ 65,574 $ 86,163 $ 161,861 $ 40,556 $ 23,756 $ 15,569
Cash flows provided by
(used in) operating
activities........... $ 27,737 $ 8,381 $ 53,781 $ 43,849 $ 57,194 $ 14,920 $ (13,741) $ 26,208
Cash flows used in
investing
activities........... $ (31,773) $ (320,753) $ (50,878) $ (312,698) $(1,028,321) $ (40,556) $ (23,756) $ (15,569)
Cash flows provided by
(used in) financing
activities........... $ 4,036 $ 314,700 -- $ 671,794 $ 586,111 $ 13,396 $ 18,396 $ (10,000)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------
AS OF
JUNE 30,
1993 1994 1995 1996 1997 1998
-------- -------- ---------- --------- --------- -----------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA
Total assets............ $356,744 $353,703 $1,128,546 $ 790,230 $ 655,134 $ 596,363
Debt.................... 181,992 195,677 476,156 1,074,196 1,075,681 1,075,681
Total stockholders'
equity (deficit)....... 138,567 101,500 578,753 (468,391) (589,579) (626,848)
</TABLE>
- -------
(footnotes on following page)
37
<PAGE>
- --------
(1) Parent completed the acquisition of Predecessor on November 30, 1993 for
a purchase price of $308.1 million.
(2) MobileMedia completed its acquisition of the paging and wireless
messaging business of Dial Page on August 31, 1995 for a purchase price
of $187.4 million. The Consolidated Statement of Operations Data includes
Dial Page's results of operations from that date. (See Note 3 to
MobileMedia's Consolidated Financial Statements and "Business--
MobileMedia--Events Leading Up to MobileMedia's Bankruptcy Filings".)
(3) MobileMedia completed the MobileComm Acquisition (as defined herein) on
January 4, 1996 for a purchase price of $928.7 million. The Consolidated
Statement of Operations Data includes MobileComm results of operations
from that date. (See Note 3 to MobileMedia's Consolidated Financial
Statements and "Business--MobileMedia--Events Leading Up to MobileMedia's
Bankruptcy Filings").
(4) Includes non-recurring adjustments to record executive separation
expenses of $2.5 million in 1994 and $0.7 million in 1995.
(5) Includes non-recurring adjustment to record, effective December 31, 1996,
a $792.5 million write-down of intangible assets based upon MobileMedia's
determination that an impairment of long-lived assets existed pursuant to
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" (See Note 2 to MobileMedia's Consolidated Financial Statements).
(6) Includes non-recurring adjustments to record restructuring costs related
to MobileMedia's bankruptcy filing on January 30, 1997.
(7) EBITDA represents earnings before other income (expense), taxes,
depreciation, amortization and restructuring costs. Other income
(expense) consists primarily of interest expense. EBITDA for the
Predecessor includes parent company cost allocations. EBITDA is a
financial measure commonly used in MobileMedia's industry and should not
be construed as an alternative to operating income (as determined in
accordance with GAAP), as an alternative to cash flows from operating
activities (as determined in accordance with GAAP) or as a measure of
liquidity. EBITDA is, however, the primary financial measure by which
MobileMedia's covenants are calculated under the agreements governing
MobileMedia's indebtedness. EBITDA in 1996 excludes the impact of the
$792.5 million writedown of intangible assets. EBITDA, as determined by
MobileMedia, may not necessarily be comparable to similarly titled data
of other paging companies.
(8) Calculated by dividing EBITDA by total revenues less cost of products
sold. EBITDA margin is a measure commonly used in the paging industry to
evaluate a company's EBITDA relative to total revenues less cost of
products sold as an indicator of the efficiency of a company's operating
structure. EBITDA margin in 1996 excludes the impact of the $792.5
million writedown of intangible assets.
(9) The interim financial information as of June 30, 1998 and for the six
months ended June 30, 1997 and 1998 contained herein is unaudited but, in
the opinion of management, includes all adjustments of a normal recurring
nature that are necessary for a fair presentation of the financial
position, results of operations, and cash flows for the periods
presented. Results of operations for the interim periods presented are
not necessarily indicative of results of operations for the entire year
or any future period.
38
<PAGE>
UNAUDITED SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following selected pro forma financial information is derived from the
unaudited pro forma condensed consolidated financial information appearing
elsewhere herein, which gives effect to the Merger as a purchase along with
the MobileMedia Tower Site Sale and should be read in conjunction with such
pro forma financial statements and the notes thereto. The financial impact of
expected operational cost synergies resulting from the Merger are excluded
from this presentation. See "The Combined Company".
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have occurred if the Merger had been consummated or of the future
operating results or financial position of Arch following the Merger.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
1997 JUNE 30, 1998
------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service, rental and maintenance revenues........... $ 831,285 $ 393,900
Product sales...................................... 81,115 35,099
--------- ---------
Total revenues..................................... 912,400 428,999
Cost of products sold.............................. (65,001) (25,464)
--------- ---------
847,399 403,535
Operating expenses:
Service rental and maintenance.................... 219,522 97,097
Selling........................................... 121,018 55,704
General and administrative........................ 285,640 125,268
Depreciation and amortization..................... 409,747 187,726
Restructuring charge.............................. -- 16,100
--------- ---------
Operating income (loss)............................ (188,528) (78,360)
Interest and non-operating expenses, net........... (138,618) (72,184)
--------- ---------
Income (loss) before income tax benefit and ex-
traordinary item.................................. (327,146) (150,544)
Income tax benefit................................. 21,172 --
--------- ---------
Income (loss) before extraordinary item............ $(305,974) $(150,544)
========= =========
OTHER OPERATING DATA:
EBITDA(1).......................................... $ 221,219 $ 125,466
EBITDA margin(2)................................... 26% 31%
Capital expenditures, excluding acquisitions....... 143,325 75,506
Pagers in service at end of period(3).............. 7,130,000 7,172,000
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1998
----------
<S> <C>
BALANCE SHEET DATA:
Current assets...................................................... $ 115,768
Total assets........................................................ 1,759,259
Long-term debt, less current maturities............................. 1,325,357
Stockholders' equity................................................ 243,477
</TABLE>
- --------
(1) EBITDA is a commonly used measure of financial performance in the paging
industry and is also one of the financial measures used to calculate
whether Arch and its subsidiaries are in compliance with covenants under
their respective indebtedness, but should not be construed as an
alternative to operating income or cash flows from operating activities as
determined in accordance with GAAP. EBITDA, as determined by Arch, may not
necessarily be comparable to similarly titled data of other paging
companies. EBITDA does not reflect restructuring charge, equity in loss of
affiliate, income tax benefit, interest and non-operating expenses, net
and extraordinary items.
(2) Calculated by dividing EBITDA by total revenues less cost of products
sold. EBITDA margin is a measure commonly used in the paging industry to
evaluate a company's EBITDA relative to total revenues less cost of
products sold as an indicator of the efficiency of a company's operating
structure.
(3) Consolidated pagers in service is calculated by adding the Arch and
MobileMedia amounts less an elimination for intercompany pagers in
service.
39
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth for the periods indicated, selected
historical per share data of Arch and MobileMedia and the corresponding pro
forma equivalent per share amounts after giving effect to the Amended Plan and
the Merger. The pro forma information gives effect to the Merger accounted for
as a purchase, assuming that 57,745,000 shares of Stock were issued with a
market price of $6.25 per share. See "Risk Factors--Uncertainties Related to
the Merger and the Reorganization--Use of Pro Forma Assumptions". The data
presented are based upon the audited and unaudited historical financial
statements and related notes thereto of Arch and MobileMedia which are
included elsewhere herein, and the Unaudited Pro Forma Condensed Consolidated
Financial Statements which are included elsewhere herein. This information
should be read in conjunction with such historical and pro forma financial
statements and related notes thereto. The unaudited pro forma consolidated
financial data are not necessarily indicative of the results that would have
occurred if the Amended Plan and the Merger had been consummated as of the
beginning of the earliest period presented.
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
1997 JUNE 30, 1998
------------ -------------
<S> <C> <C>
Arch Historical:
Income (loss) before extraordinary item........... $(8.77) $(5.17)
Extraordinary item................................ -- (0.08)
Net income (loss)................................. (8.77) (5.25)
Book value (1).................................... (1.59) (5.57)
MobileMedia Historical: (2)
Pro forma Consolidated--Arch and MobileMedia (3):
Income (loss) before extraordinary item........... (3.90) (1.91)
Extraordinary item................................ -- (0.02)
Net income (loss)................................. (3.90) (1.93)
Book value (4).................................... 4.69 2.77
</TABLE>
- --------
(1) Historical book value per share is computed by dividing total
stockholders' equity (deficit) by the number of shares of Stock
outstanding at the end of the period.
(2) The historical per share data for MobileMedia is not presented since MMC
is a wholly-owned subsidiary of Parent with a de minimis number of shares
of common stock issued and outstanding and therefore this information is
not considered meaningful.
(3) Pro forma consolidated net income (loss) per share is computed by dividing
pro forma net income (loss) by the weighted average number of shares of
Stock after giving effect to the issuance of Stock in the Merger, at an
assumed market price of $6.25 per share, having an aggregate value of
approximately $360.9 million.
(4) Pro forma consolidated book value per share is computed by dividing pro
forma consolidated stockholders' equity (deficit) by the number of shares
of Stock outstanding after giving effect to the issuance of Stock in the
Merger, at an assumed market price of $6.25 per share, having an aggregate
value of approximately $360.9 million.
40
<PAGE>
MARKET PRICE INFORMATION AND DIVIDEND POLICY
Arch's Common Stock is traded on the Nasdaq National Market under the symbol
"APGR". Parent's common stock is not listed on the Nasdaq National Market or
any other stock exchange. Common Stock began trading on the Nasdaq National
Market in 1993. The following table sets forth for the periods indicated the
high and low reported sale prices per share of Common Stock on the Nasdaq
National Market:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL 1996
First Quarter.......................................... $27.125 $19.125
Second Quarter......................................... $27.125 $17.875
Third Quarter.......................................... $19.75 $11.50
Fourth Quarter......................................... $13.875 $ 8.25
FISCAL 1997
First Quarter.......................................... $10.00 $ 3.75
Second Quarter......................................... $ 8.375 $ 3.75
Third Quarter.......................................... $ 9.50 $ 5.875
Fourth Quarter......................................... $ 9.125 $ 4.125
FISCAL 1998
First Quarter.......................................... $ 6.125 $ 3.00
Second Quarter......................................... $ 6.938 $ 3.50
Third Quarter (through , 1998)................. $ $
</TABLE>
On August 19, 1998, Arch publicly announced it was engaged in negotiations
to acquire Parent, on August 20, 1998, Arch announced it had entered into a
merger agreement with Parent and MMC. On September 4, 1998, Arch announced
that it had modified the previously announced merger agreement and entered
into the Merger Agreement. The last reported sale price per share of the
Common Stock on September 11, 1998 was $2.375. Based upon the last reported
sale price of Common Stock on September 11, 1998, assuming an equivalence in
value between Common Stock and Class B Common Stock, and (assuming that no
Adjustment is made) assuming the Arch Common Stock Price is not less than
$6.25, the shares of Arch Stock to be issued in connection with the Merger
would have a market value of $137.1 million. Based upon the estimated market
price per share of $6.25 used to prepare the pro forma condensed consolidated
financial statements, the shares of Common Stock to be issued in connection
with the Merger would have a market value of $360.9 million. Because the Arch
Common Stock Price is subject to fluctuation, the market value of the shares
of Stock that the Unsecured Creditors will receive in connection with the
Merger may increase or decrease significantly prior to the Merger. In
addition, if the Arch Common Stock Price is below $6.25 additional Common
Stock, rights and warrants will be issued.
On the Record Date, Arch had stockholders of record. The number of record
holders may not be representative of the number of beneficial holders because
many shares are held by depositaries, brokers or other nominees.
Neither Arch nor Parent has ever declared or paid any cash dividends on its
capital stock. Arch anticipates that all of its earnings in the foreseeable
future will be used to finance the continued growth and development of its
business and has no current intention to pay cash dividends on Stock. Arch's
future dividend policy will depend on its earnings, capital requirements and
financial condition, requirements of the financing agreements to which it is
then a party and other factors considered relevant by the Arch Board. The API
Credit Facility prohibits declaration or payment of cash dividends to Arch
stockholders without the written consent of a majority of the lenders during
the term of the credit agreement and until all obligations under the credit
agreement have been met. The Arch Indentures only permit the declaration or
payment of cash dividends subject to certain leverage and cash flow
requirements (which Arch does not currently meet). In addition, the terms of
the Series C Preferred Stock of Arch generally prohibit the payment of cash
dividends on Stock unless all accrued dividends due with respect to the Series
C Preferred Stock have been paid in full. See "Description of Securities" and
"Description of Certain Arch Indebtedness".
41
<PAGE>
THE MERGER AND THE REORGANIZATION
BACKGROUND OF THE MERGER
In furtherance of its strategic objective to strengthen its position as a
leading nationwide paging company, Arch has completed 33 acquisitions of other
paging companies since its inception in 1986. Senior management of Arch
regularly engages in discussions of potential acquisitions with third parties.
Prior to its bankruptcy proceeding, MobileMedia had also engaged in several
acquisitions of paging companies.
At various times during 1995 and 1996, the then Chief Executive Officer of
MobileMedia and C. Edward Baker, Jr., Arch's Chairman and Chief Executive
Officer, informally discussed opportunities for a possible business
combination involving the two companies. In December 1996, Arch executed a
non-disclosure agreement with MobileMedia, received confidential information
about MobileMedia's operations and began to explore on a more formal basis a
potential business combination with MobileMedia. In January 1997, Arch engaged
Bear Stearns & Co. Inc. ("Bear Stearns") as its financial advisor to explore a
variety of strategic consolidation opportunities, including the possibility of
a business combination involving MobileMedia. These discussions terminated
prior to MobileMedia filing for bankruptcy protection in January 1997 without
Arch making any formal proposal.
During the summer of 1997, MobileMedia, through The Blackstone Group, L.P.,
its financial advisor ("Blackstone"), solicited acquisition proposals from a
number of third parties, including Arch. During this process, Arch reviewed
various operational and financial information provided by MobileMedia, and
conducted a due diligence investigation with respect to MobileMedia's
business, including a meeting with MobileMedia's executives held at
Blackstone's offices on June 9, 1997. By letter dated September 24, 1997, Arch
made a preliminary proposal to acquire MobileMedia for $300 million of senior
notes, $200 million of preferred stock, and Common Stock which would have
represented approximately 32% of the outstanding shares of Common Stock (on an
as-converted basis) following such issuance. Bear Stearns, on behalf of Arch,
and Blackstone, on behalf of MobileMedia, continued to negotiate possible
changes or enhancements to Arch's preliminary proposal through December 1997.
In October 1997, the Chairman--Restructuring of MobileMedia met with the Chief
Executive Officer of Arch to discuss a possible business combination. In
December 1997, Arch was informed that MobileMedia had determined to pursue a
different strategy and formal discussions between Arch and MobileMedia
concerning a potential business combination were terminated.
Thereafter, certain unsecured creditors of MobileMedia engaged in informal
discussions with Bear Stearns about a potential business combination between
MobileMedia and Arch. These discussions focused upon the amount of
indebtedness Arch would be willing to incur, as well as the type and amount of
equity securities that Arch would be willing to issue, in connection with such
a transaction.
Following the filing of the original plan of reorganization by MobileMedia
on January 27, 1998 providing for the continued operation of MobileMedia as a
stand-alone entity (the "Original Plan"), Bear Stearns contacted Blackstone
and Houlihan, Lokey, Howard & Zukin ("HLH&Z"), the financial advisor to the
Unsecured Creditors Committee. As a result of such discussions, Arch agreed to
make an acquisition proposal, subject to the support of the Unsecured
Creditors Committee.
At a March 4, 1998 meeting of Arch's board of directors (the "Arch Board"),
Arch management and Bear Stearns made presentations concerning the status of
negotiations with MobileMedia, and the directors authorized submission of an
acquisition proposal.
On March 17, 1998, Arch, the Unsecured Creditors Committee, W.R. Huff and
Northwestern Mutual executed a term sheet relating to an acquisition of
MobileMedia by Arch for consideration consisting of $300.0 million in cash
and/or senior notes (at Arch's election), the assumption of up to $30.0
million in administrative claims and liabilities under the DIP Credit
Agreement, shares of Common Stock equivalent to 70% of the outstanding common
stock of the Combined Company on a pro forma basis, and warrants to purchase
Common Stock equivalent to 3.5% of the fully diluted equity interest in the
Combined Company (concurrent with the
42
<PAGE>
issuance of identical warrants to existing Arch stockholders for the purchase
of 8.5% of the fully diluted equity interest in the Combined Company). This
proposal was subject to a number of conditions, including the satisfactory
completion of due diligence, the negotiation of definitive agreements and the
consent of Arch's lenders. Pursuant to the term sheet, for a period of 30 days
Arch and the Unsecured Creditors Committee each agreed to use its best efforts
to accomplish the proposed transaction, and each of Arch, W.R. Huff,
Northwestern Mutual and the Unsecured Creditors Committee (subject to its
fiduciary duties) agreed not to pursue any alternative proposal.
By letter dated March 17, 1998 to Parent and Blackstone, Arch proposed an
acquisition of MobileMedia on the terms set forth in the term sheet executed
by Arch, the Unsecured Creditors Committee, W.R. Huff and Northwestern Mutual.
On March 30, 1998, Mr. Baker and John B. Saynor, Executive Vice President of
Arch, together with Arch's financial and legal advisors, met with certain
members of the executive management of MobileMedia, members of the Unsecured
Creditors Committee, and certain secured creditors of MobileMedia, and their
respective financial and legal advisors, to discuss the March 17, 1998 Arch
proposal. Following this meeting, it was agreed that each of Arch and
MobileMedia would conduct due diligence on the other's operations, primarily
to identify and quantify potential operational cost synergies that Arch
indicated in its proposal would likely result from a business combination.
Over the next several weeks, executives of each of Arch and MobileMedia
exchanged information and met on a number of occasions to review business
synergies and operational and technical integration issues. In addition,
Arch's financial advisor continued negotiations with the financial advisors to
MobileMedia, the secured creditors and the Unsecured Creditors Committee, and
their respective legal advisors commenced due diligence reviews.
On April 17, 1998, the financial advisors for the secured creditors and the
Unsecured Creditors Committee met with the senior management of Arch and
MobileMedia, together with their respective financial advisors, to review
Arch's and MobileMedia's estimated operational cost synergies believed likely
to result from a combination of the businesses by each respective senior
management team. By letter dated April 24, 1998, Arch informed MobileMedia
that it had substantially completed its business due diligence, confirmed the
terms of its proposal and indicated it was prepared to negotiate expeditiously
the requisite legal documentation to proceed with the acquisition. On April
24, 1998, Arch's counsel forwarded to MobileMedia's counsel a proposed merger
agreement.
From April 17, 1998 through June 12, 1998, Arch and Bear Stearns held
ongoing discussions with MobileMedia, Blackstone, various secured creditors,
the Unsecured Creditors Committee and their financial advisors concerning
Arch's acquisition proposal. Major issues included the form of the proposed
consideration, since the secured creditors were seeking a cash payment for
their claims, and the appropriate valuation of the Arch securities proposed to
be issued. The Arch Board again reviewed the status of negotiations among
Arch, MobileMedia and the Unsecured Creditors Committee at a meeting held on
May 19, 1998. On May 20, 1998, Arch management and its financial advisor made
a presentation to a group of MobileMedia's unsecured creditors, including
Credit Suisse First Boston Corporation, Northwestern Mutual, Whippoorwill,
W.R. Huff and HLH&Z, about Arch's due diligence and the merits of the business
combination. Further discussions followed and, on June 12, 1998, the Unsecured
Creditors Committee sent Arch and MobileMedia a draft term sheet providing for
a cash payment of the secured creditors' pre-petition claims of $649.0
million. The term sheet contemplated that the cash payment to the secured
creditors would be funded by $170.0 million in proceeds from the MobileMedia
Tower Site sale, $217.0 million in proceeds from the sale of Arch equity
securities to certain Unsecured Creditors, and borrowings incurred by Arch
estimated to be $262.0 million. The term sheet also contemplated that the
Unsecured Creditors would receive in consideration for their MobileMedia
claims and their $217 million equity investment, shares of Common Stock
equivalent to 67.05% of the outstanding Common Stock of the Combined Company
on a pro forma basis, and warrants to purchase Common Stock equivalent to 5.0%
of the fully diluted equity interest in the Combined Company (concurrent with
the issuance of identical warrants to existing Arch stockholders for the
purchase of 7.0% of the fully diluted equity interest in the Combined
43
<PAGE>
Company). Following further discussions, on July 2, 1998 the Unsecured
Creditors Committee circulated a revised term sheet providing for the Rights
Offering to the Unsecured Creditors, with certain Unsecured Creditors agreeing
to subscribe for and exercise their pro rata portion of the Rights as well as
any Rights not exercised by the other unsecured creditors.
On July 7, 1998 counsel to MobileMedia circulated a revised form of merger
agreement reflecting the July 2, 1998 term sheet. On July 14, 1998, senior
managements of Arch and MobileMedia, their respective financial advisors and
counsel and the financial advisor and counsel to the Unsecured Creditors
Committee met to discuss the proposed merger agreement. The major issues
discussed included the circumstances under which breakup fees would be payable
by each party and the size of such fees, the conditions to closing, the
liabilities and administrative expenses to be assumed by Arch following the
merger and the number of directors to be added to the Arch Board. At an Arch
Board meeting held on July 28, 1998, Arch's financial advisor and legal
counsel again reviewed the proposed transaction.
The Arch Board met again on August 14, 1998 to further consider the
transactions contemplated by the Merger Agreement and, following the delivery
of an opinion by Bear Stearns as to the fairness of the consideration to be
paid by Arch in the proposed transactions, from a financial point of view, to
Arch and its stockholders, the Arch Board conditionally approved the Merger
Agreement, the Merger and the transactions contemplated thereby, including the
issuance of the Stock and Warrants. Legal and financial advisors for Arch,
MobileMedia and the Unsecured Creditors Committee continued to negotiate
various terms and documentation, and conducted due diligence through August
17, 1998. The Arch Board met again on August 17, 1998 received an update from
Arch's legal counsel on the status of negotiations and approved certain
additional terms and authorized management to execute definitive documents. On
August 19, 1998, the parties reached final agreement and thereafter executed
the Agreement and Plan of Merger dated as of August 18, 1998 (the "Original
Merger Agreement"), the First Amended Joint Plan of Reorganization dated as of
August 18, 1998 and the related documents (collectively, the "August 18
Agreements").
On August 31 and September 1, 1998, senior management of Arch and
MobileMedia, the Unsecured Creditors Committee, the Standby Purchasers, and
their respective financial advisors and legal counsel, met to discuss concerns
resulting from increased volatility in the capital markets, the market price
of the Arch Common Stock since the execution and announcement of the August 18
Agreements and the process for submitting for Bankruptcy Court approval the
Initial Motion Order (as defined below), which provided for certain
exclusivity, termination fee and expense reimbursement provisions in the
Original Merger Agreement to become immediately enforceable. During these
meetings, the representatives of Arch, MobileMedia, the Unsecured Creditors
Committee and the Standby Purchasers negotiated modifications to the August 18
Agreements, principally to incorporate the Subsequent Pricing Period, reduce
the minimum market price of the Arch Common Stock in such Subsequent Pricing
Period and provide for the issuance of the Arch Stockholder Rights, or the
Arch Participation Warrants in lieu of unexercised Arch Stockholder Rights, to
the Arch stockholders.
On September 1, 1998, the Arch Board, together with Arch's legal and
financial advisors, met to consider the proposed modifications to the August
18 Agreements. Subject to the delivery of a fairness opinion by Bear Stearns
as to the fairness of the consideration to be paid by Arch in the proposed
transactions, from a financial point of view, to Arch and its stockholders,
the Arch Board approved the proposed revisions to the August 18, 1998
Agreements and authorized management to negotiate and execute documents
reflecting the proposed amendments. During the evening of September 1, 1998,
Bear Stearns delivered an oral fairness opinion as to the fairness of the
consideration to be paid by Arch in the proposed transactions, which opinion
was subsequently confirmed in writing.
Representatives of Arch, MobileMedia, the Unsecured Creditors Committee and
the Standby Purchasers thereafter negotiated various additional terms and
documentation, and amendments to the August 18 Agreements were executed on
September 3, 1998.
44
<PAGE>
ARCH REASONS FOR THE MERGER
The Arch Board has approved the Merger Agreement, the Merger and the other
transactions contemplated thereby.
The Arch Board believes that the Merger represents a strategic opportunity
to significantly expand the size and scope of Arch's operations, while
significantly decreasing Arch's overall financial leverage. The Arch Board
believes that, following the Merger, Arch will have greater financial
strength, operational efficiencies and growth potential than either Arch or
MobileMedia would have on its own. The Arch Board has identified a number of
potential benefits of the proposed Merger that it believes will contribute to
the success of the combined entities, including the following:
. The combination of Arch and MobileMedia would create the second largest
paging company in the United States. Given high fixed infrastructure
costs in the paging industry, greater scale should permit increased
efficiencies and improved margins for the Combined Company.
. Arch's overall leverage should be reduced significantly as a result of
the Merger. Arch's ratio of consolidated total debt to EBITDA (based on
annualized EBITDA for the six months ended June 30, 1998) was 7.2x as of
June 30, 1998; on a pro forma basis, taking into account the Merger,
such leverage ratio would have been 5.3x as of June 30, 1998.
. Arch would have access to MobileMedia's two nationwide narrowband PCS
licenses, and the cost of developing a nationwide narrowband PCS network
could be shared over the combined operations.
. Significant operational efficiencies could be realized through the
integration and combination of operations and the sharing of investment
in future infrastructure investments.
. Greater scale should yield enhanced purchasing power and improved sales
distribution.
. Following the Merger, Arch would have a significantly stronger capital
structure and financial resources providing greater operating
flexibility, as well as enhancing Arch's capabilities to further
effectuate its strategic objective to participate in the continuing
paging industry consolidation.
. Arch's larger market capitalization and size should result in broader
research coverage and increased interest by institutional investors.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Arch is unaware of any interests that any directors or officers of Arch have
in connection with the Merger that are in addition to the interests of the
stockholders of Arch generally.
ACCOUNTING TREATMENT
The Merger will be accounted for under the purchase method of accounting in
accordance with GAAP, whereby the purchase price will be allocated based on
the relative fair value of the assets acquired and liabilities assumed. Such
allocations will be made based upon valuations that have not been finalized.
The excess of such purchase price over the amounts so allocated will be
allocated to goodwill. It is anticipated that the most significant effect on
the purchase accounting will be to record a significant amount of goodwill and
other intangible assets which will result in substantial amortization charges
to the income of the combined company over the useful lives of such assets.
See "Risk Factors--Uncertainties Relating to the Merger and the
Reorganization".
In accordance with GAAP, Arch will be treated as the acquiror in the Merger
for accounting and financial reporting purposes, and Arch will report its
historical financial statements as the historical financial statements of the
combined entities.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger will result in the ownership by Arch of all of the outstanding
stock of the Merger Subsidiary, which will own substantially all of the assets
held by MMC immediately prior to consummation of the Merger. For federal
income tax purposes, Arch will not recognize gain or loss as a result of the
Merger.
45
<PAGE>
Arch expects to file federal income tax returns reflecting NOL carryforwards
of approximately $280.0 million for its taxable year ended December 31, 1997,
a portion of which will begin to expire in the taxable year ending December
31, 2002. Section 382 of the Tax Code generally restricts a corporation's
utilization of its NOL carryforwards and other tax attributes by limiting the
amount of income earned by the corporation after an "ownership change" that
may be offset by tax attributes that arose prior to the ownership change (the
"Section 382 Limitation"). The issuance of Arch shares pursuant to the Merger
Agreement and the Amended Plan will cause Arch to experience an ownership
change as defined under Section 382(g) of the Tax Code on the Effective Date
(the "Change Date"). Consummation of the Amended Plan will also cause MMC to
experience such an ownership change.
In general, when the Section 382 Limitation applies, a corporation's
utilization of its pre-Change Date tax attributes (including NOL carryforwards
and certain amounts that otherwise would be allowable as deductions during the
five-year period beginning on the Change Date that are attributable to pre-
Change Date periods) for taxable years following the Change Date is limited to
an annual amount of tax attributes equal to (A) the product of (i) the value
of the corporation immediately before the ownership change multiplied by
(ii) the long-term tax exempt rate (as announced each month by the Treasury
Department and which was 5.02% for September 1998) on the date of ownership
change, plus (B) any unused portion of the Section 382 Limitation from prior
years.
A taxpayer generally must include in gross income the amount of any
cancellation of indebtedness income realized during the taxable year. Section
108 of the Tax Code provides, however, that when the cancellation of
indebtedness occurs in a case under the Bankruptcy Code, gross income does not
include any amount that otherwise would be included in gross income by reason
of the cancellation of indebtedness. Instead, cancellation of indebtedness
income will generally be applied to reduce certain tax attributes of the
taxpayer, including NOL carryforwards. Accordingly, it is anticipated that the
NOL carryforwards and possibly other tax attributes of MMC will be
substantially reduced as a result of consummation of the Amended Plan pursuant
to (S)382 and (S)108 of the Tax Code.
REGULATORY APPROVALS
FCC APPROVAL
The Communications Act requires prior FCC approval for the transfer of
actual or legal control of companies holding FCC authorizations. The
Communications Act requires that the FCC, as a prerequisite to granting its
approval, find that the proposed acquisition or transfer would serve the
public interest, convenience and necessity. The FCC also requires that the
purchaser or transferee demonstrate that it possesses the requisite legal,
technical and financial qualifications to operate the licensed facilities.
The prior approval of the FCC is a condition to the consummation of the
Merger. See "The Merger Agreement--Conditions". Arch and MobileMedia have
jointly filed applications with the FCC seeking FCC approval of the Merger,
including the transfer and/or assignment of FCC licenses held by Arch and
MobileMedia. There can be no assurance that the FCC will grant the approvals
sought or that, if granted, that such FCC approvals will be on a timely basis
or on terms and conditions acceptable to Arch and MobileMedia. In the event of
a challenge by an adverse party, the termination date established in the
Merger Agreement may not allow sufficient time for FCC approvals to be
received or, if received, for FCC approvals to become final. See "Industry
Overview--Regulation".
In its press releases issued on September 27 and October 21, 1996,
MobileMedia disclosed that misrepresentations had been made to the FCC and
that other violations had occurred during the licensing process for as many as
400 to 500 authorizations, or approximately 6% to 7% of its approximately
8,000 local transmission one-way paging transmitter stations. MobileMedia
caused an investigation to be conducted by its outside counsel, and a
comprehensive report regarding these matters was provided to the FCC on
October 15, 1996. In cooperation with the FCC, outside counsel's investigation
was expanded to examine all of MobileMedia's nationwide paging licenses, and
the results of that investigation were submitted to the FCC on
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November 8, 1996. Since November 8, 1996, MobileMedia has continued to provide
additional information to the FCC.
On January 13, 1997, the FCC issued a public notice (the "Public Notice")
relating to the status of certain FCC authorizations held by MobileMedia. In
the Public Notice, the FCC announced that it had (i) automatically terminated
approximately 185 authorizations for paging facilities that were not
constructed by the expiration date of their construction permits and remained
unconstructed, (ii) dismissed approximately 93 applications for fill-in sites
around existing paging stations (which had been filed under the "40-mile
rule") as defective because they were predicated upon unconstructed facilities
and (iii) automatically terminated approximately 99 other authorizations for
paging facilities that were constructed after the expiration date of their
construction permits. With respect to the constructed stations, the Public
Notice permitted MobileMedia to continue to operate those stations on an
interim basis until further action by the FCC.
On April 8, 1997, the FCC issued an order (the "FCC Order") commencing an
administrative hearing to inquire into the qualification of MobileMedia to
remain an FCC licensee. The FCC Order directed an administrative law judge
("ALJ") to take evidence and develop a full factual record on issues
concerning MobileMedia's filing of false forms and applications in connection
with its applications for paging licenses. While the FCC Order initiated a
fact-finding and evaluative hearing process to gather information with which
to make a decision, the FCC directed the ALJ to make a recommended decision
only as to factual matters. Decisions as to the conclusions of law, the
disposition of the case and any appropriate sanctions were reserved to the
FCC. During the proceeding, MobileMedia would continue to operate in the
ordinary course and provide uninterrupted service to customers.
On April 23, 1997, MobileMedia filed a motion with the ALJ seeking a stay of
the hearing proceedings instituted by the FCC Order. MobileMedia sought the
stay on the ground that, absent a stay, the uncertainty created by the hearing
process would likely inflict material irreparable damage on MobileMedia's
business. In the motion, MobileMedia also sought confirmation that
MobileMedia's operations could be preserved through an assignment or transfer
of control of MobileMedia's licenses consistent with an FCC doctrine known as
Second Thursday. On May 5, 1997, the ALJ denied MobileMedia's motion for a
stay. On May 13, 1997, MobileMedia requested review of the ALJ's order and
sought a stay of the hearing proceeding and a determination that MobileMedia
should have an opportunity to comply with the FCC's Second Thursday doctrine.
The FCC granted MobileMedia's request on June 6, 1997 and issued a ten-month
stay of the hearing proceeding determining that the Second Thursday doctrine
may apply to publicly traded corporations, such as Parent.
The Second Thursday doctrine balances the FCC's interests with the
Bankruptcy Code's policies of preserving value for creditors by permitting a
company to transfer its licenses as long as the individuals charged with
misconduct (i) would have no part in the proposed operations and (ii) would
receive either no benefit from the transfer or only a minor benefit that would
be outweighed by equitable considerations in favor of innocent creditors. As
part of the applications seeking FCC approval of the Merger, MobileMedia also
will request termination of the hearing proceeding under the Second Thursday
doctrine. MobileMedia believes it will satisfy the requirements of Second
Thursday pursuant to the Merger and the Amended Plan. FCC approval of the
transfer of MobileMedia's licenses pursuant to the Amended Plan is a condition
to effectiveness of the Amended Plan. Such approval, if granted, will
terminate the pending proceedings into MobileMedia's qualification to remain
an FCC licensee. On March 27, 1998, MobileMedia filed a request with the FCC
to extend the ten-month stay for an additional six months, in order to provide
MobileMedia with sufficient time to complete its reorganization process and to
continue discussions among the various parties in interest. This extension
request was granted by the FCC on June 4, 1998.
STATE APPROVALS
The prior approval of certain state regulatory authorities is a condition to
the consummation of the Merger. See "The Merger Agreement--Conditions". Arch
and MobileMedia have jointly filed applications with certain states seeking
approval of the consummation of the Merger. It is possible that one or more
other states may assert
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a right to review and approve the Merger. In such event, Arch and MobileMedia
may choose to challenge such assertion, seek to obtain such approval or take
such other or further actions as they deem necessary or advisable at the time.
If any state were to claim a right to approve the Merger, there is no
assurance that any challenge to override or overturn that claim would be
successful or that any approval, if sought, would be granted or, if granted,
would be on a timely basis or on terms and conditions acceptable to Arch and
MobileMedia. In the event of a challenge by an adverse party, the termination
date established in the Merger Agreement may not allow sufficient time for
state regulatory approvals to be received or, if received, for such approvals
to become final. See "Industry Overview--Regulation".
ANTITRUST
The Merger is subject to the requirements of the HSR Act, and the rules and
regulations thereunder, which provide that certain transactions may not be
consummated until certain required information and materials have been
furnished to the Antitrust Division and the FTC and certain waiting periods
have expired or been terminated. Arch and MobileMedia expect to file the
required information and material with the Antitrust Division and the FTC on
or before August 28, 1998.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. The termination of the
HSR Act waiting periods does not preclude the Antitrust Division or the FTC
from challenging the Merger on antitrust grounds. Accordingly, at any time
before or after the Effective Time, either the Antitrust Division or the FTC
could take such action, including seeking to enjoin the Merger, under the
antitrust laws as it deems necessary or desirable in the public interest.
Certain other persons, including the attorney general of one or more states or
private parties, could take action under the antitrust laws.
In addition, as part of the FCC's consideration of whether granting consent
to the transfer of control of Arch's and MobileMedia's FCC licenses would
serve the public interest, the FCC takes into account the potential effect
that the Merger may have on competition in affected markets. The FCC's
antitrust analysis may differ from that of the Antitrust Division and the FTC,
and could serve as a basis for the FCC denying consent to the transfer or
imposing conditions on its consent, which could materially adversely affect
the combined operations of Arch and MobileMedia.
FEDERAL SECURITIES LAW CONSEQUENCES
The Common Stock, Class B Common Stock and Warrants issuable in connection
with the Merger will generally be freely tradeable under the Securities Act
following the Merger, provided the holder thereof is not deemed to be an
"affiliate" of Arch following the Merger pursuant to Rule 144 or an
"underwriter" within the meaning of Section 2(11) of the Securities Act or
Section 1145(b) of the Bankruptcy Code. The Standby Purchasers and any other
Unsecured Creditors who acquire 10% or more of the Common Stock may be deemed
to be statutory underwriters with respect to the Securities they purchase.
Arch has agreed to register the Rights to be issued in connection with the
Rights Offering, together with the shares of Stock and the Warrants which may
be issued thereunder. Unsecured Creditors who receive these Securities may
also freely sell such Securities provided they are not deemed to be
"affiliates" of Arch pursuant to Rule 144 or an underwriter. The shares of
Stock to be distributed from the Directly Distributed Creditor Stock Pool are
exempt from registration under the Securities Act pursuant to Section 1145 of
the Bankruptcy Code, and will be therefore freely tradeable by any Unsecured
Creditor who is not deemed to be an "affiliate" of Arch under Rule 144 or an
underwriter. Any securities of Arch held by a person deemed to be an
"affiliate" of Arch will be subject to certain restrictions on resale pursuant
to Rule 144. Arch has agreed to register these securities for resale by
persons who may be deemed to be underwriters, such as the Standby Purchasers.
See "The Merger Agreement--Related Agreements--Registration Rights
Agreements".
NASDAQ NATIONAL MARKET LISTING
Arch intends to file an application to have the Common Stock, Class B Common
Stock and the Warrants to be issued in connection with the Rights Offering and
the Merger approved for quotation on the Nasdaq National Market.
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THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement, a
composite copy of which is attached as Annex B to this Prospectus and
incorporated herein by reference in its entirety. Although this section
summarizes the material terms of the Merger Agreement, such summary is
qualified in its entirety by reference to the Merger Agreement. Prospective
investors in the Rights Offering are urged to read the Merger Agreement in its
entirety for a more complete description of the Merger. Defined terms used
herein not otherwise defined shall have the meaning ascribed to them in the
Merger Agreement.
THE MERGER
The Merger Agreement and the Amended Plan provide that, following the
approval by the stockholders of Arch and the satisfaction or, if legally
permissible, waiver of the conditions to the Merger, MMC will be merged with
and into the Merger Subsidiary. Immediately prior to the Merger, Parent will
contribute all of its assets to MMC, and MMC's subsidiaries will be
consolidated into a single subsidiary which will become an indirect wholly
owned subsidiary of Arch as a result of the Merger.
EFFECT OF THE MERGER
At the Effective Time, all of the estate, property, rights, privileges,
immunities, powers and franchises of MMC will be transferred to and vested in
the Surviving Corporation.
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement, each of Parent and MMC on the one hand, and Arch on
the other, has made certain representations and warranties regarding, among
other things: (i) their respective organization, qualification, corporate
power and authority to enter into and perform their respective obligations
under the Merger Agreement; (ii) capitalization; (iii) the compliance of the
transactions contemplated by the Merger Agreement with their respective
certificates of incorporation and by-laws, certain contracts and applicable
laws; (iv) subsidiaries; (v) the accuracy of their respective financial
statements; (vi) the absence of certain specified types of changes in the
business, assets (including licenses, franchises and other intangible assets),
financial condition, operating income and prospects of each party and their
respective subsidiaries, taken as a whole; (vii) the absence of undisclosed
liabilities; (viii) taxes; (ix) tangible assets; (x) owned real property; (xi)
intellectual property; (xii) real property leases; (xiii) certain contracts
which are material to the respective parties; (xiv) the possession of licenses
and authorizations; (xv) the absence of certain litigation; (xvi) certain
employment contracts and related matters; (xvii) employee benefit plans;
(xviii) certain environmental matters; (xix) compliance with applicable laws;
(xx) certain information with respect to the parties' respective subscribers
and suppliers; (xxi) capital expenditures; (xxii) brokers' fees; (xxiii) the
accuracy of certain information provided by each of the parties in connection
with the various documents to be filed with the applicable regulatory
authorities in connection with the Merger Agreement and the transactions
contemplated thereby and (xxiv) the accuracy of the information provided by
each of the parties to the other. In addition, Arch has made representations
concerning (i) the Merger Subsidiary, (ii) the opinion of Bear Stearns
regarding the fairness of the Merger, from a financial point of view, to Arch
and its stockholders, (iii) certain amendments to Arch's shareholders rights
plan, (iv) Section 203 of the DGCL and (v) the vote of Arch stockholders
required to approve the Transactions.
CERTAIN COVENANTS AND AGREEMENTS
Except as otherwise contemplated by the Merger Agreement or the Amended Plan
and, in the case of Parent and MMC, by the Bankruptcy Code, the Federal Rules
of Bankruptcy Procedure, the operation and information requirements of the
Office of United States Trustee, and any orders entered or approvals or
authorizations granted by the Bankruptcy Court in the Insolvency Proceedings
during the period prior to the Effective Time (collectively, "Bankruptcy-
Related Requirements"), each of MobileMedia, MMC and Arch shall, and shall
cause each of their respective subsidiaries, as applicable, to conduct its
operations in the ordinary course of
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business and in compliance with all other applicable laws and regulations,
and, to the extent consistent therewith, use all reasonable efforts to
preserve intact its current business organization, keep its physical assets in
good working condition, pay all taxes (all post-petition taxes in the case of
the Parent and MMC) as they become due and payable, maintain insurance on its
business and assets (in amounts and types consistent with past practice), keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings
with it to the end that its goodwill and ongoing business shall not be
impaired in any material respect.
BEST EFFORTS
Except as otherwise contemplated by the Merger Agreement, or in the case of
the Parent and MMC except to the extent required by Bankruptcy-Related
Requirements, Arch, the Parent and MMC are obligated to use their respective
best efforts to cause the transactions contemplated by the Merger Agreement
and the Amended Plan to be consummated in accordance with the terms thereof.
APPROVALS; CONSENTS
The Merger Agreement generally obligates Arch, the Parent and MMC to obtain
and maintain in full force and effect all approvals, consents, permits,
licenses and other authorizations from all Governmental Entities (as defined
therein) reasonably necessary or required for the operation of their
respective businesses as presently conducted, as and when such approvals,
consents, permits, licenses or other authorizations are necessary or required.
The Merger Agreement provides that none of Arch, the Parent or MMC shall make
any material commitments to any Governmental Entity relating to any material
approval, consent, permit or license without the prior written consent of the
other, and that Arch, the Parent and MMC shall, and shall cause each of their
respective subsidiaries, as applicable, to, use their reasonable best efforts
to resolve any competitive issues relating to or arising under the HSR Act or
any other federal or state antitrust or fair trade law raised by any
Governmental Entity. In the event of a challenge to the transactions
contemplated by the Merger Agreement pursuant to the HSR Act, Arch, the Parent
and MMC shall, and shall cause each of their respective subsidiaries to use
their reasonable best efforts to defeat such challenge, including by
institution and defense of litigation, or to settle such challenge on terms
that permit the consummation of the transactions contemplated by the Merger
Agreement; provided, however, that in no event shall Arch be required to
divest or hold separate any portion of its business or otherwise take any
action, which divestiture or holding separate or taking such action would be
materially adverse to the continued conduct of either party's businesses. Arch
is obligated to pay all filing fees payable by either Arch, the Parent or MMC
in connection with the HSR Act.
ARCH NOT TO CONTROL
The Merger Agreement provides that, pending the consummation of the
transactions contemplated thereby, Arch shall not obtain actual (de facto) or
legal (de jure) control over the Parent and MobileMedia. Specifically, and
without limitation, the responsibility for the operation of the Parent and
MobileMedia shall, pending the consummation of the transactions contemplated
thereby, reside with the Board of Directors of the Parent and MMC (subject to
the jurisdiction of the Bankruptcy Court). Notwithstanding the foregoing, Arch
and the Parent and MobileMedia have agreed to consult and cooperate with one
another and consider in good faith the views of one another with respect to
the assumption or rejection by the Parent and MobileMedia prior to the
Effective Time of any unexpired lease, license or other executory contract.
BANKRUPTCY COVENANTS
The Amended Plan requires MobileMedia and the Parent to file certain motions
with the Bankruptcy Court and take certain other actions in furtherance of the
transactions contemplated by the Merger Agreement. See "The MobileMedia Plan
of Reorganization". On September 3, 1998, MobileMedia and Parent filed a
motion seeking Bankruptcy Court approval of the exclusivity provisions,
breakup fees and expense reimbursement provisions of the Merger Agreement,
which motion was approved by the Bankruptcy Court (the "Initial Merger Order")
on September 4, 1998. See "--Exclusivity Provisions", "--Breakup Fee
Provisions" and "--Reimbursement of Arch's Expenses".
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CONDUCT OF MOBILEMEDIA'S BUSINESS PENDING THE MERGER
The Merger Agreement provides that prior to the Effective Time, except to
the extent required by any Bankruptcy-Related Requirements, MMC and Parent
shall not and shall not permit any of its subsidiaries to, without the prior
written consent of Arch and except as otherwise contemplated by the Merger
Agreement or the Amended Plan: (i) except for assets not in excess of $2.5
million of fair market value, sell, lease, mortgage, pledge, encumber or
dispose of any of its assets, other than in the ordinary course of business;
(ii) except for borrowings under the existing DIP Credit Agreement in an
aggregate amount outstanding at any one time equal to the sum of (x) amounts
representing costs incurred or committed as of the date hereof in connection
with MMC's N-PCS network construction ("N-PCS Construction") plus any
additional costs for N-PCS Construction approved by Arch and (y)(1) at any
time on or before December 31, 1998 up to a maximum of $20.0 million, and (2)
at any time between January 1, 1999 and June 30, 1999 up to a maximum of $30.0
million, previously committed or create, incur or assume any indebtedness for
borrowed money not currently outstanding (including obligations in respect of
capital leases); assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other person; or make any loans, advances or capital contributions to,
or investments in, any other person; (iii) except for changes to MobileMedia's
payroll program as previously disclosed to Arch, enter into, adopt or amend
any MobileMedia employee benefit plan, or (except for normal adjustments in
the ordinary course of business) increase in any material respect the
compensation or fringe benefits of, or modify the employment terms of its
directors, officers or employees generally or pay any benefit not required by
the terms in effect on the date hereof of any existing MobileMedia employee
benefit plan; (iv) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a generally
applicable change in GAAP; (v) pay any pre-petition liability other than
liabilities in connection with the assumption of pre-petition contracts and
with respect to wages, taxes, customer refunds and other related expenses that
MobileMedia is authorized to pay by the Bankruptcy Court and adequate
protection payments and the payment to the Pre-Petition Lenders of the cash
proceeds from the MobileMedia Tower Site Sale, in each case as authorized by
the Bankruptcy Court; (vi) amend its certificate of incorporation, by-laws or
other comparable organizational documents; (vii) sell, assign, transfer or
license any material licenses, authorizations or intellectual property other
than in the ordinary course of business; (viii) enter into, amend, terminate,
take or omit to take any action that would constitute a material violation of
or default under, or waive any material rights under, certain licenses,
authorizations, contracts or agreements other than in the ordinary course of
business; (ix) make or commit to make any capital expenditure not set forth in
the capital expense budget provided to Arch; (x) (A) declare, set aside or pay
any dividends on, or make any other distributions (whether in cash, securities
or other property) in respect of, any of its outstanding capital stock (other
than, with respect to a subsidiary of MMC, to its corporate parent), (B)
split, combine or reclassify any of its outstanding capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its outstanding capital stock, or (C) purchase,
redeem or otherwise acquire any shares of outstanding capital stock or any
rights, warrants or options to acquire any such shares; (xi) issue, sell,
grant or pledge any shares of its capital stock, any other voting securities
or any securities convertible into or exchangeable for, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible or exchangeable securities, other than upon the exercise of
options, or upon the conversion or exchange of securities, outstanding on the
date of the Merger Agreement; (xii) make any material tax election or settle
or compromise any material tax liability or any pending or threatened suit or
action other than consistent with Parent's practice since the Petition Date or
pursuant to the terms of the Amended Plan; (xiii) establish, or transfer any
assets to, a trust for purposes of funding any employee benefit plan,
including, without limitation, a so-called "rabbi trust," except as required
by applicable law; or (xiv) agree in writing or otherwise to take any of the
foregoing actions.
CONDUCT OF ARCH'S BUSINESS PENDING THE MERGER
The Merger Agreement provides that, prior to the Effective Time, Arch shall
not, and shall not permit any of its subsidiaries to, without the prior
written consent of MobileMedia, and except as otherwise contemplated by the
Merger Agreement or the Amended Plan: (i) dispose of any of its assets or
acquire or dispose of any assets or shares or other equity interests in or
securities of any subsidiary, other than in the ordinary course of
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business, except for (A) the mortgage, pledge or encumbering of such assets,
shares, equity interests or securities pursuant to agreements existing as of
the date of the Merger Agreement or agreements entered into to provide
funding, in whole or in part, for the amounts payable by Arch under the Merger
Agreement or the Amended Plan or (B) the acquisition of such assets, shares,
equity interests or securities of any other Person (as defined therein) with
an aggregate purchase price not exceeding $25.0 million; (ii) except for
borrowings under the API Credit Facility or borrowings to provide funding for
the amounts payable by Arch under the Merger Agreement or the Amended Plan,
create, incur or assume any indebtedness for borrowed money not currently
outstanding (including obligations in respect of capital leases); assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person;
or make any loans, advances or capital contributions to, or investments in,
any other person; (iii) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a generally
applicable change in GAAP; (iv) amend its certificate of incorporation, by-
laws or other comparable organizational documents; (v) sell, assign, transfer
or license any material license, authorization or intellectual property, other
than in the ordinary course of business; (vi) enter into, amend, terminate,
take or omit to take any action that would constitute a material violation of
or default under, or waive any material rights under, certain licenses,
contracts or agreements, other than in the ordinary course of business; (vii)
make or commit to make any capital expenditure not set forth in the capital
expense budget provided to Parent; (viii) except as required under agreements
existing as of the date of the Merger Agreement, (A) declare, set aside or pay
any dividends on, or make any other distributions (whether in cash, securities
or other property) in respect of, any of its outstanding capital stock (other
than, with respect to any subsidiary of Arch, to its corporate parent), (B)
split, combine or reclassify any of its outstanding capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its outstanding capital stock, or (C) purchase,
redeem or otherwise acquire any shares of outstanding capital stock or any
rights, warrants or options to acquire any such shares, except, in the case of
this clause (C), for the acquisition of shares from holders of options in full
or partial payment of the exercise price payable by such holder upon exercise
of options; (ix) issue, sell, grant, pledge any shares of its capital stock,
any other voting securities or any securities convertible into or exchangeable
for, or, if outstanding as of the date of the Merger Agreement, change the
material terms of any of the foregoing, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible or exchangeable
securities, other than pursuant to the terms of any benefit plan as in effect
on the date of the Merger Agreement in accordance with past practice or upon
the exercise of options, or upon the conversion or exchange of securities,
outstanding on the date of the Merger Agreement; (x) make any material tax
election or settle or compromise any material tax liability or any pending or
threatened suit or action; (xi) establish, or transfer any assets to, a trust
for purposes of funding any of Arch's employee benefit plans, including,
without limitation, a so-called "rabbi trust," except as required by
applicable law; or (xiii) agree in writing or otherwise to take any of the
foregoing actions.
NOTICE OF BREACHES
The Merger Agreement provides that each of Arch, Parent and MobileMedia
shall promptly deliver to the other parties written notice of any event or
development that would (a) render any statement, representation or warranty of
such party in the Merger Agreement inaccurate or incomplete in any respect, or
(b) constitute or result in a breach by such party of, or a failure by such
party to comply with, any agreement or covenant in the Merger Agreement
applicable to such party. No such disclosure shall be deemed to avoid or cure
any such misrepresentation or breach.
EXCLUSIVITY PROVISIONS
The Merger Agreement provides that, except for the MobileMedia Tower Site
Sale, Parent and MMC shall not, and shall cause each of their respective
subsidiaries, as applicable, and each of their respective directors, officers,
employees, financial advisors, representatives or agents, not to, directly or
indirectly, (i) solicit, initiate, engage or participate in or encourage
discussions or negotiations with any person or entity (other than Arch)
concerning any merger, consolidation, sale of material assets, tender offer
for, recapitalization of or accumulation
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or acquisition of securities issued by MobileMedia or any of its subsidiaries,
as applicable, proxy solicitation or other business combination involving
MobileMedia or any of its subsidiaries, as applicable, (each, a "MobileMedia
Acquisition Proposal") or (ii) provide any non-public information concerning
the business, properties or assets of MobileMedia or any of its subsidiaries,
as applicable, to any person or entity (other than to Arch and other parties
in accordance with existing confidentiality arrangements). The Merger
Agreement provides that Parent and MMC shall, and shall cause each of their
respective subsidiaries, as applicable, to immediately cease any and all
existing activities, discussions or negotiations with any person other than
Arch with respect to any MobileMedia Acquisition Proposal. Parent and MMC are
obligated under the Merger Agreement to immediately notify Arch of, and to
disclose to Arch all details of, any such inquiries, discussions or
negotiations.
The Merger Agreement provides, however, that prior to the entry of the
Confirmation Order (as defined below), MobileMedia may, to the extent required
by the Bankruptcy-Related Requirements, or to the extent that MMC's Board of
Directors determines, in good faith after consultation with outside legal
counsel, that its fiduciary duties under applicable law require it to do so,
participate in discussions or negotiations with, and, subject to the
requirements set forth below, furnish information to any person, entity or
group after such person, entity or group has delivered to MobileMedia, in
writing, an unsolicited bona fide offer to effect a MobileMedia Acquisition
Proposal that MMC's Board in its good faith judgment determines, after
consultation with its independent financial advisors, would result in a
transaction more favorable to the claimholders of MobileMedia from a financial
point of view than the Merger and for which financing, to the extent required,
is then committed (or which, in the good faith judgment of MMC's Board, is
reasonably capable of being obtained) and which (in the good faith judgment of
such Board) is likely to be consummated (a "MobileMedia Superior Proposal").
In the event MobileMedia receives a MobileMedia Superior Proposal, nothing
contained in the Merger Agreement (but subject to the terms thereof) will
prevent MMC's Board from approving such MobileMedia Superior Proposal or
requesting authorization of such MobileMedia Superior Proposal from the
Bankruptcy Court, if MMC's Board determines, in good faith, after consultation
with outside legal counsel, that such action is required by its fiduciary
duties under applicable law; in such case, MMC's Board may terminate the
Merger Agreement; provided, however, that MobileMedia may not terminate the
Merger Agreement until at least 48 hours after Arch's receipt of a copy of
such MobileMedia Superior Proposal. The Merger Agreement further provides that
MobileMedia and each of its subsidiaries, as applicable, shall not provide any
non-public information to a third party unless: (i) MobileMedia provides such
non-public information pursuant to a non-disclosure agreement with terms
regarding the protection of confidential information at least as restrictive
as such terms in the confidentiality agreements between Parent and Arch; and
(ii) such non-public information has previously been delivered or made
available to Arch.
MMC, on behalf of itself, Parent and MobileMedia, has agreed not to make any
material change to the Amended Plan or the Merger Agreement, exercise any
rights they may have to terminate the Merger Agreement or take any action
which could result in the termination of the Merger Agreement by Arch without
the prior written consent of the Unsecured Creditors Committee or the entry of
an order by the Bankruptcy Court. MMC has further agreed not to exercise its
rights to respond to or negotiate acquisition proposals received from third
parties without advising and consulting with the Unsecured Creditors
Committee. MMC also agreed that the Unsecured Creditors Committee could
request MMC to exercise its right to terminate the Merger Agreement, and if
MMC does not do so, the Unsecured Creditors Committee may seek an order of the
Bankruptcy Court to do so.
The Merger Agreement provides that except for the contemplated sale of
certain tower sites owned by Arch, Arch shall not, and shall cause each of its
subsidiaries and each of their respective directors, officers, employees,
financial advisors, representatives or agents not to, directly or indirectly,
(i) solicit, initiate, engage or participate in or encourage discussions or
negotiations with any person or entity (other than MobileMedia and, in
connection with the transactions contemplated by the Merger Agreement, the
Unsecured Creditors Committee concerning any merger (other than mergers of
Arch subsidiaries in connection with acquisitions of other businesses by Arch
(x) with a fair market value not in excess of $25.0 million and (y) that would
not upon the closing thereof be in breach of Arch's obligations under the
Merger Agreement), consolidation, sale of material assets, tender offer for,
recapitalization of or accumulation or acquisition of securities issued by
Arch or any of Arch's subsidiaries,
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proxy solicitation or other business combination (other than business
combinations of subsidiaries of Arch in connection with acquisitions of other
businesses by Arch (x) with a fair market value not in excess of $25.0 million
and (y) that would not upon the closing thereof be in breach of Arch's
obligations under the Merger Agreement), involving Arch or any of its
subsidiaries (each, an "Arch Acquisition Proposal") or (ii) except as
permitted by the foregoing clause (i), provide any non-public information
concerning the business, properties or assets of Arch or any its subsidiaries
to any person or entity (other than MobileMedia or any of Arch's financing
sources). The Merger Agreement provides that Arch and its subsidiaries shall
immediately cease any and all existing activities, discussions or negotiations
with any person other than MobileMedia with respect to any Arch Acquisition
Proposal. Arch is obligated under the Merger Agreement to immediately notify
MobileMedia of, and to disclose to MobileMedia all details of, any such
inquiries, discussions or negotiations.
The Merger Agreement provides, however, that prior to the Special Meeting,
Arch may, to the extent that the Arch Board determines, in good faith, after
consultation with outside legal counsel, that its fiduciary duties under
applicable law require it to do so, participate in discussions or negotiations
with, and, subject to the requirements set forth below, furnish information to
any person, entity or group after such person, entity or group has delivered
to Arch, in writing, an unsolicited bona fide offer to effect an Arch
Acquisition Proposal that the Arch Board in its good faith judgment
determines, after consultation with its independent financial advisors, would
result in a transaction more favorable to the stockholders of Arch from a
financial point of view than the transactions contemplated thereby and for
which financing, to the extent required, is then committed (or which, in the
good faith judgment of the Arch Board, is reasonably capable of being
obtained) and which (in the good faith judgment of the Arch Board) is likely
to be consummated (an "Arch Superior Proposal"). In the event Arch receives an
Arch Superior Proposal, nothing contained in the Merger Agreement (but subject
to the terms thereof) will prevent the Arch Board from recommending to its
stockholders such Arch Superior Proposal if the Arch Board determines, in good
faith, after consultation with outside legal counsel, that such action is
required by its fiduciary duties under applicable law. The Merger Agreement
further provides that Arch shall not provide any non-public information to a
third party unless: (i) Arch provides such non-public information pursuant to
a non-disclosure agreement with terms regarding the protection of confidential
information at least as restrictive as such terms in the Confidentiality
Agreement; and (ii) such non-public information has previously been delivered
or made available to MobileMedia.
The exclusivity provisions became effective on September 4, 1998, the date
the Initial Merger Order was entered by the Bankruptcy Court.
BREAKUP FEE PROVISIONS
The Merger Agreement provides that in the event that (i) Arch terminates the
Merger Agreement as a result of a material breach of a representation,
warranty or covenant by MobileMedia or as a result of the failure of the
Confirmation Order to be entered on a timely basis due to the failure of the
creditors of MobileMedia entitled to vote on the Amended Plan, other than
Classes 7, 8 or 9 (see "The MobileMedia Plan of Reorganization--The Amended
Plan"), to vote in favor of the Amended Plan, or due to the withdrawal or
amendment of the Amended Plan in a manner adverse to Arch, the filing of any
other plan of reorganization by MobileMedia, or the modification or amendment
of any material provision of the Amended Plan, in each case without Arch's
consent, or the confirmation of any other plan of reorganization filed by any
other person, (ii) MobileMedia sells or otherwise transfers other than to Arch
all or any substantial portion of its assets as part of a sale approved
pursuant to Section 363 of the Bankruptcy Code (other than the MobileMedia
Tower Site Sale), (iii) MobileMedia has terminated the Merger Agreement in
connection with a MobileMedia Superior Proposal (each of the foregoing being a
"Major Breakup Event"), or (iv) Arch terminates the Merger Agreement as a
result of the failure of the MobileMedia Tower Site Sale to close when all
other conditions to MobileMedia's obligation to close have been satisfied (a
"Minor Breakup Event"; and, together with the Major Breakup Events, the
"Breakup Events"), and at the time of any such Breakup Event Arch is not in
material breach of any material covenant or obligation required to be
performed by Arch thereunder at or before such time, and is not in breach
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of its representations and warranties contained in the Merger Agreement
(except where the matters in respect of which such representations and
warranties are in breach would not in the aggregate have a material adverse
effect on Arch), then MobileMedia shall pay to Arch as promptly as practicable
after demand therefor (but in no event later than the third business day
thereafter) (x) in the case of a Major Breakup Event, the amount of $25.0
million, and (y) in the case of a Minor Breakup Event, an amount equal to one-
half of any amount actually received by MobileMedia pursuant to the Tower
Agreement (or pursuant to a settlement with Pinnacle in lieu thereof) (in
either case, the "Buyer Breakup Fee").
In the event that MobileMedia terminates the Merger Agreement as the result
of Arch being in material breach of its representations, warranties and
covenants, the failure of the Arch Board to recommend the MobileMedia Proposal
and the Charter Amendment Proposal as required by the Merger Agreement or the
failure of the MobileMedia Proposal and the Charter Amendment Proposal to be
approved at the Special Meeting, or Arch or MobileMedia terminates the Merger
Agreement as a result of Arch's failure to obtain the financing necessary to
effect the transactions contemplated by the Merger Agreement and the Amended
Plan (when all other conditions to Arch's obligations to close have been
satisfied), and at the time of such termination MobileMedia is not in material
breach of any material covenant or obligation required to be performed by
MobileMedia thereunder at or before such time and is not in breach of its
representations and warranties contained in the Merger Agreement (except where
the matters in respect of which such representations and warranties are in
breach would not in the aggregate have a material adverse effect on
MobileMedia), then Arch shall pay to MobileMedia as promptly as practicable
after demand therefor (but in no event later than the third business day
thereafter) the amount of $32.5 million (the "MobileMedia Breakup Fee").
The Breakup Fee provisions became effective on September 4, 1998, the date
the Initial Merger Order was entered by the Bankruptcy Court.
NASDAQ NATIONAL MARKET QUOTATION
The Merger Agreement provides that Arch shall use its best efforts to have
the shares of Common Stock (and such Common Stock issuable upon conversion of
Arch's Class B Common Stock and upon exercise of the Warrants and certain
other warrants) and Warrants and certain other warrants to be issued as
contemplated in the Merger Agreement and the Amended Plan approved for
quotation on the Nasdaq National Market prior to the Effective Time.
DELIVERY OF FINANCIAL STATEMENTS
The Merger Agreement provides that as promptly as possible following the
last day of each month prior to the Effective Time, and in any event within 35
days after the end of each such month, each of Arch and MobileMedia shall
deliver to the other its unaudited consolidated balance sheet and the related
consolidated statements of operations and cash flows for the one-month period
then ended, all certified by its chief financial officer to the effect that
such interim financial statements are prepared in accordance with GAAP (except
as otherwise described therein) on a consistent basis as with each party's
audited financial statements and fairly present the consolidated financial
condition of each party as of the date thereof and for the period covered
thereby. As promptly as possible following the last day of each fiscal
quarter, and in any event within 45 days after the end of each such quarter,
each of Arch and MobileMedia shall deliver to the other its unaudited
consolidated balance sheet and the related unaudited consolidated statements
of operations and cash flows for the year-to-date period then ended, prepared
in accordance with GAAP (except as otherwise described therein) applied on a
consistent basis, which comply as to form with the applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto. MobileMedia shall also provide Arch with all information
(including financial statements and accountants' consents) as Arch may
reasonably request in connection with any offering of securities by Arch to
fund amounts payable under the Amended Plan or working capital needs of the
Combined Company.
FULL ACCESS
The Merger Agreement provides that Arch and MobileMedia shall each permit
representatives of the other to have full access (at all reasonable times, and
in a manner so as not to interfere with normal business
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operations) to all premises, properties, financial and accounting records,
contracts, other records and documents, and personnel, of or pertaining to
such party. MobileMedia, upon Arch's request, is introducing Arch to
MobileMedia's principal suppliers and employees to facilitate discussions
between such persons and Arch with regard to the conduct of the Surviving
Corporation's business.
STOCKHOLDER APPROVAL; SPECIAL MEETING
The Merger Agreement provides that Arch shall take all action reasonably
necessary in accordance with applicable law, the rules of the Nasdaq National
Market, the Merger Agreement and the Arch Certificate and Arch By-laws, duly
to convene the Special Meeting as promptly as practicable. Arch has agreed,
subject to the Arch Board's fiduciary obligations, to recommend that its
stockholders vote in favor of the Merger and related proposals and to use its
best efforts to cause to be solicited proxies from stockholders of Arch to be
voted at the Special Meeting in favor of the Merger and the related proposals
and to take all other actions necessary or advisable to secure the vote or
consent of stockholders required to approve the Merger and related proposals.
PREPARATION OF PROSPECTUS AND DISCLOSURE STATEMENT
Pursuant to the Merger Agreement, Arch has prepared and filed a registration
statement on Form S-4, including a proxy statement for the Special Meeting
(the "Arch Stockholder Registration Statement"), with respect to the Merger
and certain securities to be issued in connection with the Merger. The Merger
Agreement obligates MobileMedia to provide all information (including
financial information) as Arch may reasonably request in connection therewith.
The Merger Agreement requires Arch to provide MobileMedia with all information
(including financial information) as MobileMedia may reasonably request for
the disclosure statement MobileMedia is required to send to its claimholders
in connection with the approval of the Amended Plan.
APPLICATION OF MOBILEMEDIA TOWER SALE PROCEEDS
The Merger Agreement provides that MobileMedia shall promptly pay the net
proceeds from the sale (the "MobileMedia Tower Site Sale") of certain
transmission towers and associated assets (the "MobileMedia Tower Sites") to
Pinnacle Towers, Inc. to the Pre-Petition Agent for the benefit of the Pre-
Petition Lenders. On September 3, 1998 the MobileMedia Tower Site Sale was
completed and the proceeds thereof ($170 million) were paid to the Pre-
Petition Lenders.
FCC FILING
Pursuant to the Merger Agreement, on September 2, 1998 Arch and MobileMedia
jointly prepared and filed applications (the "FCC Applications") requesting
(i) the FCC's consent to the transfer of the control of the Debtor
Authorizations (as defined therein) to Arch, (ii) to the extent that such
consent is required, the FCC's consent to the transfer of control of Buyer
Authorizations (as defined therein) from Arch's current stockholders to Arch's
stockholders immediately following the consummation of the transactions
contemplated hereby in accordance with the Amended Plan, (iii) the termination
of the hearing in WT Docket No. 97-115, In the Matter of MobileMedia
Corporation, et al. (the "Hearing") without any further findings adverse to
MobileMedia, or to the Debtor Authorizations or otherwise materially
restricting Arch's or MobileMedia's ability to own or operate the properties,
assets and businesses of MobileMedia following the Effective Time, and (iv)
the grant to Arch of permanent license authority to operate those stations
listed on Attachment C of Public Notice DA 97-78 (January 13, 1997), as to
which MobileMedia is currently operating under a grant of interim operating
authority, or in the alternative, a determination by the FCC that as to such
stations, Arch will enjoy protection from, and rights of incumbency as to, any
future Market Area Licensee authorized to operate on the frequencies licensed
under interim operating authority. Arch and MobileMedia are obligated to
cooperate in providing all information and taking all steps necessary to
expedite the preparation, filing and prosecution of the FCC Applications with
the FCC. In the event any person or entity petitions the FCC to deny any FCC
Application, or petitions for any further proceedings in the Hearing, or
otherwise challenges the grant of any FCC Application before the FCC, or in
the event the FCC approves the transfer of control of the Debtor
Authorizations (and, if necessary, Arch
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Authorizations), and any person requests reconsideration or judicial review of
such order, then Arch and MobileMedia shall take such reasonable actions as
are necessary to oppose such petition or challenge before the FCC or defend
such action and the order of the FCC before the judiciary diligently and in
good faith; provided, however, that nothing contained herein shall be deemed
to require Arch to intervene in the Hearing or otherwise to defend MobileMedia
as to any allegations or proceedings relating to the allegations before the
FCC in the Hearing, except as reasonably required to support the transfer of
control of the Debtor Authorizations to Arch. MobileMedia is obligated to
provide Arch (whether or not Arch intervenes or otherwise participates in the
Hearing) with reasonable advance notice of, and a right to participate in, any
meetings or hearings relating to the FCC Applications or the Hearing, and a
right to review in advance any correspondence, agreements, or pleadings which
may be submitted by MobileMedia to the FCC or any other party to the Hearing
with regard to the FCC Applications or any proceedings relating to the
Hearing. In each such case, each party shall bear its own costs and expenses
of prosecuting such application to a favorable conclusion, to the end that the
transactions contemplated by the Merger Agreement and the Amended Plan may be
consummated.
The Merger Agreement provides that MobileMedia shall use its reasonable best
efforts to complete its voluntary program to inspect and audit its transmitter
site facilities and license data, and provide periodic updates on the progress
of such program to Arch.
INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE
The Merger Agreement provides that, to the extent set forth in the Amended
Plan and only to such extent, all rights to indemnification and exculpation
from liabilities for acts or omissions occurring prior to the Effective Time
existing at the Effective Time in favor of the current or former directors or
officers of MobileMedia as provided in their respective charters or by-laws
(or comparable organization documents) and any indemnification agreements of
MobileMedia (including with Alvarez & Marsal, Inc.) shall survive the Merger
and shall continue in full force and effect in accordance with their terms for
a period of not less than three years from the Effective Time and the
obligations of MobileMedia in connection therewith shall be assumed by Arch.
To the extent set forth in the Amended Plan and only to such extent, Arch is
obligated to provide, or to cause the Surviving Corporation to provide,
MobileMedia's current directors and officers an insurance and indemnification
policy (including any fiduciary liability policy) that provides coverage with
respect to any claims made during the three-year period following the
Effective Time for events occurring prior to the Effective Time in an amount
of $40,000,000 or such lesser amount as can be purchased for $750,000.
STATE TAKEOVER LAWS
The Merger Agreement provides that if any "fair price", "business
combination" or "control share acquisition statute" or other similar statute
or regulation shall become applicable to the transactions contemplated hereby,
Arch and MobileMedia and their respective Boards of Directors shall use all
reasonable efforts to grant such approvals and take such actions as are
necessary so that such transactions may be consummated as promptly as
practicable on the terms contemplated hereby and shall otherwise act to
minimize the effects of any state statute or regulation affecting the
transactions contemplated hereby.
EMPLOYEES
The Merger Agreement provides that after the Effective Time Arch shall
transfer MobileMedia employees to Arch's employee benefit plans as soon as
practicable, and prior to such transfer shall maintain benefits for such
employees comparable to the benefits currently in effect for employees of
MobileMedia. Arch has agreed to honor accrued vacation, holiday, sick and
personal days, maintain MobileMedia's 1998 Employee Incentive Plan and give
MobileMedia's employees credit under Arch's benefit plans for service with
MobileMedia, to the extent permitted by law.
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EFFECTS OF ARCH'S RIGHTS AGREEMENT
The Merger Agreement provides that, except as contemplated by the Merger
Agreement, Arch is obligated not to (i) amend the Rights Agreement or (ii)
take any action with respect to, or make any determination under, the Rights
Agreement (including a redemption of the Preferred Rights) with the purpose of
facilitating an Arch Acquisition Proposal. Arch has amended its Rights Plan to
increase the ownership threshold for W.R. Huff, CS First Boston Corporation,
Whippoorwill and Northwestern Mutual to a maximum of 33%, 26%, 27% and 15.5%,
respectively. See "Description of Arch Capital Stock--Anti-Takeover
Provisions--Rights Plan".
RIGHTS OFFERING; REGISTRATION STATEMENT
As specified in the Amended Plan, Arch will issue on a pro rata basis to the
holders of allowed Class 6 Claims (with certain exceptions as specified in the
Amended Plan) Rights to purchase, for an aggregate consideration of $217.0
million, Units, each consisting of one share of Common Stock or Class B Common
Stock and 0.0516 of one Warrant, if no Adjustment is made, or one share of
Common Stock or Class B Common Stock and no Warrants, if an Adjustment is
made.
MobileMedia and Arch have entered into a Standby Purchase Agreement with
each Standby Purchaser, as described in "The Rights Offering--Standby Purchase
Agreements", and, prior to or at the Closing, Arch will execute and deliver to
each of the Standby Purchasers a Registration Rights Agreement.
Arch is obligated to use its best efforts to have the Registration Statement
declared effective by the Commission as promptly as practicable. Arch is also
obligated to take any action required to be taken under state blue sky laws or
other securities laws in connection with the Rights Offering. MobileMedia has
agreed to furnish Arch with all information (including, without limitation,
financial statements, pro forma financial statements and projections) and
shall take such other action including obtaining any necessary consents from
its accountants as Arch may reasonably request in connection with the
Registration Statement. Arch has agreed to consult with MobileMedia and its
counsel in connection with, and shall permit MobileMedia and its counsel to
participate in, the preparation of the Registration Statement. Arch has agreed
to cause the Rights to be issued as specified in the Amended Plan as soon as
practicable after the date the Registration Statement becomes effective but
not before approval of the Disclosure Statement by the Bankruptcy Court.
Arch has agreed to promptly notify MobileMedia of the receipt of the
comments of the Commission and of any requests by the Commission for amendment
or supplements to the Registration Statement or for additional information,
and shall promptly supply MobileMedia with copies of all correspondence
between it (or its representatives) and the Commission (or its staff) with
respect thereto, and shall permit counsel for MobileMedia to participate in
any telephone conferences or meetings with the staff of the Commission.
ARCH RIGHTS OFFERING; REGISTRATION STATEMENT
If an Adjustment is made, Arch will issue Arch Stockholders' Rights to
holders of Arch's Common Stock and Series C Preferred Stock as of a record
date to be determined by the Arch Board; provided that, Arch's Board, in its
sole discretion, may permit or require that Arch Stockholders' Rights shall
automatically transfer with the underlying shares of Common Stock or Series C
Preferred Stock in respect of which the Arch Stockholders' Rights are
distributed. In connection therewith, if an Adjustment is made, immediately
following the Merger Arch will be obligated to issue to the stockholders of
Arch one Arch Stockholders' Participation Warrant for each Arch Stockholders'
Right issued to such holder that has expired unexercised.
REIMBURSEMENT OF ARCH'S EXPENSES
Pursuant to the Initial Merger Order, on September 10, 1998, MMC paid
$500,000 to Arch in partial reimbursement of Arch's expenses in connection
with the negotiation and execution of the Merger Agreement.
CONDITIONS
The Merger Agreement provides that the respective obligations of Arch and
MobileMedia to effect the Merger are subject to the satisfaction or waiver on
or prior to the Effective Time of each of the following
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conditions: (i) the Merger and certain related proposals shall have been
approved by the requisite vote of the stockholders of Arch in accordance with
the DGCL, the Arch Certificate and Arch By-laws; (ii) no statute, rule, order,
decree or regulation shall have been enacted or promulgated by any foreign or
domestic Governmental Entity which prohibits the consummation of the
transactions contemplated thereby and all consents, orders and approvals from
all Governmental Entities and other persons or entities identified by
MobileMedia and Arch shall have been obtained and shall be in effect; (iii)
there shall be no order or injunction of a foreign or United States federal or
state court or other governmental authority of competent jurisdiction in
effect precluding, restraining, enjoining or prohibiting consummation of the
transactions contemplated thereby; (iv) the expiration or early termination of
any waiting period under the HSR Act shall have occurred; (v) (1) the FCC
shall have issued an order (the "FCC Grant") both (i) consenting to the
transfer of the Debtor Authorizations and, to the extent requested by the
Parties, to the transfer of the Buyer Authorizations without any conditions
which would have a Buyer FCC Material Adverse Effect (as defined below in this
clause (v)) or a Debtor FCC Material Adverse Effect (as defined below in this
clause (v)) and (ii) terminating the Hearing without any findings or
conclusions (x) which are materially adverse to the Reorganized Debtors or the
Debtor Authorizations or which would have a material adverse effect on the use
of the Debtor Authorizations by the Reorganized Debtors following the Closing,
or (y) which impose any material monetary forfeiture on the Debtors or the
Reorganized Debtors or retain jurisdiction to impose any material monetary
forfeitures in the future on the Buyer or the Reorganized Debtors based on the
activities of the Debtors prior to the Closing, or (z) which would have a
Buyer FCC Material Adverse Effect or a Debtor FCC Material Adverse Effect; and
(2) either (i) the FCC Grant has become a Final Order (as defined below in
Section 5.1(e)) or (ii)(a) any condition or conditions under the Bank Lending
Documents to the effect that the FCC Grant shall have become a Final Order (or
any condition or conditions therein having a substantially similar effect)
shall have been satisfied or, if not satisfied, the Bank Lenders shall have
waived any such condition or conditions (or any such condition or conditions
having a substantially similar effect) and (b) any condition or conditions
under the Other Lending Documents to the effect that the FCC Grant shall have
become a Final Order (or any condition or conditions therein having a
substantially similar effect) shall have been satisfied or, if not satisfied,
the Other Lenders shall have waived any such condition or conditions (or any
such condition or conditions having a substantially similar effect); in this
clause (v), (A) "Bank Lenders" shall mean, collectively, the Existing Lenders
(as defined in the Bank Commitment Letter) and the Credit Parties (as so
defined), as the same in each case shall exist at the Closing, (B) "Bank
Lending Documents" shall mean the Existing Credit Agreements (as defined in
the Bank Commitment Letter) as amended and modified by the Amendments (as so
defined), (C) "Bank Commitment Letter" shall mean the Commitment Letter dated
August 10, 1998 between Arch Paging, Inc. and the Credit Parties, including
the Term Sheet (as defined in such Bank Commitment Letter), copies of which
has been delivered to MobileMedia by Arch as the same may be amended or
modified, (D) "Other Lenders" shall mean the Lenders (as defined in the Bridge
Commitment Letter), as the same shall exist at the Closing, or, if applicable,
any other lenders which lend funds to ACI or Arch (or Arch or any other Arch
Subsidiary) pursuant to a Substitute Loan Agreement (as defined below), (E)
"Other Lending Documents" shall mean the Bridge Commitment Letter, Bridge Loan
Agreement (as defined in the Bridge Commitment Letter) or any other loan
agreement, indenture or similar agreement (the "Substitute Loan Agreement")
entered into by Arch or any Arch Subsidiary in lieu thereof for purposes of
funding a material portion of the consideration required by Arch for the
transactions contemplated by this Agreement, (F) "Bridge Commitment Letter"
shall mean the Bridge Commitment Letter, the Bridge Fee Letter and the Bridge
Engagement Letter, each of even date herewith, between Arch and ACI, on the
one hand, and the Other Lenders, on the other hand, a copy of which has been
delivered by Arch to MobileMedia, as the same may be amended or modified, (G)
"Buyer FCC Material Adverse Effect" shall mean a material adverse effect on
the financial condition and operating income of Arch and its subsidiaries,
taken as a whole, excluding any effect generally applicable to the economy or
the industry in which Arch conducts its business, and (H) "Debtor FCC Material
Adverse Effect" shall mean a material adverse effect on the financial
condition and operating income of MobileMedia, taken as a whole, excluding any
effect generally applicable to the economy or the industry in which
MobileMedia conducts its business; for purposes of this clause (v), the FCC
Grant shall become a "Final Order" when no request for a stay is pending, no
stay is in effect and any deadline for filing such a request that may be
designated by statute or regulation is past; no petition for rehearing or
reconsideration or application for review is pending and the time for filing
any such petition or application is passed; the FCC does not have the
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action or decision under reconsideration on its own motion and the time for
initiating any such reconsideration that may be designated by statute or rule
has passed; and no appeal is pending or in effect and any deadline for filing
any such appeal that may be designated by statute or rule has passed; deadline
for filing any such appeal that may be designated by statute or rule has
passed; (vi) each of the Registration Statement and the Arch Stockholder
Registration Statement shall have been declared effective and no stop order
with respect thereto shall be in effect; (vii) the shares of Common Stock
(including all such shares issuable upon conversion of the Class B Common
Stock and the Warrants, as the case may be) to be issued as contemplated by
the Amended Plan and the Merger Agreement shall have been approved for
quotation on the Nasdaq National Market; (viii) (1) the Confirmation Order
(which shall authorize and approve the assumption by MobileMedia of the
Assumed Contracts), in a form reasonably satisfactory to each of the Parties,
shall have been entered by the Bankruptcy Court; and (2) either (i) the
Confirmation Order has become a Final Order (as defined below in this clause
(v)) or (ii) (a) any condition or conditions under the Bank Lending Documents
to the effect that the Confirmation Order shall have become a Final Order (or
any condition or conditions therein having a substantially similar effect)
shall have been satisfied or, if not satisfied, the Bank Lenders shall have
waived any such condition or conditions (or any such condition or conditions
having a substantially similar effect), and (b) any condition or conditions
under the Other Lending Documents to the effect that the Confirmation Order
shall have become a Final Order (or any condition or conditions therein having
a substantially similar effect) shall have been satisfied or, if not
satisfied, the Other Lenders shall have waived any such condition or
conditions (or any such condition or conditions having a substantially similar
effect); the Confirmation Order shall become a "Final Order" when it shall
have been in full force and effect for eleven days without any stay or
material modification or amendment thereof, and when the time to appeal or
petition for certiorari designated by statute or regulation has expired and no
appeal or petition for certiorari is pending or, if an appeal or petition for
certiorari has been timely filed or taken, the order or judgment of the
tribunal has been affirmed (or such appeal or petition has been dismissed as
moot) by the highest court (or other tribunal having appellate jurisdiction
over the order or judgment) to which the order was appealed or the petition
for certiorari has been denied, and the time to take any further appeal or to
seek further certiorari designated by statute or regulation has expired; (ix)
no action, suit or proceeding shall be pending or threatened by any
Governmental Entity challenging the validity of the actions taken by Arch,
MobileMedia or any of their respective subsidiaries in connection with the
confirmation of the Amended Plan; (x) the Effective Date (as defined in the
Amended Plan) shall have occurred; and (xi) the shares of Common Stock
constituting the Directly Distributed Creditor Stock Pool to be issued as
contemplated by the Merger Agreement shall be so issued and distributed
pursuant to the exemption from registration under the Securities Act provided
by Section 1145 of the Bankruptcy Code, shall be freely tradeable by holders
thereof who are not then affiliates of Arch or "underwriters" under the
Securities Act or 1145(b)(1) of the Bankruptcy Code and, except for
certificates issuable to such affiliates or underwriters, shall be represented
by certificates bearing no restrictive legend.
The obligation of Arch to consummate the transactions to be performed by
Arch in connection with the Closing is subject to the satisfaction, or waiver
by Arch, of the following conditions: (i) the representations and warranties
of MobileMedia contained in the Merger Agreement, which representations and
warranties shall be deemed not to include any qualification or limitation with
respect to materiality, shall be true and correct as of the Effective Time,
with the same effect as though such representations and warranties were made
as of the Effective Time, except where the matters in respect of which such
representations and warranties are not true and correct, result from actions
permitted by the Merger Agreement or would not in the aggregate have a
material adverse effect on the businesses, assets (including licenses,
franchises and other intangible assets), financial condition, operating income
and prospects of MobileMedia and its subsidiaries, taken as a whole; (ii)
MobileMedia shall have performed or complied with its material agreements and
covenants required to be performed or complied with under the Merger Agreement
as of or prior to the Effective Time in all material respects; (iii) there
shall not have occurred between the date of the Merger Agreement and the
Effective Time an event which has had a material adverse effect on the
businesses, assets (including licenses, franchises and other intangible
assets), financial condition, operating income and prospects of MobileMedia
and its subsidiaries, taken as a whole; (iv) MobileMedia shall have delivered
to Arch a certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that the preceding conditions are satisfied in all
respects; (v) after each of
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the Registration Statement and the Arch Stockholder Registration Statement has
been declared effective, each of the Rights Offering and the Arch Rights
Offering shall have expired and Arch shall have received aggregate proceeds
therefrom (and/or from the closings contemplated by the Standby Purchase
Agreements) of $217.0 million; and (vi) the closing of the MobileMedia Tower
Site Sale shall have occurred and MobileMedia shall have applied at least
$165.0 million towards payment of the secured creditors of Parent and
MobileMedia in connection with the Amended Plan. On September 3, 1998 the sale
of the MobileMedia Tower Sites was completed and the proceeds thereon ($170
million) were paid to the Pre-Petition Lenders.
The obligation of MobileMedia to consummate the transactions to be performed
by it in connection with the Merger is subject to the satisfaction, or waiver
by MobileMedia, of the following conditions: (i) the representations and
warranties of Arch contained in the Merger Agreement, which representations
and warranties shall be deemed not to include any qualification or limitation
with respect to materiality, shall be true and correct as of the Effective
Time, with the same effect as though such representations and warranties were
made as of the Effective Time, except where the matters in respect of which
such representations and warranties are not true and correct, result from
actions permitted by the Merger Agreement or would not in the aggregate have a
material adverse effect on the businesses, assets (including licenses,
franchises and other intangible assets), financial condition, operating income
and prospects of Arch and its subsidiaries, taken as a whole; (ii) Arch shall
have performed or complied with its material agreements and covenants required
to be performed or complied with under the Merger Agreement as of or prior to
the Closing in all material respects; (iii) there shall not have occurred
between the Agreement Date and the Effective Time an event which has had
material adverse effect on the businesses, assets (including licenses,
franchises and other intangible assets), financial condition, operating income
and prospects of Arch and its subsidiaries, taken as a whole; (iv) the
Preferred Rights shall not have become nonredeemable, exercisable, distributed
or triggered pursuant to the terms of the Rights Agreement; and (v) Arch shall
have delivered to MobileMedia a certificate (without qualification as to
knowledge or materiality or otherwise) to the effect that such conditions are
satisfied in all respects.
TERMINATION
The Merger Agreement provides that Arch and MobileMedia may terminate the
Merger Agreement prior to the Effective Time only as follows: (i) Arch and
MobileMedia may terminate the Merger Agreement by mutual written consent; (ii)
either Arch or MobileMedia may terminate the Merger Agreement by giving
written notice to the other in the event the other is in breach (A) of its
representations and warranties contained in the Merger Agreement, which
representations and warranties shall be deemed not to include any
qualification or limitation with respect to materiality, except where the
matters in respect of which such representations and warranties are in breach
would not in the aggregate have a material adverse effect on the business,
assets (including licenses, franchises and other intangible assets), financial
condition, operating income and prospects of such party and its respective
subsidiaries, taken as a whole, or (B) in respect of its material covenants or
agreements contained in the Merger Agreement, and in either case such breach
is not remedied within 20 business days of delivery of such written notice
thereof (which notice shall specify in reasonable detail the nature of such
breach); (iii) (A) Arch may terminate the Merger Agreement by written notice
to MobileMedia if the Confirmation Order has not been entered by the
Bankruptcy Court on or prior to March 31, 1999 (unless such failure results
primarily from a breach by Arch of any representation, warranty or covenant
contained in the Merger Agreement) or (B) Arch may terminate the Merger
Agreement by giving written notice to MobileMedia if the Merger shall not have
occurred on or before June 30, 1999 (unless the failure results primarily from
a breach by Arch of any representation, warranty or covenant contained in the
Merger Agreement); (iv)(A) MobileMedia may terminate the Merger Agreement by
written notice to Arch if the Confirmation Order has not been entered by the
Bankruptcy Court on or prior to March 31, 1999 (unless the failure results
primarily from a breach by MobileMedia of any representation, warranty or
covenant contained in the Merger Agreement) or (B) MobileMedia may terminate
the Merger Agreement by giving written notice to Arch if the Merger shall not
have occurred on or before June 30, 1999 (unless the failure results primarily
from a breach by MobileMedia of any representation, warranty or covenant
contained in the Merger Agreement); (v) MobileMedia may terminate the Merger
Agreement in connection with a MobileMedia Superior Proposal by giving written
notice to Arch, provided that on or before such termination MobileMedia shall
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have paid to Arch the applicable Arch Breakup Fee; (vi) MobileMedia may
terminate the Merger Agreement by giving written notice to Arch if (A) the
Arch Board does not issue the Arch Recommendation prior to the Special Meeting
or withdraws or amends in a manner adverse to MobileMedia the Arch
Recommendation or otherwise materially breaches its obligations with respect
to soliciting proxies from its stockholders for approval of the Merger and
related proposals at the Special Meeting or (B) at the Special Meeting the
Merger and related proposals are not approved by the requisite vote of Arch
Stockholders; (vii) Arch may terminate the Merger Agreement by giving written
notice to MobileMedia if MobileMedia or any of its subsidiaries files either
an amendment to the Amended Plan or any other plan of reorganization in a
manner that is in violation of the Merger Agreement and (viii) Arch may
terminate the Merger Agreement by giving notice to MobileMedia if (A)
MobileMedia takes (or omits to take) any action that would constitute a
material breach of any of its covenants or agreements but for exceptions to
its obligations pursuant to Bankruptcy-Related Requirements, and (B) such
action is not remedied within 20 business days of delivery of written notice
thereof (which notice shall specify in reasonable detail the nature of such
action). Parent has agreed for itself and MMC not to exercise any right to
terminate the Merger Agreement without the prior written consent of the
Unsecured Creditors Committee.
If any party terminates the Merger Agreement, all obligations of Arch and
MobileMedia thereunder shall generally terminate without any liability of any
party to any other party, except for any liability of any party for willful or
intentional breaches of the Merger Agreement, and except for MobileMedia's
obligation to pay the Buyer Breakup Fee, if applicable, and Arch's obligation
to pay the MobileMedia Breakup Fee, if applicable, which shall survive any
such termination.
AMENDMENT AND WAIVER
Arch, Parent and MMC may mutually amend any provision of the Merger
Agreement (in certain cases Parent and MMC may do so only with the consent of
the Unsecured Creditors Committee or pursuant to an order of the Bankruptcy
Court). The Merger Agreement provides that no waiver by any party to the
Merger Agreement of any default, misrepresentation or breach of warranty or
covenant thereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation or breach of warranty or
covenant thereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
MMC, on behalf of itself, Parent and MobileMedia, has agreed not to make any
material changes, exercise any rights they may have to terminate the Merger
Agreement or take any action which might result in the termination of the
Merger Agreement without the prior written consent of the Unsecured Creditors
Committee or pursuant to an order of the Bankruptcy Court. MMC has further
agreed not to exercise its rights to respond to or negotiate acquisition
proposals received from third parties without advising and consulting with the
Unsecured Creditors Committee. MMC also agreed that the Unsecured Creditors
Committee could request MMC to exercise its right to terminate the Merger
Agreement, and if MMC does not do so, the Unsecured Creditors Committee may
seek an order of the Bankruptcy Court to do so.
RELATED AGREEMENTS
The agreements summarized below are related to the Merger Agreement and the
transactions contemplated thereby. See also "The MobileMedia Plan of
Reorganization".
REGISTRATION RIGHTS AGREEMENTS
At the Effective Time, Arch will enter into a registration rights agreement
with the Standby Purchasers (the "Standby Purchaser Registration Rights
Agreement") and, upon the request of any stockholder who as a result of the
Merger becomes the beneficial owner of at least 10% of the outstanding Stock
(a "10% Stockholder"), will enter into a separate registration rights
agreement with such 10% Stockholder (the "10% Stockholder Registration Rights
Agreement").
Pursuant to the Standby Purchaser Registration Rights Agreement, Arch will
be required to file and have declared effective, by the Effective Time, a
shelf registration statement relating to resales of Common Stock,
Warrants and Arch Stockholders' Participation Warrants and the issuance and
resale of the Stock issuable upon
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exercise of such warrants, the Class B Common Stock and the Common Stock
issuable upon conversion of the Class B Common Stock owned by such Standby
Purchasers or acquired after the Effective Time and securities, if any,
received from Arch in respect of the foregoing by reason of stock dividends or
similar matters (the "Registrable Securities"). Arch will be required to use
its reasonable best efforts to keep such shelf registration statement
continuously effective until the earliest of (a) March 1, 2003, (b) the date
on which all Registrable Securities covered by the shelf registration
statement have been sold thereunder and (c) the date on which all Registrable
Securities covered by the shelf registration statement may be sold publicly
without registration under the Securities Act.
Each Standby Purchaser will also have demand registration rights which may
be exercised no more than twice. In addition, Arch will provide Standby
Purchasers "piggyback" registration rights with respect to other offerings
filed by Arch.
The 10% Stockholder Registration Rights Agreement provides for similar
registration rights and indemnification provisions, except that Arch need not
file a shelf registration except upon the written request of a 10%
Stockholder.
Fees and expenses incurred in connection with the filing of any registration
statements (other than selling commissions) will be borne by Arch. These
registration rights agreements will also provide for customary indemnification
obligations on the part of Arch.
WARRANT AGREEMENTS
If no Adjustment is made, Arch will enter into a warrant agreement (the
"Warrant Agreement") at the Effective Time with The Bank of New York, as
warrant agent, with respect to the Warrants and the Standby Purchasers'
Warrants. The Warrant Agreement will govern the terms relating to the
issuance, form, registration, exercise, transfer and exchange of the Warrants,
as well as certain adjustment provisions. Each Warrant will initially
represent the right to purchase one share of Stock. The Warrants will have an
initial exercise price of $8.19 per share, if no Adjustment is made. Warrants
may be exercised in whole or in part, at any time after the Effective Time and
prior to September 1, 2001.
If an Adjustment is made, Arch will enter into a warrant agreement (the
"Arch Stockholders' Participation Warrant Agreement") at the Effective Time
with The Bank of New York, as warrant agent, with respect to the Arch
Stockholders' Participation Warrants and the Standby Purchasers' Warrants. The
Arch Stockholders' Participation Warrant Agreement will govern the terms
relating to the issuance, form, registration, exercise, transfer and exchange
of Arch Stockholders' Participation Warrants, as well as certain adjustment
provisions. Each Arch Stockholders' Participation Warrant and Standby
Purchasers' Warrant will represent the right to purchase one share of Common
Stock at a fixed exercise price equal to the Subscription Price plus an amount
to reflect compounding, from the Effective Date until September 1, 2001, at a
20% per annum internal rate of return over the Subscription Price and to be
exercisable until September 1, 2001.
Arch will be required to maintain an effective registration statement
registering the issuance of Stock upon exercise of the warrants described
above.
RELATED MATTERS AFTER THE MERGER
At the Effective Time, the Certificate of Incorporation and By-Laws of the
Merger Subsidiary, as in effect immediately prior to the Effective Time, will
be the Certificate of Incorporation and By-Laws of the Surviving Corporation
and will continue to be the Surviving Corporation's Certificate of
Incorporation and By-Laws until amended as provided therein or by applicable
law.
The directors and officers of the Merger Subsidiary immediately prior to the
Effective Time will be the directors and officers of the Surviving
Corporation, and will hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation.
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THE MOBILEMEDIA PLAN OF REORGANIZATION
The following is a brief summary of certain provisions of the Amended Plan,
a copy of which is attached as Annex C to this Prospectus and incorporated
herein by reference in its entirety. Although this section summarizes the
material terms of the Amended Plan, such summary is qualified in its entirety
by reference to the Amended Plan. Prospective investors in the Rights Offering
are urged to read the Amended Plan in its entirety for a more complete
description of the Amended Plan. Defined terms used herein but not otherwise
defined shall have the meaning ascribed to them in the Amended Plan.
THE AMENDED PLAN
The Debtors filed the Amended Plan with the Bankruptcy Court on September 4,
1998. The Amended Plan provides for the merger of MMC with and into the Merger
Subsidiary. In connection with the Amended Plan, Arch has agreed to (i) pay to
certain secured creditors of Parent and MobileMedia $479.0 million in cash and
to issue to the Unsecured Creditors shares of Stock representing 9.7% (at an
Arch Common Stock Price of $2.50) to 31.3% (at an Arch Common Stock Price of
$10.63) of Arch's outstanding shares on a Diluted Basis (as defined in the
Amended Plan), (ii) to assume and pay all priority and administrative claims
of MobileMedia and (iii) repay amounts due under the DIP Credit Agreement. In
connection with the Amended Plan, Arch will conduct the Rights Offering. The
Amended Plan provides that the Effective Date shall be that date that is 10
business days after the date that the Confirmation Order has been entered and
10 days have passed without the Confirmation Order being reversed, modified,
vacated or stayed and each of the conditions to the consummation of the Merger
is satisfied or waived, if legally permissible, other than the condition
relating to the confirmation of the Amended Plan.
The Amended Plan provides for the treatment of all claims against and equity
interests in MobileMedia. The Amended Plan provides that holders of pre-
petition claims which are entitled to priority in accordance with applicable
provisions of the Bankruptcy Code will be paid in full in cash on the
Effective Date or be unimpaired under the Bankruptcy Code and that all post-
petition claims against MobileMedia in the ordinary course of business or as
authorized by the Bankruptcy Court will either be paid in full in cash on the
Effective Date or in accordance with the terms applicable to such post-
petition claims. The Amended Plan requires Arch to make sufficient funds
available to pay all such priority and administrative claims, provided,
however, that if the total required to be paid on account of priority tax
claims, accrued and unpaid professional fees, cure payments due with respect
to assumed executory contracts, bonus payments for employees and
professionals, claims of indenture trustees, amounts required to pay certain
fees and expenses of the secured creditors of MobileMedia and amounts required
to pay the Dial Page Notes, together with the costs and expenses of the
Standby Purchasers in accordance with the Standby Purchase Agreements, exceeds
$34.0 million, the number of shares of Common Stock constituting the Directly
Distributed Creditor Stock Pool will be reduced by a number of shares equal to
the amount by which such claims exceed $34.0 million divided by $25.315. Arch
has also agreed to pay in cash on the Effective Date loans outstanding under
the DIP Credit Agreement. The Merger Agreement provides that as of the
Effective Date the amount of loans outstanding under the DIP Credit Agreement
shall not exceed $20.0 million prior to December 31, 1998, or $30.0 million
between January 1, 1999 and June 30, 1999, in each case plus amounts borrowed
under the DIP Credit Agreement for N-PCS construction incurred or committed by
MobileMedia as of the date of the Merger Agreement or otherwise approved by
Arch.
The Amended Plan classifies all holders of pre-petition claims against, and
equity interests in, MobileMedia into nine classes.
1. Class 1 claims consist of claims entitled to priority under Section
507(a)(3) of the Bankruptcy Code (unpaid claims for wages, salaries or
commissions up to an amount not in excess of $4,000 earned within ninety
(90) days of the commencement of the Insolvency Proceedings), 507(a)(4) of
the Bankruptcy Code (claims for contributions to employee benefits plans
subject to a formula limitation) and 507(a)(6) of the Code (claims for
consumer deposits in an amount not in excess of $1,800). These claims have
been estimated by MobileMedia to total $ . The Amended Plan provides that
all such claims will be paid in cash on the Effective Date. Arch is
obligated to provide MobileMedia with the cash needed to pay these claims.
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2. Class 2 claims consist of miscellaneous secured claims. MobileMedia
estimates that the total of such claims is $ . The Amended Plan provides
that all such secured claims will be paid in accordance with their terms or
will be unimpaired under the Amended Plan.
3. Class 3 claims consist of customer refund claims not in Class 1 or
Class 2. MobileMedia estimates that these claims total $ . The Amended
Plan provides that all such customer refund claims will be paid in
accordance with their terms.
4. Class 4 claims consist of claims arising under the MobileMedia 1995
Credit Agreement. As of the Petition Date, MobileMedia was indebted
thereunder in the principal amount of $649.0 million. During the pendency
of the Insolvency Proceedings, MobileMedia has paid the lenders thereunder
adequate protection payments equal to the amount of interest due at the
non-default rate. The Amended Plan provides that the banks will be paid
100% of the principal amount of their claims in full in cash on the
Effective Date, together with certain fees and expenses and any unpaid
accrued interest thereon up to the Effective Date at the non-default rate.
On September 3, 1998, MobileMedia paid to the holders of the Class 4 claims
all net proceeds realized from the MobileMedia Tower Sites Sale ($170.0
million) pursuant to the Purchase Agreement between MobileMedia and
Pinnacle (the "MobileMedia Tower Sale Agreement"). Arch is obligated to pay
the balance of the Class 4 claims in cash on the Effective Date.
5. Class 5 consists of claims arising under the Dial Page Notes. The
outstanding principal balance of the Dial Page Notes, together with
interest accrued thereon through the Effective Date and the reasonable fees
and expenses of the Indenture Trustee for the Dial Page Notes, will be paid
in full in cash on the Effective Date. MobileMedia estimates that these
claims will total approximately $2.1 million as of June 30, 1998. Arch is
obligated to provide the cash needed to pay the Dial Page Notes.
6. Class 6 claims consist of all pre-petition unsecured claims which are
not entitled to priority and not included in any other class. MobileMedia
estimates that the total amount of Class 6 claims that will be allowed is
approximately $ million. A pro rata share of the Directly Distributed
Creditor Stock Pool and the Rights will be distributed to Class 6 creditors
in full satisfaction of their claims, except that any Class 6 creditor
whose claim is not allowed as of the date the Rights Offering is commenced
or on the date of a supplemental Rights distribution, and who later has a
Class 6 claim allowed, will be paid in cash the value of the Rights that
the creditor would have received had its claim been allowed as of the date
that the Rights Offering was commenced (the "Cash Equivalent"). The funds
to make such cash payments will be obtained from the sale of Rights which
are reserved from distribution to Class 6 creditors on account of disputed
claims as of the date the Rights Offering is commenced, and which remain
undistributed immediately after the date the Amended Plan is confirmed. If
the proceeds from the sale of the Rights which are reserved from
distribution are insufficient to pay the Cash Equivalent because Class 6
claims are allowed for more than the estimated amount, Arch is obligated to
pay the Cash Equivalent out of its own funds.
7. Class 7 claims consist of claims of holders of MobileMedia promissory
notes based on alleged violations of applicable securities laws and any
claims by officers or directors or underwriters for indemnification related
thereto. The Amended Plan provides that no payment will be made with
respect to Class 7 claims.
8. Class 8 claims consist of all equity interests in Parent and all
claims related to alleged violations of applicable securities laws and
various claims for indemnification by any officer, director, underwriter,
employee or professional related thereto. The Amended Plan provides that
the holders of equity interests in Parent, any related claims thereto and
any claims for indemnification will receive no distribution under the
Amended Plan.
9. Class 9 consists of any claim by Parent, MMC or any of MMC's
subsidiaries against one another and the equity interests held by Parent,
MMC or MMC's subsidiaries in one another. The Amended Plan provides that
such claims and equity interests are cancelled, except that MMC will retain
its shareholder interest in MobileComm.
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EXECUTORY CONTRACTS
The Amended Plan provides that all executory contracts of MobileMedia are to
be assumed by the Surviving Corporation except for those which are the subject
of a specific motion to reject and those which are set forth in a schedule to
the Amended Plan of executory contracts to be rejected. All the defaults under
contracts which are to be assumed must be cured on the Effective Date.
MobileMedia estimates that the cost to cure defaults under contracts to be
assumed totals approximately $ . Arch will make the funds available to pay
cure payments.
IMPLEMENTATION OF PLAN
The Amended Plan provides that following Confirmation but prior to the
Effective Date the current officers and directors of MobileMedia will continue
to be responsible for the operations of MobileMedia and that the Unsecured
Creditors Committee will continue to exist. On the Effective Date, the
Unsecured Creditors Committee will cease to exist, and the officers and
directors of Merger Subsidiary will become the officers and directors of the
Surviving Corporation. Also on the Effective Date, Parent will contribute its
assets to MMC and will then be dissolved, all subsidiaries of MobileMedia will
be merged into MMC, and all FCC licenses to operate MobileMedia's wireless
network will be conveyed to a wholly owned limited liability company of MMC.
The Unsecured Creditors Committee prior to its expiration will appoint a
person, subject to Arch's and MobileMedia's consent, who will be responsible
for winding up the bankruptcy estate of MobileMedia. Arch has agreed to fund
the costs of such estate representative according to a budget which shall be
mutually agreed upon by Arch and such estate representative. The estate
representative will have the power to object to claims and to resolve all such
objections. Any causes of action of MobileMedia arising under the Bankruptcy
Code or otherwise are preserved for the benefit of the Combined Company, to be
pursued or not in the discretion of the Combined Company.
The Amended Plan provides that Class 6 creditors will receive their share of
the Stock and (unless an Adjustment is made) the Warrants purchased through
the exercise of Rights and of the Directly Distributed Creditor Stock Pool
from Arch and the Exchange Agent. The Directly Distributed Creditor Stock Pool
will be distributed on the Effective Date, or as soon thereafter as is
practical. To the extent that there are disputed claims in Class 6 as of the
Effective Date, the Exchange Agent will reserve from distribution from the
Directly Distributed Creditor Stock Pool sufficient shares of Common Stock so
that if a holder of a disputed claim has its claim allowed for the full amount
asserted, such holder will receive the same distribution it would have
received had its claim been allowed as of the first distribution from the
Directly Distributed Creditor Stock Pool. When a disputed claim is resolved,
and to the extent such claim is allowed, the holder of such claim will receive
a distribution of Common Stock equal to what the claimant would have received
had the claim been allowed when the original distribution of Common Stock was
made by the Exchange Agent and a cash payment in respect of the Rights the
holder of such claim would have been entitled to receive had such claim been
allowed when the Rights were distributed. Also included in Class 6 are claims
arising from the rejection of contracts and leases. If the reserve established
for such claims is inadequate, there is a possibility that there will be
insufficient shares in the Directly Distributed Creditor Stock Pool to make
the pro rata distribution to all holders of Class 6 claims whose claims are
allowed after the Effective Time. When all Class 6 claims have been resolved,
the Exchange Agent will make a final distribution of then remaining shares in
the Directly Distributed Creditor Stock Pool on a pro rata basis. If, at the
time of the final distribution, there are less than 10,000 shares in the
Directly Distributed Creditor Stock Pool, such shares will not be distributed
and instead will be delivered to Arch and become treasury shares.
CONDITIONS TO EFFECTIVENESS OF THE PLAN
The Bankruptcy Court will schedule a hearing to consider confirmation of the
Amended Plan. The list that follows is qualified by reference to the Amended
Plan and the Merger Agreement. The conditions to the Effective Date set forth
in the Amended Plan are:
(a) That the Confirmation Order has been entered by the Bankruptcy Court,
more than ten (10) days
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have elapsed since the Confirmation Date, no stay of the Confirmation Order
is in effect and the Confirmation Order has not been reversed, modified or
vacated;
(b) That all conditions to the Closing under the Merger Agreement (other
than the condition that the Effective Date shall have occurred) have been
satisfied or, if legally permissible, waived by the party entitled thereto;
and
(c) That the commitments under the DIP Credit Agreement have terminated,
all amounts owing under or in respect of the DIP Credit Agreement have been
paid in full in cash and any outstanding letters of credit issued under and
in connection with the DIP Credit Agreement or the MobileMedia 1995 Credit
Agreement have been terminated or satisfied, or the Debtors have provided
cash collateral therefor in accordance with the terms of the DIP Credit
Agreement or the MobileMedia 1995 Credit Agreement, as applicable.
DISCHARGE
The Amended Plan incorporates the provisions of Section 1141(d) of the
Bankruptcy Code which provide that except as specifically set forth in the
Amended Plan or the Confirmation Order, all claims against MobileMedia and all
equity interests in MobileMedia will be discharged and/or extinguished on the
Effective Date. In addition, the Amended Plan provides that any person holding
a claim against MobileMedia or an interest in MobileMedia is enjoined from
taking any action which seeks to enforce any claim or assert any interest in
MobileMedia that is inconsistent with the Amended Plan.
RELEASES AND INDEMNIFICATION
The Amended Plan provides that MobileMedia shall release all officers and
directors of all liabilities for any and all actions up through and to the
Effective Date, except for claims against former officers or directors who are
considered by the FCC to be alleged or actual wrongdoers as of the Effective
Date of the Amended Plan for purposes of MobileMedia's Second Thursday
Application provided that such release shall not be provided to any officer or
director who has a Disputed Claim as of the Effective Date. MobileMedia also
agrees to continue in full force and effect, without the benefit of any
discharge, its indemnification obligations to those persons who are officers
and employees of MobileMedia as of the Effective Date, but not directors, and
not any officers who are as of the effective date of the Amended Plan
considered by the FCC to be alleged or actual wrongdoers for purposes of
MobileMedia's Second Thursday Application except for indemnification claims
(i) relating to the Securities Actions, (ii) based upon factual allegations or
causes of action similar to those alleged in the Securities Actions or (iii)
relating to any action to rescind a purchase or sale of a security of
MobileMedia or for damages relating to any such purchase or sale. MobileMedia
has also agreed to purchase a directors and officers' liability insurance
policy covering claims made within three years after the Effective Date with
respect to acts or omissions occurring prior to the Effective Date for its
current and former directors and officers, other than those former officers
and directors who are now or hereafter considered by the FCC to be alleged
wrongdoers for purposes of MobileMedia's Second Thursday Application with an
aggregate coverage of up to $40,000,000 or such lesser amount as may be
purchased for a premium of $750,000.
JURISDICTION
The Bankruptcy Court will retain jurisdiction to oversee implementation of
the Amended Plan, to resolve any disputes relating to the Merger, to hear all
applications for professional fees, to hear all objections to claims and other
matters as set forth in the Amended Plan or as may be provided for in the
Confirmation Order.
CALCULATION OF SHARES
The number of shares of Stock and Warrants to be issued pursuant to the
Merger Agreement and the Amended Plan will be determined by reference to the
Arch Common Stock Price, which will be equal to the lower of (i) the average
per share closing sales price of Common Stock in the Nasdaq National Market
for eight
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randomly selected days, with the two highest and two lowest prices
disregarded, over the period from August 24, 1998 to and including September
22, 1998 or (ii) the average per share closing sales price of Common Stock on
the Nasdaq National Market for five randomly selected days, with the highest
and lowest prices disregarded, over the 15 trading-day period commencing on
the first trading day after entry of a Confirmation Order; provided that the
Arch Common Stock Price shall not be less than $6.25 nor greater than $10.63
if determined under clause (i) nor less than $2.50 nor greater than $6.24 if
determined under clause (ii).
The aggregate number of shares of Stock to be issued pursuant to the Amended
Plan will range from approximately 48.8 million shares at an Arch Common Stock
Price of $10.63 to 57.7 million shares at an Arch Common Stock Price of $6.25
to approximately 122.8 million shares at an Arch Common Stock Price of $2.50.
See "Stockholdings Before and After the Merger". A portion of such aggregate
number of shares shall be issued pursuant to the Rights Offering, with the
remainder being allocated to the Directly Distributed Creditor Stock Pool. The
number of shares of Stock to be sold in the Rights Offering will be determined
by dividing $217.0 million by the exercise price of a Right. The Subsequent
Price each Right will be 80% of the Arch Common Stock Price.
The number of Warrants shall be determined by reference to the number of
shares of Common Stock issued (on an as-converted basis,) as of the date on
which the Arch Common Stock Price is determined, plus the number of shares to
be issued pursuant to the Merger Agreement and the Amended Plan, and
reflecting the assumption that 21,067,110 shares of Common Stock are issued
and outstanding immediately prior thereto. The Warrants issued in the Rights
Offering, the Standby Purchasers' Warrants and the warrants issued to Arch
stockholders will be equal to approximately 2.5%, 2.5% and 7.0%, respectively,
of the total number of shares of Common Stock on a Fully Diluted Basis after
giving effect to the Warrants, except that, if an Adjustment is made, no
Warrants will be issued and the number of Arch Stockholders' Rights (and, to
the extent any of such Warrants are not exercised, Arch Stockholders'
Participation Warrants) will be sufficient to cause the holders of Arch's
Common Stock and Series C Preferred Stock immediately prior to the Merger to
hold 32.2% of such total number of shares of Common Stock on a Fully Diluted
Basis immediately thereafter. The Warrants will be exercisable from the date
of issuance until September 1, 2001 and will have an initial exercise price of
$8.19 per share if no Adjustment is made. If an Adjustment is made, the
Warrants will have an initial exercise price per share equal to the
Subscription Price of the Rights plus an amount reflecting compounding, from
the Effective Time through September 1, 2001, at a 20% per annum internal rate
of return over the Subscription Price. Assuming a December 31, 1998 Effective
Date, such exercise price would range between $3.25 and $8.11 per share
depending on the Subscription Price.
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THE COMBINED COMPANY
OVERVIEW
Arch, after giving effect to the acquisition of MobileMedia, would be the
second largest paging operator in the United States in terms of pager units in
service, net revenues (total revenues less cost of products sold) and EBITDA.
On a pro forma basis (before the financial impact of expected operational cost
synergies), at and for the six months ended June 30, 1998, the Combined
Company would have had approximately 7.2 million pagers in service, net
revenues of $403.5 million, EBITDA (before reorganization expenses and
restructuring charges) of $125.5 million and total debt of $1.3 billion. See
"Unaudited Pro Forma Condensed Consolidated Financial Statements".
Arch believes that the Combined Company will be well positioned to compete
effectively in the highly competitive paging industry for the following
reasons. The combination of MobileMedia's market presence in major
metropolitan markets with Arch's historical emphasis on middle and small
markets should significantly broaden the geographic scope of Arch's marketing
presence and should position the Combined Company to compete more effectively
for large corporate customers with diverse geographic operations. With a
significantly larger subscriber base, the Combined Company should be better
able to serve strategic distribution arrangements, as well as amortize
marketing investments over a larger revenue base. In addition, MobileMedia's
third party retail distribution agreements, which serve the more rapidly
growing consumer market, should complement the more than 200 Arch-owned retail
outlets. Similarly, MobileMedia's two nationwide paging networks (and the
potential for higher revenue nationwide services) should enhance Arch's local
coverage and provide an opportunity to take advantage of Arch's distribution
platforms. MobileMedia's plan to deploy its nationwide N-PCS spectrum
utilizing its existing network infrastructure should permit Arch to market N-
PCS (primarily multi-market alphanumeric and text messaging services) sooner
than it would otherwise have been able to, and these services are expected to
offer higher revenue and more growth potential than basic paging services.
Finally, MobileMedia's investments to date in two national call centers should
supplement Arch's own call center and complement Arch's strategy of evolving
to "scalable" regional customer service centers.
STRATEGY
Arch expects the Combined Company to execute the following strategy:
Cost Reductions. Arch's management has worked closely with MobileMedia's
management to identify redundant managerial and administrative functions that
Arch's management believes can be eliminated without material impact to
customer related activities.
Low Cost Provider. Arch management will continue to evolve its cost
structure to seek greater cost efficiencies. Arch expects to be able to
gradually improve the operating processes of the Combined Company to further
reduce the Combined Company's operating costs from continuing efficiency
gains. The greater scale of the combined operations should permit Arch to
further reduce per unit operating costs.
Balanced Distribution Channels. Arch's combination of direct sales, company-
owned stores, and third party resellers will be supplemented by MobileMedia's
own local market direct sales force, and its distribution agreements with
third party regional and national retailers. In addition, MobileMedia's
national accounts sales force should significantly enhance Arch's efforts to
improve distribution to nationwide customers.
Expanded Product Line. The Combined Company will have one of the broadest
product offerings in the paging industry. MobileMedia's N-PCS Spectrum will
provide Arch with more economical and broader access to higher ARPU,
nationwide and regional services and text messaging services, which to date
Arch has marketed on a limited basis through the resale of other carriers'
services on less attractive terms.
69
<PAGE>
Enhanced Value-Added Services. The Combined Company's larger subscriber base
should offer new revenue opportunities from the sale of enhanced value-added
services such as voicemail, resale of long-distance service and fax storage
and retrieval.
UNAUDITED FINANCIAL PROJECTIONS AND OPERATIONAL COST SYNERGIES
Arch and MobileMedia have developed the Combined Company Projections
consisting of unaudited pro forma operating and financial results for the six-
month period ending December 31, 1998 and the twelve-month period ending
December 31, 1999. The Unaudited Combined Company Projections assume
confirmation of the Amended Plan and consummation of the Merger Agreement and
the Amended Plan as of December 31, 1998. The Combined Company Projections
were filed with the Bankruptcy Court on August 20, 1998 in connection with
MobileMedia's filing of the Amended Plan.
The Unaudited Combined Company Projections, which were developed by
management of each of Arch and MobileMedia, with the assistance of their
respective financial advisors, are based on:
.Arch's projected financial results, as developed by management of Arch,
taking into account anticipated cost reductions associated with the
recently announced Divisional Reorganization;
. MobileMedia's projected financial results, as developed by management of
MobileMedia, taking into account the sale of tower assets and the related
rental by MobileMedia of certain transmitter space and equipment on such
towers;
. Certain adjustments to MobileMedia's projected results made by Arch
management to reflect more conservative assumptions with regard to
expected subscriber additions, subscriber turnover and net revenues. Such
adjustments were intended to reflect the continuing potential impact from
the effects of MobileMedia's Chapter 11 filing and the integration of
Arch's and MobileMedia's operations.
The Combined Company Projections for the six months ended December 31, 1998
do not include the financial benefits of potential operational expense
reductions and capital expenditure efficiencies (expected to result from the
Merger). The Combined Company Projections for the year ended December 31, 1999
reflect half of $25.0 million ($12.5 million) of operational cost synergies
expected to be recognized by December 31, 1999.
THE COMBINED COMPANY PROJECTIONS WERE NOT PREPARED WITH A VIEW TO COMPLYING
WITH THE GUIDELINES FOR PROSPECTIVE FINANCIAL STATEMENTS PUBLISHED BY THE
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. NEITHER THE INDEPENDENT
ACCOUNTANTS FOR ARCH NOR THE INDEPENDENT AUDITORS FOR MOBILEMEDIA HAVE
EXAMINED OR COMPILED THE ACCOMPANYING COMBINED COMPANY PROJECTIONS AND
ACCORDINGLY DO NOT EXPRESS AN OPINION OR ANY OTHER FORM OF ASSURANCE WITH
RESPECT THERETO.
ARCH AND MOBILEMEDIA DO NOT PUBLISH THEIR RESPECTIVE BUSINESS PLANS AND
STRATEGIES OR PROJECTIONS OF THEIR RESPECTIVE ANTICIPATED FINANCIAL POSITION
OR RESULTS OF OPERATIONS. THE PROJECTIONS WERE PREPARED FOR, AND ARE CONTAINED
IN, THE DISCLOSURE STATEMENT BEING DISTRIBUTED TO MOBILEMEDIA'S CREDITORS IN
CONNECTION WITH THE APPROVAL OF THE AMENDED PLAN. THEY WERE INCLUDED THEREIN
IN ORDER TO SATISFY APPLICABLE REQUIREMENTS FOR INFORMATION REQUIRED TO BE
INCLUDED IN A BANKRUPTCY COURT APPROVED DISCLOSURE STATEMENT. THEY ARE
PROVIDED HEREBY SO THAT ARCH STOCKHOLDERS WILL HAVE THE SAME INFORMATION BEING
PROVIDED TO MOBILEMEDIA'S CREDITORS. ACCORDINGLY, ARCH AND MOBILEMEDIA DO NOT
INTEND, AND DISCLAIM ANY OBLIGATION TO, (A) FURNISH UPDATED COMBINED COMPANY
PROJECTIONS, (B) INCLUDE SUCH UPDATED INFORMATION IN ANY DOCUMENTS WHICH MAY
BE REQUIRED TO BE FILED WITH THE COMMISSION, OR (C) OTHERWISE MAKE SUCH
UPDATED INFORMATION PUBLICLY AVAILABLE.
70
<PAGE>
ARTHUR ANDERSEN LLP, THE INDEPENDENT PUBLIC ACCOUNTANTS FOR ARCH, HAS
NEITHER COMPILED NOR EXAMINED SUCH PROJECTIONS AND, ACCORDINGLY, DOES NOT
EXPRESS ANY OPINION OR ANY OTHER FORM OF ASSURANCE WITH RESPECT TO, ASSUMES NO
RESPONSIBILITY FOR AND DISCLAIMS ANY ASSOCIATION WITH, SUCH PROJECTIONS. ERNST
& YOUNG LLP, THE INDEPENDENT AUDITORS FOR MOBILEMEDIA, HAS NEITHER COMPILED
NOR EXAMINED SUCH PROJECTIONS AND, ACCORDINGLY, DOES NOT EXPRESS ANY OPINION
OR ANY OTHER FORM OF ASSURANCE WITH RESPECT TO, ASSUMES NO RESPONSIBILITY FOR
AND DISCLAIMS ANY ASSOCIATION WITH, SUCH PROJECTIONS.
THE COMBINED COMPANY PROJECTIONS PROVIDED HEREIN HAVE BEEN PREPARED BY ARCH
AND MOBILEMEDIA. THE COMBINED COMPANY PROJECTIONS, ALTHOUGH PRESENTED WITH
NUMERICAL SPECIFICITY, ARE BASED UPON A SERIES OF ESTIMATES AND ASSUMPTIONS
WHICH, ALTHOUGH CONSIDERED REASONABLE BY ARCH AND MOBILEMEDIA, MAY NOT BE
REALIZED, AND ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND
COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE
CONTROL OF ARCH AND MOBILEMEDIA. NO REPRESENTATIONS CAN BE OR ARE MADE AS TO
THE ACCURACY OF THE COMBINED COMPANY PROJECTIONS. SOME ASSUMPTIONS INEVITABLY
WILL NOT MATERIALIZE, AND EVENTS AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE
DATE ON WHICH THE COMBINED COMPANY PROJECTIONS WERE PREPARED MAY BE DIFFERENT
FROM THOSE ASSUMED OR MAY BE UNANTICIPATED AND, ACCORDINGLY, MAY AFFECT
FINANCIAL RESULTS IN A MATERIAL AND POSSIBLY ADVERSE MANNER. THE COMBINED
COMPANY PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON AS A GUARANTY OR OTHER
ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR. THE FOREGOING ASSUMPTIONS AND
RESULTANT COMPUTATIONS WERE MADE SOLELY FOR PURPOSES OF PREPARING THE COMBINED
COMPANY PROJECTIONS. SEE "FORWARD LOOKING STATEMENTS".
71
<PAGE>
UNAUDITED COMBINED COMPANY PROJECTED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1998 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 5.0 $ 2.0
Accounts receivable, net................................... 73.6 76.0
Inventories................................................ 14.5 15.2
Prepaid expenses and other................................. 14.1 14.1
-------- --------
Total current assets..................................... 107.2 107.3
-------- --------
Property and equipment, net................................ 431.0 464.2
Intangible and other assets................................ 1,127.8 964.3
-------- --------
$1,666.0 $1,535.8
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt....................... -- 1.2
Accounts payable........................................... 77.7 79.8
Accrued expenses........................................... 12.6 13.4
Accrued interest........................................... 7.5 7.5
Customer deposits and deferred revenue..................... 49.9 52.1
Accrued restructuring charges.............................. 40.6 12.5
-------- --------
Total current liabilities................................ 188.3 166.5
-------- --------
Long-term debt, less current maturities.................... 1,347.6 1,432.7
-------- --------
Other long-term liabilities................................ 10.2 10.2
-------- --------
Stockholders' equity (deficit)............................... 119.9 (73.6)
-------- --------
$1,666.0 $1,535.8
======== ========
</TABLE>
72
<PAGE>
UNAUDITED COMBINED COMPANY PROJECTED STATEMENTS OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
DECEMBER 31, 1998(1) DECEMBER 31, 1999(2)
-------------------- --------------------
<S> <C> <C>
Service, rental and maintenance
revenues........................... $ 395.9 $ 819.6
Product sales....................... 49.6 102.7
------- -------
Total revenues.................. 445.5 922.3
Cost of products sold............. (38.8) (81.1)
------- -------
406.7 841.2
Operating expenses:
Service, rental and maintenance... 102.6 206.4
Selling........................... 57.0 114.7
General and administrative........ 125.3 252.6
Depreciation and amoritzation..... 162.9 311.0
------- -------
Total operating expenses........ 447.8 884.7
------- -------
Operating income (loss)............. (41.1) (43.5)
Interest expense, net............... (73.0) (145.0)
Other expenses...................... (4.0) (5.0)
------- -------
Net income (loss)................... $(118.1) $(193.5)
======= =======
EBITDA.............................. $121.8 $267.5
======= =======
</TABLE>
- --------
(1) Does not include the financial impact of potential operational expense
reductions and capital expenditure efficiencies that may be achieved
following the Merger.
(2) Based upon annualized $25.0 million in operational costs synergies (see
"Unaudited Combined Company Projected Statement of Cash Flow--Potential
Operational Cost Savings") expected to be realized by December 31, 1999
(assuming closing on January 1, 1999). Half of the annualized savings, or
$12.5 million, is projected to be recognized throughout 1999. Prior to
giving effect to the operational cost synergies expected to be realized,
the EBITDA for the Combined Company for the year ending December 31, 1999
would be $255.0 million.
73
<PAGE>
UNAUDITED COMBINED COMPANY PROJECTED STATEMENT OF CASH FLOW
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
------------
<S> <C>
Net cash provided by operating activities.......................... $ 138.0
-------
Cash flows from investing activities:
Additions to property and equipment, net......................... (177.7)
Additions to intangible and other assets......................... (8.0)
-------
Net cash used for investing activities............................. (185.7)
-------
Cash flows from financing activities:
Issuance of long-term debt....................................... 44.7
-------
Net cash provided by financing activities.......................... 44.7
-------
Net decrease in cash and cash equivalents.......................... (3.0)
Cash and cash equivalents, beginning of period..................... 5.0
-------
Cash and cash equivalents, end of period........................... $ 2.0
=======
</TABLE>
POTENTIAL OPERATIONAL COST SAVINGS
During the negotiations leading up to the execution of the Merger Agreement,
management of Arch and MobileMedia estimated operational expense reductions
and capital expenditure efficiencies they believed could be achieved in
connection with the Merger. Senior management from Arch and MobileMedia,
together with their respective financial advisors, attended multiple meetings
during April and July 1998 to discuss, review and compare organizational
structures and staffing arrangements in order to identify potential
opportunities to eliminate redundant costs and estimate the resulting
financial impact. Three primary areas of estimated expense reductions
included: (i) redundant managerial and administrative overhead at both Arch
and MobileMedia; (ii) duplicative purchased services, including subcontracted
paging services; and (iii) duplicative capital expenditures.
Potential personnel redundancies and associated estimated financial impact
were identified following a comparison of staffing levels at corporate,
divisional and regional offices and on a market-by-market basis. No personnel
reductions were identified in MIS operations, call center operations, local
market-level customer service, and most other "customer facing" activities.
Purchased services identified include operations-related services, such as
telecommunications and network services, subcontracted paging network
services, third party dispatch services, and advertising and promotion
expenditures; as well as professional services, including legal and
accounting. These purchased services were reviewed to identify potential cost
savings achievable through volume discounts, conversion to company-owned
networks, replacement with lower cost service providers, and elimination of
redundant expenditures.
The two companies' planned capital expenditures were reviewed and savings
opportunities identified for negotiating greater volume discounts on the
purchase of pagers, avoiding network expenditures by utilizing complementary
existing infrastructure, and eliminating duplicative expenditures related to
each company's current N-PCS strategy.
The following table presents the range of estimated annual ongoing expense
reductions and annual capital expenditure savings that management of Arch and
MobileMedia believe might be achieved based upon the foregoing review. Such
estimates are based on current operating run-rates and the existing cost
structures of Arch and MobileMedia, respectively. The Potential Cost Savings
shown below represent expense reduction opportunities and efficiencies that
Arch believes will be implemented during the first twelve months following
74
<PAGE>
the Effective Time of the Merger, based on current expense run-rates. The
estimated financial benefits as shown represent annualized savings. This table
does not reflect additional unidentified savings opportunities or costs and
timing risks associated with achieving the potential cost savings described.
ESTIMATED RANGE OF ANNUAL OPERATIONAL EXPENSE REDUCTIONS BASED ON CURRENT COSTS
(IN MILLIONS)
<TABLE>
<CAPTION>
LOW HIGH
----- -----
<S> <C> <C>
Operating expense reductions:
Market level personnel overlap................................... $ 6.6 $ 8.0
Regional/divisional level management overlap..................... 3.6 4.4
Corporate administrative overlap................................. 5.8 7.6
Purchased services............................................... 7.5 12.5
----- -----
Potential annual expense reductions............................ $23.5 $32.5
===== =====
Capital expenditure efficiencies:
Pager purchases.................................................. $ 1.7 $ 4.2
Network and N-PCS implementation................................. 8.0 10.0
----- -----
Potential annual capital expenditure efficiencies.............. $ 9.7 $14.2
===== =====
</TABLE>
75
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet has
been prepared to reflect the Merger using the purchase method of accounting,
assuming the Merger had occurred on June 30, 1998. Under the purchase method
of accounting, the purchase price will be allocated to assets acquired and
liabilities assumed based on their estimated fair values at the Effective
Time. Income of the Combined Company will not include income (or loss) of
MobileMedia prior to the Effective Time. The unaudited pro forma condensed
consolidated statements of operations for the year ended December 31, 1997 and
the six months ended June 30, 1998 present the results of operations of Arch
and MobileMedia assuming the Merger had been effected on January 1, 1997. The
pro forma condensed consolidated financial statements reflect the issuance of
57,745,000 shares of Stock in connection with the Merger and the payment of
$479.0 million in cash by Arch. The unaudited pro forma financial data should
be read in conjunction with the notes thereto and the consolidated historical
financial statements of Arch and MobileMedia, including the respective notes
thereto, which are included in this Proxy Statement.
The pro forma condensed consolidated financial data is for information
purposes only and is not necessarily indicative of the results of future
operations of the Combined Company or the actual results that would have been
achieved had the Merger been consummated during the periods indicated.
Moreover, the pro forma condensed consolidated financial statements reflect
preliminary pro forma adjustments made to combine Arch with MobileMedia
utilizing the purchase method of accounting. The actual adjustments will be
made as of the Effective Time of the Merger and may differ from those
reflected in the pro forma financial statements.
Under the terms of the Merger Agreement, the number of shares of Common
Stock (on an as-converted basis) to be issued by Arch, and the percentages
which such shares represent of all outstanding shares on an as-converted
basis, will vary depending on the Arch Common Stock Price. See "The
MobileMedia Plan of Reorganization--Calculation of Shares". For purposes of
presenting the pro forma condensed consolidated financial statements included
herein, Arch has assumed the Arch Common Stock Price to be $6.25. This
assumption results in pro forma shares to be issued of 57,745,000 which are
valued at $360.9 million. In the event that the Arch Common Stock Price is
below $6.25, additional shares of Stock will be issued and the valuation of
the Shares will be based on the market price at that time. This will have the
effect of reducing stockholders' equity, loss per share and other financial
measurements as well as increasing the dilution to current Arch stockholders.
See Notes 11 and 12 of Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements below. See "Risk Factors--Uncertainties Related to the
Merger and the Reorganization--Use of Pro Forma Assumptions".
76
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ARCH MOBILEMEDIA PRO FORMA PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS CONSOLIDATED
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $ 4,913 $ 11,559 $ 16,472
Accounts receivable
net.................. 32,483 39,890 $ (1,807) (7) 70,566
Inventories........... 13,278 916 14,194
Prepaid expenses and
other................ 3,582 10,954 14,536
---------- ----------- ----------- ----------
Total current
assets............. 54,256 63,319 (1,807) 115,768
---------- ----------- ----------- ----------
Property and
equipment, net....... 229,862 227,699 (5,768) (6) 451,793
Intangible and other
assets............... 687,431 305,345 (284,228)(10) 1,191,698
504,267 (10)
(21,117) (2)
---------- ----------- ----------- ----------
$ 971,549 $ 596,363 $ 191,347 $1,759,259
========== =========== =========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Current maturities of
long-term debt....... $ -- $ 1,075,681 $ (479,000)(2) $ --
(170,000)(6)
(426,681)(1)
Accounts payable...... 22,951 19,939 (16,124)(1) 24,959
(1,807)(7)
Accrued expenses...... 12,850 64,412 (24,062)(1) 53,200
Accrued interest...... 7,453 23,037 (23,037)(1) 7,453
Customer deposits and
deferred revenue..... 16,281 32,446 48,727
Accrued
restructuring........ 15,846 5,041 (5,041)(1) 45,846
30,000 (10)
---------- ----------- ----------- ----------
Total current
liabilities........ 75,381 1,220,556 (1,115,752) 180,185
---------- ----------- ----------- ----------
Long-term debt, less
current maturities... 1,003,357 -- 322,000 (3) 1,325,357
---------- ----------- ----------- ----------
Deferred income
taxes................ -- 2,655 (2,655)(1) --
---------- ----------- ----------- ----------
Other long-term
liabilities.......... 10,240 -- -- 10,240
---------- ----------- ----------- ----------
Stockholders' equity
(deficit):
Preferred stock....... 3 -- -- 3
Common stock.......... 211 -- 521 (5) 732
Additional paid-in
capital.............. 376,867 676,025 (676,025)(4) 737,252
360,385 (5)
Accumulated deficit... (494,510) (1,302,873) 1,302,873 (4) (494,510)
---------- ----------- ----------- ----------
Total stockholders'
equity (deficit)... (117,429) (626,848) 987,754 243,477
---------- ----------- ----------- ----------
$ 971,549 $ 596,363 $ 191,347 $1,759,259
========== =========== =========== ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements
77
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ARCH MOBILEMEDIA PRO FORMA PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS CONSOLIDATED
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Service, rental and
maintenance revenues... $ 351,944 $ 491,174 $ (2,500)(6) $ 831,285
(9,333)(7)
Products sales.......... 44,897 36,218 -- 81,115
----------- --------- ---------- -----------
Total revenues...... 396,841 527,392 (11,833) 912,400
Cost of products sold... (29,158) (35,843) -- (65,001)
----------- --------- ---------- -----------
367,683 491,549 (11,833) 847,399
----------- --------- ---------- -----------
Operating expenses:
Service, rental and
maintenance.......... 79,836 139,333 9,686 (6) 219,522
(9,333)(7)
Selling............... 51,474 69,544 -- 121,018
General and
administrative....... 106,041 179,599 -- 285,640
Depreciation and
amortization......... 232,347 140,238 (521)(6) 409,747
22,004 (10)
15,679 (10)
Bankruptcy related
expense.............. -- 19,811 (19,811)(9) --
----------- --------- ---------- -----------
Total operating
expenses........... 469,698 548,525 17,704 1,035,927
----------- --------- ---------- -----------
Operating income
(loss)................. (102,015) (56,976) (29,537) (188,528)
Interest expense, net... (97,159) (67,611) 67,611 (8) (134,749)
(37,590)(8)
Other (expenses)
income................. (3,872) 3 -- (3,869)
----------- --------- ---------- -----------
Income (loss) before
income tax benefit and
extraordinary item..... (203,046) (124,584) 484 (327,146)
Benefit from income
taxes.................. 21,172 -- -- 21,172
----------- --------- ---------- -----------
Income (loss) before
extraordinary item..... $ (181,874) $(124,584) $ 484 $ (305,974)
=========== ========= ========== ===========
Basic income (loss)
before extraordinary
item per share......... $ (8.77) $ (3.90)
=========== ===========
Weighted average common
shares outstanding..... 20,746,240 57,745,000 (5) 78,491,240
=========== ========== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements
78
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ARCH MOBILEMEDIA PRO FORMA PRO FORMA
(HISTORICAL) (HISTORICAL) ADJUSTMENTS CONSOLIDATED
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Service, rental and
maintenance revenues... $ 184,280 $215,109 $ (1,262)(6) $ 393,900
(4,227)(7)
Products sales.......... 21,305 13,794 -- 35,099
---------- -------- ---------- ----------
Total revenues...... 205,585 228,903 (5,489) 428,999
Cost of products sold... (14,690) (10,774) -- (25,464)
---------- -------- ---------- ----------
190,895 218,129 (5,489) 403,535
---------- -------- ---------- ----------
Operating expenses:
Service, rental and
maintenance.......... 40,409 56,028 4,887 (6) 97,097
(4,227)(7)
Selling............... 24,244 31,460 -- 55,704
General and
administrative....... 56,516 68,752 -- 125,268
Depreciation and
amortization......... 108,400 60,748 (264)(6) 187,726
11,002 (10)
7,840 (10)
Restructuring
expense.............. 16,100 -- -- 16,100
Bankruptcy related
expense.............. -- 9,250 (9,250)(9) --
---------- -------- ---------- ----------
Total operating
expenses........... 245,669 226,238 9,988 481,895
---------- -------- ---------- ----------
Operating income
(loss)................. (54,774) (8,109) (15,477) (78,360)
Interest expense, net... (51,123) (29,113) 29,113 (8) (69,918)
(18,795)(8)
Other expenses.......... (2,219) (47) -- (2,266)
---------- -------- ---------- ----------
Income (loss) before
extraordinary item..... $ (108,116) $(37,269) $ (5,159) $ (150,544)
========== ======== ========== ==========
Basic income (loss)
before extraordinary
item per share......... $ (5.17) $ (1.91)
========== ==========
Weighted average common
shares outstanding..... 20,918,048 57,745,000 (5) 78,663,048
========== ========== ==========
</TABLE>
See accompanying notes to unaudited proforma condensed consolidated financial
statements
79
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) To eliminate liabilities of MobileMedia which (i) Arch will not assume,
(ii) will be satisfied in cash or (iii) will be exchanged for Stock.
(2) To record the payment of $479.0 million to satisfy certain claims
associated with MobileMedia's secured creditors. This amount was funded by
$262.0 million from Arch borrowings and the proceeds of the Rights
Offering of $217.0 million. Deferred financing costs associated with the
former MobileMedia credit facility and notes of $21.1 million were written
off in connection with this paydown of debt.
(3) To record the additional Arch borrowings necessary to fund its obligations
in the Merger, as follows: (i) $262.0 million to pay the MobileMedia
secured creditors, (ii) $35.0 million to satisfy various administrative
costs associated with the bankruptcy and (iii) $25.0 million of
transaction costs.
(4) To eliminate MobileMedia equity balances.
(5) To record the issuance of 57,745,000 shares of Stock pursuant to the
Merger Agreement and the exercise of the Rights to purchase Stock.
(6) To record the effect of the sale of MobileMedia's tower sites to a third
party on September 3, 1998. The net proceeds of this transaction,
approximately $170.0 million, were utilized as partial payment of
MobileMedia's secured creditors. This entry removes various assets
associated with this business, removes rental income earned by these
assets from earnings and provides ongoing rental expense for the use of
transmitter space on such towers.
(7) To eliminate accounts receivable, payable, revenues and expenses between
Arch and MobileMedia.
(8) To remove the interest expense associated with the various MobileMedia
credit facilities and notes eliminated pursuant to the Amended Plan and to
record the interest associated with the additional Arch borrowings used to
fund the Merger.
(9) To eliminate expenses incurred by MobileMedia related primarily to its
administration of the bankruptcy proceedings.
(10) To record the excess of purchase price over the assumed fair value of the
identifiable assets acquired and the related amortization for the year
ended December 31, 1997 and the six months ended June 30, 1998. The
excess of purchase price over the assumed fair value of identifiable
assets acquired is calculated as follows:
<TABLE>
<S> <C> <C>
Consideration exchanged:
Payments to secured creditors....................... $479,000
Assumed fair value of shares issued to unsecured
creditors.......................................... 89,656
Assumed fair value of rights and warrants issued.... $ 271,250
Less: Proceeds of rights offering................... (217,000) 54,250
--------- --------
622,906
Liabilities assumed:
Administrative costs.............................. 35,000
Other............................................. 74,804
--------
Total consideration exchanged....................... 732,710
Transaction costs................................... 25,000
Restructuring reserve............................... 30,000
--------
Total purchase price................................ 787,710
Less fair value of tangible net assets acquired....... 283,443
--------
Excess of purchase price over tangible net assets
acquired............................................. 504,267
Less estimated fair value of FCC licenses and other
intangibles.......................................... 284,228
--------
Estimated additional intangible assets and goodwill to
be recorded.......................................... $220,039
========
</TABLE>
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<PAGE>
The related amortization on the additional intangibles assets and goodwill
was calculated on a straight-line basis over 10 years in the amounts of
$22,004 and $11,002 for the year ended December 31, 1997 and the six
months ended June 30, 1998, respectively. The amortization related to the
$284.2 million estimated fair value of FCC licenses and other intangibles
has already been provided in the historical financial statements of
MobileMedia. The MobileMedia historical amortization was adjusted by
$15,679 and $7,840 for the year ended December 31, 1997 and the six months
ended June 30, 1998, respectively, to conform the estimated useful lives
of these assets to those used by Arch.
(11) As discussed in "The MobileMedia Plan of Reorganization--Calculation of
Shares", the proposed transaction contemplates a range of shares to be
exchanged based on the Arch Common Stock Price during the Initial
Measurement Period and the Subsequent Pricing Period. The range of stock
prices in the Initial Measurement Period is $6.25 to $10.63. The
following unaudited pro-forma consolidated information is provided for
informational purposes, assuming the Arch Common Stock Price is at the
high point of the range for the Initial Measurement Period and exceeds
$6.25 during the Subsequent Pricing Period. See "The MobileMedia Plan of
Reorganization--Calculation of Shares".
<TABLE>
<CAPTION>
ARCH MARKET PRICE
-----------------
HIGH POINT
-----------------
<S> <C>
Excess of purchase price over tangible net assets
acquired.............................................. $ 662,067
Total assets........................................... 1,917,059
Stockholders' equity................................... 401,277
Operating income (loss):
For the year ended December 31, 1997................. (204,308)
For the six months ended June 30, 1998............... (86,250)
Income (loss) before extraordinary item:
For the year ended December 31, 1997................. (321,754)
For the six months ended June 30, 1998............... (158,434)
Basic income (loss) before extraordinary item per
share:
For the year ended December 31, 1997................. (4.63)
For the six months ended June 30, 1998............... (2.27)
Shares exchanged (000s)................................ 48,796
</TABLE>
(12) As discussed in "Summary--The Merger and The Reorganization", additional
rights and warrants will be issued if the Arch Common Stock Price during
the Subsequent Pricing Period is less than $6.25. The range of stock
prices in the Subsequent Pricing Period is $2.50 to $6.24. The following
unaudited pro forma consolidated information is provided for
informational purposes, assuming that the Arch Common Stock Price during
the Subsequent Pricing Period is less than $6.25 and none of such rights
and warrants is exercised.
<TABLE>
<CAPTION>
ARCH MARKET PRICE
----------------------------------
$2.50 $4.375 $6.24
---------- ---------- ----------
<S> <C> <C> <C>
Excess of purchase price over
tangible net assets acquired........ $ 450,474 $ 477,370 $ 504,124
Total assets......................... 1,705,466 1,732,362 1,759,116
Stockholders' equity................. 189,684 216,580 243,334
Operating income (loss):
For the year ended December 31,
1997.............................. (183,149) (185,838) (188,514)
For the six months ended June 30,
1998.............................. (75,670) (77,015) (78,353)
Income (loss) before extraordinary
item:
For the year ended December 31,
1997.............................. (300,595) (303,284) (305,960)
For the six months ended June 30,
1998.............................. (147,854) (149,199) (150,537)
Basic income (loss) before
extraordinary item per share:
For the year ended December 31,
1997.............................. (2.09) (3.12) (3.89)
For the six months ended June 30,
1998.............................. (1.03) (1.53) (1.91)
Shares exchanged (000s).............. 122,845 76,345 57,815
</TABLE>
81
<PAGE>
INDUSTRY OVERVIEW
GENERAL
Paging is a method of wireless communication which uses an assigned radio
frequency to contact a paging subscriber anywhere within a designated service
area. A subscriber carries a pager which receives messages by the transmission
of a one-way radio signal. To contact a subscriber, a message is usually sent
by placing a telephone call to the subscriber's designated telephone number.
The telephone call is received by an electronic paging switch which generates
a signal that is sent to radio transmitters in the service area. Depending
upon the topography of the service area, the operating radius of a radio
transmitter typically ranges from three to 20 miles. The transmitters
broadcast a signal that is received by the pager a subscriber carries, which
alerts the subscriber by a tone or vibration that there is a voice, tone,
digital or alphanumeric message.
The paging industry has been in existence since 1969 when the FCC allocated
a group of radio frequencies for use in providing one-way and two-way types of
mobile communications services. Throughout its history, the paging industry
has been characterized by consolidation, substantial growth and technological
change. Historically, the paging industry has been highly fragmented, with a
large number of small, local operators. Since the 1980s, concentration in the
paging industry has increased as paging companies continue to grow rapidly
either internally or through acquisitions.
Arch believes that paging is the most cost-effective form of mobile wireless
communications. Paging has an advantage over conventional telephone service
because a pager's reception is not restricted to a single location, and over a
cellular telephone or broadband PCS handset because a pager is smaller, has a
longer battery life and, most importantly, because pagers and air time
required to transmit an average message cost less than equipment and air time
for cellular telephones or broadband PCS handsets. Paging subscribers
generally pay a flat monthly service fee for pager services, regardless of the
number of messages, unlike cellular telephone or broadband PCS subscribers,
whose bills typically have a significant variable usage component. For these
reasons, some cellular subscribers use a pager in conjunction with their
cellular telephone to screen incoming calls and thus lower the expense of
cellular telephone service, and to a lesser extent, some broadband PCS
subscribers use a pager in conjunction with their broadband PCS handsets,
which often incorporate messaging functions, but have a much shorter battery
life.
Industry sources estimate that, since 1992, the number of pagers in service
in the United States has grown at an annual rate of approximately 25% and will
continue to grow at an annual rate of approximately 8% through the year 2001.
Based on industry sources, Arch believes that there were in excess of 49
million pagers in service in the United States at December 31, 1997. Factors
contributing to this growth include: (i) a continuing shift towards a service-
based economy; (ii) increasing mobility of workers and the population at
large; (iii) increasing awareness of the benefits of mobile communications
among the population at large; (iv) the relatively high cost of two-way mobile
communications, such as cellular telephone services; (v) introduction of new
or enhanced paging services, including nationwide paging capability; (vi)
continuing improvements in the performance of paging equipment; and (vii)
significant price/performance improvements in paging services. The paging
industry has undergone substantial consolidation over the past ten years, and
Arch believes that the top five paging carriers represent approximately 50% of
the pagers in service. Nonetheless, Arch believes that the paging industry
remains fragmented, with more than 300 licensed carriers in the United States,
and will continue to undergo consolidation.
The paging industry has benefited from technological advances resulting from
research and development conducted by vendors of pagers and transmission
equipment. Such advances include microcircuitry, liquid crystal display
technology and standard digital encoding formats, which have enhanced the
capability and capacity of paging services while lowering equipment and air
time costs. Technological improvements have enabled Arch to provide better
quality services at lower prices to its subscribers and have generally
contributed to strong growth in the market for paging services.
82
<PAGE>
The paging industry has traditionally distributed its services through
direct marketing and sales activities. In recent years, additional channels of
distribution have evolved, including: (i) carrier-operated stores; (ii)
resellers, who purchase paging services on a wholesale basis from carriers and
resell those services on a retail basis to their own customers; (iii) agents
who solicit customers for carriers and are compensated on a commission basis;
(iv) retail outlets that often sell a variety of merchandise, including pagers
and other telecommunications equipment; and (v) most recently, the Internet.
While most paging subscribers traditionally have been business users, industry
observers believe that pager use among retail consumers has increased
significantly in recent years. In addition, paging subscribers have
increasingly chosen to purchase rather than lease their pagers. These trends
are expected to continue.
PAGING AND MESSAGING SERVICES
The following table describes the principal paging and messaging services
currently available in the paging industry.
<TABLE>
<CAPTION>
TYPE OF SERVICE DESCRIPTION
--------------- -----------
<C> <S>
Numeric (Digital Display) Paging
Service......................... Numeric paging service permits a caller
utilizing a touchtone telephone to transmit
to a subscriber a numeric message
consisting of a telephone number, an
account number or coded information.
Numeric pagers have memory capability to
store several such numeric messages which
can be recalled by a subscriber when
desired.
Alphanumeric Paging Service...... Alphanumeric paging service allows
subscribers to receive and store messages
consisting of both letters and numbers.
Alphanumeric pagers have sufficient memory
to store thousands of characters. This
service also has the capability to tie into
computer-based networks to provide advanced
messaging services. Callers may input
messages either by using an operator
dispatch center, a personal computer
equipped with applicable software or a
portable alphanumeric input device.
Voice Mail Service............... Voice mail service enables a caller to
leave a recorded message and automatically
alerts a subscriber, through a pager, that
a message has been recorded. A subscriber
may retrieve messages by calling his or her
voice mailbox at a paging network center.
Wireless Electronic Mail Wireless electronic mail allows the user to
Service......................... receive messages via wireless receivers
used in conjunction with portable personal
computers or "PDAs" (this service is not
currently offered by Arch or MobileMedia).
</TABLE>
COMPETITION
The paging industry is highly competitive with price being the primary means
of differentiation among providers of numeric display paging services.
Companies in the industry also compete on the basis of coverage area offered
to subscribers, available services offered in addition to basic numeric or
tone paging, transmission quality, system reliability, and customer service.
Arch and MobileMedia compete by maintaining competitive pricing of their
products and service offerings, by providing high-quality, reliable
transmission networks and by furnishing subscribers a superior level of
customer service. Several hundred licensed paging companies provide only local
basic numeric or tone paging service. Compared to these companies, Arch and
MobileMedia offer wireless messaging services on a local, regional and
nationwide basis. In addition, Arch and MobileMedia offer enhanced services
such as alphanumeric paging, voice mail and voice mail notifications, news,
sports, weather reports and stock quotes.
83
<PAGE>
Arch and MobileMedia compete with one or more competitors in all markets in
which they operate. Although some of Arch's and MobileMedia's competitors are
small, privately owned companies serving one market area, others are large
diversified telecommunications companies serving numerous markets. Some of
Arch's and MobileMedia's competitors possess financial, technical and other
resources greater than those of Arch and MobileMedia. Major paging carriers
that currently compete in one or more of Arch's and MobileMedia's markets
include PageNet, Metrocall, and AirTouch Communications, Inc.
As paging services become increasingly interactive, and as two-way services
become increasingly competitive, the scope of competition for communications
service customers in Arch's and MobileMedia's markets may broaden. For
example, the FCC has created potential sources of competition by auctioning
new spectrum for Wireless Communications Services and Local Multipoint
Distribution Service and holding an auction in the 220-222 MHZ service.
Further, the FCC has announced plans to auction licenses in the General
Wireless Communications Services, a service created from spectrum reallocated
from federal government use in 1995. Moreover, entities offering service on
wireless two-way communications technology, including cellular, broadband PCS
and specialized mobile radio services, as well as mobile satellite service
providers, also compete with the paging services that Arch and MobileMedia
provide. See "Risk Factors--Risks Common to Arch and MobileMedia--Competition
and Technological Change."
In the 1995 FCC auctions for regional narrowband PCS licenses, MobileMedia
purchased licenses for a nationwide system with a common two-way frequency. In
addition, MobileMedia acquired a second narrowband PCS license for a
nationwide system in the MobileComm Acquisition. Competitors of MobileMedia,
some of which have substantially greater resources than MobileMedia, also
acquired PCS licenses in the FCC auctions. One of MobileMedia's competitors,
SkyTel, recently introduced a two-way narrowband PCS wireless data service.
Although Arch cannot predict the types of PCS services which will be offered
by those companies, Arch expects that those services will compete with the
narrowband PCS and paging services to be offered by MobileMedia.
REGULATION
Paging operations and the construction, modification, ownership and
acquisition of paging systems are subject to extensive regulation by the FCC
under the Communications Act and, to a much more limited extent, by public
utility or public service commissions in certain states. The following
description does not purport to be a complete discussion of all present and
proposed legislation and regulations relating to Arch's and MobileMedia's
paging operations.
FEDERAL REGULATION
Regulatory Classification.
Paging companies historically have been subject to different federal
regulatory requirements depending upon whether they were providing service as
a Radio Common Carrier ("RCC"), a Private Carrier Paging Operator ("PCP") or
as a reseller. Arch's and MobileMedia's paging operations encompass RCC, PCP
and resale operations. However, federal legislation enacted in 1993 required
the FCC to reduce the disparities in the regulatory treatment of similar
mobile services (such as RCC and PCP services), and the FCC has taken, and
continues to take, actions to implement this legislation. Under the new
regulatory structure, all of Arch's and MobileMedia's paging services are
classified as CMRS. As CMRS providers, Arch and MobileMedia are regulated as
common carriers, except that the FCC has exempted paging services, which have
been found to be highly competitive, from some typical common carrier
regulations, such as tariff filing and resale requirements.
The classification of Arch's and MobileMedia's paging operations as CMRS
affects the level of permissible foreign ownership, as discussed below, and
the nature and extent of the state regulation to which both may be subject. In
addition, the FCC now is required to resolve competing requests for CMRS
spectrum by conducting auctions, which may have the effect of increasing the
costs of acquiring additional spectrum in markets in which Arch and
MobileMedia operate. Also, Arch and MobileMedia are obligated to pay certain
regulatory fees in connection with their paging operations.
84
<PAGE>
FCC Regulatory Approvals and Authorizations
The Communications Act requires radio licensees such as Arch and MobileMedia
to obtain prior approval from the FCC for the assignment or transfer of
control of any construction permit or station license or authorization or any
rights thereunder. This statutory requirement attaches to acquisitions of
other paging companies (or other radio licensees) by Arch and MobileMedia as
well as transfers of a controlling interest in any of Arch's or MobileMedia's
licenses, construction permits or any rights thereunder. To date, the FCC has
approved each assignment and transfer of control for which Arch and
MobileMedia have sought approval. Although there can be no assurance that any
future requests for approval of transfers of control and/or assignments of
license will be acted upon in a timely manner by the FCC, or that the FCC will
grant the approval requested, with the exception of the pending FCC
investigation into MobileMedia's qualification to continue to be an FCC
licensee, neither Arch nor MobileMedia knows of any reason that any such
applications will not be approved or granted.
Effective April 2, 1998, the FCC's Wireless Telecommunications Bureau, which
directly regulates Arch's and MobileMedia's paging activities, announced that
it will forbear from enforcing its filing requirements with respect to pro
forma assignments and transfers of control of certain wireless authorizations,
such as Arch's and MobileMedia's RCC and PCP licenses. Pursuant to this
decision, wireless telecommunications carriers now only have to file a written
notification of a pro forma transaction within 30 days after the transaction
is completed. This decision will expedite the process and reduce the costs
related to corporate reorganizations; however, Arch and MobileMedia may still
be required to obtain prior FCC approval for the pro forma assignment or
transfer of control of some of their licenses not covered by the forbearance
decision, such as certain business radio authorizations.
The FCC paging licenses granted to Arch and MobileMedia are for varying
terms of up to 10 years, at the end of which renewal applications must be
approved by the FCC. In the past, paging license renewal applications
generally have been granted by the FCC upon a showing of compliance with FCC
regulations and of adequate service to the public. With the exception of the
pending FCC proceeding regarding MobileMedia's qualifications to remain an FCC
licensee, Arch and MobileMedia are unaware of any circumstances which would
prevent the grant of any pending or future renewal applications; however, no
assurance can be given that any of Arch's or MobileMedia's renewal
applications will be free of challenge or will be granted by the FCC. It is
possible that there may be competition for radio spectrum associated with
licenses as they expire, thereby increasing the chances of third-party
interventions in the renewal proceedings. Other than those renewal
applications still pending, the FCC has thus far granted each license renewal
application that Arch or MobileMedia have filed.
On February 13, 1997, in connection with its filing for protection under the
Bankruptcy Code, MobileMedia sought a grant of permission from the FCC to
execute an involuntary, pro forma assignment of its licenses to MobileMedia as
debtors-in-possession. On March 3, 1997, the FCC granted such permission with
respect to MobileMedia's earth stations, on April 3, 1997, the FCC granted
such permission for the assignment of MobileMedia's microwave licenses and on
May 26, 1998 and July 17, 1998, the FCC granted such permission with respect
to MobileMedia's paging, air-to-ground and narrowband PCS licenses. In
addition, as noted above, FCC approval of the transfer of MobileMedia's
licenses pursuant to the Merger Agreement and the Amended Plan (on terms that
do not impair the feasibility of the Amended Plan and permit it to be
implemented and consummated) is a condition to effectiveness of the Amended
Plan and the closing of the Merger.
The FCC's review and revision of rules affecting paging companies is ongoing
and the regulatory requirements to which Arch and MobileMedia are subject may
change significantly over time. For example, the FCC has decided to adopt a
market area licensing scheme for all paging channels under which carriers
would be licensed to operate on a particular channel throughout a broad
geographic area (for example, a Major Trading Area as defined by Rand McNally)
rather than being licensed on a site-by-site basis. These geographic area
licenses will be awarded pursuant to auction. Incumbent paging licensees that
do not acquire licenses at auction will be entitled to interference protection
from the market area licensee. Arch and MobileMedia are participating actively
in this proceeding in order to protect their existing operations and retain
flexibility, on an interim and long-term basis, to modify systems as necessary
to meet subscriber demands.
85
<PAGE>
Currently, however, the Act requires that Arch and MobileMedia obtain
licenses from the FCC to use radio frequencies to conduct their paging
operations at specified locations. FCC licenses issued to Arch and MobileMedia
set forth the technical parameters, such as power strength and tower height,
under which Arch and MobileMedia are authorized to use those frequencies. In
many instances, Arch and MobileMedia require the prior approval of the FCC
before they can implement any significant changes to their radio systems. Once
the FCC's market area licensing rules are implemented, however, these site-
specific licensing obligations will be eliminated, with the exception of
applications still required by Section 22.369 of the FCC Rules (request for
authority to operate in a designated Quiet Zone), Section 90.77 (request for
authority to operate in a protected radio receiving location) and Section
1.1301 et seq. (construction/modification that may have a significant
environmental impact) or for coordination with Canada or Mexico.
The FCC has issued a Further Notice of Proposed Rulemaking in which the FCC
seeks comments on, among other matters, whether it should impose coverage
requirements on licensees with nationwide exclusivity (such as Arch and
MobileMedia), whether these coverage requirements should be imposed on a
nationwide or regional basis, and whether--if such requirements are imposed--
failure to meet the requirements should result in a revocation of the entire
nationwide license or merely a portion of the license. If the FCC were to
impose stringent coverage requirements on licensees with nationwide
exclusivity, Arch and MobileMedia might have to accelerate the build-out of
their systems in certain areas.
Telecommunications Act of 1996
The Telecommunications Act directly affects Arch and MobileMedia. Some
aspects of the Telecommunications Act may place financial obligations upon
each of Arch and MobileMedia or subject them to increased competition. For
example, the FCC has adopted new rules that govern compensation to be paid to
pay phone providers which has resulted in increased costs for certain paging
services including toll-free 800 number paging. Arch and MobileMedia have
generally passed these costs on to their subscribers, which makes their
services more expensive and which could affect the attraction or retention of
customers; however, there can be no assurance that Arch or MobileMedia will be
able to continue to pass on these costs. These rules are the subject of
several judicial appeals. In addition, the FCC also has adopted new rules
regarding payments by telecommunications companies into a revamped fund that
will provide for the widespread availability of telecommunications services
including Universal Service. Prior to the implementation of the
Telecommunications Act, Universal Service obligations largely were met by
local telephone companies, supplemented by long-distance telephone companies.
Under the new rules, all telecommunications carriers, including paging
companies, will be required to contribute to the Universal Service Fund. In
addition, certain state regulatory authorities have enacted, or have indicated
that they intend to enact, similar contribution requirements based on state
revenues. Neither Arch nor MobileMedia can yet know the impact of these state
contribution requirements, if enacted and applied to Arch and MobileMedia.
Moreover, Arch and MobileMedia are unable at this time to estimate the amount
of any such payments that it will be able to bill to their subscribers;
however, payments into the Universal Service Fund will likely increase the
cost of doing business.
Some aspects of the Telecommunications Act could have a beneficial effect on
Arch's and MobileMedia's business. For example, proposed federal guidelines
regarding antenna siting issues may remove local and state barriers to the
construction of communications facilities, although states and municipalities
continue to exercise significant control with regard to such siting issues.
Moreover, in a rulemaking proceeding pertaining to interconnection between
LECs and CMRS providers such as MobileMedia and Arch, the FCC has concluded
that LECs are required to compensate CMRS providers for the reasonable costs
incurred by such providers in terminating traffic that originates on LEC
facilities, and vice versa. Consistent with this ruling, the FCC has
determined that LECs may not charge a CMRS provider or other carrier for
terminating LEC-originated traffic or for dedicated facilities used to deliver
LEC-originated traffic to one-way paging networks. Nor may LECs charge CMRS
providers for number activation and use fees. These interconnection issues are
still in dispute, and it is unclear whether the FCC will maintain its current
position.
86
<PAGE>
Depending on further FCC disposition of these issues, Arch and MobileMedia
may or may not be successful in securing refunds, future relief or both, with
respect to charges for termination of LEC-originated local traffic. If these
issues are ultimately resolved by the FCC in Arch's and MobileMedia's favor,
then Arch believes that it and MobileMedia would pursue relief through
settlement negotiations, administrative complaint procedures or both. If these
issues are ultimately decided in favor of the LECs, Arch and MobileMedia
likely would be required to pay all past due contested charges and may also be
assessed interest and late charges for amounts withheld.
Foreign Ownership
The Communications Act also limits foreign investment in and ownership of
entities that are licensed as radio common carriers by the FCC. Arch and
MobileMedia own or control several radio common carriers and are accordingly
subject to these foreign investment restrictions. Because Arch and MobileMedia
are each individually parents of radio common carriers (but are not radio
common carriers themselves), Arch and MobileMedia are limited to having 25% of
their stock owned or voted by aliens or their representatives, a foreign
government or their representatives or a foreign corporation. The FCC has the
authority to waive this restriction unless the public interest would be served
by denying such waiver. In connection with the WTO Agreement--agreed to by 69
countries--the FCC adopted rules effective February 9, 1998 that create a very
strong presumption in favor of such a waiver if the foreign investor's home
market country signed the WTO Agreement. Arch's and MobileMedia's subsidiaries
that are radio common carrier licensees are subject to more stringent
requirements and may have only up to 20% of their stock owned or voted by
aliens or their representatives, a foreign government or their representatives
or a foreign corporation. This ownership restriction is not subject to waiver.
See "Industry Overview--Regulation". The Arch Certificate permits the
redemption of shares of Arch's capital stock from foreign stockholders where
necessary to protect FCC licenses held by Arch or its subsidiaries, but such
redemption would be subject to the availability of capital to Arch and any
restrictions contained in applicable debt instruments and under the DGCL
(which currently would not permit any such redemptions). The failure to redeem
such shares promptly could jeopardize the FCC licenses held by Arch or its
subsidiaries (including MobileMedia following the Merger). See "--High Degree
of Leverage After the Merger", "--Competition and Technological Change" and
"Industry Overview--Regulation".
STATE REGULATION
In addition to regulation by the FCC, certain states impose various
regulations on the common carrier paging operations of Arch and MobileMedia.
Regulation in some states historically required Arch and MobileMedia to obtain
certificates of public convenience and necessity before constructing,
modifying or expanding paging facilities or offering or abandoning paging
services. Rates, terms and conditions under which Arch and MobileMedia
provided services, or any changes to those rates, have also been subject to
state regulation. However, as a general rule, states are preempted from
exercising rate and entry regulation of CMRS, but may choose to regulate other
terms and conditions of service (for example, requiring the identification of
an agent to receive complaints). States also are accorded an opportunity to
petition the FCC for authority to continue to regulate CMRS rates if certain
conditions are met. State filings seeking rate authority have all been denied
by the FCC, although new petitions seeking such authority may be filed in the
future. The preemption of state entry regulation was confirmed in the
Telecommunications Act. In certain instances, the construction and operation
of radio transmitters also will be subject to zoning, land use, public health
and safety, consumer protection and other state and local taxes, levies and
ordinances. Further, some states and localities continue to exert jurisdiction
over (i) approval of acquisitions and transfers of wireless systems; and (ii)
resolution of consumer complaints. Arch and MobileMedia believe that to date
all required filings for Arch's and MobileMedia's paging operations have been
made.
FUTURE REGULATION
From time to time, legislation which could potentially affect Arch and
MobileMedia, either beneficially or adversely, is proposed by federal or state
legislators. There can be no assurance that legislation will not be enacted by
the federal or state governments, or that regulations will not be adopted or
actions taken by the FCC or state regulatory authorities, which might
materially adversely affect the business of Arch and/or MobileMedia. Changes
such as the allocation by the FCC of radio spectrum for services that compete
with Arch's and MobileMedia's business could adversely affect Arch's and
MobileMedia's results of operations. See "Risk Factors--Risks Common to Arch
and MobileMedia--Government Regulation, Foreign Ownership and Possible
Redemption."
87
<PAGE>
BUSINESS
ARCH
Arch is a leading provider of wireless messaging services, primarily paging
services, and is the second largest paging company in the United States (based
on EBITDA). Arch had 4.1 million pagers in service at June 30, 1998. Arch
operates in 41 states and more than 180 of the 200 largest markets in the
United States. Arch offers local, regional and nationwide paging services
employing digital networks covering approximately 85% of the United States
population. Arch offers four types of paging services through its networks:
digital display, alphanumeric display, tone-only and tone-plus-voice. Arch
also offers enhanced and complementary services, including voice mail,
personalized greeting, message storage and retrieval, pager loss protection
and pager maintenance.
Arch has achieved significant growth in pagers in service and operating cash
flow through a combination of internal growth and acquisitions. From January
1, 1995 through June 30, 1998, Arch's total number of subscribers grew at a
compound rate on an annualized basis of 79.0%. For the same period on an
annualized basis, Arch's compound rate of internal subscriber growth
(excluding pagers added through acquisitions) was 56.1%. From commencement of
operations in September 1986, Arch has completed 33 acquisitions representing
an aggregate of 1.7 million pagers in service at the time of purchase.
The following table sets forth certain information regarding the approximate
number of pagers in service with Arch subscribers and net increases in number
of pagers through internal growth and acquisitions during the periods
indicated:
<TABLE>
<CAPTION>
PAGERS IN SERVICE NET INCREASE IN
AT BEGINNING OF PAGERS THROUGH INCREASE IN PAGERS PAGERS IN SERVICE
YEAR ENDED AUGUST 31, PERIOD INTERNAL GROWTH(1) THROUGH ACQUISITIONS(2) AT END OF PERIOD
- --------------------- ----------------- ------------------ ----------------------- -----------------
<S> <C> <C> <C> <C>
1987.................... 4,000 3,000 12,000 19,000
1988.................... 19,000 8,000 3,000 30,000
1989.................... 30,000 14,000 34,000 78,000
1990.................... 78,000 20,000 4,000 102,000
1991.................... 102,000 24,000 1,000 127,000
1992.................... 127,000 33,000 -- 160,000
1993.................... 160,000 70,000 24,000 254,000
1994.................... 254,000 138,000 18,000 410,000
<CAPTION>
FOUR MONTHS ENDED DECEMBER 31,
- ------------------------------
<S> <C> <C> <C> <C>
1994.................... 410,000 64,000 64,000 538,000
<CAPTION>
YEAR ENDED DECEMBER 31,
- -----------------------
<S> <C> <C> <C> <C>
1995.................... 538,000 366,000 1,102,000 2,006,000
1996.................... 2,006,000 815,000 474,000 3,295,000
1997.................... 3,295,000 595,000 -- 3,890,000
<CAPTION>
SIX MONTHS ENDED JUNE 30,
- -------------------------
<S> <C> <C> <C> <C>
1998.................... 3,890,000 241,000 -- 4,131,000
</TABLE>
- ---------------------
(1) Includes internal growth in acquired paging businesses after their
acquisition by Arch. Increases in pagers through internal growth are net
of subscriber cancellations during each applicable period.
(2) Based on pagers in service of acquired paging businesses at the time of
their acquisition by Arch.
BUSINESS STRATEGY
Arch's strategic objective is to strengthen its position as one of the
leading nationwide paging companies in the United States. Arch believes that
larger, multi-market paging companies enjoy a number of competitive
advantages, including: (i) operating efficiencies resulting from more
intensive utilization of existing paging systems; (ii) economies of scale in
purchasing and administration; (iii) broader geographic coverage of paging
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systems; (iv) greater access to capital markets and lower costs of capital;
(v) the ability to obtain additional radio spectrum; (vi) the ability to offer
high-quality services at competitive prices; and (vii) enhanced ability to
attract and retain management personnel. Arch believes that the current size
and scope of its operations afford it many of these advantages, and that it
has the scope and presence to effectively compete on a national level. In
addition, Arch believes that the paging industry will undergo further
consolidation, and Arch expects to participate in such consolidation.
Arch's operating objectives are to increase its EBITDA, deploy its capital
efficiently, reduce its financial leverage and expand its customer
relationships. Arch pursues the following strategies to achieve its operating
objectives:
Low-Cost Operating Structure. Arch has selected a low-cost operating
strategy as its principal competitive tactic. Arch believes that a low-cost
operating structure, compared to the other two fundamental competitive
tactics in the paging industry (differentiated premium pricing and niche
positioning), maximizes its flexibility to offer competitive prices while
still achieving target margins and EBITDA. Arch maintains a low-cost
operating structure through a combination of (i) the consolidation of
certain operating functions, including centralized purchases from key
vendors, to achieve economies of scale, and (ii) the installation of
technologically advanced, reliable, transmission systems. In June 1998, the
Arch Board approved the Divisional Reorganization, as part of which Arch
plans, over a period of 18 to 24 months, to consolidate its seven operating
divisions into four operating divisions and consolidate certain regional
administrative support functions, resulting in various operating
efficiencies. The Divisional Reorganization, once fully implemented, is
expected to result in annual cost savings of approximately $15.0 million
(approximately $11.5 million for salary and employee benefits and $3.5
million for lease obligations). See "Business--Arch Management's Discussion
and Analysis of Financial Condition and Results of Operations".
Efficient Capital Deployment. Arch's principal financial objective is to
reduce financial leverage by reducing capital requirements and increasing
EBITDA. To reduce capital expenditures, Arch has implemented a company-wide
focus on the sale, rather than lease, of pagers, since subscriber-owned
units require a lower level of capital investment than Arch-owned units. As
a result of these efforts, the number of subscriber-owned pagers, as a
percentage of net new pagers in service, increased from 56.6% in the six
months ended June 30, 1997 to 78.8% in the six months ended June 30, 1998.
In addition, Arch has modified its incentive compensation programs for line
managers so that bonuses are based, in part, on capital efficiency.
Fast Follower on N-PCS Opportunities. Consistent with its low-cost
provider competitive tactic, Arch has focused its capital and marketing
resources on one-way paging and other enhanced services rather than N-PCS
services. However, Arch recognizes the potential benefits to current and
prospective customers and the associated market opportunities from certain
N-PCS applications, such as two-way text and voice messaging services. Arch
has taken steps to position itself to participate in new and emerging N-PCS
services and applications, including marketing N-PCS services as a reseller
and its 49.9% equity interest in Benbow. See "--Investments in Narrowband
PCS Licenses".
Exploit Revenue Enhancement Opportunities. Arch believes there are a
number of new revenue opportunities associated with its 4.1 million pagers
in service, including increasing the proportion of subscribers utilizing
alphanumeric display services, which generate higher revenue, and selling
value-added, non-facilities-based enhanced services such as voicemail,
resale of long-distance service and fax storage and retrieval. See "--
Paging and Messaging Services, Products and Operations".
PAGING AND MESSAGING SERVICES, PRODUCTS AND OPERATIONS
Arch currently provides four basic types of paging services: digital
display, alphanumeric display, tone-only and tone-plus-voice. Depending upon
the type of pager used, a subscriber may receive information displayed or
broadcast by the pager or may receive a signal from the pager indicating that
the subscriber should call a prearranged number or a company operator to
retrieve a message.
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A digital 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 capability to store several such numeric
messages in memory for later recall by the subscriber. An alphanumeric display
pager allows subscribers to receive and store messages consisting of both
numbers and letters. A tone-only pager notifies the subscriber that a call has
been received by emitting an audible beeping sound or vibration. A tone-plus-
voice pager emits a beeping sound followed by a brief voice message. Arch
provides digital display, alphanumeric display and tone-only service in all of
its markets and tone-plus-voice service in only a few markets.
Digital display paging service, which was introduced by the paging industry
nearly 20 years ago, has in recent years grown at a faster rate than tone-only
or tone-plus-voice service and currently represents a majority of all pagers
in service. The growth of alphanumeric display service, which was introduced
in the mid-1980s, has been constrained by its difficult data-input and
specialized equipment requirements and its relatively high use of system
capacity during transmission. The following table summarizes the types of
Arch's pagers in service at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------- JUNE 30,
1995 1996 1997 1998
------------- ------------- ------------- -------------
UNITS % UNITS % UNITS % UNITS %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Digital display......... 1,755,000 87% 2,796,000 85% 3,284,000 85% 3,478,000 84%
Alphanumeric display.... 171,000 9 395,000 12 524,000 13 580,000 14
Tone-only............... 37,000 2 54,000 2 43,000 1 38,000 1
Tone-plus-voice......... 43,000 2 50,000 1 39,000 1 35,000 1
--------- --- --------- --- --------- --- --------- ---
Total.................. 2,006,000 100% 3,295,000 100% 3,890,000 100% 4,131,000 100%
========= === ========= === ========= === ========= ===
</TABLE>
Arch provides paging service to subscribers for a monthly fee. Subscribers
either lease the pager from Arch for an additional fixed monthly fee or they
own the pager, having purchased it either from Arch or from another vendor.
The monthly service fee is generally based upon the type of service provided,
the geographic area covered, the number of pagers provided to the customer and
the period of the subscriber's commitment. Subscriber-owned pagers provide a
more rapid recovery of Arch's capital investment than pagers owned and
maintained by Arch, but may generate less recurring revenue. Arch also sells
pagers to third-party resellers who lease or resell pagers to their own
subscribers and resell Arch's paging services under marketing agreements. The
following table summarizes the number of Arch-owned and leased, subscriber-
owned and reseller-owned pagers in service at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------- JUNE 30,
1995 1996 1997 1998
------------- ------------- ------------- -------------
UNITS % UNITS % UNITS % UNITS %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arch-owned and leased... 902,000 45% 1,533,000 47% 1,740,000 45% 1,791,000 43%
Subscriber-owned........ 596,000 30 914,000 28 1,087,000 28 1,205,000 29
Reseller-owned.......... 508,000 25 848,000 25 1,063,000 27 1,135,000 28
--------- --- --------- --- --------- --- --------- ---
Total.................. 2,006,000 100% 3,295,000 100% 3,890,000 100% 4,131,000 100%
========= === ========= === ========= === ========= ===
</TABLE>
Arch provides enhancements and ancillary services such as voice mail,
personalized greetings, message storage and retrieval, pager loss protection
and pager maintenance services. Voice mail allows a caller to leave a recorded
message that is stored in Arch's computerized message retrieval center. When a
message is left, the subscriber can be automatically alerted through the
subscriber's pager and can retrieve the stored message by calling Arch's
paging terminal. Personalized greetings allow the subscriber to record a
message to greet callers who reach the subscriber's pager or voice mail box.
Message storage and retrieval allows a subscriber who leaves Arch's service
area to retrieve calls that arrived during the subscriber's absence from the
service area. Pager loss protection allows subscribers who lease pagers to
limit their costs of replacement upon loss or destruction of a pager. Pager
maintenance services are offered to subscribers who own their own equipment.
Arch is also in the process of test marketing various non-facilities-based
value-added services that can be integrated with existing paging services.
These include, among other services, voicemail, resale of long distance
service and fax storage and retrieval.
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INVESTMENTS IN NARROWBAND PCS LICENSES
Arch has taken the following steps to position itself to participate in new
and emerging N-PCS services and applications.
Benbow PCS Ventures, Inc. Arch holds a 49.9% equity interest in Benbow PCS
Ventures, Inc. ("Benbow"), which holds (through Page Call, Inc. ("Page Call"))
exclusive rights to a 50 KHz outbound/12.5 KHz inbound N-PCS license in each
of the five regions of the United States. Benbow is a "designated entity" (a
small, minority-controlled or female-controlled business) under FCC rules and
is entitled to discounts and installment payment schedules in the payment of
its N-PCS licenses. Arch has the right to designate one of Benbow's three
directors and has veto rights with respect to specified major business
decisions by Benbow. Arch is obligated, to the extent such funds are not
available to Benbow from other sources and subject to the approval of Arch's
designee on Benbow's Board of Directors, to advance to Benbow sufficient funds
to service debt obligations incurred by Benbow in connection with the
acquisition of its N-PCS licenses and to finance construction of an N-PCS
system. The total purchase price for Benbow's licenses (together with the
purchase price of licenses acquired from Page Call), net of the discounts, was
$42.5 million. Arch estimates that the total cost to Benbow of servicing its
license-related debt obligations and constructing such N-PCS system (including
the effect of the Page Call acquisition) will be approximately $100.0 million
over the next five years. Arch's advances to Benbow are secured by Benbow's
assets, bear interest at an interest rate equal to that paid by Arch on its
senior debt, are due on demand and must be repaid prior to any distribution of
profits by Benbow. With certain exceptions, Arch has agreed not to exercise
its right to demand repayment of such advances prior to the occurrence of a
default. As of June 30, 1998, Arch had advanced $18.0 million to Benbow.
Pursuant to a five-year management agreement expiring on October 1, 2000,
Arch is responsible, subject to Benbow's ultimate control, for Benbow's day-
to-day operations and is paid a management fee and is reimbursed for its
expenses. Arch also has a right of first refusal to provide Benbow with
design, engineering and construction services for its N-PCS system as well as
to lease certain equipment to Benbow for use in connection with such system.
Arch has a right of first refusal with respect to any transfer of shares held
by Ms. June Walsh, who holds the remaining 50.1% equity interest in Benbow,
and Ms. Walsh has the right to require Arch, commencing January 23, 2000 (or
sooner under certain circumstances), to repurchase (subject to prior FCC
approval) her Benbow shares for an amount equal to the greater of (i) an
amount between $3.5 million and $5.0 million, depending on the timing and
circumstances under which Ms. Walsh exercises her put option, and (ii) the
fair market value of her shares (as determined by arbitration absent agreement
of the parties). If Arch exercises its right of first refusal or Ms. Walsh
exercises her put option, Benbow could lose some of the benefits of the
discounts and installment payment schedules for its FCC payments unless
another "designated entity" acquired control of Benbow under FCC rules. See
Note 1 of Notes to Arch's Consolidated Financial Statements included elsewhere
herein.
Benbow needs to construct its N-PCS system (or make other arrangements)
before it can offer N-PCS services. Benbow has indicated that it plans to roll
out its services over time to reach approximately one-third of the population
in the licensed areas by the end of 1999. Benbow's network will use a Reflex
25 paging protocol. Arch believes that Benbow will provide Arch with a
platform for a new generation of wireless messaging services, including two-
way messaging and other enhanced services, and that the value of its Benbow
relationship was significantly enhanced by the completion of the Page Call
acquisition. Arch has yet to determine how to best integrate its N-PCS
strategy with respect to Benbow and that of MobileMedia's intent to deploy its
N-PCS Spectrum which has already been funded.
On June 29, 1998, Benbow acquired Page Call's outstanding stock by issuing
to Page Call's former stockholders preferred stock and a promissory note in
the aggregate face amount of $17.2 million with a 12% annual return. At the
time of the closing, Benbow entered into a five-year consulting agreement with
one of Page Call's stockholders requiring consulting payments in the aggregate
amount of $911,000. Benbow's preferred stock and promissory note are
exchangeable for Stock (i) at any time at the option of the holders thereof,
at an exchange price equal to the higher of (A) $13.00 per share or (B) the
market price of Arch's Common Stock,
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(ii) mandatorily on April 8, 2000, at the then prevailing market price of
Stock, or (iii) automatically at an exchange price of $13.00 per share, if the
market price of Stock equals or exceeds $13.00 for 20 consecutive trading
days. Arch is permitted to require Benbow to redeem its preferred stock and
promissory note at any time for cash. Arch entered into guarantees (payable in
Arch's Common Stock or cash, at Arch's election) of all obligations of Benbow
under the Benbow preferred stock, promissory note and consulting agreement
described above. Benbow's redemption of its preferred stock and promissory
note for cash, or Arch's payment of cash pursuant to its guarantees of
Benbow's preferred stock and promissory note, would be subject to the
availability of capital and any restrictions contained in applicable debt
instruments and under the DGCL (which currently would not permit any such cash
redemptions or payments). If Arch issues Stock or pays cash pursuant to its
guarantees, Arch will receive from Benbow a promissory note and non-voting,
non-convertible preferred stock of Benbow with an annual yield of 14.5%
payable upon an acquisition of Benbow or earlier to the extent that available
cash and applicable law permit. Page Call's stockholders received customary
registration rights with respect to any shares of Arch's Common Stock issued
in exchange for Benbow's preferred stock and promissory note or pursuant to
Arch's guarantees thereof.
CONXUS Communications, Inc. Arch currently holds a 10.5% equity interest in
CONXUS Communications, Inc. ("Conxus"), formerly known as PCS Development
Corporation, which holds exclusive rights to a 50 KHz outbound/50 KHz inbound
two-way messaging license throughout the United States. Conxus, like Benbow,
is a "designated entity" under FCC rules and is entitled to discounts and
installment payment schedules.
Each stockholder of Conxus is entitled to purchase services from Conxus at
"most favored customer" rates, based on like services. Conxus and Arch have
agreed to negotiate in good faith to enter into mutually acceptable
intercarrier, network access and similar agreements. If Arch wishes to
purchase N-PCS services of the kind offered by Conxus, Arch has agreed to
contract exclusively with Conxus for such services so long as such services
are competitive in price and quality with comparable services offered by
others. Arch is currently acting as a reseller of voice messaging services
through Conxus in a limited number of markets.
SUBSCRIBERS AND MARKETING
Arch's paging accounts are generally businesses with employees who travel
frequently but must be immediately accessible to their offices or customers.
Arch's subscribers include proprietors of small businesses, professionals,
management and medical personnel, field sales personnel and service forces,
members of the construction industry and trades, and real estate brokers and
developers. Arch believes that pager use among retail consumers will increase
significantly in the future, although consumers do not currently account for a
substantial portion of Arch's subscriber base.
Although today Arch operates in more than 180 of the 200 largest U.S.
markets, Arch historically has focused on medium-sized and small market areas
with lower rates of pager penetration and attractive demographics. Arch
believes that such markets will continue to offer significant opportunities
for growth, and that its national scope and presence will also provide Arch
with growth opportunities in larger markets.
Arch markets its paging services through a direct marketing and sales
organization which, as of June 30, 1998, operated approximately 200 retail
stores. Arch also markets its paging services indirectly through independent
resellers, agents and retailers. Arch typically offers resellers paging
services in large quantities at wholesale rates that are lower than retail
rates, and resellers offer the services to end-users at a markup. Arch's costs
of administering and billing resellers are lower than the costs of direct end-
users on a per pager basis.
Arch also acts as a reseller of other paging carriers' services when
existing or potential Arch customers have travel patterns that require paging
service beyond the coverage of Arch's own networks.
In May 1997, Arch established a single national identity, Arch Paging, for
its paging services which previously had been marketed under various
trademarks. As part of this branding initiative, Arch adopted a new
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corporate logo, a corporate-wide positioning strategy tied to customer service
delivery, and launched its Internet Web site at www.arch.com. Arch believes
that its unified branding identity will give the Arch name national exposure
for the first time and result in significant economic leverage in its
marketing and communications efforts.
COMPETITION
See "Industry Overview--Competition".
REGULATION
See "Industry Overview--Regulation".
SOURCES OF EQUIPMENT
Arch does not manufacture any of the pagers or other equipment used in its
paging operations. The equipment used in Arch's paging operations is generally
available for purchase from multiple sources. Arch centralizes price and
quantity negotiations for all of its operating subsidiaries in order to
achieve cost savings from volume purchases. Arch buys pagers primarily from
Motorola and NEC and purchases terminals and transmitters primarily from
Glenayre and Motorola. Arch anticipates that equipment and pagers will
continue to be available in the foreseeable future, consistent with normal
manufacturing and delivery lead times. See "Risk Factors--Risks Common to Arch
and MobileMedia--Dependence on Third Parties".
Because of the high degree of compatibility among different models of
transmitters, computers and other paging equipment manufactured by suppliers,
Arch is able to design its systems without being dependent upon any single
source of such equipment. Arch routinely 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. Arch believes that its
paging system equipment is among the most technologically sophisticated in the
paging industry.
EMPLOYEES
At June 30, 1998, Arch employed approximately 2,800 persons. None of Arch's
employees is represented by a labor union. Arch believes that its employee
relations are good. As part of the Divisional Reorganization, Arch anticipates
a net reduction of approximately 10% of its workforce. See "Business--Arch
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Divisional Reorganization".
TRADEMARKS
Arch owns the service marks "Arch" and "Arch Paging", and holds a federal
registration for the service mark "Arch Nationwide Paging" as well as various
other trademarks.
PROPERTIES
At June 30, 1998, Arch owned five office buildings and leased office space
(including its executive offices) in over 200 localities in 35 states for use
in conjunction with its paging operations. Arch leases transmitter sites
and/or owns transmitters on commercial broadcast towers, buildings and other
fixed structures in approximately 3,200 locations in 45 states. Arch's leases
are for various terms and provide for monthly lease payments at various rates.
Arch believes that it will be able to obtain additional space as needed at
acceptable cost. In April 1998, Arch announced an agreement for the Arch Tower
Site Sale. Arch is selling communications towers, real estate, site management
contracts and/or leasehold interests involving 134 sites (including one site
acquired from entities affiliated with Benbow's controlling shareholder) in 22
states, and will lease back space on the towers on which it currently operates
communications equipment to service its own paging network. Arch held the
initial closing on June 26, 1998 and expects to complete the transaction in
the third quarter of 1998. As part of the
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Divisional Reorganization, Arch will close certain office locations and
redeploy other real estate assets. See "Business--Arch Management's Discussion
and Analysis of Financial Condition and Results of Operations--Divisional
Reorganization".
LITIGATION
Arch, from time to time, is involved in lawsuits arising in the normal
course of business. Arch believes that its currently pending lawsuits will not
have a material adverse effect on Arch.
ARCH MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
individuals who are the directors and executive officers of Arch.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
C. Edward Baker, Jr..... 48 Chairman of the Board, Chief Executive Officer and Director
Lyndon R. Daniels....... 45 President and Chief Operating Officer
John B. Saynor.......... 57 Executive Vice President and Director
J. Roy Pottle........... 39 Executive Vice President and Chief Financial Officer
Paul H. Kuzia........... 56 Executive Vice President/Technology and Regulatory Affairs
R. Schorr Berman(1)(2).. 49 Director
James S. Hughes(1)...... 55 Director
Allan L. Rayfield(2).... 63 Director
John A. Shane(1)(2)..... 65 Director
John Kornreich.......... 52 Director
</TABLE>
- --------
(1) Member of the Audit Committee of Arch.
(2) Member of the Executive Compensation and Stock Option Committee of Arch.
C. EDWARD BAKER, JR. has served as Chief Executive Officer and a director of
Arch since 1988 and of ACI since 1995. Mr. Baker became Chairman of the Board
of Arch in 1989 and of ACI in 1995. He also served as President of Arch from
1988 to January 1998 and of ACI from 1995 to January 1998. From 1986 until
joining Arch in March 1988, Mr. Baker was President and Chief Executive
Officer of US West Paging.
LYNDON R. DANIELS joined Arch and ACI in January 1998 as President and Chief
Operating Officer. From November 1993 to January 1998, Mr. Daniels was the
President and Chief Executive Officer of Pacific Bell Mobile Services, a
subsidiary of SBC Communications Inc. From May 1988 until November 1993, Mr.
Daniels was the Chief Financial Officer of Pactel Corp., a mobile telephone
company.
JOHN B. SAYNOR has served as a director of Arch since 1988 and of ACI since
1995. Mr. Saynor has served as Executive Vice President of ACI since 1995 and
of Arch since 1990. Mr. Saynor is a founder of Arch and served as President
and Chief Executive Officer of Arch from 1986 to March 1988 and as Chairman of
the Board from 1986 until May 1989.
J. ROY POTTLE joined Arch and ACI in February 1998 as Executive Vice
President and Chief Financial Officer. From October 1994 to February 1998, Mr.
Pottle was Vice President/Treasurer of Jones Intercable, Inc., a cable
television operator. From September 1989 to October 1994, he served as Vice
President and Relationship Manager at The Bank of Nova Scotia, New York
Agency.
PAUL H. KUZIA has served as Executive Vice President/Technology and
Regulatory Affairs of Arch and ACI since September 1996. He served as Vice
President/Engineering and Regulatory Affairs of Arch from 1988 to September
1996 and of ACI from 1995 to September 1996. Prior to 1988, Mr. Kuzia was
director of operations at Message Center Inc.
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R. SCHORR BERMAN has been a director of Arch since 1986 and of ACI since
1995. Since 1987, he has been the President and Chief Executive Officer of MDT
Advisers, Inc., an investment adviser. He is a director of Mercury Computer
Systems, Inc. as well as a number of private companies.
JAMES S. HUGHES has been a director of Arch since 1986 and of ACI since
1995. Since 1987, he has been President and Chief Executive Officer of Norwich
Corporation, a real estate investment and service firm, and, since 1992, he
has served as President and Managing Director of Inventa Corporation, an
international business development firm.
ALLAN L. RAYFIELD has been a director of Arch since 1997 and of ACI since
1998. He has been a consultant since 1995. From November 1993 until December
1994, Mr. Rayfield served as Chief Executive Officer of M/A Com Inc., a
microwave electrical manufacturing company. From April 1991 until November
1993, he served as Chief Operating Officer of M/A Com Inc. He is a director of
Parker Hannifin Corporation and Acme Metals Incorporated.
JOHN A. SHANE has been a director of Arch since 1988 and of ACI since 1995.
He has been the President of Palmer Service Corporation since 1972. He has
been a general partner of Palmer Partners L.P., a venture capital firm, since
1981. He serves as a director of Overland Data, Inc., Summa Four, Inc., United
Asset Management Corporation and Gensym Corporation and as a trustee of Nvest
Funds.
JOHN KORNREICH has been a director of Arch and ACI since June 1998. Mr.
Kornreich has served as a Managing Director of Sandler Capital Management Co.,
Inc. since 1988.
The Arch Certificate and the Arch By-Laws provide that Arch has a classified
Board of Directors composed of three classes, each of which serves for three
years, with one class being elected each year. The term of Messrs. Hughes and
Rayfield will expire at Arch's annual meeting of stockholders to be held in
1999, the term of Messrs. Saynor and Shane will expire at Arch's annual
meeting of stockholders to be held in 2000 and the term of Messrs. Baker,
Berman and Kornreich will expire at Arch's annual meeting of stockholders to
be held in 2001.
In connection with the Merger, designees of W.R. Huff and Whippoorwill are
expected to be elected to the Arch Board and the Board of Directors of ACI at
the Effective Time. See "The Merger Agreement--Related Agreements--
Registration Rights Agreements". The expected nominees are:
EDWIN M. BANKS, age 35, has been employed by W.R. Huff since 1988 and
currently serves as a portfolio manager. From 1985 until he joined W.R. Huff,
Mr. Banks was employed by Merrill Lynch & Company. Mr. Banks received his B.A.
degree from Rutgers College and his MBA degree from Rutgers University. Mr.
Banks also serves as a director of Magellan Health Services (formerly Charter
Medical Corporation) and e.SPILE Corporation (formerly American Communications
Services, Inc.)
H. SEAN MATHIS, age 51, has been Chairman of the Board and Chief Executive
Officer of Allis Chalmers, Inc. since January 1996 and previously served as a
Vice President of such company since 1989. From July 1996 to September 1997,
Mr. Mathis was Chairman of the Board of Universal Gym Equipment Inc., a
privately owned company which filed for protection under the Bankruptcy Code
in July 1997. From 1991 to 1993, Mr. Mathis was President of RCL Acquisition
Corp., and from 1993 to 1995 he was President and a director of RCL Capital
Corporation, which was merged into DISC Graphics in November 1995. Previously,
Mr. Mathis was a director and Chief Operating Officer of Ameriscribe
Corporation. Mr. Mathis was the President of a predecessor to, and currently
is a director of, Allied Digital Technologies. He is also a director of
Thousand Trails, Inc.
The holders of Series C Preferred Stock have the right, voting as a separate
class, to elect one member of the Board of Directors of Arch and ACI, and such
director will have the right to be a member of any committee of such Boards of
Directors. Mr. Kornreich is currently the director elected by the holders of
Series C Preferred Stock.
Arch's executive officers are elected by the Arch Board and hold office
until their successors are elected or until their earlier death, resignation
or removal.
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Certain of Arch's executive officers have entered into non-competition
agreements with Arch which provide that, for a minimum period of one year
following termination, they will not compete with Arch nor, for a period of
three years following termination, recruit or hire any other Arch employee.
Arch has formed an offshore corporation to pursue wireless messaging
opportunities in Latin America. Arch and an entity owned by Mr. Hughes each
contributed $250,000 to this offshore corporation and each owns 13.3% of its
equity.
BOARD COMMITTEES
The Arch Board has an Audit Committee and an Executive Compensation and
Stock Option Committee. There is no standing nominating committee of the Arch
Board. The Audit Committee reviews the annual consolidated financial
statements of Arch and its subsidiaries prior to their submission to the Arch
Board and consults with Arch's independent public accountants to review
financial results, internal financial controls and procedures, audit plans and
recommendations. The Audit Committee also recommends the selection, retention
or termination of independent public accountants and approves services
provided by independent public accountants prior to the provision of such
services. The Executive Compensation and Stock Option Committee recommends to
Arch's Board the compensation of executive officers, key managers and
directors and administers Arch's stock option plans.
INDEMNIFICATION AND DIRECTOR LIABILITY
The Arch Certificate provides that Arch will, to the fullest extent
permitted by the DGCL, indemnify all persons whom it has the power to
indemnify against all costs, expenses and liabilities incurred by them by
reason of having been officers or directors of Arch, any subsidiary of Arch or
any other corporation for which such persons acted as an officer or director
at the request of Arch.
The Arch Certificate also provides that the directors of Arch will not be
personally liable for monetary damages to Arch or its stockholders for any act
or omission, provided that the foregoing shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty
to Arch or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the DGCL (relating to illegal dividends or stock
redemptions) or (iv) for any transaction from which the director derived an
improper personal benefit. If the DGCL is amended to permit further
elimination or limitation of the personal liability of directors, then the
liability of a director of Arch shall be eliminated or limited to the fullest
extent permitted by the DGCL as so amended.
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<PAGE>
ARCH EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to the
annual and long-term compensation of Arch's Chief Executive Officer and other
executive officers (the "Named Executive Officers") for the years ended
December 31, 1995, 1996 and 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- --------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION DURING 1997 YEAR SALARY $ BONUS $(1) COMPENSATION ($)(2) OPTIONS (#)(3)
- --------------------------------------- ---- -------- ---------- ------------------- --------------
<S> <C> <C> <C> <C> <C>
C. Edward Baker, Jr...... 1997 $353,317 $227,500 $600 459,324(4)
Chairman, President and 1996 329,050 36,833 600 268,860(5)(6)
Chief Executive Officer 1995 281,650 106,000 600 40,000(7)
Lyndon R. Daniels........ 1997 -- -- -- --
President and Chief
Operating Officer
(joined Arch in January
1998)
J. Roy Pottle............ 1997 -- -- -- --
Executive Vice President
and Chief Financial
Officer (joined Arch in
February 1998)
John B. Saynor........... 1997 153,188 72,900 600 51,810(8)
Executive Vice President 1996 146,867 15,300 600 20,000(6)
1995 131,870 50,000 600 20,000(7)
Paul H. Kuzia............ 1997 157,633 77,400 600 86,574(9)
Executive Vice
President/Technology 1996 133,800 14,620 600 8,000(6)
and Regulatory Affairs 1995 123,300 46,000 600 8,000(7)
William A. Wilson........ 1997 133,599 150,500 600 32,836
Former Executive Vice
President and 1996 203,133 19,833 600 170,000(10)
Chief Financial
Officer(11) 1995 157,300 58,000 600 20,000(7)
</TABLE>
- --------
(1) Represents bonus paid in such fiscal year with respect to prior year.
(2) Represents Arch's matching contributions paid under Arch's 401(k) plan.
(3) No restricted stock awards or stock appreciation rights ("SARs") were
granted to any of the Named Executive Officers during the years ended
December 31, 1995, 1996 or 1997.
(4) Includes options to purchase 409,688 shares granted as part of Arch's
January 16, 1998 option repricing program.
(5) Includes options to purchase 106,860 shares replaced in connection with
Arch's October 23, 1996 option repricing program.
(6) Option replaced in connection with Arch's January 16, 1998 option
repricing program.
(7) Option replaced in connection with Arch's October 23, 1996 option
repricing program.
(8) Includes options to purchase 35,905 shares granted as part of Arch's
January 16, 1998 option repricing program.
(9) Includes options to purchase 69,687 shares granted as part of Arch's
January 16, 1998 option repricing program.
(10) Includes options to purchase 75,000 shares replaced in connection with
Arch's October 23, 1996 option repricing program.
(11) Mr. Wilson resigned on June 30, 1997.
97
<PAGE>
EXECUTIVE RETENTION AGREEMENTS
Arch is a party to Executive Retention Agreements (the "Retention
Agreements") for a total of 16 executives (the "Arch Executives"), including
Messrs. Baker, Daniels, Kuzia, Pottle and Saynor.
The purpose of the Retention Agreements is to assure the continued
employment and dedication of the Arch Executives without distraction from the
possibility of a Change in Control (as defined in the Retention Agreements) of
Arch. In the event of a Change in Control, and the termination of the
Executive's employment by Arch at any time within the 12-month period
thereafter (other than for cause, disability or death) or by the Executive for
Good Reason (as defined in the Retention Agreements), the Executive shall be
eligible to receive (i) a cash severance payment equal to the Executive's base
salary plus any other amounts earned through the date of termination (to the
extent not previously paid), (ii) an additional lump sum cash payment equal to
a specified multiple (the "Multiple") of the sum of (a) the Executive's annual
base salary in effect at the time of the Change in Control and (b) the average
bonus paid for the three calendar years immediately preceding the calendar
year during which the Change in Control occurs, and (iii) any amounts or
benefits required to be paid or provided to the Executive or which the
Executive is eligible to receive following the Executive's termination under
any plan, program, policy, practice, contract or agreement of Arch. In
addition, until the earlier of (a) 12 months after termination or (b) the
Executive becomes reemployed with another employer and is eligible to receive
substantially equivalent benefits, Arch shall arrange to provide the Executive
with life, disability, accident and health insurance benefits similar to those
previously maintained. The Multiple for Messrs. Baker, Daniels, Kuzia, Pottle
and Saynor is three, and the Multiple for the other Arch Executives is one or
two. Good Reason is defined to include, among other things, a material
reduction in employment responsibilities, compensation or benefits or, in the
case of Mr. Baker, the failure to become the Chief Executive of any entity
succeeding or controlling Arch.
STOCK OPTION GRANTS
The following table summarizes certain information regarding options granted
to the Named Executive Officers during the year ended December 31, 1997. No
SARs were granted during the year ended December 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTIONS TERM(3)
-------------------------------------------------- -------------------
PERCENT OF
TOTAL
OPTIONS/SARS
OPTIONS/SARS GRANTED TO EXERCISE OR
GRANTED EMPLOYEE IN BASE PRICE EXPIRATION
(#)(1) FISCAL YEAR ($/SHARE)(2) DATE 5% ($) 10% ($)
------------ ------------ ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
C. Edward Baker, Jr. ... 49,636(4) 2.89 $6.875 03/05/07 $214,609 $ 543,861
409,688(5) 23.89 5.0625 01/16/08 553,600 2,110,041
Lyndon R. Daniels....... -- -- -- -- -- --
J. Roy Pottle........... -- -- -- -- -- --
John B. Saynor.......... 15,905(4) 0.93 6.875 03/05/07 68,768 174,271
35,905(5) 2.09 5.0625 01/16/08 48,517 184,924
Paul H. Kuzia........... 16,887(4) 0.98 6.875 03/05/07 73,013 185,031
69,687(5) 4.06 5.0625 01/16/08 94,166 358,913
William A. Wilson....... 32,836 1.92 6.875 03/05/07 141,971 359,783
</TABLE>
- --------
(1) Options generally become exercisable at a rate of 20% of the shares
subject to the option on the first anniversary of the date of grant and
5% of the shares subject to the option per calendar quarter thereafter.
98
<PAGE>
(2) The exercise price is equal to the fair market value of Common Stock on
the date of grant.
(3) Amounts represent hypothetical gains that could be achieved for the
options if exercised at the end of the option terms. These gains are
based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted and are not
intended to forecast future appreciation of the price of the Common
Stock. The Named Executive Officers will realize no gain upon the
exercise of these options without an increase in the price of the Common
Stock, which increase will benefit all Arch stockholders proportionately.
(4) Option replaced as part of the January 16, 1998 option repricing program.
(5) Option granted as part of the January 16, 1998 option repricing program.
OPTION EXERCISES AND YEAR-END OPTION TABLE
The following table sets forth certain information regarding the exercise of
stock options during the year ended December 31, 1997 and stock options held
as of December 31, 1997 by the Named Executive Officers.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
EXERCISE REALIZED (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
NAME (#) ($)(1) (#) ($)(2)
---- ----------- -------- ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C>
C. Edward Baker, Jr .... -- -- 314,904(3) 188,816 $ 188,064 --
Lyndon R. Daniels....... -- -- -- -- -- --
John B. Saynor.......... -- -- 4,000 31,905 -- --
J. Roy Pottle........... -- -- -- -- -- --
Paul H. Kuzia........... -- -- 46,400 23,287 -- --
William A. Wilson....... -- -- -- -- -- --
</TABLE>
- --------
(1) Represents the difference between the exercise price and the fair market
value of Arch's Common Stock on the date of exercise.
(2) Based on the fair market value of Arch's Common Stock on December 31, 1997
($5.125 per share) less the option exercise price.
(3) Subsequent to December 31, 1997, Mr. Baker exercised an option for 94,032
shares.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of Arch's Compensation Committee are R. Schorr Berman,
Allan L. Rayfield and John A. Shane. Messrs. Berman and Shane served on the
Compensation Committee throughout 1997, and Mr. Rayfield joined the
Compensation Committee upon his election as a director in July 1997.
C. Edward Baker, Jr., the Chairman and Chief Executive Officer of Arch,
makes recommendations and participates in discussions regarding executive
compensation, but he does not participate directly in discussions regarding
his own compensation. No current executive officer of Arch has served as a
director or member of the Compensation Committee (or other committee serving
an equivalent function) of any other entity, any of whose executive officers
has served as a director of Arch or as a member of the Compensation Committee
of Arch.
99
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock, as of June 30, 1998, by (i) each person
who is known by Arch to beneficially own more than 5% of its outstanding
shares of Common Stock, (ii) each current director of Arch, (iii) Arch's Chief
Executive Officer and the other Named Executive Officers and (iv) all current
directors and executive officers of Arch as a group.
The following table does not reflect shares to be issued in connection with
the Merger. Based upon an assumed Arch Common Stock Price of $6.25, Arch will
issue 57,745,000 shares of Stock in the Merger. See "The MobileMedia Plan of
Reorganization--Calculation of Shares". After giving pro forma effect to the
issuance of 57,745,000 shares of Stock in the Merger, and assuming that all
shares sold in the Rights Offering are purchased by the Standby Purchasers,
the shares received by the Standby Purchasers in connection with the Merger
would represent an aggregate of approximately 61.0% of the total number of
shares of Common Stock outstanding immediately after the Merger on an as-
converted basis. However, the Standby Purchasers would not hold, in the
aggregate, shares representing more than 49.0% of the securities of Arch
generally entitled to vote in the election of directors or 49.0% of the total
voting power of the outstanding securities of Arch outstanding at the
Effective Time. See "The Merger Agreement--Related Agreements--Registration
Rights Agreements".
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES(1) PERCENTAGE(2)
--------------------------------------------------- --------- -------------
<S> <C> <C>
Sandler Capital Management (3) .................... 4,594,364 17.9%
Franklin Resources, Inc. (4)....................... 2,514,080 9.8
Memorial Drive Trust (5)........................... 1,947,990 7.6
State of Wisconsin Investment Board (6)............ 1,388,000 5.4
Dimensional Fund Advisors Inc. (7)................. 1,304,900 5.1
J. & W. Seligman & Co. Incorporated (8)............ 1,257,372 4.9
Goldman, Sachs & Co. (9)........................... 1,225,500 4.8
C. Edward Baker, Jr. .............................. 186,647 0.7
Lyndon R. Daniels.................................. 12,000 *
John B. Saynor..................................... 193,924 0.8
J. Roy Pottle...................................... -- --
Paul H. Kuzia...................................... 17,000 *
R. Schorr Berman (10).............................. 1,961,140 7.7
James S. Hughes.................................... 80,837 *
John Kornreich (11) ............................... 4,830,569 18.9
Allan L. Rayfield.................................. 3,250 *
John A. Shane (12)................................. 94,785 *
William A. Wilson (13)............................. 600 *
All current directors and executive officers of
Arch as a group (10 persons) (14)................. 7,380,152 28.6
</TABLE>
- ---------------------
* Less than 0.5%
(1) Unless otherwise indicated, each person or entity named in the table has
sole voting power and investment power (or shares such power with his
spouse) with respect to all shares of capital stock listed as owned by
such person or entity.
(2) Assumes the conversion of Series C Preferred Stock into Common Stock at
the initial conversion price of $5.50 per share. See "--Arch Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Sandler Equity Investment".
(3) The business address of Sandler is 767 Fifth Avenue, 45th Floor, New
York, New York 10153. Sandler has sole voting and investment power over
348,000 of such shares and shared voting and investment power over
4,246,364 of such shares. This information is based on the Schedule 13G
filed by Sandler with the Commission on July 10, 1998.
(4) The business address of Franklin Resources, Inc. is 777 Mariners Island
Boulevard, San Mateo, California 94404. Franklin Advisers, Inc., a
subsidiary of Franklin Resources, Inc., has sole voting power and sole
investment power with respect to 2,493,700 shares. Franklin Management,
Inc., a subsidiary of Franklin Resources, Inc., has sole investment power
with respect to 20,380 shares. Franklin Resources, Inc., the principal
shareholders thereof, Franklin Advisers, Inc. and Franklin Management,
Inc. disclaim beneficial
100
<PAGE>
ownership of these securities. This information is based on Amendment No.
1 to Schedule 13G filed by Franklin Resources, Inc. with the Commission on
January 26, 1998.
(5) The business address of Memorial Drive Trust is 125 Cambridge Park Drive,
Cambridge, Massachusetts 02140. All shares listed in the above table as
held by Memorial Drive Trust are held by MD Co. as nominee for Memorial
Drive Trust, a trust holding assets of a qualified profit sharing plan
for employees of Arthur D. Little, Inc., over which Mr. Berman may be
deemed to share voting and investment power. See Note (10).
(6) The business address of the State of Wisconsin Investment Board is P.O.
Box 7842, Madison, Wisconsin 53707. This information is based on the
Schedule 13G filed by the State of Wisconsin Investment Board with the
Commission on January 27, 1998.
(7) The business address of Dimensional Fund Advisors Inc. is 1299 Ocean
Avenue, 11th Floor, Santa Monica, California 90401. Dimensional Fund
Advisors Inc. has sole voting power with respect to 860,800 shares and
sole investment power with respect to all 1,304,900 shares. Officers of
Dimensional Fund Advisors Inc. also serve as officers of DFA Investment
Dimensions Group Inc. and The DFA Investment Trust Company, each an open-
end management investment company. These officers have sole voting power
with respect to 139,100 shares owned by DFA Investment Dimensions Group
Inc. and 305,000 shares owned by The DFA Investment Trust Company. All of
these securities are owned by advisory clients of Dimensional Fund
Advisors Inc., none of which, to the knowledge of Dimensional Fund
Advisors Inc., owns more than 5% of the class. Dimensional Fund Advisors
Inc. disclaims beneficial ownership of such securities. This information
is based on the Schedule 13G filed by Dimensional Fund Advisors Inc. with
the Commission on February 10, 1998.
(8) The business address of J. & W. Seligman & Co. Incorporated is 100 Park
Avenue, New York, New York 10017. J. & W. Seligman & Co. Incorporated has
shared voting power with respect to 1,129,325 of such shares and shared
investment power with respect to all 1,257,372 shares. This information
is based on Amendment No. 1 to Schedule 13G filed by J. & W. Seligman &
Co. Incorporated with the Commission on February 12, 1998.
(9) The business address of Goldman, Sachs & Co. and its parent holding
company, The Goldman Sachs Group, L.P. (collectively "Goldman Sachs"), is
85 Broad Street, New York, New York 10004. Goldman Sachs has shared
voting power with respect to 854,100 shares and shared investment power
with respect to all 1,225,500 shares. Goldman Sachs disclaims beneficial
ownership of the shares beneficially owned by (i) managed accounts and
(ii) certain investment limited partnerships, of which a subsidiary of
Goldman Sachs is the general partner or managing general partner, to the
extent partnership interests in such partnerships are held by persons
other than Goldman Sachs or their affiliates. This information is based
on the Schedule 13G filed by Goldman Sachs with the Commission on
February 17, 1998.
(10) Includes 1,947,990 shares held by Memorial Drive Trust, over which Mr.
Berman may be deemed to share voting and investment power as
Administrator and Chief Executive Officer of Memorial Drive Trust. Mr.
Berman disclaims beneficial ownership of such shares held by Memorial
Drive Trust.
(11) Includes 4,594,364 shares beneficially owned by Sandler, over which Mr.
Kornreich may be deemed to have voting and investment power as Managing
Director, and 190,000 shares beneficially owned by two limited
partnerships, over which Mr. Kornreich may be deemed to have voting and
investment power as a general partner. Mr. Kornreich disclaims
beneficial ownership of all such shares.
(12) Includes 1,051 shares owned by Palmer Service Corporation, over which Mr.
Shane may be deemed to have voting and investment power as President and
sole stockholder of Palmer Service Corporation, and 59,701 shares
issuable upon conversion of $1,000,000 principal amount of Arch's 6 3/4%
Convertible Subordinated Debentures due 2003 held by Palmer Organization
III, L.P., of which Mr. Shane is the general partner of the general
partner. See "Description of Certain Arch Indebtedness--Arch Convertible
Debentures".
(13) Consists of 600 shares held by or jointly with Mr. Wilson's children.
(14) Includes (i) 4,594,364 shares beneficially owned by Sandler and 190,000
shares beneficially owned by two limited partnerships of which Mr.
Kornreich is a general partner, (ii) 1,947,990 shares held by Memorial
Drive Trust, (iii) 1,051 shares held by Palmer Service Corporation, (iv)
59,701 shares issuable upon conversion of $1,000,000 principal amount of
Arch's 6 3/4% Convertible Subordinated Debentures due 2003 held by Palmer
Organization III, L.P. and (v) 74,347, 15,680, 10,250, 10,250, 750,
2,250, 10,250 and 123,777 shares issuable upon the exercise of
outstanding stock options held by Messrs. Baker, Kuzia, Berman, Hughes,
Kornreich, Rayfield, Shane and all current directors and executive
officers of Arch as a group, respectively, exercisable within 60 days
after June 30, 1998.
101
<PAGE>
STOCKHOLDINGS BEFORE AND AFTER THE MERGER
The number of shares of Stock and Warrants to be issued in connection with
the Merger will be determined by reference to the Arch Common Stock Price.
Based upon the capitalization of Arch as of June 30, 1998, if the Merger is
approved and becomes effective, Arch stockholders who collectively own, on an
as-converted basis, 100% of the outstanding Common Stock immediately prior to
the Effective Time will own, on an as-converted basis, approximately 30.7% of
the outstanding Common Stock at the Effective Time (approximately 34.0% on a
Fully Diluted Basis) if no Adjustment is made, or approximately 17.3% to 30.7%
(approximately 32.2% on a Fully Diluted Basis) if an Adjustment is made, and
the Unsecured Creditors (including the Standby Purchasers), their successors
and/or their assigns will collectively own, on an as-converted basis,
approximately 69.3% of the outstanding Common Stock at the Effective Time
(approximately 66.0% on a Fully Diluted Basis) if no Adjustment is made, or
approximately 69.3% to 82.7% (approximately 67.8% on a Fully Diluted Basis) if
an Adjustment is made. See Note 11 to the Unaudited Pro Forma Condensed
Consolidated Financial Statements and "The MobileMedia Plan of
Reorganization--Calculation of Shares" for additional information about the
range of shares that may be issued in connection with the Merger and the
Reorganization.
102
<PAGE>
ARCH MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following discussion and analysis should be read in conjunction with
Arch's Consolidated Financial Statements and Notes thereto included elsewhere
in this Prospectus.
Arch is a leading provider of wireless messaging services, primarily paging
services, and is the second largest paging company in the United States (based
on EBITDA). Arch had 4.1 million pagers in service at June 30, 1998. From
January 1, 1995 through June 30, 1998, Arch's total number of subscribers grew
at a compound rate on an annualized basis of 79.0%. For the same period on an
annualized basis, Arch's compound rate of internal subscriber growth
(excluding pagers added through acquisitions) was 56.1%.
Arch derives the majority of its revenues from fixed periodic (usually
monthly) fees, not dependent on usage, charged to subscribers for paging
services. As long as a subscriber remains on service, operating results
benefit from the recurring payments of the fixed periodic fees without
incurrence of additional selling expenses by Arch. Arch's service, rental and
maintenance revenues and the related expenses exhibit substantially similar
growth trends. Arch's average revenue per subscriber has declined over the
last three years for two principal reasons: (i) an increase in the number of
subscriber owned and reseller owned pagers for which Arch receives no
recurring equipment revenue and (ii) an increase in the number of reseller
customers whose airtime is purchased at wholesale rates. The reduction in
average paging revenue per subscriber resulting from these trends has been
more than offset by the elimination of associated expenses so that Arch's
margins have improved over such period. Furthermore, recent data indicates
such rate of decline has slowed.
Arch has achieved significant growth in pagers in service and operating cash
flow through a combination of internal growth and acquisitions, including USA
Mobile in September 1995 and Westlink Holdings, Inc. ("Westlink") in May 1996.
Arch's total revenues have increased from $162.6 million in the year ended
December 31, 1995 to $331.4 million in the year ended December 31, 1996 and to
$396.8 million in the year ended December 31, 1997. Over the same periods,
through operating efficiencies and economies of scale, Arch has been able to
reduce its per pager operating costs to enhance its competitive position in
its markets. Due to the rapid growth in its subscriber base, Arch has incurred
significant selling expenses, which are charged to operations in the period
incurred. Arch had net losses of $36.6 million, $114.7 million and $181.9
million in the years ended December 31, 1995, 1996 and 1997, respectively, as
a result of significant depreciation and amortization expenses related to
acquired and developed assets and interest charges associated with
indebtedness. However, as its subscriber base has grown, Arch's operating
results have improved, as evidenced by an increase in its EBITDA from $47.2
million in the year ended December 31, 1995 to $105.8 million in the year
ended December 31, 1996 and to $130.3 million in the year ended December 31,
1997.
EBITDA is a commonly used measure of financial performance in the paging
industry and also is one of the financial measures used to calculate whether
Arch and its subsidiaries are in compliance with the covenants under their
respective debt agreements, but should not be construed as an alternative to
operating income or cash flows from operating activities as determined in
accordance with GAAP. One of Arch's financial objectives is to increase its
EBITDA, as such earnings are a significant source of funds for servicing
indebtedness and for investment in continued growth, including purchase of
pagers and paging system equipment, construction and expansion of paging
systems, and possible acquisitions. EBITDA, as determined by Arch, may not
necessarily be comparable to similarly titled data of other paging companies.
SHIFT IN OPERATING FOCUS
In April 1997, Arch reordered its operating priorities to improve capital
efficiency and strengthen its balance sheet by placing a higher priority on
leverage reduction than subscriber unit growth. As part of its reordered
operating priorities, Arch has implemented various initiatives to reduce
capital costs while sustaining acceptable levels of unit and revenue growth.
As a result, Arch's rate of internal growth in pagers in service slowed during
the second half of 1997 and is expected to remain below the rates of internal
growth previously achieved by
103
<PAGE>
Arch. As part of its reordered operating priorities, Arch is also reviewing
the possible sale of non-strategic assets. In April 1998, Arch announced an
agreement to sell certain tower site assets of ACI (the "Arch Tower Site
Sale") for approximately $38.0 million in cash (subject to adjustment). In the
Arch Tower Site Sale, ACI is selling communications towers, real estate, site
management contracts and/or leasehold interests involving 134 sites in 22
states and leasing back space on the towers on which it currently operates
communications equipment to service its own paging network. ACI will use its
net proceeds from the Arch Tower Site Sale (estimated to be $36.0 million) to
repay indebtedness. ACI held the initial closing of the Arch Tower Site Sale
on June 26, 1998 with gross proceeds to ACI of approximately $12.0 million
(excluding $1.3 million which was paid to Benbow for certain assets which
Benbow sold as part of this transaction) and currently expects to hold the
final closing for the balance of the transaction in the third quarter of 1998,
although no assurance can be given that the final closing will be held as
expected. See "Business--Arch--Investments in Narrowband PCS Licenses".
DIVISIONAL REORGANIZATION
In June 1998, the Arch Board approved the Divisional Reorganization. As part
of the Divisional Reorganization, which will be implemented over a period of
18 to 24 months, Arch plans to consolidate its seven operating divisions into
four operating divisions, and consolidate certain regional administrative
support functions, resulting in various operating efficiencies. Once fully
implemented, the Divisional Reorganization is expected to result in annual
cost savings of approximately $15.0 million. Arch expects to reinvest a
portion of these cost savings to expand its sales activities.
In connection with the Divisional Reorganization, Arch (i) anticipates a net
reduction of approximately 10% of its workforce, (ii) plans to close certain
office locations and redeploy other real estate assets and (iii) recorded a
restructuring charge of $16.1 million during the second quarter of 1998. The
restructuring charge consisted of approximately (i) $9.7 million for employee
severance and benefits, (ii) $3.5 million for lease obligations and
terminations and (iii) $2.9 million for the writedown of related assets. There
can be no assurance that the desired cost savings will be achieved or that the
anticipated reorganization of Arch's business will be accomplished smoothly,
expeditiously or successfully. The difficulties of such reorganization may be
increased by the need to integrate MobileMedia's operations in multiple
locations and to combine two corporate cultures. The inability to successfully
integrate the operations of MobileMedia could have a material adverse effect
on Arch following the Merger. See Note 9 to Arch's Consolidated Financial
Statements.
ACE/USAM MERGER
On June 29, 1998, Arch effected a number of restructuring transactions
involving certain of its direct and indirect wholly owned subsidiaries. Arch
Communications Enterprises, Inc. ("ACE") was merged (the "ACE/ USAM Merger")
into API, which was then a subsidiary of USA Mobile Communications, Inc. II
("USAM"). In connection with the ACE/USAM Merger, USAM changed its name to ACI
and issued 100 shares of its common stock to Arch. Immediately prior to and in
connection with the ACE/USAM Merger, (i) USAM contributed its operating assets
and liabilities to an existing subsidiary of USAM, (ii) The Westlink Company,
which held ACE's 49.9% equity interest in Benbow, distributed its Benbow
assets and liabilities to a new subsidiary of ACE, The Westlink Company II,
(iii) ACE contributed its operating assets and liabilities to an existing
subsidiary of ACE, (iv) all of USAM's subsidiaries were merged into API, and
(v) The Westlink Company II was merged into a new API subsidiary, Benbow
Investments, Inc. ("Benbow Investments").
104
<PAGE>
RESULTS OF OPERATIONS
The following table presents certain items from Arch's Combined Statements
of Operations as a percentage of net revenues (total revenues less cost of
products sold) and certain other information for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
--------------------------- -----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total revenues.............. 114.7 % 109.0 % 107.9 % 107.9 % 107.7 %
Cost of products sold....... (14.7) (9.0) (7.9) (7.9) (7.7)
------- ------- ------- ------- -------
Net revenues................ 100.0 100.0 100.0 100.0 100.0
Operating expenses:
Service, rental and
maintenance.............. 20.9 21.4 21.7 21.2 21.2
Selling................... 17.3 15.4 14.0 14.8 12.7
General and
administrative........... 28.5 28.4 28.8 28.5 29.6
Depreciation and
amortization............. 42.5 63.1 63.2 66.8 56.8
Restructuring charge...... -- -- -- -- 8.4
------- ------- ------- ------- -------
Operating income (loss)... (9.2)% (28.3)% (27.7)% (31.3)% (28.7)%
======= ======= ======= ======= =======
Net income (loss)......... (25.8)% (37.7)% (49.5)% (52.9)% (57.5)%
======= ======= ======= ======= =======
EBITDA...................... 33.3 % 34.8 % 35.4 % 35.5 % 36.5 %
======= ======= ======= ======= =======
Annual service, rental and
maintenance expenses per
pager...................... $ 28 $ 25 $ 22 $ 22 $ 20
</TABLE>
Six Months Ended June 30, 1998 Compared with Six Months Ended June 30, 1997
Total revenues increased to $205.6 million (a 5.8% increase) in the six
months ended June 30, 1998, from $194.3 million in the six months ended June
30, 1997. Net revenues (total revenues less cost of products sold) increased
to $190.9 million (a 6.1% increase) in the six months ended June 30, 1998 from
$180.0 million in the six months ended June 30, 1997. Service, rental and
maintenance revenues, which consist primarily of recurring revenues associated
with the sale or lease of pagers, increased to $184.3 million (a 7.2%
increase) in the six months ended June 30, 1998 from $172.0 million in the six
months ended June 30, 1997. These increases in revenues were due primarily to
the increase through internal growth in the number of pagers in service from
3.7 million at June 30, 1997 to 4.1 million at June 30, 1998. Maintenance
revenues represented less than 10% of total service, rental and maintenance
revenues in the six months ended June 30, 1998 and 1997. Arch does not
differentiate between service and rental revenues. Product sales, less cost of
products sold, decreased to $6.6 million (a 17.3% decrease) in the six months
ended June 30, 1998 from $8.0 million in the six months ended June 30, 1997,
respectively, as a result of a decline in the average revenue per pager sold.
Service, rental and maintenance expenses, which consist primarily of
telephone line and site rental expenses, increased to $40.4 million (21.2% of
net revenues) in the six months ended June 30, 1998 from $38.1 million (21.2%
of net revenues) in the six months ended June 30, 1997. The increase was due
primarily to increased expenses associated with system expansions and the
provision of paging services to a greater number of subscribers. As existing
paging systems become more populated through the addition of new subscribers,
the fixed costs of operating these paging systems are spread over a greater
subscriber base. Annualized service, rental and maintenance expenses per
subscriber were $20 in the six months ended June 30, 1998 as compared to $22
in the corresponding 1997 periods.
Selling expenses decreased to $24.2 million (12.7% of net revenues) in the
six months ended June 30, 1998 from $26.6 million (14.8% of net revenues) in
the six months ended June 30, 1997. The decrease was due primarily to a
decrease in the number of net new subscriber additions and nonrecurring
marketing costs incurred in 1997 to promote Arch's new Arch Paging brand
identity. The number of net new subscriber additions resulting
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from internal growth decreased by 35.0% in the six months ended June 30, 1998
compared to the six months ended June 30, 1997. Most selling expenses are
directly related to the number of net new subscribers added.
General and administrative expenses increased to $56.5 million (29.6% of net
revenues) in the six months ended June 30, 1998, respectively, from $51.3
million (28.5% of net revenues) in the six months ended June 30, 1997. The
increase was due primarily to administrative and facility costs associated
with supporting more pagers in service.
Depreciation and amortization expenses decreased to $108.4 million in the
six months ended June 30, 1998 from $120.2 million in the six months ended
June 30, 1997. These expenses principally reflect Arch's acquisitions of
paging businesses in prior periods, accounted for as purchases, and investment
in pagers and other system expansion equipment to support growth.
Operating losses were $54.8 million in the six months ended June 30, 1998
compared to $56.3 million in the six months ended June 30, 1997, as a result
of the factors outlined above, including the $16.1 million restructuring
charge recorded in the second quarter of 1998.
Net interest expense increased to $51.1 million in the six months ended June
30, 1998 from $47.7 million in the six months ended June 30, 1997. The
increase is principally attributable to an increase in Arch's outstanding
debt. Interest expense for the six months ended June 30, 1998 and 1997 include
approximately $18.0 million and $16.2 million, respectively, of non-cash
interest accretion on the 10 7/8% Arch Discount Notes under which semi-annual
interest payments commence on September 15, 2001. See "Description of Certain
Arch Indebtedness--Arch Discount Notes".
Arch recognized income tax benefits of $10.6 million in the six months ended
June 30, 1997. This benefit represents the tax benefit of operating losses
incurred subsequent to the acquisitions of USA Mobile and Westlink which were
available to offset deferred tax liabilities arising from Arch's acquisition
of USA Mobile in September 1995 and Westlink in May 1996. The tax benefit of
these operating losses was fully recognized during 1997. Accordingly, Arch has
established a valuation reserve against its deferred tax asset which reduced
the income tax benefit to zero. Arch does not expect to recover, in the
foreseeable future, its deferred tax asset and will continue to increase its
valuation reserve accordingly.
In June 1998, Arch recognized an extraordinary charge of $1.7 million
representing the write-off of unamortized deferred financing costs associated
with the prepayment of indebtedness under prior credit facilities.
Net loss increased to $109.8 million in the six months ended June 30, 1998
from $95.2 million in the six months ended June 30, 1997, as a result of the
factors outlined above.
EBITDA increased 9.1% to $69.7 million (36.5% of net revenues) in the six
months ended June 30, 1998 from $63.9 million (35.5% of net revenues) in the
six months ended June 30, 1997, as a result of the factors outlined above.
Year Ended December 31, 1997 Compared with Year Ended December 31, 1996
Total revenues increased $65.5 million, or 19.8%, to $396.8 million in the
year ended December 31, 1997 from $331.4 million in the year ended December
31, 1996 and net revenues increased $63.8 million, or 21.0%, from $303.9
million to $367.7 million over the same period. Service, rental and
maintenance revenues increased $60.5 million, or 20.8%, to $351.9 million in
the year ended December 31, 1997 from $291.4 million in the year ended
December 31, 1996. These increases in revenues were due primarily to the
increase in the number of pagers in service from 3.3 million at December 31,
1996 to 3.9 million at December 31, 1997 and the full year impact of the
Westlink acquisition which was completed in May 1996. Maintenance revenues
represented less than 10% of total service, rental and maintenance revenues in
the years ended December 31, 1996 and 1997.
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Product sales, less cost of products sold, increased 25.9% to $15.7 million in
the year ended December 31, 1997 from $12.5 million in the year ended December
31, 1996 as a result of a greater number of pager unit sales.
Service, rental and maintenance expenses increased to $79.8 million (21.7%
of net revenues) in the year ended December 31, 1997 from $65.0 million (21.4%
of net revenues) in the year ended December 31, 1996. The increase was due
primarily to increased expenses associated with system expansions and the
provision of paging services to a greater number of subscribers. Annual
service, rental and maintenance expenses per subscriber decreased to $22 in
the year ended December 31, 1997 from $25 in the year ended December 31, 1996.
Selling expenses increased to $51.5 million (14.0% of net revenues) in the
year ended December 31, 1997 from $47.0 million (15.4% of net revenues) in the
year ended December 31, 1996. The increase in selling expenses was due to the
full year impact of the Westlink acquisition and the marketing costs incurred
to promote Arch's Arch Paging brand identity. Arch's selling cost per net new
pager in service increased to $87 in the year ended December 31, 1997 from $58
in the year ended December 31, 1996, primarily due to fixed selling costs and
increased marketing costs being spread over fewer net new pagers put into
service.
General and administrative expenses increased to $106.0 million (28.8% of
net revenues) in the year ended December 31, 1997 from $86.2 million (28.4% of
net revenues) in the year ended December 31, 1996. The increase in absolute
dollars was due primarily to increased expenses associated with supporting
more pagers in service, including the full year impact of Westlink, as well as
expenses associated with the establishment of Arch's National Services
Division. See "Business--Arch--Subscribers and Marketing".
Depreciation and amortization expenses increased to $232.3 million (63.2% of
net revenues) in the year ended December 31, 1997 from $191.9 million (63.1%
of net revenues) in the year ended December 31, 1996. These expenses reflect
Arch's acquisitions of paging businesses, accounted for as purchases, and
continued investment in pagers and other system expansion equipment to support
continued growth.
Operating loss increased to $102.0 million in the year ended December 31,
1997 from $86.1 million in the year ended December 31, 1996 as a result of the
factors outlined above.
Net interest expense increased to $97.2 million in the year ended December
31, 1997 from $75.9 million in the year ended December 31, 1996. The increase
was attributable to an increase in Arch's average outstanding debt. In 1997
and 1996 interest expense includes approximately $33 million and $24 million,
respectively, of non-cash interest accretion on Arch's 10 7/8% Senior Discount
Notes due 2008 under which semi-annual interest payments commence on September
15, 2001. See Note 3 to Arch's Consolidated Financial Statements.
During the years ended December 31, 1997 and 1996, Arch recognized income
tax benefits of $21.2 million and $51.2 million, respectively, representing
the tax benefit of operating losses subsequent to the acquisitions of USA
Mobile in September 1995 and Westlink in May 1996 which were available to
offset deferred tax liabilities arising from Arch's acquisitions of USA Mobile
and Westlink.
During 1996, Arch recognized an extraordinary charge of $1.9 million,
representing the write-off of unamortized deferred financing costs associated
with the prepayment of indebtedness under a prior credit facility.
Net loss increased to $181.9 million in the year ended December 31, 1997
from $114.7 million in the year ended December 31, 1996 as a result of the
factors outlined above. Included in the net loss for the years ended December
31, 1997 and 1996 were charges of $3.9 million and $2.0 million, respectively,
representing Arch's pro rata share of Benbow's losses since the Westlink
acquisition in May 1996.
EBITDA increased 23.2% to $130.3 million (35.4% of net revenues) in the year
ended December 31, 1997 from $105.8 million (34.8% of net revenues) in the
year ended December 31, 1996 as a result of the factors outlined above.
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Year Ended December 31, 1996 Compared with Year Ended December 31, 1995
Total revenues increased $168.8 million, or 103.8%, to $331.4 million in the
year ended December 31, 1996 from $162.6 million in the year ended December
31, 1995 and net revenues increased $162.1 million, or 114.3%, from $141.8
million to $303.9 million over the same period. Service, rental and
maintenance revenues increased $152.9 million, or 110.4%, to $291.4 million in
the year ended December 31, 1996 from $138.5 million in the year ended
December 31, 1995. These increases in revenues were due primarily to the
increase in the number of pagers in service from 2.0 million at December 31,
1995 to 3.3 million at December 31, 1996. Acquisitions of paging companies
added 0.5 million pagers in service during 1996, with the remaining 0.8
million pagers added through internal growth. Maintenance revenues represented
less than 10% of total service, rental and maintenance revenues in the years
ended December 31, 1995 and 1996. Product sales, less cost of products sold,
increased 274.0% to $12.5 million in the year ended December 31, 1996 from
$3.3 million in the year ended December 31, 1995 as a result of a greater
number of pager unit sales.
Service, rental and maintenance expenses increased to $65.0 million (21.4%
of net revenues) in the year ended December 31, 1996 from $29.7 million (20.9%
of net revenues) in the year ended December 31, 1995. The increase was due
primarily to increased expenses associated with system expansions and the
provision of paging services to a greater number of subscribers. Annual
service, rental and maintenance expenses per subscriber decreased to $25.00 in
the year ended December 31, 1996 from $28.00 in the year ended December 31,
1995.
Selling expenses increased to $47.0 million (15.4% of net revenues) in the
year ended December 31, 1996 from $24.5 million (17.3% of net revenues) in the
year ended December 31, 1995. The increase in selling expenses was due to the
addition of sales personnel to support continued growth in the subscriber
base, as the number of net new pagers in service resulting from internal
growth increased by 122.7% from the year ended December 31, 1995 to the year
ended December 31, 1996. Arch's selling cost per net new pager in service
decreased to $58 in the year ended December 31, 1996 from $67 in the year
ended December 31, 1995, primarily due to increased sales through indirect
distribution channels.
General and administrative expenses increased to $86.2 million (28.4% of net
revenues) in the year ended December 31, 1996 from $40.4 million (28.5% of net
revenues) in the year ended December 31, 1995. The increase was due primarily
to increased expenses associated with supporting more pagers in service.
Depreciation and amortization expenses increased to $191.9 million (63.1% of
net revenues) in the year ended December 31, 1996 from $60.2 million (42.5% of
net revenues) in the year ended December 31, 1995. These expenses reflect
Arch's acquisitions of paging businesses, accounted for as purchases, and
continued investment in pagers and other system expansion equipment to support
continued growth.
Operating loss increased to $86.1 million in the year ended December 31,
1996 from $13.0 million in the year ended December 31, 1995 as a result of the
factors outlined above.
Net interest expense increased to $75.9 million in the year ended December
31, 1996 from $22.5 million in the year ended December 31, 1995. The increase
was attributable to an increase in Arch's average outstanding debt. Interest
expense in 1996 includes approximately $24 million of non-cash interest
accretion on Arch's 10 7/8% Senior Discount Notes due 2008. See Note 3 to
Arch's Consolidated Financial Statements.
During the years ended December 31, 1996 and 1995, Arch recognized income
tax benefits of $51.2 million and $4.6 million, respectively, representing the
tax benefit of operating losses subsequent to the acquisitions of USA Mobile
and Westlink which were available to offset deferred tax liabilities arising
from Arch's acquisitions of USA Mobile and Westlink.
During 1996 and 1995, Arch recognized an extraordinary charge of $1.9
million and $1.7 million, respectively, representing the write-off of
unamortized deferred financing costs associated with the prepayment of
indebtedness under separate prior credit facilities.
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Net loss increased to $114.7 million in the year ended December 31, 1996
from $36.6 million in the year ended December 31, 1995 as a result of the
factors outlined above. Included in net loss for the year ended December 31,
1995 was a charge of $4.0 million representing Arch's pro rata share of USA
Mobile's net loss for the period of time from Arch's acquisition of its
initial 37% interest in USA Mobile on May 16, 1995 through the completion of
Arch's acquisition of USA Mobile on September 7, 1995. Included in the net
loss for the year ended December 31, 1996 was a charge of $2.0 million
representing Arch's pro rata share of Benbow's losses since the Westlink
acquisition in May 1996.
EBITDA increased 124.2% to $105.8 million (34.8% of net revenues) in the
year ended December 31, 1996 from $47.2 million (33.3% of net revenues) in the
year ended December 31, 1995 as a result of the factors outlined above.
LIQUIDITY AND CAPITAL RESOURCES
Arch's business strategy requires the availability of substantial funds to
finance the expansion of existing operations, to fund capital expenditures for
pagers and paging system equipment, to service debt and to finance
acquisitions.
Capital Expenditures and Commitments
Excluding acquisitions of paging businesses, Arch's capital expenditures
were $60.5 million in the year ended December 31, 1995, $155.6 million in the
year ended December 31, 1996, $102.8 million in the year ended December 31,
1997 and $59.9 million in the six months ended June 30, 1998. To date, Arch
has funded its capital expenditures with net cash provided by operating
activities and the incurrence of debt.
Arch currently anticipates capital expenditures of approximately $85.0
million to $90.0 million for the year ending December 31, 1998, primarily for
the purchase of pagers, paging system equipment and transmission equipment, as
well as expenditures for information systems and advances to Benbow (as
described below). Such amounts are subject to change based on Arch's internal
growth rate and acquisition activity, if any, during 1998. Included in Arch's
anticipated capital expenditures for 1998 is funding to upgrade hardware and
internally develop software for a centralized billing and management
information system which is expected to offer the back office capability to
support significant future growth and to address year 2000 issues. See "Risk
Factors--Risks Common to Arch and MobileMedia--Impact of the Year 2000 Issue".
Arch believes that it will have sufficient cash available from operations and
credit facilities to fund these expenditures.
Arch is obligated, to the extent such funds are not available to Benbow from
other sources, to advance to Benbow sufficient funds to service its license
related debt obligations incurred by Benbow in connection with its acquisition
of its N-PCS licenses and to finance construction of an N-PCS system. The
total cost to Benbow of servicing its debt obligations and constructing an N-
PCS system (including the effect of Benbow's acquisition of Page Call) will be
approximately $100.0 million over the next five years. Arch currently
anticipates that approximately $40.0 million (approximately $10.0 million in
each of the next four years) of such amount will be funded by Arch and the
balance will be funded through vendor financing and other sources. Arch also
is funding ongoing obligations in connection with Benbow's recent acquisition
of Page Call. See "Business--Arch--Investments in Narrowband PCS Licenses".
Other Commitments
Interest payments on the $467.4 million principal amount at maturity of Arch
Discount Notes commence September 15, 2001. Arch expects to service such
interest payments out of cash made available to it by its subsidiaries. Based
on the principal amount of Arch Discount Notes presently outstanding, such
interest payments will equal $25.4 million on March 15 and September 15 of
each year until scheduled maturity on March 15, 2008. A default by Arch in its
payment obligations under the Arch Discount Notes could have a material
adverse effect on the business, financial condition, results of operations or
prospects of Arch. See "Risk Factors--Risks Related to Arch--Arch's
Indebtedness and High Degree of Leverage".
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Sources of Funds
Arch's net cash provided by operating activities was $14.7 million, $37.8
million and $63.6 million in the years ended December 31, 1995, 1996 and 1997,
respectively, and $43.9 million in the six months ended June 30, 1998. Arch
believes that its capital needs for the foreseeable future will be funded with
borrowings under current and future credit facilities, net cash provided by
operations and, depending on Arch's needs and market conditions, possible
sales of equity or debt securities. For additional information, see Note 3 of
Notes to Arch's Consolidated Financial Statements. Arch's ability to access
future borrowings will be dependent, in part, on its ability to continue to
grow its EBITDA. After giving pro forma effect to the Merger and assuming an
offering of the Planned ACI Notes, Arch estimates it will have $415 million
outstanding, and approximately $185.0 million in available borrowing capacity
under the API Credit Facility. If Arch is unable to complete the Planned ACI
Notes offering and therefore borrows under the Bridge Facility, Arch estimates
that the principal amount outstanding under the API Credit Facility would
increase to $500.0 million and available borrowing capacity would be reduced
to $100.0 million.
API Credit Facility
In June 1998, ACE amended its existing credit facility to establish senior
secured revolving credit and term loan facilities with API as borrower in the
aggregate amount of $400.0 million consisting of (i) a $175.0 million reducing
revolving credit facility (the "Tranche A Facility"), (ii) a $100.0 million
364-day revolving credit facility under which the principal amount outstanding
on the 364th day following the closing will convert to a term loan (the
"Tranche B Facility") and (iii) a $125.0 million term loan which was available
in a single drawing on the closing date (the "Tranche C Facility"). See
"Description of Certain Arch Indebtedness--API Credit Facility".
Effective as of August 18, 1998, API, The Bank of New York, Royal Bank of
Canada and Toronto Dominion (Texas), Inc. executed a commitment letter for the
API Credit Facility Increase, which, subject to approval by each of API's
lenders, would result in a $25.0 million increase in the Tranche A Facility, a
$25.0 million increase in the Tranche B Facility and a $150.0 million increase
in the Tranche C Facility. See "Description of Certain Arch Indebtedness--API
Credit Facility " and "Risk Factors--Risks Related to Arch--API Credit
Facility, Bridge Facility and Indenture Restrictions".
Bridge Facility
Effective as of August 18, 1998, ACI and the Bridge Lenders executed a
commitment letter for the Bridge Facility pursuant to which a $120.0 million
term loan will be available for a single drawing on the closing date of the
Merger. See "Description of Certain Arch Indebtedness--Bridge Facility" and
"Risk Factors--Risks Related to Arch--API Credit Facility, Bridge Facility and
Indenture Restrictions".
Issuance and Sale of Private Notes
In June 1998, ACI issued and sold $130.0 million principal amount of private
notes to Bear Stearns, Barclays Capital Inc., RBC Dominion Securities
Corporation, BNY Capital Markets, Inc. and TD Securities (USA) Inc. for net
proceeds of $122.6 million (after deducting the discount to the Initial
Purchasers and estimated offering expenses payable by Arch) in a private
placement made pursuant to Rule 144A under the Securities Act. The private
notes were sold at an initial price to investors of 98.049% of the face amount
of their investment. See "Description of Certain Arch Indebtedness--ACI 12
3/4% Notes ".
Sandler Equity Investment
On June 29, 1998, two partnerships managed by Sandler Capital Management
Company, Inc., ("Sandler") an investment management firm, together with
certain other private investors, made an equity investment in Arch of $25.0
million in the form of Series C Preferred Stock. Simultaneously, Arch
contributed to ACI as an equity investment $24.0 million of the net proceeds
from the sale of Series C Preferred Stock, ACI contributed such
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amount to API as an equity investment and API used such amount to repay
indebtedness under ACE's existing credit facility as part of the establishment
of the API Credit Facility. So long as at least 50% of the Series C Preferred
Stock remains outstanding, the holders of the Series C Preferred Stock have
the right, voting as a separate class, to designate one member of the Arch
Board. Immediately prior to the Series C Preferred Stock financing,
partnerships managed by Sandler owned 4.3% of the outstanding Stock. After
giving effect to the issuance of the Series C Preferred Stock, the holders of
the Series C Preferred Stock beneficially owned (including the Common Stock
owned by partnerships managed by Sandler) 21.3% of Stock. See "Description of
Securities".
Inflation
Inflation has not had a material effect on Arch's operations to date. Paging
systems equipment and operating costs have not increased in price and Arch's
pager costs have declined substantially in recent years. This reduction in
costs has generally been reflected in lower pager prices charged to
subscribers who purchase their pagers. Arch's general operating expenses, such
as salaries, employee benefits and occupancy costs, are subject to normal
inflationary pressures.
RECENT AND PENDING ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. Arch adopted SFAS No.
130 in 1998. The adoption of this standard did not have an effect on its
reporting of income.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131
"Disclosures about Segments of an Enterprise and Related Information". SFAS
No. 131 establishes standards for reporting information about operating
segments in annual financial statements and requires selected information
about operating segments in interim financial reports. SFAS No. 131 also
establishes standards for related disclosures about products and services,
geographic areas and major customers. Arch intends to adopt SFAS No. 131 for
its year ending December 31, 1998. The adoption of this standard is not
expected to have a significant impact on its reporting.
In April 1998, the Accounting Standards Executive Committee of the Financial
Accounting Standards Board issued Statement of Position 98-5 ("SOP 98-5")
"Reporting on the Costs of Start-Up Activities". SOP 98-5 requires costs of
start-up activities and organization costs to be expensed as incurred. Initial
application of SOP 98-5 will be reported as the cumulative effect of a change
in accounting principle. Arch intends to adopt SOP 98-5 effective January 1,
1999. The adoption of SOP 98-5 is not expected to have a material effect on
Arch's financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
requires that every derivative instrument be recorded in the balance sheet as
either an asset or liability measured at its fair value and that changes in
the derivative's fair value be recognized currently in earnings. Arch intends
to adopt this standard effective January 1, 2000. Arch has not yet quantified
the impact of adopting SFAS No. 133 on its financial statements, however,
adopting SFAS No. 133 could increase volatility in earnings and other
comprehensive income.
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MOBILEMEDIA
Parent, through MobileMedia, operates one of the largest paging companies in
the United States, with approximately 3.2 million units in service as of June
30, 1998. Through its sales offices, nationwide retail distribution network,
company-operated retail stores and resellers, MobileMedia offers local,
regional and national coverage to subscribers in all 50 states and the
District of Columbia, including local coverage to each of the 100 most
populated metropolitan markets in the United States. MobileMedia markets its
services primarily under the MobileComm brand name. Parent's business is
conducted primarily through MobileMedia, and MMC and its various subsidiaries
hold MobileMedia's FCC licenses and, where applicable, state public utility
commission authorizations that grant MobileMedia the authority to operate its
paging systems.
MobileMedia distributes its paging services using three primary distribution
channels: direct, reseller and retail, as described below. MobileMedia's
paging and wireless messaging services consist principally of numeric and
alphanumeric paging services. As of June 30, 1998, MobileMedia had
approximately 2.6 million numeric units in service, representing approximately
81% of its subscriber base, approximately .6 million alphanumeric units in
service, representing approximately 18% of its subscriber base, with other
types of units in service representing the remaining approximately 1% of its
subscriber base.
BUSINESS STRATEGY
Since the Petition Date, MobileMedia has been engaged in restructuring its
operations with the objective of improving performance, principally in the
areas of order entry, billing and collections, inventory controls, management
information systems conversion and customer service. MobileMedia has also
undertaken cost reduction analyses and has taken actions that have the
objective of reducing telecommunications, subcontracting and lease expenses,
among others. In addition, MobileMedia has sought to refocus its marketing and
sales efforts in an attempt to achieve unit additions consistent with positive
cash flow, and is continuing to change its management structure with the
objective of establishing profit and loss accountability in each market.
PAGING AND MESSAGING SERVICES PRODUCTS AND OPERATIONS
Paging and Messaging Services.
MobileMedia currently offers a variety of paging and messaging services. To
send a page to a MobileMedia subscriber, a party must initiate contact with a
paging terminal. This is typically accomplished, depending on the type of
paging service, by use of a touch-tone telephone, with the assistance of an
operator employed by or working on behalf of MobileMedia or through software
loaded onto the sender's personal computer, an input device or the Internet.
The paging terminal then sends an encoded message to MobileMedia's transmitter
network, which broadcasts the call to its geographic service area. This
broadcast signal is received by the subscriber's pager, which decodes the
information, alerts the subscriber and displays the message received. The main
paging services offered by MobileMedia are:
Numeric (Digital Display) Paging Service. Numeric paging service permits
a caller, using a touch-tone telephone, to transmit to a subscriber a
numeric message consisting of a telephone number, an account number or
coded information. Numeric pagers have memory capability to store several
such numeric messages which can be recalled by a subscriber when desired.
As of June 30, 1998, MobileMedia had approximately 2.6 million numeric
units in service.
Alphanumeric Paging Service. Alphanumeric paging service allows
subscribers to receive and store messages consisting of both letters and
numbers. Alphanumeric pagers have sufficient memory to store numerous
messages. This service has the capability to tie into computer-based
networks to provide advanced messaging services. Callers may send messages
either by using an operator dispatch center, a personal computer equipped
with a modem and MessageSoft software or a portable alphanumeric input
device, such as the AlphaMate manufactured by Motorola. Internet and
WorldWide Web access is also possible for many alphanumeric paging
customers. As of June 30, 1998, MobileMedia had approximately .6 million
alphanumeric units in service.
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Other Services. In addition to local, regional and nationwide paging
service--both numeric and alphanumeric--MobileMedia offers a variety of
enhanced services such as voice mail and voice mail notification, e-mail
notification and news, sports reports and stock quotes.
The following table sets forth the number of MobileMedia customers by
service type as of the dates indicated.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30,
------------------------------------------------- --------------------------------
1995 1996 1997 1997 1998
--------------- --------------- --------------- --------------- ---------------
TYPE OF SERVICE NUMBER % NUMBER % NUMBER % NUMBER % NUMBER %
--------------- --------- ----- --------- ----- --------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Numeric Display......... 1,934,774 81.7% 3,713,579 83.9% 2,820,443 82.0% 3,297,379 83.0% 2,624,869 81.0%
Alphanumeric............ 384,843 16.2% 658,769 14.9% 593,280 17.2% 638,266 16.0% 598,702 18.5%
Other................... 49,484 2.1% 51,759 1.2% 26,619 0.8% 38,115 1.0% 18,169 0.5%
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
Total................... 2,369,101 100.0% 4,424,107 100.0% 3,440,342 100.0% 3,973,760 100.0% 3,241,740 100.0%
========= ===== ========= ===== ========= ===== ========= ===== ========= =====
Customers with
nationwide services
(included above)....... 63,101 325,924 330,254 337,293 330,642
</TABLE>
Products and Services
Subscribers for paging services enter into a service contract with
MobileMedia that provides for either the purchase or lease of pagers and the
payment of airtime and other charges. As of June 30, 1998, approximately 50%
of units in service were purchased either by subscribers or by resellers, and
approximately 50% were owned by MobileMedia and leased to subscribers.
Customer-owned and -maintained ("COAM") pagers and those owned by resellers do
not require capital investment by MobileMedia, unlike MobileMedia-owned pagers
leased to subscribers. MobileMedia also sells its services in bulk quantities
to resellers, who subsequently sell MobileMedia's services to end-users.
Resellers are responsible for sales, billing, collection and equipment
maintenance costs. MobileMedia sells other products and services, including
pagers and accessories and pager replacement and maintenance contracts. The
following table sets forth MobileMedia's units in service by ownership as of
the dates indicated.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30,
------------------------------------------------- --------------------------------
1995 1996 1997 1997 1998
--------------- --------------- --------------- --------------- ---------------
OWNERSHIP NUMBER % NUMBER % NUMBER % NUMBER % NUMBER %
--------- --------- ----- --------- ----- --------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Company owned and rented
to subscribers......... 1,087,183 45.9% 1,996,141 45.2% 1,712,941 49.8% 1,901,678 47.9% 1,633,794 50.4%
COAM.................... 514,068 21.7% 1,112,194 25.1% 861,250 25.0% 1,019,939 25.7% 805,338 24.8%
Resellers............... 767,850 32.4% 1,315,772 29.7% 866,151 25.2% 1,052,143 26.4% 802,608 24.8%
--------- ----- --------- ----- --------- ----- --------- ----- --------- -----
Total................... 2,369,101 100.0% 4,424,107 100.0% 3,440,342 100.0% 3,973,760 100.0% 3,241,740 100.0%
========= ===== ========= ===== ========= ===== ========= ===== ========= =====
</TABLE>
NETWORKS AND LICENSES
MobileMedia operates local, regional and national paging networks which
enable its customers to receive pages over a broad geographical area. The
extensive coverage provided by this network infrastructure provides
MobileMedia with an advantage over certain competitors whose networks lack
comparable coverage in securing accounts with large corporate clients and
retail chains, who frequently demand national network coverage from their
paging service provider.
Although MobileMedia's networks provide local, regional and national
coverage, its networks operate over numerous frequencies and are subject to
some capacity constraints in certain geographic markets. The use of multiple
frequencies adds complexity to inventory management, customer service and
order fulfillment processes. Certain of MobileMedia's networks utilize older
technologies and are comparatively costlier to operate. Although the capacity
of MobileMedia's network infrastructure varies significantly market-by-market,
customer usage of MobileMedia's systems is close to capacity in several
markets, thus limiting future growth in such markets in the absence of
additional capital investment.
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MobileMedia is seeking to improve overall network efficiency through the
deployment of new paging terminals, the consolidation of subscribers on fewer,
higher capacity networks and increasing the transmission speed (baud rate) of
certain of its existing networks. MobileMedia believes its investments in its
network infrastructure will facilitate and improve the delivery of high
quality paging services while at the same time reducing associated costs of
such services.
Nationwide wireless networks. MobileMedia operates two nationwide 900 MHz
networks. As part of the MobileComm Acquisition, MobileMedia acquired
MobileComm's fully operational nationwide wireless "8875" network, which
was upgraded in 1996 to incorporate high-speed FLEX technology developed by
Motorola. In addition, in 1996, MobileMedia completed the construction of a
second nationwide "5375" network that uses FLEX technology. The use of FLEX
technology significantly increases transmission capacity and represents a
marked improvement over other systems that use older paging protocols.
Nationwide two-way narrowband PCS networks. Narrowband PCS networks
enable paging companies to offer two-way paging services and to make more
efficient use of radio spectrum than do non-PCS networks. MobileMedia
purchased five regional licenses through the FCC's 1994 auction of
narrowband PCS licenses, providing the equivalent of a nationwide 50 kHz
outbound/12.5 kHz inbound PCS system. In addition, as part of the
MobileComm Acquisition, MobileMedia acquired a second two-way narrowband
PCS license for a nationwide 50 kHz outbound/12.5 kHz inbound system.
In order to retain its narrowband PCS licenses, MobileMedia must comply with
certain minimum buildout requirements. With respect to each of the regional
PCS licenses purchased at the FCC's 1994 auction, MobileMedia would be
required to build out the related PCS system to cover 150,000 sq. km. or 37.5%
of each of the five regional populations by April 27, 2000 and 300,000 sq. km.
or 75% of each of the five regional populations by April 27, 2005. With
respect to the nationwide PCS license acquired as part of the MobileComm
Acquisition, MobileMedia would be required to build out the related PCS system
to cover 750,000 sq. km. or 37.5% of the U.S. population by September 29, 1999
and 1,500,000 sq. km. or 75% of the U.S. population by September 29, 2004. In
each instance, the population percentage will be determined by reference to
population figures at the time of the applicable deadline. MobileMedia
estimates that the costs of these minimum build-outs (which would not be
sufficient for MobileMedia to provide significant narrowband PCS applications)
could be as much as approximately $9.0 million. MobileMedia has concluded
that, given the expected high demand for nationwide alphanumeric services, the
potential demand for guaranteed receipt services and MobileMedia's high fixed
costs for maintaining and building out its existing networks, the most
economical means for satisfying projected demand is for MobileMedia to
construct a fully operational narrowband PCS network with ReFLEX 25
capability. MobileMedia estimates that the cost for this construction will be
approximately $40.0 million over the next two years, and that it will be able
to complete the construction relatively economically using its existing
nationwide network infrastructure and supplementing it with additional
transmitters and receivers. On May 12, 1998, the Bankruptcy Court authorized
MobileMedia to enter into contracts during 1998 up to the amount of $16.0
million in connection with the buildout of the network necessary to support
narrowband PCS services.
SALES AND MARKETING
MobileMedia's sales and marketing efforts are directed toward adding
additional units with existing subscribers and identifying new potential
subscribers. Subscribers to MobileMedia's paging and wireless communications
services generally have been individuals and organizations whose employees are
highly mobile or whose business involves multiple work locations and who are
required to remain in contact at all times. Traditional subscribers include
medical personnel, sales and service organizations, specialty trade
organizations, manufacturing organizations and governmental agencies. However,
paging services are increasingly appealing to mass market consumers for
private, non-business uses such as communicating with family and friends.
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Sales Channels
MobileMedia markets its paging services through three primary sales
channels: direct, reseller and retail.
Direct. In the direct channel, MobileMedia leases or sells pagers
directly to its customers and bills and services such customers.
MobileMedia's direct customers range from individuals and small- and
medium-sized businesses to Fortune 500 accounts and government agencies.
Business and government accounts typically exhibit lower churn rates than
consumer accounts. The direct channel will continue to have the highest
priority among MobileMedia's marketing and sales efforts, given its
critical contribution to recurring revenue and projected growth.
MobileMedia is engaged in efforts to improve sales productivity and
strengthen its direct channel sales force, which suffered from high
turnover and open positions during much of 1997. In addition, MobileMedia
has commenced implementing consumer direct marketing techniques in 1998. As
of June 30, 1998, the direct channel accounted for approximately 79% of
recurring revenue.
Reseller. In the reseller channel, MobileMedia sells access to its
transmission networks in bulk to a third party, who then resells such
services to the end users (usually consumers or small businesses).
MobileMedia offers paging services to resellers at bulk discounted rates.
The third party reseller provides customer service, is responsible for
pager maintenance and repair costs, invoices the end user and retains the
credit risk of the end user, although MobileMedia retains the credit risk
of the reseller. Because resellers are responsible for customer equipment,
the capital costs that would otherwise be borne by MobileMedia are reduced.
MobileMedia's resellers generally are not exclusive distributors of
MobileMedia's services and often resell paging services of more than one
provider. Competition among service providers to attract and maintain
reseller distribution is based primarily upon price, including the sale of
pagers to resellers at discounted rates. MobileMedia intends to be an
active participant in the reseller channels and to concentrate on accounts
that are profitable and where longer term partnerships can be established
with selected resellers. As of June 30, 1998, the reseller channel
accounted for approximately 11% of recurring revenue.
Retail. In the retail channel, MobileMedia sells pagers to retailers and,
after the consumer purchases the pager from the retailer, the consumer
contacts MobileMedia to activate service. The retail channel is targeted at
the consumer market and consists primarily of national retail chains.
Consumers served by the retail channel typically purchase (as opposed to
lease) paging units, reducing MobileMedia's capital investment
requirements. Subscribers obtained through retailers are billed and
serviced directly by MobileMedia. Retail distribution permits MobileMedia
to penetrate the consumer market by supplementing direct sales efforts. As
of June 30, 1998, the retail channel accounted for approximately 10.5% of
recurring revenue.
COMPETITION
See "Industry Overview--Competition".
REGULATION
See "Industry Overview--Regulation".
SOURCES OF EQUIPMENT
MobileMedia does not manufacture any of the pagers or related transmitting
and paging terminal equipment used in its paging operations. MobileMedia
currently purchases pagers from a limited number of suppliers and in turn
sells or leases the pagers to its subscribers. Motorola is the primary
supplier of pagers to MobileMedia. Glenayre is MobileMedia's primary supplier
of paging terminals, paging transmitters and voice mail system equipment. On
February 6, 1997, MobileMedia obtained Bankruptcy Court approval to pay the
pre-petition outstanding accounts payable owing to Motorola, Glenayre, NEC and
Panasonic Communications & Systems Company ("Panasonic" and together with
Motorola, Glenayre and NEC, the "Key Suppliers"), in exchange for
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which each of Motorola, NEC, Panasonic and Glenayre entered into post-petition
supply agreements with MobileMedia.
EMPLOYEES
At June 30, 1998, MobileMedia employed 3,107 people in various capacities,
with 161 in MobileMedia's corporate headquarters in Fort Lee, New Jersey and
the balance in its five regions. None of such employees is covered by
collective bargaining agreements. MobileMedia believes its employee relations
are good.
TRADEMARKS
MobileMedia markets its services primarily under the trade name MobileComm
and the federally registered mark MOBILECOMM, except in the Greater
Metropolitan Cincinnati area and in certain parts of Western Pennsylvania and
Western New York, in which it markets its services under the federally
registered mark MOBILEMEDIA. MobileMedia markets its messaging services under
the federally registered mark VOICESTAR, and other services under the
federally registered mark SPORTSCASTER and the unregistered mark MOBILECOMM
CITYLINK. MobileMedia also owns other federally registered marks including:
DIAL PAGE, DMC DIGITAL MOBILE COMMUNICATIONS, EZ ALERT, MEMORY MANAGER,
MESSAGESOFT, MOBILEMEDIA (and design) MOBILEMEDIA (and Globe Design),
MOBILEMEDIA PAGING & PERSONALCOM and PAGERXTRA. In addition, MobileMedia has
applications on file for federal registration of the marks MMS and MOBILECOMM
(and design.)
PROPERTIES
In addition to its FCC licenses and network infrastructure (which includes
radio transmission and satellite uplink equipment), MobileMedia has the
following categories of assets: (i) pagers (including both pagers held as
fixed assets for lease and pager inventory for sale), pager parts and
accessories; (ii) its subscriber base and related accounts receivable; (iii)
intellectual property; (iv) real estate and improvements; (vi) leased assets;
(vii) computer and telephone systems and equipment; (viii) furniture, fixtures
and equipment; (ix) ownership of one-third of the equity of Abacus
Communications Partners, L.P.; (x) goodwill and other intangibles; and (xi)
cash and cash equivalents.
On January 22, 1998, the Bankruptcy Court approved MobileMedia's entry into
a lease with Miller Freeman, Inc. (the "Fort Lee Lease"). Pursuant to the Fort
Lee Lease, MobileMedia relocated its headquarters to Fort Lee, New Jersey as
of March 23, 1998, resulting in cost savings to MobileMedia of approximately
$3.0 million over the term of the Fort Lee Lease. On March 18, 1998, the
Bankruptcy Court approved the assignment of the lease for the premises that
previously served as MobileMedia's headquarters. The Bankruptcy Court has also
extended the period during which MobileMedia can decide whether to assume or
reject non-residential real property leases to the confirmation date of the
Plan. As of June 30, 1998, 121 leases had been rejected with Bankruptcy Court
approval. On April 14, 1998, the Bankruptcy Court approved MobileMedia's
motion to assume the lease for the premises that serves as its Dallas, Texas
customer service center.
Sale of MobileMedia Tower Sites
On July 7, 1998, MobileMedia and Pinnacle executed an agreement, subject to
Bankruptcy Court approval, to sell the MobileMedia Tower Sites, and to rent
from Pinnacle transmitter space on the MobileMedia Tower Sites. The sale of
the MobileMedia Tower Sites was completed on September 3, 1998. MobileMedia
recognized proceeds from such sale of $170.0 million, and the projected annual
rental expense is expected to be approximately $10.7 million. The proceeds of
the MobileMedia Tower Site Sale were paid to the Pre-Petition Lenders, which
Lenders have liens on all of the assets being sold.
The MobileMedia Tower Site Sale is the product of an extensive bidding
process. Prior to executing this agreement, Blackstone, on behalf of
MobileMedia, contacted approximately 40 potential MobileMedia Tower Sites
buyers and executed confidentiality agreements with, and distributed the
MobileMedia Tower Sites
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information to, approximately 30 of these potential buyers. After permitting
certain potential purchasers to conduct due diligence, MobileMedia and
Blackstone determined that Pinnacle's offer represented the highest and best
offer.
In connection with the agreement to sell the MobileMedia Tower Sites to
Pinnacle, MobileMedia filed two motions on July 14, 1998. One motion sought to
establish procedures for bidding on the MobileMedia Tower Sites and provides
for liquidated damages and the reimbursement of expenses to Pinnacle under
certain circumstances. This relief was granted on July 23, 1998. The second
motion sought Bankruptcy Court approval of the sale of the MobileMedia Tower
Sites to Pinnacle, and the rental of transmitter sites from Pinnacle and the
payment of the sale proceeds to the Pre-Petition Lenders. The relief requested
in this Motion was granted on August 10, 1998.
At August 1, 1998, MobileMedia leased office space (including its executive
offices) in approximately 33 states for use in conjunction with its paging
operations. MobileMedia leases transmitter sites and/or owns transmitters on
commercial broadcast towers, buildings and other fixed structures.
MobileMedia's leases are for various terms and provide for monthly lease
payments at various rates. MobileMedia believes that it will be able to obtain
additional space as needed at acceptable cost.
EVENTS LEADING UP TO MOBILEMEDIA'S BANKRUPTCY FILINGS
Beginning in 1995, MobileMedia grew its business primarily through
acquisitions. In August 1995, MobileMedia completed the acquisition of the
paging and wireless messaging business of Dial Page (the "Dial Page
Acquisition"). The purchase price of the Dial Page Acquisition was largely
financed through an initial public offering of 8,800,000 shares of Parent
Class A Common Stock which, at a price to the public of $18.50 per share,
generated net proceeds of approximately $151.9 million, which proceeds were
contributed to MMC. The total purchase price of the Dial Page Acquisition was
$187.4 million, which included the assumption of $85 million outstanding
principal amount of the 12 1/4% Dial Page Notes. Concurrently with the
transaction, MMC repurchased all but approximately $1.6 million of the Dial
Page Notes. The Dial Page Acquisition added approximately 0.4 million units in
service in the southeastern United States to MMC's subscriber base.
In January 1996, MobileMedia completed the acquisition of MobileComm, the
paging and wireless messaging unit of BellSouth Corporation and an associated
nationwide two-way narrowband 50/12.5 kHz PCS license (the "MobileComm
Acquisition"). The purchase price for the MobileComm Acquisition was $928.7
million which was financed by (i) Parent's public offering of 15,525,000
shares of Class A Common Stock which, at a price to the public of $23.75 per
share, generated net proceeds of approximately $354.9 million, of which $340.0
million was contributed by Parent to MMC, (ii) a concurrent public offering by
MMC of $250.0 million aggregate principal amount at maturity of 9 3/8% Notes
(the "MobileMedia 9 3/8 Notes") and (iii) loan facilities aggregating $750.0
million, consisting of a $550.0 million secured term loan facility and a
$200.0 million secured revolving loan facility (the "MobileMedia 1995 Credit
Facility"), evidenced by The MobileMedia 1995 Credit Agreement. $500.0 million
of the secured term loan facility was used as consideration for the MobileComm
Acquisition. Fifty million dollars of the MobileMedia 1995 Credit Facility was
used to repay MMC's former credit facility. The MobileComm Acquisition added
approximately 1.7 million units in service to MobileMedia's subscriber base.
During 1996, MobileMedia experienced difficulties executing its post-
acquisition business strategy. These difficulties related largely to the
process of integration of the operations of Dial Page and MobileComm into
those of MobileMedia. As a result, MobileMedia did not achieve expected growth
in its subscriber base and revenues, nor did it realize anticipated
efficiencies and cost reductions from the elimination of duplicative
functions.
During 1996, MobileMedia's financial position deteriorated. As of September
30, 1996, MMC was in violation of certain financial covenants under its $750.0
million 1995 Credit Agreement, which resulted in the occurrence of "Events of
Default" under the MobileMedia 1995 Credit Agreement and precluded MMC from
borrowing additional funds thereunder. MMC's obligations under the MobileMedia
1995 Credit Agreement are guaranteed by Parent and by all the subsidiaries of
MMC. In the fall of 1996, MobileMedia commenced
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negotiations with The Chase Manhattan Bank, the agent for the lenders under
the MobileMedia 1995 Credit Agreement, regarding the terms of a possible
financial restructuring.
In press releases issued on September 27 and October 21, 1996, MobileMedia
disclosed that misrepresentations had been made to the FCC by former members
of management and that other violations had occurred during the licensing
process for as many as 400 to 500 authorizations, or approximately 6% to 7%,
of its approximately 8,000 local transmission one-way paging stations.
MobileMedia caused an investigation to be conducted by its outside counsel,
and a comprehensive report regarding these matters was provided to the FCC on
October 15, 1996. The results of an expanded investigation were submitted to
the FCC on November 8, 1996. MobileMedia is still in the process of resolving
these issues with the FCC. See "--MobileMedia Management's Discussion and
Analysis of Financial Condition and Results of Operations--Pending FCC Action
Against MobileMedia".
In November and December of 1996, MobileMedia sought to modify payment terms
with certain of its larger vendors, some of which had not been paid in
accordance with their scheduled payment terms. In the fall of 1996, Motorola,
MobileMedia's largest supplier of pagers and pager repair parts, informed
MobileMedia that it would require credit support to assure payment of
approximately $35.0 million past due accounts payable and would refuse to
accept orders for products or services from, and refuse to make shipments to,
MobileMedia pending resolution of the matter. Subsequently, Glenayre,
MobileMedia's primary supplier of paging terminals, transmitters and related
parts, and NEC and Panasonic, MobileMedia's secondary suppliers of pagers,
also made demands on MobileMedia for payment of their past due accounts in the
aggregate amount of $11.8 million.
On November 1, 1996, MobileMedia failed to make a scheduled interest payment
of approximately $11.8 million on the MobileMedia 9 3/8% Notes, which failure
was not cured during the 30-day grace period ending November 30, 1996. In
addition, in December 1996 and January 1997, MobileMedia failed to make
scheduled interest payments in the aggregate amount of approximately $13.4
million under the MobileMedia 1995 Credit Agreement.
Negotiations between MobileMedia and the Pre-Petition Lenders, the holders
of the MobileMedia 9 3/8% Notes and certain other outstanding notes
(collectively, the "MobileMedia Notes") and with the Key Suppliers continued
through late 1996. When it became apparent that MobileMedia would be unable,
among other things, to reach agreements with the Key Suppliers to resume
shipments of critical inventory and equipment or to reach agreement with the
Pre-Petition Lenders and the holders of the MobileMedia Notes on the terms of
a restructuring of its indebtedness outside of Chapter 11 of the Bankruptcy
Code, MobileMedia concluded that it had no practical alternative other than to
seek protection under Chapter 11.
On January 30, 1997, MobileMedia filed a voluntary petition for
reorganization under Chapter 11 with the Bankruptcy Court.
LITIGATION
MobileMedia is attempting to resolve issues with the FCC surrounding
misrepresentations and violations that occurred during the licensing process.
In addition, MobileMedia is involved in the following litigation, potential
litigation or claims.
Securities Class Actions
Prior to the Petition Date, five actions allegedly arising under the federal
securities laws were filed against MobileMedia and certain of its officers,
directors and underwriters in the United States District Court for the
District of New Jersey. These actions were subsequently consolidated as In re
MobileMedia Securities Litigation, No. 96-5723 (AJL) (the "New Jersey
Actions"). A consolidated amended complaint (the "Complaint") was filed on
November 21, 1997. The Complaint does not name MobileMedia as a defendant, but
alleges that (i) certain former officers of MobileMedia deceived the investing
public in violation of section 10(b) of the
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Exchange Act and Rule 10b-5 promulgated thereunder and section 20(b) of the
Exchange Act by making false statements or omissions in press releases and
public filings between June 29, 1995 and September 27, 1996, and (ii) certain
officers, directors and underwriters of MobileMedia violated sections 11,
12(a)(2) and 15 of the Securities Act by failing to disclose information in
offering documents filed with the Commission on or around November 7, 1995 in
connection with the secondary offering of MobileMedia common stock and
MobileMedia 9 3/8% Notes.
The plaintiffs in the New Jersey Actions allege that, as a result of alleged
misrepresentations, purchasers of Parent's common stock and MobileMedia 9 3/8%
Notes suffered hundreds of millions of dollars in damages as the truth
concerning, among other things, the severe problems with MobileMedia's growth
strategy and its submission of false license applications to the FCC began to
emerge and the price of MobileMedia securities dropped.
In June 1997, MobileMedia initiated an Adversary Proceeding in the
Bankruptcy Court to stay the prosecution of the New Jersey Actions. The basis
of MobileMedia's motion for a stay was, inter alia, that the continued
prosecution of the New Jersey Actions would interfere with MobileMedia's
efforts to reorganize and would deplete the assets of the estate.
Pursuant to a Stipulation entered into among MobileMedia and the plaintiffs
in the New Jersey Actions and "So Ordered" by the Bankruptcy Court on October
31, 1997, the plaintiffs in the New Jersey Actions may conduct only limited
discovery in connection with the New Jersey Actions and may not file any
pleadings, except responses to motions to dismiss, until the earlier of
September 30, 1998 and the Effective Date of the Plan.
In addition to the New Jersey Actions, two lawsuits were filed in September
1997 in the United States District Court for the Northern District of
California and the Superior Court of California naming as defendants certain
former officers and certain present and former directors of MobileMedia,
certain investment entities and Ernst & Young LLP. MobileMedia is not named as
a defendant in these two actions. The actions are styled Allen T. Gilliland
Trust v. Hellman & Friedman Capital Partners II, L.P., Civil Action No. 97-
3543 (N.D. Cal. 1997), and Allen T. Gilliland Trust v. Hellman & Friedman
MobileMedia Partners, L.L.C., Case No. 989891 (Cal. Super. Ct. 1997)
(together, the "California Actions" and, together with the New Jersey Actions,
the "Securities Actions"). The plaintiffs in the California Actions are or
were shareholders of Parent who purchased stock during 1995 and 1996 and
allege that Parent, through the actions of the named defendants, violated
federal securities laws, various provisions of the California Corporations
Code and California state law in connection with the sale of Parent's
securities and in various public filings.
On November 4, 1997, MobileMedia commenced an adversary proceeding in the
Bankruptcy Court seeking to stay the prosecution of the California Actions
against the named defendants. At a hearing held on December 10, 1997, the
Bankruptcy Court enjoined the plaintiffs in the California Actions until May
31, 1998 from prosecuting the California Actions, except that the Bankruptcy
Court permitted the plaintiffs in the California Actions to prosecute and
respond to certain legal motions and to request documents of defendants and
non-parties who do not currently serve on the Board of Directors of
MobileMedia.
On May 15, 1998, MobileMedia filed a motion with the Bankruptcy Court
seeking an extension of the stay in connection with the California Actions.
Subsequent to negotiations with the plaintiffs in the California Actions,
MobileMedia submitted an agreed form of order that bars certain types of
discovery until September 15, 1998. This order was signed by the Bankruptcy
Court on May 29, 1998.
Neither the New Jersey Actions nor the California Actions name MobileMedia
or any of its subsidiaries as a defendant. However, proofs of claim have been
filed against MobileMedia by the plaintiffs in the New Jersey Actions, and
both the New Jersey Actions and the California Actions may give rise to claims
against MobileMedia's Directors, Officers and Corporate Liability Insurance
Policy. As to MobileMedia, however, these Claims are classified in Classes 7
and 8, and will receive no distributions under the Amended Plan.
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Bankruptcy Claims
Since the June 16, 1997 bar date established by the Bankruptcy Court for
filing proofs of claim in the Insolvency Proceedings, MobileMedia has been
actively involved in resolving the claims filed against its estates. As of
July 31, 1998, approximately 2,410 proofs of claim had been filed in the
Insolvency Proceedings. Approximately 1,260 of these claims, filed in an
aggregate amount of approximately $91.4 million, have already been resolved by
order of the Bankruptcy Court at an aggregate allowed amount of approximately
$3.65 million. As of July 31, 1998, MobileMedia had also analyzed and resolved
an additional 855 proofs of claim, representing an aggregate allowed amount of
$5.3 million. Excluding claims filed by or on behalf of the Pre-Petition
Lenders, the holders of the MobleMedia Notes and taxing authorities, there are
fewer than 40 unresolved filed claims over $100,000, which claims have an
aggregate filed value of less than $30.0 million. MobileMedia has already
filed objections with the Bankruptcy Court to certain of these claims and is
currently in the process of reconciling and resolving those remaining.
MobileMedia believes that, once resolved, the aggregate allowed amount of
these remaining claims will be substantially less than $30.0 million.
MobileMedia is also in the process of reconciling and resolving the tax
claims filed against its estates. These tax claims were filed in an aggregate
amount of approximately $30 million. MobileMedia anticipates that these claims
will be allowed in an amount substantially less than the filed amount.
Potential Unsecured Creditors Committee Litigation
At a hearing held before the Bankruptcy Court on January 27, 1998, counsel
to the Unsecured Creditors Committee indicated its intention immediately to
serve discovery demands in connection with a potential objection to the Plan
as filed on January 27, 1998. The Unsecured Creditors Committee's ex parte
order authorizing discovery under Bankruptcy Rule 2004 was approved by the
Bankruptcy Court on February 5, 1998, and the Unsecured Creditors Committee
subsequently served subpoenas for the production of documents on MobileMedia
and other parties. The production of documents by the respondents was largely
completed during March, although issues pertaining to the production of
certain privileged documents have yet to be resolved. On April 1, the
Unsecured Creditors Committee also served requests to conduct the depositions
of numerous individuals, including members of MobileMedia's management, board
of directors, professionals involved in the reorganization proceedings, and
members of the steering committee for MobileMedia's pre- and post-petition
secured lenders. Because the Unsecured Creditors Committee supports the
Amended Plan in its present form, it is not expected that this litigation will
continue.
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MOBILEMEDIA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PRESENTATION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following definitions are relevant to a review and discussion of
MobileMedia's operating results.
Services, rents and maintenance revenues ("paging revenue"): includes
primarily monthly, quarterly, semi-annually and annually billed recurring
revenue, not dependent on usage, charged to subscribers for paging and
related services such as voice mail and pager repair and replacement.
Net revenues: includes primarily paging revenues and sales of customer
owned and maintained pagers less cost of pagers sold.
Services, rents and maintenance expenses: includes costs related to the
management, operation and maintenance of MobileMedia's network systems.
Selling expenses: includes salaries, commissions and administrative costs
for MobileMedia's sales force and related marketing and advertising
expenses.
General and administrative expenses: includes primarily customer service
expense, executive management, accounting, office telephone, rents and
maintenance and information services.
Average revenues per Unit ("ARPU"): calculated by dividing (i) the average
monthly services, rents and maintenance revenues for the period by (ii) the
weighted average number of units in service for the period. ARPU, as
determined by MobileMedia, may not necessarily be comparable to similarly
titled data of other paging companies.
Average monthly operating expense per unit : calculated by dividing (i) the
average monthly services, rents and maintenance, selling and general and
administrative expenses for the period by (ii) the weighted average number
of units in service for the period.
As used herein, "EBITDA" represents earnings before other income (expense),
taxes, depreciation, and amortization and restructuring costs. Other income
(expense) consists primarily of interest expense. EBITDA is a financial
measure commonly used in the paging industry and should not be construed as an
alternative to operating income (as determined in accordance with GAAP), as an
alternative to cash flows from operating activities (as determined in
accordance with GAAP) or as a measure of liquidity. EBITDA is, however, the
primary financial measure by which MobileMedia's covenants are calculated
under the agreements governing MobileMedia's indebtedness. EBITDA as
determined by MobileMedia may not necessarily be comparable to similarly
titled data of other paging companies. EBITDA in 1996 is reported prior to the
impact of a $792.5 million asset impairment writedown pursuant to Statement of
Financial Accounting Standards No. 121. (See Note 2 of MobileMedia's Notes to
Consolidated Financial Statements included elsewhere herein).
As used herein, the term "acquisitions" refers to both the MobileComm
Acquisition and the Dial Page Acquisition.
OVERVIEW
The following discussion and analysis should be read in conjunction with
MobileMedia's Consolidated Financial Statements and Notes thereto included
elsewhere in this Prospectus.
MobileMedia builds and operates wireless messaging and communications
systems, and generates revenues from the provision of paging and other
wireless communications services. MobileMedia's strategy is to strengthen its
industry leadership position by providing superior paging and messaging
services at competitive prices.
MobileMedia's revenues are derived primarily from fixed periodic recurring
fees, not dependent on usage, charged to MobileMedia's subscribers for paging
services. While a subscriber remains in MobileMedia's service, future
operating results benefit from this recurring revenue stream with minimal
requirements for incremental selling expenses or other costs.
121
<PAGE>
On January 4, 1996, MobileMedia completed its acquisition of MobileComm and
on August 31, 1995 MMC purchased the paging business of Dial Page, Inc.
MobileMedia has incurred integration related costs in excess of those
originally anticipated to (i) transfer units-in-service between paging
networks to rationalize capacity, (ii) temporarily operate duplicative
functions, primarily customer service, and (iii) hire additional employees and
consultants to focus on the integration. Additionally, MobileMedia has
experienced increased loss of subscribers related to the integration
difficulties. Accordingly, MobileMedia's financial results have been
negatively impacted by the higher than anticipated integration costs and
increased loss of subscribers.
On January 30, 1997, Parent and MobileMedia filed voluntary petitions for
relief under the Bankruptcy Code in order to implement an operational and
financial restructuring ("Bankruptcy filing"). Parent and MobileMedia are
presently operating its business as debtors-in-possession subject to the
jurisdiction of the Bankruptcy Court. Pursuant to the requirements of the
Bankruptcy Code, Parent and MobileMedia are required to file monthly operating
reports with the United States Trustee. Such reports are publicly available
through the office of the Trustee, and copies of such reports to date have
been filed as Current Reports on Form 8-K with the Commission. Financial
statements included in MobileMedia's periodic reports since February, 1997
have not been prepared in accordance with GAAP due to MobileMedia's inability
at the time of such filings to determine the amount of an impairment loss
related to long-lived assets pursuant to Financial Accounting Standard No.
121, are unaudited and have been revised periodically based on subsequent
determination of changes in facts and circumstances impacting previously filed
unaudited financial statements. The audited financial statements of
MobileMedia included herein reflect adjustments from the unaudited statements,
including but not limited to, an impairment adjustment of approximately $792.5
million recorded as of December 31, 1996.
On July 7, 1998, MobileMedia entered into an agreement to sell 163
transmission towers and 49 owned parcels of land to Pinnacle for $170.0
million. The transaction also includes the assignment of leases related to
towers included in the sale. On September 3, 1998, the transaction was
completed. In connection with the transaction, MobileMedia entered into a
lease agreement with Pinnacle under which MobileMedia agreed to rent
transmitter space on towers for 683 transmitters for a period of fifteen years
at a cost of approximately $10.7 million per year.
On August 20, 1998, MobileMedia announced that it had executed the Original
Merger Agreement, pursuant to which MobileMedia will become a wholly owned
subsidiary of Arch. On September 3, 1998, MobileMedia filed the Amended Plan
that reflects the Merger. The Amended Plan has the support of the Unsecured
Creditors Committee. Under the Amended Plan, most creditors of MobileMedia
will receive cash or equity securities of Arch in satisfaction of their pre-
petition claims against MobileMedia. Because there are a variety of conditions
precedent to the consummation of the Amended Plan and the Merger, there can be
no assurance that the transactions contemplated thereby will be consummated.
PENDING FCC ACTION AGAINST MOBILEMEDIA
MobileMedia disclosed in press releases dated September 27, 1996 and October
21, 1996 that misrepresentations and other violations had occurred during the
licensing process for as many as 400 to 500, or approximately 6% to 7%, of its
approximately 8,000 local transmission one-way paging stations. MobileMedia
caused an investigation to be conducted by outside counsel, and a
comprehensive report regarding these matters was provided to the FCC in the
fall of 1996. In cooperation with the FCC, outside counsel's investigation was
expanded to examine all of MobileMedia's paging licenses, and the results of
that investigation were submitted to the FCC on November 8, 1996. Since
November 8, 1996, MobileMedia has continued to provide additional information
to the FCC.
On January 13, 1997, the FCC issued a Public Notice relating to the status
of certain FCC authorizations held by MobileMedia. Pursuant to the Public
Notice, the FCC announced that it had (i) automatically terminated
approximately 185 authorizations for paging facilities that were not
constructed by the expiration date of their construction permits and remained
unconstructed, (ii) dismissed approximately 94 applications for fill-in sites
122
<PAGE>
around existing paging stations (which had been filed under the so-called "40-
mile rule") as defective because they were predicated upon unconstructed
facilities and (iii) automatically terminated approximately 99 other
authorizations for paging facilities that were constructed after the
expiration date of their construction permits. With respect to each of the
approximately 99 authorizations where the underlying station was untimely
constructed, the FCC granted MobileMedia interim operating authority subject
to further action by the FCC.
On April 8, 1997, the FCC adopted an order commencing an administrative
hearing into the qualification of MobileMedia to remain a licensee. The order
directed an ALJ to take evidence and develop a full factual record on directed
issues concerning MobileMedia's filing of false forms and applications.
MobileMedia was permitted to operate its licensed facilities and provide
service to the public during the pendency of the hearing.
On June 6, 1997 in response to a request by MobileMedia, the FCC issued an
order staying the hearing proceeding for ten months in order to allow
MobileMedia to develop and consummate a plan of reorganization that provides
for a change of control of MobileMedia and a permissible transfer of
MobileMedia's FCC licenses. The order, which is based on an FCC doctrine known
as Second Thursday, provides that if there is a change of control that meets
the conditions of Second Thursday, the regulatory issues designated for
administrative hearing will be resolved by the transfer of MobileMedia's FCC
licenses to the new owners of MobileMedia and the hearing will not proceed.
MobileMedia believes that a reorganization plan that provides for either a
conversion of certain existing debt to equity, in which case existing
MobileMedia equity interests will be eliminated, or a sale or merger of
MobileMedia will result in a change of control that will satisfy the Second
Thursday doctrine. MobileMedia has requested, and the FCC granted an extension
of the order staying the hearing for an additional six months to October 6,
1998. If MobileMedia is unable to present the FCC with a plan of
reorganization that satisfies the conditions of Second Thursday prior to the
expiration of the stay of the hearing, MobileMedia may be required to proceed
with the hearing, which, if adversely determined, could result in the loss of
MobileMedia's licenses or substantial monetary fines, or both. Such an outcome
would have a material adverse effect on MobileMedia's financial condition and
results of operations.
123
<PAGE>
RESULTS OF OPERATIONS
Six Months Ended June 30, 1998 Compared With Six Months Ended June 30, 1997
The following table presents certain items from MobileMedia's Consolidated
Statement of Operations and certain other information for the periods
indicated:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------
1997 1998
-------------------------- --------------------------
(IN THOUSANDS, EXCEPT PERCENTAGE AND UNIT DATA)
(UNAUDITED)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA
Revenues
Services, rents and
maintenance........... $ 257,420 99.6% $ 215,109 98.6%
Equipment sales and ac-
tivation fees......... 18,048 7.0 13,794 6.3
------------- --------- ------------- ---------
Total revenues........... 275,468 106.6 228,903 104.9
Cost of products sold.... (16,948) (6.6) (10,774) (4.9)
------------- --------- ------------- ---------
258,520 100.0 218,129 100.0
Operating expenses
Services, rents and
maintenance........... 74,009 28.6 56,028 25.7
Selling................ 37,201 14.4 31,460 14.4
General and administra-
tive.................. 101,115 39.1 68,752 31.5
Restructuring costs.... 10,952 4.2 9,250 4.2
Depreciation and amor-
tization.............. 71,168 27.5 60,748 27.8
------------- --------- ------------- ---------
Total operating ex-
penses.................. 294,445 113.9 226,238 103.7
------------- --------- ------------- ---------
Operating loss........... (35,925) (13.9) (8,109) (3.7)
Total other expense...... (35,467) (13.7) (29,160) (13.4)
------------- --------- ------------- ---------
Net loss................. $ (71,392) (27.6)% $ (37,269) (17.1)%
============= ========= ============= =========
OTHER DATA
EBITDA................... $ 46,195 17.9% $ 61,889 28.4%
Average Revenue per Unit
("ARPU")................ $ 10.22 $ 10.73
Average monthly operating
expense per unit........ $ 8.43 $ 7.79
Units in service (at end
of period).............. 3,973,760 3,241,740
</TABLE>
Units in service decreased from 3,973,760 as of June 30, 1997 to 3,241,740
as of June 30, 1998, a decrease of 18.4%. The decrease was attributable to a
decrease in gross unit additions and an increase in unit cancellations
primarily resulting from acquisition integration difficulties, billing system
clean up to remove non-revenue generating units and cancellation of units for
non-payment.
Services, rents and maintenance revenues decreased 16.4% to $215.1 million
for the six months ended June 30, 1998 compared to $257.4 million for the six
months ended June 30, 1997. The decrease was attributable to fewer units in
service and partially offset by a $0.51 increase in ARPU from $10.22 for the
six months ended June 30, 1997 to $10.73 for the six months ended June 30,
1998. The increase in ARPU was largely due to a greater percentage of units in
service in the direct distribution channel and a smaller percentage in the
reseller distribution channel. Units sold through the direct distribution
channel generally are sold at higher ARPU.
Equipment sales and activation fees decreased 23.6% to $13.8 million for the
six months ended June 30, 1998 compared to $18.0 million for the six months
ended June 30, 1997. The decrease in equipment sales was primarily due to
decreases in equipment sold through the retail distribution channel. Equipment
sales and activation fees, less cost of products sold, increased 174.5% to
$3.0 million for the six months ended June 30, 1998 from $1.1 million for the
six months ended June 30, 1997. This increase was primarily attributable to
sales of used pagers with lower net book values resulting from a change in
pager depreciation from a four-year life to a three-year life as of October 1,
1997.
124
<PAGE>
Net revenues decreased 15.6% to $218.1 million for the six months ended June
30, 1998 compared to $258.5 million for the six months ended June 30, 1997.
Services, rents and maintenance expenses decreased 24.3% to $56.0 million
for the six months ended June 30, 1998 compared to $74.0 million for the six
months ended June 30, 1997. This decrease resulted primarily from lower
subcontracted paging expenses by approximately $8.0 million resulting from
billing reconciliations, increased unit cancellations and customer migration
to company-owned networks and reduced paging related telecommunications
expenses by approximately $8.7 million. The decline in paging-related
telecommunications expenses resulted primarily from the FCC clarification of
its interconnection rules pursuant to the Telecommunications Act of 1996,
which prohibit local exchange carriers from charging paging carriers for the
cost of dedicated facilities used to deliver local telecommunications traffic
to paging networks. The FCC clarification, however, noted that the FCCs
considering requests for reconsideration of these rules. In addition, paging-
related telecommunications expense declined as a result of a reconfiguration
of MobileComm's network to maximize usage of lower cost facilities. As a
percentage of net revenue, services, rents and maintenance expenses decreased
from 28.6% to 25.7%.
Selling expenses for the six months ended June 30, 1998 decreased 15.4% to
$31.5 million compared to $37.2 million for the six months ended June 30,
1997. The decrease resulted primarily from lower sales personnel costs and
lower commissions attributable to lower sales headcount and lower gross
additions. Selling expenses as a percentage of net revenue were constant at
14.4%.
General and administrative expenses decreased 32.0% to $68.8 million for the
six months ended June 30, 1998 compared to $101.1 million for the six months
ended June 30, 1997 and decreased as a percentage of net revenues to 31.5% for
the six months ended June 30, 1998 from 39.1% for the six months ended June
30, 1997. The decrease primarily resulted from reduced bad debt expense due to
improvements in MobileMedia's billing and collections functions and lower
administrative telephone expenses resulting from lower call volume and lower
long distance rates as of October 1, 1997.
Restructuring costs decreased from $11.0 million for the six months ended
June 30, 1997 to $9.3 million for the six months ended June 30, 1998 due to a
decline in professional fees constituting administrative expenses incurred by
MobileMedia as a result of the bankruptcy filing on January 30, 1997.
Depreciation and amortization decreased 14.6% to $60.7 million for the six
months ended June 30, 1998 compared to $71.2 million for the six months ended
June 30, 1997. The decrease was primarily due to lower pager depreciation
attributable to a reduced depreciable base of pager assets resulting from the
change in useful life from four to three years on October 1, 1997 and
decreased pager purchases. As a percentage of net revenues, depreciation and
amortization expense increased to 27.8% for the six months ended June 30, 1998
from 27.5% for the six months ended June 30, 1997.
Operating loss decreased 77.4% to $8.1 million for the six months ended June
30, 1998 from $35.9 million for the six months ended June 30, 1997. The
decrease was primarily due to decreased operating expenses.
Total other expense, principally interest expense, decreased 17.8% to $29.2
million for the six months ended June 30, 1998 compared to $35.5 million for
the six months ended June 30, 1997. The decrease was primarily due to interest
on the $250,000 Senior Subordinated Notes due November 1, 2007 and the
$210,000 Senior Subordinated Deferred Coupon Notes not being recognized
subsequent to the bankruptcy filing and lower interest expense on
MobileMedia's DIP facility resulting from lower outstanding borrowings in
1998.
Net loss, as a result of the above factors, decreased 47.8% to $37.3 million
for the six months ended June 30, 1998 compared to $71.4 million for the six
months ended June 30, 1997.
EBITDA increased 34.0% to $61.9 million for the six months ended June 30,
1998 compared to $46.2 million for the six months ended June 30, 1997. As a
percentage of net revenues, EBITDA increased to 28.4%
125
<PAGE>
for the six months ended June 30, 1998 from 17.9% for the six months ended
June 30, 1997. The increase in EBITDA was primarily due to decreased operating
expenses. Average monthly operating expenses per unit in service decreased to
$7.79 for the six months ended June 30, 1998 compared to $8.43 for the six
months ended June 30, 1997.
Year Ended December 31, 1997 Compared with Year Ended December 31, 1996
The following table presents certain items from MobileMedia's Consolidated
Statement of Operations and certain other information for the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1996 1997
---------------------------- --------------------------
(IN THOUSANDS, EXCEPT PERCENTAGE AND UNIT DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA
Revenues
Services, rents and
maintenance.......... $ 568,892 100.1% $ 491,174 99.9%
Equipment sales and
activation fees...... 71,818 12.6 36,218 7.4
--------------- ---------- ------------- ---------
Total revenues.......... 640,710 112.8 527,392 107.3
Cost of products
sold................. (72,595) (12.8) (35,843) (7.3)
--------------- ---------- ------------- ---------
568,115 100.0 491,549 100.0
Operating expenses
Services, rents and
maintenance.......... 144,050 25.4 139,333 28.3
Selling............... 96,817 17.0 69,544 14.1
General and adminis-
trative.............. 218,607 38.5 179,599 36.5
Impairment of long-
lived assets......... 792,478 139.5 -- --
Restructuring costs... 4,256 0.7 19,811 4.0
Depreciation and amor-
tization............. 348,698 61.4 140,238 28.5
--------------- ---------- ------------- ---------
Total operating ex-
penses................. 1,604,906 282.5 548,525 111.6
--------------- ---------- ------------- ---------
Operating loss.......... (1,036,791) (182.5) (56,976) (11.6)
Total other expense..... (92,595) (16.2) (67,608) (13.8)
--------------- ---------- ------------- ---------
Loss before income tax
benefit................ (1,129,386) (198.7) (124,584) (25.3)
Income tax benefit...... (69,442) 12.2 -- --
--------------- ---------- ------------- ---------
Net loss................ $ (1,059,944) (186.5)% $ (124,584) (25.3)%
=============== ========== ============= =========
OTHER DATA
EBITDA.................. $ 108,641 19.1% $ 103,073 21.0%
ARPU.................... $ 11.08 $ 10.41
Average monthly operat-
ing expense per unit
(1).................... $ 8.95 $ 8.23
Units in service (at end
of period)............. 4,424,107 3,440,342
</TABLE>
- --------
(1) Does not include impact of $792.5 million asset impairment writedown in
1996.
Units in service decreased from 4,424,107 as of December 31, 1996 to
3,440,342 as of December 31, 1997, a decrease of 22.2%. The decrease was
attributable to a decrease in gross unit additions and an increase in unit
cancellations primarily resulting from acquisition integration difficulties,
billing system clean up to remove non-revenue generating units and
cancellation of units for non-payment.
Services, rents and maintenance revenues decreased 13.7% to $491.2 million
for the year ended December 31, 1997 compared to $568.9 million for the year
ended December 31, 1996 due to fewer units in service and lower ARPU. ARPU
decreased to $10.41 for the year ended December 31, 1997 from $11.08 for the
year ended December 31, 1996 largely due to continued competitive market
conditions.
126
<PAGE>
Equipment sales and activation fees decreased 49.6% to $36.2 million for the
year ended December 31, 1997 compared to $71.8 million for the year ended
December 31, 1996. The decrease in equipment sales was primarily attributable
to less equipment sold through the retail distribution channel. Equipment
sales and activation fees, less cost of products sold, increased from $(0.8)
million for the year ended December 31,1996 to $0.4 million for the year ended
December 31, 1997 primarily as a result of lower retail sales of equipment
sold at a discount. Cost of products sold for the year ended December 31, 1996
includes a writedown of $3.2 million, reflecting the establishment of a lower
of cost or market reserve for pagers held for resale through MobileMedia's
retail and reseller distribution channels.
Net revenues decreased 13.5% to $491.5 million for the year ended December
31, 1997 compared to $568.1 million for the year ended December 31, 1996.
Services, rents and maintenance expenses decreased 3.3% to $139.3 million
for the year ended December 31, 1997 compared to $144.1 million for the year
ended December 31, 1996, primarily due to billing reconciliation and lower
nationwide subcontracted paging expenses resulting from cancellations and
customer migration from networks not owned by MobileMedia to company-owned
networks.
Selling expenses for the year ended December 31, 1997 decreased 28.2% to
$69.5 million from $96.8 million for the year ended December 31, 1996
primarily due to lower sales personnel costs and lower sales commissions
attributable to lower sales headcount and lower gross additions. In addition,
reseller and retail distribution channel selling expenses declined as a result
of lower sales volume. Selling expenses as a percentage of net revenue
decreased to 14.1% for the year ended December 31, 1997 from 17.0% for the
year ended December 31, 1996.
General and administrative expenses decreased 17.8% to $179.6 million for
the year ended December 31, 1997 compared to $218.6 million for the year ended
December 31, 1996. General and administrative expenses decreased as a
percentage of net revenues to 36.5% for the year ended December 31, 1997 from
38.5% for the year ended December 31, 1996 primarily due to decreased bad debt
expense, customer service expenses related to the assimilation of MobileComm's
customer service functions, and consulting fees related to the integration of
the acquisitions. Bad debt expense decreased as a result of increased
collections resulting from improvements in MobileMedia's billing and
collection functions.
Restructuring costs increased from $4.2 million for the year ended December
31, 1996 to $19.8 million for the year ended December 31, 1997 due to
professional fees constituting administrative expenses incurred by MobileMedia
as a result of the bankruptcy filing on January 30, 1997 as compared to the
1996 expenses incurred in connection with MobileMedia's attempt to restructure
its debt.
Depreciation and amortization decreased 59.8% to $140.2 million for the year
ended December 31, 1997 compared to $348.7 million for the year ended December
31, 1996. The decrease was primarily due to a writedown of impaired assets by
$792.5 million pursuant to Statement of Financial Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
be Disposed Of" effective December 31, 1996 (See Note 2 of MobileMedia's Notes
to Consolidated Financial Statements included elsewhere herein), amortization
of a non-competition agreement related to the MobileComm Acquisition which was
fully amortized in 1996 and decreased pager depreciation resulting from a
decrease in expenses related to unrecoverable subscriber equipment and a
reserve established to lower book values of certain pager models to current
market values in 1996. As a percentage of net revenues, depreciation and
amortization expense decreased to 28.5% for the year ended December 31, 1997
from 61.4% for the year ended December 31, 1996.
Operating loss decreased to $57.0 million for the year ended December 31,
1997 from $1,036.8 million for the year ended December 31, 1996. The decrease
was primarily due to the $792.5 million asset impairment writedown effective
December 31, 1996 and other factors indicated above.
Total other expense, principally interest expense, decreased 27.0% to $67.6
million for the year ended December 31, 1997 compared to $92.6 million for the
year ended December 31, 1996. The decrease was
127
<PAGE>
primarily due to interest expense related to MobileMedia's $250,000 Senior
Subordinated Notes due November 1, 2007 and $210,000 Senior Subordinated
Deferred Coupon Notes not being recognized subsequent to the Bankruptcy filing
on January 30, 1997.
Loss before income tax benefit, as a result of the above factors, decreased
to $124.6 million for the year ended December 31, 1997 from $1,129.4 million
for the year ended December 31, 1996.
Income tax benefit of $69.4 million resulted from the deferred tax
adjustment attributable to the $792.5 asset impairment writedown effective
December 31, 1996.
EBITDA decreased to $103.1 million for the year ended December 31, 1997
compared to $108.6 million for the year ended December 31, 1996, a decrease of
5.1%. As a percentage of net revenues, EBITDA increased to 21.0% for the year
ended December 31, 1997 from 19.1% for the year ended December 31, 1996.
Year Ended December 31, 1996 Compared with Year Ended December 31, 1995
The following table presents certain items from MobileMedia's Consolidated
Statement of Operations and certain other information for the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1995 1996
-------------------------- ----------------------------
(IN THOUSANDS, EXCEPT PERCENTAGE AND UNIT DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA
Revenues
Services, rents and
maintenance.......... $ 220,745 97.6% $ 568,892 100.1%
Equipment sales and
activation fees...... 32,251 14.3 71,818 12.6
------------- --------- --------------- ----------
Total revenues.......... 252,996 111.9 640,710 112.8
Cost of products
sold................. (26,885) (11.9) (72,595) (12.8)
------------- --------- --------------- ----------
226,111 100.0 568,115 100.0
Operating expenses
Services, rents and
maintenance.......... 59,800 26.4 144,050 25.4
Selling............... 45,203 20.0 96,817 17.0
General and adminis-
trative.............. 59,034 26.1 218,607 38.5
Impairment of long-
lived assets......... -- -- 792,478 139.5
Restructuring costs... -- -- 4,256 0.7
Depreciation and amor-
tization............. 71,408 31.6 348,698 61.4
------------- --------- --------------- ----------
Total operating ex-
penses................. 235,445 104.1 1,604,906 282.5
------------- --------- --------------- ----------
Operating loss.......... (9,334) (4.1) (1,036,791) (182.5)
Total other expense..... (31,745) (14.0) (92,595) (16.2)
------------- --------- --------------- ----------
Loss before income tax
benefit................ (41,079) (18.2) (1,129,386) (198.7)
Income tax benefit...... -- -- (69,442) 12.2
------------- --------- --------------- ----------
Net loss................ $ (41,079) (18.2)% $ (1,059,944) (186.5)%
============= ========= =============== ==========
OTHER DATA
EBITDA.................. $ 62,074 27.5% $ 108,641 19.1%
ARPU.................... $ 9.64 $ 11.08
Average monthly operat-
ing expense per unit
(1).................... $ 7.17 $ 8.95
Units in service (at end
of period)............. 2,369,101 4,424,107
</TABLE>
- --------
(1) Does not include impact of $792.5 million asset impairment writedown in
1996.
Units in service increased by 2,055,006 to 4,424,107 as of December 31, 1996
when compared to December 31, 1995. The increase was attributable to 1,764,752
units acquired from the MobileComm
128
<PAGE>
Acquisition and 290,254 net units acquired from internal growth through
MobileMedia's various sales distribution channels.
Services, rents and maintenance revenues increased 157.7% to $568.9 million
for the year ended December 31, 1996 compared to $220.7 million for the year
ended December 31, 1995 due to additional revenues associated with the
acquisitions and continued growth in the number of units in service. ARPU
increased to $11.08 for the year ended December 31, 1996 from $9.64 for the
year ended December 31, 1995 largely due to the impact of the acquired
subscribers from MobileComm and Dial Page. The ARPU impact of the acquisitions
was partly offset by net units added in 1996 through the reseller distribution
channel at lower ARPU. ARPU also declined as a result of continued competitive
market conditions.
Equipment sales and activation fees increased 122.7% to $71.8 million for
the year ended December 31, 1996 compared to $32.3 million for the year ended
December 31, 1995. The increase in equipment sales is attributable to
MobileMedia's significant presence in retail distribution as a result of the
MobileComm Acquisition. Equipment sales and activation fees, less cost of
products sold, decreased 114.5% to $(0.8) million for the year ended December
31,1996. The decrease is attributable to discounting of equipment selling
prices to large retailers as a means of generating subscriber additions
through the retail distribution channel. Cost of products sold also includes
an writedown of $3.2 million in 1996, reflecting the establishment of a lower
of cost or market reserve for pagers held for resale through MobileMedia's
retail and reseller distribution channels.
Net revenues increased 151.3% to $568.1 million for the year ended December
31, 1996 compared to $226.1 million for the year ended December 31, 1995.
Services, rents and maintenance expenses increased 140.9% to $144.1 million
for the year ended December 31, 1996 compared to $59.8 million for the year
ended December 31, 1995, primarily due to increased expense levels related to
the acquisitions and increased transmitter site lease expenses related to
MobileMedia's nationwide paging network which commenced service on April 1,
1996. The balance of the increase resulted primarily from an increase in
subcontracted paging expense by approximately $6.3 million primarily
associated with the increase in nationwide paging units serviced by networks
other than those owned by MobileMedia and $1.6 million in research and
development expenses related to the development of a two-way wireless
subscriber device. Services, rents and maintenance expenses decreased as a
percentage of net revenues to 25.4% for the year ended December 31, 1996 from
26.4% for the year ended December 31, 1995.
Selling expenses for the year ended December 31, 1996 increased 114.2% to
$96.8 million from $45.2 million for the year ended December 31, 1995
primarily due to the increased expense levels related to the acquisitions.
Selling expenses as a percentage of net revenue decreased to 17.0% for the
year ended December 31, 1996 from 20.0% for the year ended December 31, 1995.
General and administrative expenses increased 270.3% to $218.6 million for
the year ended December 31, 1996 compared to $59.0 million for the year ended
December 31, 1995 primarily due to the increased expense levels related to the
acquisitions. General and administrative expenses increased as a percentage of
net revenues to 38.5% for the year ended December 31, 1996 from 26.1% for the
year ended December 31, 1995. The balance of the increase resulted primarily
from increased bad debt expense, customer service expenses related to the
assimilation of MobileComm's customer service functions, and consulting fees
related to the integration of the acquisitions. During the third and fourth
quarters of 1996, MobileMedia experienced significant difficulty in collecting
outstanding accounts receivable. These difficulties resulted primarily from
inaccurate billing and inadequate resolutions of customer problems largely
caused by difficulties of integrating acquisitions. In addition, MobileMedia
paid $2.1 million in separation expenses in the second half of 1996 due to the
departure of several senior executives of MobileMedia and $0.7 million in
separation expenses in the first quarter of 1995 due to the departure of the
Chairman of the Board of Directors of MobileMedia.
Impairment of long-lived assets of $792.5 million included a writedown of
long-lived assets effective December 31, 1996, pursuant to Statement of
Financial Accounting Standards No. 121. (See Note 2 of MobileMedia's Notes to
Consolidated Financial Statements included elsewhere herein).
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Restructuring costs of $4.3 million for the year ended December 31, 1996
included legal and professional fees related to various restructuring
activities by MobileMedia prior to the Bankruptcy filing.
Depreciation and amortization increased 388.3% to $348.7 million for the
year ended December 31, 1996 compared to $71.4 million for the year ended
December 31, 1995. The increase was primarily due to additional amortization
expenses related to the acquisitions and increased pager depreciation
resulting from a decrease to the depreciable pager base resulting from
unrecoverable subscriber equipment and a reserve established to lower book
values of certain pager models to current market values. As a percentage of
net revenues, depreciation and amortization expense increased to 61.4% for the
year ended December 31, 1996 compared to 31.6% for the year ended December 31,
1995.
Operating loss increased to $1,036.8 million for the year ended December 31,
1996 from $9.3 million for the year ended December 31, 1995. The increase was
primarily due to the impairment loss and increased amortization expenses
relating to the acquisitions offset by the increase in net revenues.
Total other expense, principally interest expense, increased 191.7% to $92.6
million for the year ended December 31, 1996 compared to $31.7 million for the
year ended December 31, 1996. The increase was primarily due to additional
debt incurred to finance the acquisitions and capital expenditures.
Loss before income tax benefit, as a result of the above factors, increased
to $1,129.4 million for the year ended December 31, 1996 compared to $41.1
million for the year ended December 31, 1995.
Income tax benefit of $69.4 million resulted from the deferred tax
adjustment attributable to the $792.5 asset impairment writedown effective
December 31, 1996.
EBITDA increased to $108.6 million for the year ended December 31, 1996
compared to $62.1 million for the year ended December 31, 1995, an increase of
75.0%. As a percentage of net revenues, EBITDA decreased to 19.1% for the year
ended December 31, 1996 from 27.5% for the year ended December 31, 1995. The
increase in EBITDA was primarily due to the acquisitions described above.
LIQUIDITY AND CAPITAL RESOURCES
MobileMedia's operations and strategy require the availability of
substantial funds to finance the development and installation of wireless
communications systems, to procure subscriber equipment and to service debt.
Historically, these requirements have been funded by net cash from operating
activities, additional borrowings and capital contributions.
Chapter 11 Filing
On January 30, 1997, Parent and MobileMedia filed voluntary petitions for
relief under the Bankruptcy Code in order to implement an operational and
financial restructuring. Parent and MobileMedia are currently operating their
businesses as debtors-in-possession subject to the jurisdiction of the
Bankruptcy Court. Pursuant to the requirements of the Bankruptcy Code, Parent
and MobileMedia are required to file monthly operating reports with the
appointed United States Trustee (the "Trustee"). Such reports are publicly
available through the office of the Trustee, and copies of such reports to
date have been filed as Current Reports on Form 8-K with the Commission.
Financial statements included in Parent's periodic reports since February,
1997 have not been prepared in accordance with GAAP due to Parent's inability
at the time of such filings to determine the amount of an impairment loss
related to long-lived assets pursuant to Financial Accounting Standard No.
121, are unaudited and have been revised periodically based on subsequent
determination of changes in facts and circumstances impacting previously filed
unaudited financial statements. The audited financial statements of
MobileMedia included herein reflect adjustments from the unaudited statements,
including but not limited to, an impairment adjustment of $792.5 million
recorded as of December 31, 1996.
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Agreement with Key Suppliers
In connection with the Filings, MobileMedia sought approval of the
Bankruptcy Court to pay the pre-petition claims of its Key Suppliers in the
aggregate amount of $47.4 million, which approval was granted by the
Bankruptcy Court on February 6, 1997. Upon entry of the Bankruptcy Court's
order approving the payments, MobileMedia paid the pre-petition claims and
entered into supply agreements with each of the Key Suppliers. Each of the Key
Suppliers has been shipping product to MobileMedia in accordance with its
respective supply agreement.
DIP Credit Agreement
In connection with the Filings, MobileMedia entered into the DIP Credit
Agreement with The Chase Manhattan Bank, as agent (the "Agent"), and certain
other financial institutions (collectively, the "DIP Agreement Lenders") that
initially provided MobileMedia with up to $200.0 million of post-petition,
debtor-in-possession ("DIP") financing. At a hearing on January 30, 1997, the
Bankruptcy Court entered an interim order approving the DIP facility, as a
result of which MobileMedia gained access to $70.0 million of such DIP funds,
subject to MobileMedia entering into agreements with its Key Suppliers to sell
equipment and provide services. This condition was satisfied when MobileMedia
entered into such agreements with the Key Suppliers. MobileMedia used $47.4
million of the available $70.0 million of DIP funds to pay the pre-petition
claims of their Key Suppliers, among other things. On February 19, 1997, the
Bankruptcy Court entered a final order approving MobileMedia's DIP facility,
as a result of which MobileMedia gained access to an additional $30.0 million
of DIP funds for a total of $100.0 million. The remaining $100.0 million of
DIP funds became available on May 1, 1997, as a result of MobileMedia's
delivery of a business plan to the Agent by April 15, 1997, which was found to
be satisfactory by the financial advisor to the DIP Agreement Lenders. Under
the terms of the DIP Credit Agreement and the order of the Bankruptcy Court
related thereto, MobileMedia is required to make monthly interest payments to
the DIP Agreement Lenders, and monthly "adequate protection" payments to the
pre-petition secured lenders of MobileMedia. During 1997, MobileMedia drew
down $47.0 million of borrowings and repaid $37.0 million under the DIP
facility. During January and February, 1998 MobileMedia repaid an additional
$10.0 million. As of June 30, 1998 there were no funded borrowings under the
DIP facility and a $0.5 million letter of credit issued in 1997 remained a
contingent obligation of MobileMedia under the DIP facility. On January 27,
1998, the DIP facility was amended and, at the request of MobileMedia, reduced
from $200.0 million to $100.0 million. On July 28, 1998 MobileMedia received
interim approval from the Bankruptcy Court to extend its DIP facility to March
31, 1999 and to reduce availability thereunder further, at the request of
MobileMedia, from $100.0 million to $75.0 million.
Capital Expenditures and Commitments
Capital expenditures were $15.6 million for the six months ended June 30,
1998 compared to $23.8 million for the six months ended June 30, 1997 and
$40.6 million for the year ended December 31, 1997 compared to $161.9 million
for the year ended December 31, 1996. Capital expenditures decreased $8.2
million for the six months ended June 30, 1998 compared to the six-month
period ended June 30, 1997 and $121.3 million for the year ended December 31,
1997 compared to the corresponding period in 1996 principally as a result of
lower pager purchases resulting from fewer gross additions and increased
utilization of existing pager inventory stock. The Merger Agreement contains
certain restrictions on MobileMedia's ability to make certain capital
expenditures without the consent of Arch. See "The Merger Agreement--Certain
Covenants and Agreements".
MobileMedia anticipates capital spending for the calendar years 1998 and
1999 to be approximately $61 million and $95 million, respectively. Capital
spending includes approximately $12 million in 1998 and $22 million in 1999
for construction of a nationwide N-PCS network providing frequency reuse and
guaranteed message delivery capabilities. The remaining expenditures are
primarily for subscriber equipment and improvements to MobileMedia's one-way
network.
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Sources of Funds
MobileMedia's net cash provided by operating activities was $26.2 million
for the six months ended June 30, 1998 compared to a use of cash of $13.7
million for the six months ended June 30, 1997. Inventories decreased $6.8
million for the six months ended June 30, 1997 compared to no change for the
six months ended June 30, 1998 as a result of utilizing pager inventory stock
and lower sales volume in the retail sales distribution channel. Accounts
payable, accrued expenses and other liabilities decreased $18.8 million for
the six months ended June 30, 1997 compared to a decrease of $11.5 million for
the six months ended June 30, 1998. Net accounts receivable increased $1.8
million for the six months ended June 30, 1997 compared to a decrease of $15.5
million for the six months ended June 30, 1998 due to improved billing and
collections functions.
MobileMedia's net cash provided by operating activities was $14.9 million
for the year ended December 31, 1997 compared to $57.2 million for the year
ended December 31, 1996. Inventories decreased $12.5 million from December 31,
1996 to December 31, 1997 as a result of utilizing pager inventory stock and
lower sales volume in the retail sales distribution channel. Accounts payable,
accrued expenses and other liabilities decreased $25.4 million from $181.8
million as of December 31, 1996 to $156.4 million as of December 31, 1997
primarily due to payments to Key Suppliers during 1997. Net accounts
receivable decreased $11.3 million from $66.7 million as of December 31, 1996
to $55.4 million as of December 31, 1997 due to improved billing and
collections functions.
Tower Sale
On July 7, 1998, MobileMedia entered into an agreement to sell 163
transmission towers and 49 owned parcels of land to Pinnacle for $170 million.
The transaction also includes the assignment of leases related to towers
included in the sale. The transaction was completed on September 3, 1998. In
connection with the transaction, MobileMedia entered into an agreement with
Pinnacle under which MobileMedia rented transmitter space on towers for 683
transmitters for the period of fifteen years at a cost of approximately $10.7
million per year.
Debt Obligations
As of June 30, 1998, the debt obligations of MobileMedia included a debtor-
in-possession credit facility. See "--DIP Credit Agreement". MobileMedia is
subject to certain financial and operating restrictions contained in the DIP
Credit Agreement that are customary in credit facilities of this type,
including a limitation on periodic capital expenditures, minimum allowable
periodic EBITDA and retention of a turnaround professional. Additionally,
MobileMedia is required to make monthly interest payments to the DIP Lenders.
Amounts outstanding under the DIP Credit Agreement bear interest at a rate of
LIBOR plus 250 basis points or Base Rate plus 150 basis points, at the option
of MobileMedia. During 1997, MobileMedia drew down $47.0 million of borrowings
and repaid $37.0 million under the DIP Credit Agreement. During January and
February, 1998 MobileMedia repaid an additional $10.0 million. As of June 30,
1998 there were no funded borrowings under the DIP Credit Agreement and a $0.5
million letter of credit issued in 1997 remained a contingent obligation of
MobileMedia under the DIP Credit Agreement.
In addition to the DIP Credit Agreement, the debt obligations of MobileMedia
also include the following:
The MobileMedia 1995 Credit Agreement, a $750.0 million senior secured and
guaranteed credit agreement with a syndicate of lenders including The Chase
Manhattan Bank. As of June 30, 1998 there was $649.0 million outstanding under
this facility consisting of term loans of $137.5 million and $412.5 million
and loans under a revolving credit facility totaling $99.0 million. This
agreement was entered into on December 4, 1995, in connection with the
financing of the MobileComm Acquisition. Commencing in 1996, MMC was in
default under this agreement. As a result of such default and the bankruptcy
filing, MMC has no borrowing capacity under this agreement. MMC's obligations
under the MobileMedia 1995 Credit Agreement are secured by substantially all
of the assets of MMC and all of its subsidiaries, including the capital stock
of the subsidiaries,
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and Parent and the subsidiaries of MMC have guaranteed all of MMC's
borrowings, including principal and interest. Performance of Parent's
obligations as a guarantor is secured by a pledge of the capital stock of MMC.
Since the petition date, MobileMedia brought current its interest payments and
has been making monthly adequate protection payments to the lenders under the
MobileMedia 1995 Credit Agreement equal to the amount of interest accruing
under such agreement.
$250.0 million Senior Subordinated MobileMedia 9 3/8% Notes issued in
November 1995, concurrent with MobileMedia's second offering of Class A Common
Stock (See Note 11 to MobileMedia's Notes to Consolidated Financial Statements
included elsewhere herein). These notes bear interest at a rate of 9 3/8%
payable semiannually on May 1 and November 1 of each year. On November 1,
1996, MobileMedia did not make its scheduled interest payment on the
MobileMedia 9 3/8% Notes which constituted an event of default under this
indenture. The noteholders have not exercised any rights or remedies afforded
such holders (which rights include, but are not limited to, acceleration of
the stated maturity of the notes). Since the Petition date, any such right or
remedy is subject to the automatic stay created by the Bankruptcy Code and no
interest has accrued on the notes.
$210.0 million of Senior Subordinated Deferred Coupon Notes (the
"MobileMedia Deferred Coupon Notes") issued, at a discount, in November 1993.
The MobileMedia Deferred Coupon Notes accrete at a rate of 10.5%, compounded
semiannually, to an aggregate principal amount of $210,000 by December 1, 1998
after which interest is paid in cash at a rate of 10.5% and is payable
semiannually. By virtue of the missed interest payments on the MobileMedia 9
3/8% Notes and the MobileMedia 1995 Credit Agreement, an event of default has
occurred under this indenture. The noteholders have not exercised any rights
or remedies afforded such holders (which rights include, but are not limited
to, acceleration of the stated maturity of the notes). Since the Petition
date, any such right or remedy is subject to the automatic stay created by the
Bankruptcy Code and no interest has accrued on the notes.
Other Matters
Prior to the bankruptcy filing, five actions allegedly arising under the
federal securities laws were filed against MobileMedia and certain of its
present and former officers, directors and underwriters in the United States
District Court for the District of New Jersey. The New Jersey Actions were
subsequently consolidated as In re MobileMedia Securities Litigation, No. 96-
5723 (AJL). The consolidated amended Complaint was filed on November 21, 1997.
The Complaint does not name MobileMedia as a defendant.
In June 1997, the Debtors initiated an Adversary Proceeding in the
Bankruptcy Court to stay the prosecution of the New Jersey Actions. Pursuant
to a Stipulation entered into among MobileMedia and the plaintiffs in the New
Jersey Actions and "So Ordered" by the Bankruptcy Court on October 31, 1997,
the plaintiffs in the New Jersey Actions may conduct only limited discovery in
connection with the New Jersey Actions and may not file any pleadings, except
responses to motions to dismiss, until the earlier of September 30, 1998 and
the effective date pursuant to a plan of reorganization.
In addition to the New Jersey Actions, the two California Actions were filed
in September 1997 in the United States District Court for the Northern
District of California and the Superior Court of California naming as
defendants certain former officers and certain present and former directors of
MobileMedia, certain investment entities and MobileMedia's independent
auditors. MobileMedia is not named as defendant in the California Actions.
On November 4, 1997, MobileMedia commenced an adversary proceeding in the
Bankruptcy Court seeking to stay the prosecution of the California Actions
against the named defendants. At hearings held on December 10, 1997 and May
29, 1998, the Bankruptcy Court enjoined the plaintiffs in the California
Actions until September 15, 1998 from taking certain actions in connection
with the California Actions.
Neither the New Jersey Actions nor the California Actions name MobileMedia
as a defendant. However, proofs of claim have been filed against MobileMedia
by the plaintiffs in the New Jersey Actions, and both the New Jersey Actions
and the California Actions may give rise to claims against MobileMedia's
Directors, Officers and Corporate Liability Insurance Policy. Under the
Amended Plan, these claims will receive no distributions.
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Year 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of
MobileMedia's computer programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
While MobileMedia is aware that certain of its software and paging systems
require modification, it is in the process of determining the full extent to
which it will be required to modify or replace significant portions of its
software and paging systems so that its systems function properly with respect
to dates in the year 2000 and thereafter. At present, MobileMedia does not yet
have an estimate of the cost that may be incurred to comply with the Year 2000
issue. If such modifications and conversions are not made, or are not
completed on a timely basis, the Year 2000 issue could have a material adverse
effect on the operations of MobileMedia.
NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" (SFAS
No. 130), which is effective for years beginning after December 15, 1997. SFAS
No. 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full
set of general-purpose financial statements. This Statement requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. SFAS No.
130 is effective for financial statements for fiscal years beginning after
December 15, 1997. MobileMedia's management does not anticipate that the
adoption of SFAS No. 130 will have any effect on MobileMedia's reporting.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131) which is effective for
years beginning after December 15, 1997. SFAS No. 131 establishes standards
for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. SFAS No. 131 is
effective for financial statements for fiscal years beginning after December
15, 1997, and therefore MobileMedia will adopt the new requirements
retroactively in 1998. MobileMedia's management has not completed its review
of SFAS No. 131, but does not anticipate that the adoption of this statement
will have a significant effect on MobileMedia's reporting.
In April 1998, the Accounting Standards Executive Committee of the Financial
Accounting Standards Board issued SOP 98-5 "Reporting Costs of Start-Up
Activities". SOP 98-5 requires costs of start-up activities and organization
costs to be expensed as incurred. Initial application of SOP 98-5 will be
reported as the cumulative effect of a change in accounting principle.
MobileMedia intends to adopt SOP 98-5 effective January 1, 1999. The adoption
of SOP 98-5 is not expected to have a material effect on MobileMedia's
financial position or results of operation.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes certain United States ("U.S.") federal
income tax consequences relating to the Rights, Stock and Warrants generally
applicable to Unsecured Creditors who hold the Rights, Stock or Warrants as
"capital assets" within the meaning of Section 1221 of the U.S. Internal
Revenue Code of 1986, as amended (the "Code") and who are U.S. individuals,
partnerships, corporations, estates or trusts, subject to U.S. federal income
tax on their worldwide income ("U.S. Persons"). Persons other than U.S.
Persons ("Non-U.S. Persons") should consult their own tax advisors about the
U.S. and foreign tax consequences of the receipt
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ownership and disposition of Rights, Stock and Warrants. This summary is
intended to be descriptive only and does not purport to be a complete analysis
or listing of all potential tax effects relevant to the ownership of Rights,
Stock or Warrants. This summary discusses certain tax consequences of the
receipt of Warrants upon the exercise of Rights but does not address the
receipt of Standby Purchasers' Warrants by Standby Purchasers as consideration
for entering into certain commitments, and such Standby Purchasers should
consult their tax advisors regarding the tax consequences of such commitments
and any related consideration they receive. Additionally, this summary does
not address the U.S. federal income tax consequences that might be relevant to
holders of Rights, Stock or Warrants that receive special treatment under the
Code, such as Non-U.S. Persons, individual retirement accounts and other tax
deferred accounts, financial institutions, life insurance companies and tax-
exempt organizations, and does not discuss the effect of state, local, foreign
or other tax laws. Further, this summary is based on interpretations of
existing law as of the date hereof and contained in the Code, applicable
current and proposed Treasury Regulations, judicial decisions and published
administrative positions of the Internal Revenue Service (the "IRS"), all of
which are subject to change either prospectively or retroactively.
THE RECEIPT OF RIGHTS BY UNSECURED CREDITORS FOR UNSECURED CLAIMS
The federal income tax consequences of the receipt of Rights to a holder of
an Unsecured Claim who receives such rights (in addition to Stock) in exchange
for such Unsecured Claim will depend, in part, on whether such holder's
Unsecured Claim constitutes a "security" of MMC for federal income tax
purposes. The term "security" is not defined in the Code or in the Treasury
regulations issued thereunder, and there is no clear standard for determining
whether a particular obligation is a security under the Code. Holders of
Unsecured Claims should consult their tax advisors as to whether any such
claim constitutes a security for federal income tax purposes.
All holders of Unsecured Claims, whether or not their Unsecured Claims
constitute "securities" for federal income tax purposes, will recognize
ordinary interest income to the extent that the amount received is allocable
to unpaid interest that has accrued on or after the beginning of the holder's
holding period and was not previously included in income, and will recognize
ordinary income to the extent, if any, of the reimbursement of any costs, fees
and charges that such holder previously deducted. No income is realized from a
payment attributable to unpaid interest that was previously included in
income.
RECEIPT OF RIGHTS BY HOLDERS OF UNSECURED CLAIMS NOT CONSTITUTING
"SECURITIES." A holder of an Unsecured Claim that does not constitute a
"security" for federal income tax purposes will recognize gain or loss (or
ordinary income, as described above) upon the receipt of Rights and other
consideration. The "amount realized" in respect of such an Unsecured Claim
will include the fair market value of the Rights and any other property
received in exchange for the Unsecured Claim. Taxable gain or loss will
generally consist of excess of the amount realized (other than any portion
thereof required to be treated as ordinary income) over the holder's adjusted
tax basis in its Unsecured Claim (not attributable to a claim for accrued
interest). Each holder should consult its own tax advisor concerning the
amount and the character of any gain or loss recognized as long-term or short-
term capital gain or loss or as ordinary income or loss, which will be
determined by a number of factors, including the tax status of the holder,
whether the Unsecured Claim has been held for more than 1 year, whether the
Unsecured Claim was purchased at a discount, and whether and to what extent
the holder has previously claimed a bad debt deduction.
RECEIPT OF RIGHTS BY HOLDERS OF UNSECURED CLAIMS CONSTITUTING
"SECURITIES." It is intended that the holders of Unsecured Claims that
constitute "securities" of MMC for federal income tax purposes be treated as
having such Unsecured Claims satisfied pursuant to a "reorganization"
qualifying under section 368(a)(2)(D) of the Tax Code. However, no ruling has
been requested from the IRS nor has any opinion of counsel been sought as to
the federal income tax treatment of the Plan, and no assurance can be given
that the IRS will not assert that the Rights were not received pursuant to the
"reorganization" but rather were received in a separate taxable transaction.
Unsecured Creditors should consult their tax advisors regarding the federal
income tax consequences of such alternative characterization. Rights received
by Unsecured Creditors who are not treated under the Code as holders of
securities of MMC cannot be treated by such Unsecured Creditors as received
pursuant to a reorganization, and therefore the receipt of such Rights
generally will require the recognition of income, gain or loss.
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The remainder of this Section (b) describes the federal income tax
consequences of treatment of the satisfaction of the Unsecured Claims as a
"reorganization" under section 368(a) of the Code insofar as it relates to the
Rights. A holder of an Unsecured Claim that constitutes a "security" of MMC
will not recognize loss on the exchange of its Unsecured Claim for
consideration, other than ordinary loss to the extent of any accrued interest
claimed that was previously included in its gross income with respect to which
consideration is not received. Such holder will not recognize gain upon the
receipt of Stock and Rights in satisfaction of its Unsecured Claim but may
recognize gain upon receipt of certain other consideration.
Such a holder's aggregate tax basis in Stock and Rights received in
satisfaction of its Unsecured Claim will equal the holder's adjusted tax basis
in its Claim (including any claim for accrued interest), decreased by the sum
of (i) the cash and fair market value of any other property received and (ii)
the amount of any loss recognized in respect of its Unsecured Claim for
accrued interest previously included in income that is not satisfied, and
increased by the amount of any gain or income recognized in respect of its
Unsecured Claim (including interest income and income relating to
reimbursement). This aggregate tax basis will be allocated in proportion to
the fair market values of each class of Stock and the Rights received. A
holder's holding period for the Stock and Rights received will include the
holder's holding period for the Unsecured Claim, except to the extent that
such Stock or Rights were issued in respect of a claim for accrued interest or
as reimbursement for costs, fees or charges which the holder previously
deducted. A holder's holding period for any other property issued in exchange
for an Unsecured Claim, including Stock or Rights issued in respect of a claim
for accrued interest or for reimbursement of previously deducted costs, will
begin on the day after the issuance thereof.
With respect to a holder of an Unsecured Claim that constitutes a "security"
and has accrued market discount, regulations may be promulgated by the
Treasury Department under Section 1276(c) of the Code pursuant to which any
accrued market discount not treated as ordinary income upon any exchange of
the Unsecured Claim will carry over to the Stock and Rights received in
exchange therefor. If such regulations are promulgated and applicable to the
Plan, a subsequent disposition of such consideration received in exchange for
the holder's Unsecured Claim would give rise to ordinary income to the extent
of any accrued market discount with respect to such Claim not previously
included in income, and the tax consequences described in "--Expiration of
Unexercised Rights," "--Exercise of the Rights and Acquisition of the Units"
and "--Tax Basis and Holding Period of the Warrants and Stock" below would
differ accordingly. In general, a debt instrument will have accrued "market
discount" if such debt instrument was acquired after its original issuance at
a discount to its adjusted issue price.
SALE OF THE RIGHTS
A holder will recognize gain or loss upon the sale of the Rights in an
amount equal to the difference between the amount realized upon the sale and
the holder's tax basis in the Rights. Such gain or loss will be a capital gain
or loss and will be considered long-term capital gain or loss if the holder's
holding period for the Rights is more than one year.
EXPIRATION OF UNEXERCISED RIGHTS
If a holder allows the Rights to expire without exercise, loss will be
recognized by such holder on the expiration of such Rights in an amount equal
the holder's tax basis in the Rights. Such loss will be a capital loss and
will be considered long-term capital loss if the Rights were held for more
than one year.
EXERCISE OF THE RIGHTS AND ACQUISITION OF THE UNITS
No gain or loss will be recognized by a holder upon the purchase of the
Units pursuant to the exercise of the Rights.
TAX BASIS AND HOLDING PERIOD OF THE WARRANTS AND STOCK
If the Rights are exercised, the tax basis of the Units purchased thereby
will be equal to the sum of the price for the Units and the amount, if any,
allocated to the tax basis of the Rights as described above. The tax basis of
a Unit that includes a fraction of a Warrant will be allocated between the
shares of Stock and the
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applicable fraction of the Warrant comprising such Unit in proportion to their
respective fair market values on the date of issuance. The holding period of
the shares of Stock and Warrants acquired upon exercise of the Rights will
begin on the date such Rights are exercised.
SALE OF THE WARRANTS OR STOCK
Gain or loss will be recognized by a holder upon the sale of the Warrants or
shares of Stock in an amount equal to the difference between the amount
realized on the sale and the tax basis of the Warrants or shares of the Stock
sold. Such gain or loss will be a capital gain or loss and will be considered
long-term capital gain or loss if the holder's holding period for the Warrants
or shares of Stock is more than one year.
EXERCISE OF THE WARRANTS
No gain or loss will be recognized by a holder of Warrants upon the exercise
thereof. If the Warrants are exercised, the holder's tax basis in the shares
of Stock received pursuant to such exercise will be equal to the sum of the
tax basis of the Warrants exercised and the exercise price thereof.
LAPSE OF THE WARRANTS
If the Warrants are allowed to expire without exercise, loss will be
recognized by the holder thereof in an amount equal to such holder's tax basis
in the Warrants, as described above. Such loss will be capital loss and will
be considered long-term capital loss if the holder's holding period for the
Warrants is more than one year.
CONSTRUCTIVE DISTRIBUTIONS WITH RESPECT TO THE WARRANTS
Under Section 305 of the Code, adjustments to the exercise price or
conversion ratio of the Warrants which may occur under certain circumstances,
or the failure to make such adjustments, may result in the receipt of taxable
constructive dividends by a Warrant holder to the extent of the Company's
current or accumulated earnings and profits, regardless of whether there is a
distribution of cash or property.
DISTRIBUTIONS ON THE STOCK ACQUIRED THROUGH THE EXERCISE OF RIGHTS OR WARRANTS
A holder of Stock who receives a distribution thereon will be treated as
having received, on the dividend payment date, a dividend taxable as ordinary
income to the extent of the Company's current and accumulated earnings and
profits allocable to such stock in the year in which such distribution is
made. Corporate holders will generally be eligible for the dividends received
deduction as set forth in Section 243 of the Code with respect to
distributions that constitute dividends. There can be no assurance that the
Company will have sufficient earnings and profits to make any distributions
treated as dividends under the Code, and the Company does not presently
anticipate the payment of cash dividends in the foreseeable future. The amount
of any distribution described above will be the amount of cash plus the fair
market value of any property received. To the extent that the amount of any
distribution exceeds the Company's current and accumulated earnings and
profits allocable to such distribution, such excess will first be applied
against and reduce the recipient's adjusted tax basis in the shares with
respect to which such distribution is made and second, to the extent that such
excess is greater than the recipient's adjusted tax basis, generally will be
treated as capital gain.
Corporate holders of Stock otherwise entitled to the dividends received
deduction should consider the minimum holding period requirements of Section
246(c) of the Code, the "debt-financed portfolio stock" rules of Section 246A
of the Code, and the "extraordinary dividend" provisions of Section 1059 of
the Code, the effects of which are to reduce or eliminate the benefit of the
dividends received deductions with respect to Stock subject to such rules.
Corporate holders of Stock should also consider whether any dividends received
deduction allowed for dividends received on such Stock may either cause or
increase the holder's liability for the alternative minimum tax.
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BACKUP WITHHOLDING
A holder may be subject to backup withholding at the rate of 31% with
respect to distributions paid on Stock and gross proceeds from the sale or
exchange of Rights, Warrants or Stock unless such holder (a) is a corporation
or comes within certain other exempt categories and, when required,
demonstrates and/or certifies this fact, or (b) provides a correct taxpayer
identification number, along with certain required certifications, and
otherwise complies with applicable requirements of the backup withholding
rules.
Holders who receive such distributions or choose to transfer their Rights,
Warrants or Stock and who do not provide the appropriate withholding agent
with their correct taxpayer identification number in the manner required may
be subject to penalties imposed by the IRS in addition to backup withholding.
Any amount withheld under these rules is not an additional tax; it will be
creditable against the holder's U.S. federal income tax liability, provided
that the required information is furnished to the IRS.
Holders should consult their own tax advisers concerning tax consequences of
the acquisition, holding or disposition of the Rights, Stock and Warrants
under applicable state and local laws. Holders that are Non-U.S. Persons
should also consult their tax advisors regarding the United States and foreign
tax consequences of the acquisition, holding or disposition of the Rights,
Stock and Warrants.
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DESCRIPTION OF SECURITIES
The authorized capital stock of Arch consists of 75,000,000 shares of Common
Stock, $.01 par value per share, and 10,000,000 shares of Preferred Stock,
$.01 par value per share. As of , 1998, there were 21,067,110 outstanding
shares of Common Stock held by stockholders of record, and 250,000 shares
of Series C Preferred Stock held by 10 stockholders of record. Upon approval
of a proposal presented at the Special Meeting, and the filing of a
Certificate of Amendment with the Secretary of State of the State of Delaware,
the Arch Certificate will be amended to increase the number of authorized
shares of Common Stock to 365,000,000 shares, of which 65,000,000 will be
designated Class B Common Stock, and to authorize the issuance of 65,000,000
shares of Class B Common Stock $.01 par value per share.
The following summary of certain provisions of the Rights, Units, Warrants,
Common Stock, Class B Common Stock, Preferred Stock, Arch Certificate and Arch
By-laws is not intended to be complete and is qualified by reference to the
provisions of applicable law and to the Arch Certificate and Arch By-laws.
RIGHTS
The Rights consist of transferable Stock Purchase Rights evidenced by
Subscription Certificates. Each Right entitles its holder to purchase, for the
Subscription Price, one Unit in the manner described under "The Rights
Offering--Method of Exercise of Rights". The Rights will expire at 5:00 p.m.,
New York City time, on the Expiration Date.
UNITS
The Units offered in the Rights Offering will each consist of one share of
Stock and of one Warrant, assuming that no Adjustment is made. The Warrants
are immediately detachable, transferable and separately tradeable from the
Stock with which they are issued. The Units will be evidenced by separate
certificates for the Stock and the Warrants which comprise the Units.
WARRANTS
Each Warrant will entitle the holder to purchase one share of Common Stock
or (in the case of the Standby Purchasers under certain circumstances) one
share of Class B Common Stock at the Warrant Exercise Price of $8.19 per share
(unless an Adjustment is made), payable solely in cash and not by tender of
Stock. The Warrants are exercisable at any time, upon days' prior written
notice to Arch and tender of the Warrant Exercise Price, from date of issuance
through 5:00 p.m., New York City time, on September 1, 2003 provided that
holders shall be able to exercise their Warrants only if (i) (A) the Warrant
Shares Registration Statement (as defined in the Warrant Agreement) is then in
effect and Arch has delivered to each person exercising a Warrant a current
prospectus meeting the requirements of the Securities Act, or (B) the exercise
of the Warrants is exempt from the registration requirements of the Securities
Act, and (ii) the Warrant Shares (as defined therein) are qualified for sale
or exempt from qualification under the applicable securities laws of the
states in which the holder of the Warrants to be exercised, and, if
applicable, the persons to whom it is proposed that the Warrant Shares be
issued on exercise of the Warrants, reside. The Warrant Exercise Price and the
number and kind of shares purchasable upon exercise of the Warrants will be
subject to adjustment upon the occurrence of certain events including payment
of dividends, subdivision of shares, combination of outstanding shares into a
smaller number of shares of Stock, reclassification of outstanding shares of
Stock, distribution of capital stock of a subsidiary, and issuance of rights,
options, or warrants to Arch stockholders at a below market price. Generally,
no adjustment or payment in respect of any dividends will be made at any time.
Fractional shares will not be issued upon exercise of Warrants; instead, the
number of shares of Stock to be received will be rounded up or down to the
nearest whole number.
If an Adjustment is made, the Warrant Exercise Price will be equal to the
Subscription Price plus an amount reflecting compounding, from the Effective
Date until September 1, 2001, at a 20% per annum internal rate of return, over
the Subscription Price.
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The terms of the Standby Purchasers' Warrants and the warrants to be
distributed to Arch's stockholders will be identical, without material
exception, to the terms of the Warrants.
Each Warrant, including without limitation any Warrants that may be issued
upon partial exercise, replacement, or transfer of Warrants, will be evidenced
by, and subject to the terms of, a Warrant Certificate.
(the "Warrant Agent"), on behalf of Arch, will keep or cause to be
kept, at the principal office of the Warrant Agent designated for such
purpose, books for registration and transfer of the Warrant Certificates
issued hereunder by Arch. Arch and the Warrant Agent will be entitled to treat
the registered holder of any Warrant Certificate as the sole owner of the
Warrants represented by such Warrant Certificate for all purposes and will not
be bound to recognize any equitable or other claim or interest in such
Warrants on the part of any other person.
Arch may reduce the Warrant Exercise Price by any amount for any period of
time, if the period is at least 20 calendar days and if the reduction is
irrevocable during the period; provided that in no event may the Warrant
Exercise Price be less than the par value of Arch Common Stock.
Arch will deliver to the Warrant Agent, within 15 calendar days after it
files them with the Commission, copies of its annual report and other
information, documents, and other reports (or copies of such portions of any
of the foregoing as the Commission may by rules and regulations prescribe)
that Arch is required to file with the Commission. To the extent any such
information, documents, or other reports are required to be sent by Arch to
the holders of outstanding Common Stock, the Company will simultaneously send
copies thereof to the holders of Warrants.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share, to receive
dividends when and if declared by the Arch Board and, subject to any
participating or similar rights of any series of Preferred Stock at the time
outstanding, to share ratably in the assets of Arch legally available for
distribution to its stockholders in the event of liquidation. Holders of
Common Stock will have no preemptive, subscription, redemption or conversion
rights. All shares of Common Stock issued in the Merger will be fully paid and
nonassessable. The holders of Common Stock do not have cumulative voting
rights.
CLASS B COMMON STOCK
The Class B Common Stock will be identical in all respects to Common Stock,
except that holders of Class B Common Stock will not be entitled to vote in
the election of directors and will be entitled to 1/100th of a vote per share
with respect to all other matters. Except as otherwise required by law, Class
B Common Stock will vote as a single class together with the Common Stock.
The Class B Common Stock will only be issued to the Standby Purchasers to
the extent that such Standby Purchasers would own, in the aggregate, more than
49% of the shares of the securities of Arch generally entitled to vote in the
election of directors or more than 49% of the total voting power of the
securities of Arch, and any shares of Class B Common Stock transferred by any
Standby Purchaser to any transferee other than another Standby Purchaser will
automatically convert into an equal number of shares of Common Stock. Class B
Common Stock is being used so that the issuance of Common Stock to the Standby
Purchasers in the Merger will not trigger the change of control repurchase
provisions contained in the indentures governing certain notes previously
issued by Arch and ACI. See "Risk Factors--Uncertainties Related to the Merger
and the Reorganization--Certain Risks Associated with the Merger" and
"Description of Certain Arch Indebtedness".
PREFERRED STOCK
The Arch Board is authorized, without any further action by the stockholders
of Arch, to issue preferred stock from time to time in one or more series and
to fix, as to any such series, the voting rights, if any, applicable
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to such series and such other designations, preferences and special rights as
the Arch Board may determine, including dividend, conversion, redemption and
liquidation rights and preferences. Arch does not have any present plans to
issue shares of its preferred stock, other than the shares of Series C
Preferred Stock currently outstanding.
SERIES C PREFERRED STOCK
The Series C Preferred Stock has the rights and preferences summarized
below:
Conversion. The Series C Preferred Stock is convertible into Common Stock at
an initial conversion price of $5.50 per share, subject to certain
adjustments.
Dividends. The Series C Preferred Stock earns dividends at an annual rate of
8.0% payable when declared quarterly in cash or, at Arch's option, through the
issuance of shares of Common Stock valued at 95% of the then prevailing market
price or, if not paid quarterly, accumulating and payable upon redemption or
conversion of the Series C Preferred Stock or liquidation of Arch.
Voting Rights. So long as at least 50% of the Series C Preferred Stock
remains outstanding, the holders of the Series C Preferred Stock have the
right, voting as a separate class, to designate one member of the Boards of
Directors of Arch and ACI and such director has the right to be a member of
any committee of such Board of Directors. On all other matters, the Series C
Preferred Stock votes as a single class with the Common Stock. Each share of
Series C Preferred Stock is currently entitled to 18 2/9 votes.
Redemption. The Series C Preferred Stock permits the holders in 2005 to
require Arch, at Arch's option, either to redeem the Series C Preferred Stock,
for either cash or convert such shares into Common Stock valued at 95% of the
then prevailing market price of Common Stock and is subject to redemption for
cash or conversion into Arch's Common Stock at ACI's option in certain
circumstances.
Liquidation Preference. Upon liquidation, dissolution or winding up of Arch,
the holders of Series C Preferred Stock will be entitled, before any
distribution or payment is made upon any Common Stock, to be paid (i) $100.00
per share of Series C Preferred Stock (subject to certain adjustments), plus
(ii) accrued and unpaid dividends on such shares of Series C Preferred Stock
before any amounts paid to the holders of shares of Common Stock. In the event
that the assets of Arch are insufficient to permit full payment to the holders
of Series C Preferred Stock as provided above, then the assets will be
distributed pro rata among the holders of the Series C Preferred Stock.
FOREIGN OWNERSHIP RESTRICTIONS
Under the Communications Act, no more than 25% of Arch capital stock can be
owned or voted by aliens or their representatives, a foreign government or its
representative or a foreign corporation. See "Industry Overview--Regulation".
Accordingly, the Arch Certificate provides that Arch may redeem outstanding
shares of its stock from certain holders if the continued ownership of such
stock by such holders (because of their foreign citizenship or otherwise)
would place the FCC licenses held by Arch in jeopardy. The Arch Certificate
provides that required redemptions, if any, will be made at a price per share
equal to the lesser of the Fair Market Value of the shares (as defined in the
Arch Certificate) or, if such shares were purchased within one year prior to
the redemption, the purchase price of such shares.
ANTI-TAKEOVER PROVISIONS
Certain provisions of Delaware law and the Arch Certificate and Arch By-Laws
may have the effect of delaying, making more difficult or preventing a change
in control or acquisition of Arch by means of a tender offer, a proxy contest
or otherwise. These provisions, as summarized below, are expected to
discourage certain types of coercive takeover practices and inadequate
takeover bids and to encourage persons seeking to acquire
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control of Arch first to negotiate with Arch. Arch believes that the benefits
of increased protection of Arch's potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or restructure
Arch outweigh the disadvantages of discouraging such proposals because, among
other things, negotiations with respect to such proposals could result in an
improvement of their terms.
RIGHTS PLAN
Arch has a stockholders rights plan (the "Preferred Stock Rights Plan")
pursuant to which each outstanding share of Common Stock has attached to it
one preferred stock purchase right (a "Purchase Right") to purchase from Arch
a unit (a "Unit") consisting of one one-thousandth of a share of Series B
Preferred stock at a cash purchase price of $150.00 per Unit, subject to
adjustment. Pursuant to the Preferred Stock Rights Plan, the Purchase Rights
automatically attach to and trade together with each share of Common Stock.
The Purchase Rights are not exercisable or transferable separately from the
shares of Common Stock to which they are attached until the earlier of (i) ten
business days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more (up to 33%
in certain specified circumstances) of the outstanding shares of the Common
Stock (a "Stock Acquisition Date"), or (ii) ten business days following the
commencement of a tender offer or exchange offer that would result in a person
or group individually owning 30% or more of then outstanding shares of Common
Stock.
In the event that any person or entity becomes an Acquiring Person (except
pursuant to an offer for all outstanding shares of Common Stock which Arch's
independent directors determine to be fair to, and in the best interests of,
Arch's stockholders), each holder of a Purchase Right other than the Acquiring
Person will thereafter have the right to receive, upon exercise, that number
of shares of Stock which equals the exercise price of the Purchase Right
divided by one-half of the current market price of the Common Stock at the
Stock Acquisition Date. However, in any such event, all Purchase Rights that
are beneficially owned by an Acquiring Person shall be null and void.
In the event that a Stock Acquisition Date occurs and (i) Arch is acquired
in a merger or other business combination transaction in which Arch is not the
surviving corporation or the Common Stock is changed or exchanged (other than
a merger that follows an offer determined to be fair by Arch's independent
directors as described above) or (ii) 50% or more of Arch's assets or earning
power is sold or transferred, each holder of a Purchase Right (except Purchase
Rights which previously have been voided as described above) shall thereafter
have the right to receive, upon exercise, that number of shares of common
stock of the acquiring company which equals the exercise price of the Purchase
Rights divided by one-half of the current market price of such common stock at
the Stock Acquisition Date.
The Purchase Rights are not currently exercisable. In connection with the
execution of the Merger Agreement, Arch amended the Preferred Stock Rights
Plan to permit each Standby Purchaser to acquire, without becoming an
Acquiring Person, up to the sum of (i) the number of shares distributed to it
from the Directly Distributed Creditor Stock Pool, (ii) the number of shares
purchased by it pursuant to the exercise of Purchase Rights, (iii) the number
of shares purchased directly pursuant to the Standby Purchase Agreements and
(iv) 5% of the outstanding Stock (but in no event more than a total of 33%,
27%, 26% or 15.5% of such outstanding stock in the case of W.R. Huff,
Whippoorwill, Credit Suisse First Boston Corporation and Northwestern Mutual
and their affiliates, respectively). The Amended Preferred Stock Rights Plan
further provides that the Standby Purchasers will not be deemed to be a group
for purposes of the Preferred Stock Rights Plan solely because of performance
of their commitments under the Standby Purchase Agreements.
CLASSIFIED BOARD OF DIRECTORS
The Arch Certificate and Arch By-laws provide that the Arch Board will be
divided into three classes, with the terms of each class expiring in a
different year. The Arch By-laws provide that the number of directors will
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be fixed from time to time exclusively by the Arch Board, but shall consist of
not more than 15 nor less than three directors. A majority of the Arch Board
then in office has the sole authority to fill in any vacancies on the Arch
Board. The Arch Certificate provides that directors may be removed only by the
affirmative vote of holders of at least 80% of the voting power of all then
outstanding shares of stock, voting together as a single class.
STOCKHOLDER ACTIONS AND MEETINGS
The Arch Certificate provides that stockholder action can be taken only at
an annual or special meeting of stockholders and prohibits stockholder action
by written consent in lieu of a meeting. The Arch Certificate and Arch By-Laws
provide that special meetings of stockholders can be called by the Chairman of
the Arch Board, pursuant to a resolution approved by a majority of the total
number of directors which Arch would have if there were no vacancies on the
Arch Board, or by stockholders owning at least 20% of the stock entitled to
vote at the meeting. The business permitted to be conducted at any special
meeting of stockholders is limited to the business brought before the meeting
by the Chairman of the Arch Board, or at the request of a majority of the
members of the Arch Board, or as specified in the stockholders' call for a
meeting. The Arch By-laws set forth an advance notice procedure with regard to
the nomination, other than by or at the direction of the Arch Board, of
candidates for election as directors. The Arch By-laws provide that any
stockholder entitled to vote in the election of directors generally may
nominate one or more persons for election as directors only if written notice
of such stockholder's intent to make such nomination or nominations has been
given to the Secretary of Arch not later than 80 days prior to the date of any
annual or special meeting. In the event that the date of such annual or
special meeting was not publicly announced by Arch more than 90 days prior to
the meeting, notice from the stockholder must be delivered to the Secretary of
Arch not later than the close of business on the tenth day following the day
on which such announcement of the date of the meeting was communicated to
stockholders. The notice must contain certain information about the proposed
nominee as would be required to be included in a proxy statement filed
pursuant to the Commission's proxy rules had the nominee been nominated by the
Arch Board. The notice must also contain the consent of each nominee to serve
as a director of Arch if so elected and certain information about the
stockholder proposing to nominate such nominee.
AMENDMENT OF CERTAIN PROVISIONS OF THE ARCH CERTIFICATE AND ARCH BY-LAWS
The Arch Certificate requires the affirmative vote of the holders of at
least 80% of the voting power of all then outstanding shares of stock, voting
together as a single class, to amend certain provisions of the Arch
Certificate, including provisions relating to the removal of directors, the
prohibition on stockholder action by written consent in lieu of a meeting, the
procedural requirements of stockholder meetings and the adoption, amendment
and repeal of certain articles of the Arch By-laws.
CONSIDERATION OF NON-ECONOMIC FACTORS IN ACQUISITIONS
The Arch Certificate empowers the Arch Board, when considering a tender
offer or merger or acquisition proposal, to take into account factors in
addition to potential economic benefits to stockholders. Such factors may
include: (i) comparison of the proposed consideration to be received by
stockholders in relation to the then current market price of the capital
stock, the estimated current value of Arch in a freely negotiated transaction,
and the estimated future value of Arch as an independent entity; (ii) the
impact of such a transaction on the subscribers and employees of Arch and its
effect on the communities in which Arch operates; and (iii) the ability of
Arch to fulfill its objectives under applicable statutes and regulations.
RESTRICTIONS ON CERTAIN PURCHASES OF STOCK BY ARCH
The Arch Certificate prohibits Arch from repurchasing any shares of Arch's
stock from any person, entity or group that beneficially owns 5% of more of
Arch's then outstanding voting stock at a price exceeding the average closing
price for the twenty trading business days prior to the purchase date, unless
a majority of Arch's Disinterested Stockholders approves the transaction.
"Disinterested Stockholders" means each holder of less than 5% of the voting
power of Arch. This restriction on purchases by Arch does not apply to any
offer to
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purchase a class of Arch's stock which is made on the same terms and
conditions to all holders of the class of stock, to any purchase of stock
owned by such a 5% stockholder occurring more than two years after such
stockholder's last acquisition of Arch's stock, to any purchase of Arch's
stock in accordance with the terms of any stock option or employee benefit
plan, or any purchase at prevailing marketing prices pursuant to a stock
repurchase program.
"BLANK CHECK" PREFERRED STOCK
The Arch Board is authorized, without any further action by the stockholders
of Arch, to issue preferred stock from time to time in one or more series and
to fix, as to any such series, the voting rights, if any, applicable to such
series and such other designations, preferences and special rights as the Arch
Board may determine, including dividend, conversion, redemption and
liquidation rights and preferences. The issuance of preferred stock, while
providing desirable flexibility in connection with possible financings,
acquisitions and other corporate purposes, could, among other things,
adversely affect the voting power of the holders of Common Stock and, under
certain circumstances, be used as a means of discouraging, delaying or
preventing a change of control in Arch.
DELAWARE ANTI-TAKEOVER STATUTE
Section 203 of the DGCL is applicable to publicly held corporations
organized under the laws of Delaware, including Arch. Subject to certain
exceptions set forth therein, Section 203 of the DGCL provides that a
corporation shall not engage in any business combination with any "interested
stockholder" for a three-year period following the date that such stockholder
becomes an interested stockholder unless (a) prior to such date, the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder, (b) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding certain shares) or (c) on or
subsequent to such date, the business combination is approved by the board of
directors of the corporation and by the affirmative vote of at least 66 2/3%
of the outstanding voting stock which is not owned by the interested
stockholder. Except as specified therein, an interested stockholder is defined
to mean any person that (i) is the owner of 15% or more of the outstanding
voting stock of the corporation or (ii) is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting stock
of the corporation at any time within three years immediately prior to the
relevant date and the affiliates and associates of such person referred to in
(i) or (ii) of this sentence. Under certain circumstances, Section 203 of the
DGCL makes it more difficult for an interested stockholder to effect various
business combinations with a corporation for a three-year period, although the
stockholders may, by adopting an amendment to the corporation's certificate of
incorporation or by-laws, elect not to be governed by this section, effective
twelve months after adoption. The Arch Certificate and the Arch By-laws do not
exclude Arch from the restrictions imposed under Section 203 of the DGCL. It
is anticipated that the provisions of Section 203 of the DGCL may encourage
companies interested in acquiring Arch to negotiate in advance with the Arch
Board.
DIRECTOR LIABILITY AND INDEMNIFICATION
Under the DGCL, a corporation has the power to indemnify any director or
officer against expenses, judgments, fines and settlements incurred in a
proceeding, other than an action by or in the right of the corporation if the
person acted in good faith and in a manner that the person reasonably believed
to be in the best interests of the corporation or not opposed to the best
interests of the corporation, and, in the case of a criminal proceeding, had
no reason to believe the conduct of the person was unlawful. In the case of an
action by or in the right of the corporation, the corporation has the power to
indemnify any officer or director against expenses incurred in defending or
settling the action if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of
the corporation; provided, however, that no indemnification may be made when a
person is adjudged liable to the corporation, unless a court determines such
person is entitled to indemnity for expenses, and then such indemnification
may be made only
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to the extent that such court shall determine. The DGCL requires that to the
extent an officer or director of a corporation is successful on the merits or
otherwise in defense of any third-party or derivative proceeding, or in
defense of any claim, issue or matter therein, the corporation must indemnify
the officer or director against expenses incurred in connection therewith.
Under the DGCL, a corporation may adopt a provision in its certificate of
incorporation eliminating or limiting the personal liability of a director to
the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director; provided, however, that such provision may not
eliminate or limit director monetary liability for: (i) breaches of the
director's duty of loyalty to the corporation or its stockholders; (ii) acts
or omissions not in good faith or involving intentional misconduct or knowing
violations of laws; (iii) the payment of unlawful dividends or unlawful stock
repurchases or redemptions; or (iv) transactions in which the director
received an improper personal benefit.
The Arch Certificate provides that Arch will, to the fullest extent
permitted by Section 145 of the DGCL, indemnify all persons whom it has the
power to indemnify against all of the costs, expenses and liabilities incurred
by them by reason of having been officers or directors of Arch, or any
subsidiary of Arch, or of any other corporation for which such persons acted
as officer or director at the request of Arch.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The Bank of New
York, 101 Barclay Street, New York, New York 10286.
REGISTRATION RIGHTS
Arch is granting certain registration rights to the Unsecured Creditors in
connection with the proposed Merger. See "The Merger Agreement--Related
Agreements--Registration Rights Agreements". The holders of Series C Preferred
Stock and the former stockholders of PageCall are also entitled to certain
registration rights. See "Business--Arch--Investments in Narrowband PCS
Licenses".
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DESCRIPTION OF CERTAIN ARCH INDEBTEDNESS
API CREDIT FACILITY
API, The Bank of New York, Royal Bank of Canada and Toronto Dominion
(Texas), Inc., as managing agents, together with certain other lenders are
parties to the API Credit Facility in the current total amount of $400.0
million, consisting of the $175.0 million reducing revolving Tranche A
Facility, (ii) the $100.0 million 364-day revolving credit Tranche B Facility
and (iii) the $125.0 million Tranche C Facility.
The Tranche A Facility is subject to scheduled quarterly reductions
commencing on September 30, 2000 and will mature on June 30, 2005. The term
loan portion of the Tranche B Facility will be amortized in quarterly
installments commencing September 30, 2000, with an ultimate maturity date of
June 30, 2005. The Tranche C Facility will be amortized in annual installments
commencing December 31, 1999, with an ultimate maturity date of June 30, 2006.
API's obligations under the API Credit Facility are secured by its pledge of
the capital stock of the former ACE operating subsidiaries. The API Credit
Facility is guaranteed by Arch, ACI and the former ACE operating subsidiaries.
Arch's guarantee is secured by a pledge of Arch's stock and notes in ACI, and
the guarantees of the former ACE operating subsidiaries are secured by a
security interest in those assets of such subsidiaries which were pledged
under ACE's former credit facility. Lenders representing 40% of the API Credit
Facility have the right to require ACI and its subsidiaries to grant security
interests in certain additional assets not currently pledged thereunder,
subject to granting a ratable security interest to holders of the ACI 9 1/2%
Notes and the ACI 14% Notes.
Borrowings under the API Credit Facility bear interest based on a reference
rate equal to either The Bank of New York's Alternate Base Rate or The Bank of
New York's LIBOR rate, in each case plus a margin based on ACI's or API's
ratio of total debt to annualized EBITDA.
The API Credit Facility requires payment of fees on the daily average amount
available to be borrowed under the Tranche A Facility and the Tranche B
Facility, which fees vary depending on ACI's or API's ratio of total debt to
annualized EBITDA.
The API Credit Facility contains restrictions that limit, among other
things: additional indebtedness and encumbrances on assets; cash dividends and
other distributions; mergers and sales of assets; the repurchase or redemption
of capital stock; investments; acquisitions that exceed certain dollar
limitations without the lenders' prior approval; and prepayment of
indebtedness other than indebtedness under the API Credit Facility. In
addition, the API Credit Facility requires Arch and its subsidiaries to meet
certain financial covenants, including covenants with respect to ratios of
EBITDA to fixed charges, EBITDA to debt service, EBITDA to interest service
and total indebtedness to EBITDA.
Effective as of August 18, 1998, API, The Bank of New York, Toronto Dominion
(Texas), Inc., Royal Bank of Canada and Barclays Bank, PLC executed a
commitment letter for the API Credit Facility Increase which, subject to the
approval of all API lenders, will increase the API Credit Facility from $400.0
million to $600.0 million. The $200.0 million increase will be allocated among
the senior credit facilities as follows: (i) the Tranche A Facility will
increase by $25.0 million to $150.0 million, (ii) the Tranche B Facility will
increase by $25.0 million to $125.0 million and (iii) the Tranche C Facility
will increase by $150.0 million to $275.0 million. All other terms and
conditions of the API Credit Facility increase will remain unchanged except
for minor changes to ACI's permitted ratio of total debt to annualized EBITDA
and the margins on which the interest rates on borrowings are based. See "Risk
Factors--Risks Related to Arch--Lender Approval and Merger Cash Requirements".
BRIDGE FACILITY
ACI and The Bear Stearns Companies, Inc. (an affiliate of Bear Stearns), The
Bank of New York, TD Securities (USA) Inc. and Royal Bank of Canada
(collectively, the "Bridge Lenders") have executed a
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commitment letter for the Bridge Facility on the following terms. Under the
Bridge Facility, a $120.0 million term loan will be available to ACI in a
single drawing upon the closing of the Merger (the "Bridge Loan"). The Bridge
Loan will bear interest equal to the LIBOR rate plus 500 basis points
(currently a total of %), increasing by 50 basis points each quarter after
funding to a maximum rate of 18%. If not paid on or before maturity 180 days
after the closing of the Merger, the Bridge Loan will convert into a term loan
(the "Term Loan") due in December 2006. The Term Loan will bear interest at
the interest rate under the Bridge Facility at the maturity of the Bridge Loan
plus 50 basis points increasing by 50 basis points each quarter after funding
to a maximum rate of 18%. Arch will be required to grant warrants (the "Bridge
Warrants") to the Bridge Lenders for the purchase of 5.0% of the Common Stock
on a fully diluted basis if the Bridge Loan has not been repaid prior to the
Bridge Loan maturity date. Upon notice from the Bridge Lenders given (a) prior
to the Merger but subsequent to the earlier to occur of (i) January 29, 1999
and (ii) the 30th day prior to the targeted date of the Merger or (b) at any
time after the funding of the Bridge Loan and prior to the Bridge Loan
maturity date, ACI will issue and sell Planned ACI Notes in an amount at least
sufficient to substitute for or refinance the Bridge Loans on such terms and
conditions as may be specified by the Bridge Lenders, provided however that
the interest rate on the Planned ACI Notes shall be determined by the Bridge
Lenders in light of the then prevailing market conditions, but in no event
shall the yield on the Planned ACI Notes exceed a rate equal to an agreed upon
margin over the yield to worst on the ACI 12 3/4% Notes. In the event that
Planned ACI Notes are issued after the Merger, the Bridge Lenders may direct
Arch to issue all or a portion of the Bridge Warrants to the purchasers of the
Planned ACI Notes rather than the Bridge Lenders. The Bridge Facility requires
payment of certain fees to the Bridge Lenders. The fees will vary based on the
amount and timing of the Bridge Facility and the Bridge Loan. The Bridge
Lenders have agreed to refund a portion of the fees if the Bridge Loan is
repaid prior to maturity. In addition, ACI has agreed to permit the Bridge
Lenders to act as placement agents for the conversion of the Bridge Loan into
the Term Loan or the issuance of the Planned ACI Notes for a fee equal to 3.0%
of the principal amount so converted or issued.
The Bridge Facility contains restrictions that are substantially similar to
those contained in the API Credit Facility, including without limitation
restrictions that, among other things, limit additional indebtedness and
encumbrances on assets, cash dividends and other distributions; mergers and
sales of assets; the repurchase or redemption of capital stock; investments;
acquisitions and mergers; and transactions with affiliates or between Arch and
its subsidiaries. In addition, the Bridge Facility requires ACI and its
subsidiaries to meet certain financial covenants, including covenants with
respect to ratios of EBITDA to fixed charges, EBITDA to debt service, EBITDA
to interest expense and total indebtedness to EBITDA.
ACI 9 1/2% NOTES
ACI has outstanding $125.0 million in aggregate principal amount of ACI 9
1/2% Notes. The ACI 9 1/2% Notes accrue interest at the rate of 9.5% per
annum, payable semi-annually on February 1 and August 1. The ACI 9 1/2% Notes
are scheduled to mature on February 1, 2004.
ACI, at its option, may redeem the ACI 9 1/2% Notes as a whole, or from time
to time in part, on or after February 1, 1999 at the following redemption
prices (expressed as percentages of the principal amount thereof) if redeemed
during the twelve-month period beginning February 1 of the years indicated
below (in each case together with accrued and unpaid interest to the
redemption date):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1999................................ 104.750%
2000................................ 103.167%
2001................................ 101.583%
2002 and thereafter................. 100.000%
</TABLE>
The covenants in the indenture under which the ACI 9 1/2% Notes are
outstanding (the "ACI 9 1/2% Notes Indenture") limit the ability of ACI's
subsidiaries to pay dividends to ACI. Additionally, the ACI 9 1/2% Notes
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Indenture imposes limitations on the incurrence of indebtedness, whether
secured or unsecured, by ACI and its subsidiaries, on the disposition of
assets, on transactions with affiliates, on guarantees of the obligations of
ACI by any of its subsidiaries, on the sale or issuance of stock by the
subsidiaries of ACI and on any merger, consolidation or sale of substantially
all of the assets of ACI.
Upon the occurrence of a "Change of Control", as defined in the ACI 9 1/2%
Notes Indenture, each holder of ACI 9 1/2% Notes has the right to require that
ACI repurchase such holder's ACI 9 1/2% Notes at a repurchase price in cash
equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of repurchase. The following constitute a Change
of Control under the ACI 9 1/2% Notes Indenture: (i) the acquisition by a
person or group of beneficial ownership of the majority of the securities of
ACI or Arch having the right to vote in the election of directors; (ii)
certain changes in the boards of directors of ACI or Arch; (iii) the sale or
transfer of all or substantially all of the assets of ACI or (iv) the merger
or consolidation of ACI or Arch with or into another corporation with the
effect that a person or group shall have become the beneficial owner of the
majority of the securities of the surviving corporation having the right to
vote in the election of directors.
The following constitute "Events of Default" under the ACI 9 1/2% Notes
Indenture: (i) a default in the payment of any installment of interest upon
any of the ACI 9 1/2% Notes as and when the same shall become due and payable,
and continuance of such default for a period of 30 days; (ii) a default in the
payment of all or any part of the principal of, or premium, if any, on any of
the ACI 9 1/2% Notes as and when the same shall become due and payable either
at maturity, upon redemption or repurchase, by declaration or otherwise; (iii)
the failure on the part of ACI duly to observe or perform any other of the
covenants or agreements on the part of ACI in the ACI 9 1/2% Notes or in the
ACI 9 1/2% Notes Indenture for a period or 60 days after the date on which
written notice specifying such failure, stating that such notice is a "Notice
of Default" and demanding that ACI remedy the same, shall have been given by
registered or certified mail, return receipt requested, to ACI by the Trustee,
or to ACI and the Trustee by the holders of at least 25% in aggregate
principal amount of the ACI 9 1/2% Notes at the time outstanding; (iv) certain
events of bankruptcy, insolvency or reorganization in respect of ACI or any of
its restricted subsidiaries; (v) (A) a default in payment of the principal of,
premium, if any, or interest on any indebtedness for borrowed money of ACI or
any restricted subsidiary in principal amount aggregating $5.0 million or
more, whether such indebtedness now exists or is hereafter created, when the
same shall become due and payable and continuation of such default after any
applicable period of grace or (B) an event of default as defined in any
indenture or instrument evidencing or under which ACI or any restricted
subsidiary has at the date of the indenture or shall thereafter have
outstanding at least $5.0 million aggregate principal amount of indebtedness
for borrowed money shall happen and be continuing and such indebtedness shall
have been accelerated so that the same shall be or become due and payable, and
in any case referred to in the foregoing clause (A) or (B) such non-payment or
acceleration shall not be rescinded or annulled within 10 days after notice of
such default in payment or event of default shall have been given to ACI by
the Trustee (if such event is known to it), or to ACI and the Trustee by the
holders of at least 25% in aggregate principal amount of the ACI 9 1/2% Notes
at the time outstanding; (vi) one or more judgments, orders or decrees for the
payment of money (provided that the amount of such money judgment shall be
calculated net of any insurance coverage that the insurer has irrevocably
acknowledged to ACI as covering such money judgment in whole or in part) in
excess of $5.0 million, whether individually or in an aggregate amount, shall
be entered against ACI or any restricted subsidiary of ACI or any of their
respective properties and shall not be discharged and there shall have been a
period of 60 days during which a stay of enforcement of such judgment or
order, by reason of pending appeal or otherwise, shall not be in effect; or
(vii) the holder of any indebtedness of ACI or any restricted subsidiary
aggregating at least $5.0 million in principal amount that is secured by a
lien on the property or assets of ACI or any restricted subsidiary (or any
agent of such holder of such debt or the trustee or other representative then
acting under any indenture or other instrument under which such debt is
outstanding) shall commence any proceeding, or take any action (including by
way of set-off) to retain in satisfaction of such debt or to collect on,
seize, dispose of or apply in satisfaction of such debt, property or assets of
ACI or any of its restricted subsidiaries having a fair market value in excess
of $5.0 million individually or in the aggregate (including funds on deposit
or held pursuant to lock-box or other similar arrangements).
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ACI 14% NOTES
ACI has outstanding $100.0 million in aggregate principal amount of ACI 14%
Notes. The ACI 14% Notes accrue interest at the rate of ACI 14% per annum,
payable semi-annually on May 1 and November. The ACI 14% Notes are scheduled
to mature on November 1, 2004.
ACI may, at its option, redeem the ACI 14% Notes as a whole, or from time to
time in part, at the redemption prices (expressed as percentages of the
principal amount thereof) if redeemed during the twelve-month period beginning
November 1 of the years indicated below (in each case together with accrued
and unpaid interest to the redemption date):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1999.............................. 107.000%
2000.............................. 104.625%
2001.............................. 102.375%
2002 and thereafter............... 100.000%
</TABLE>
The covenants in the indenture under which the ACI 14% Notes are outstanding
(the "ACI 14% Notes Indenture") limit the ability of ACI and its subsidiaries
to pay dividends to Arch. Additionally, the ACI 14% Notes Indenture imposes
limitations on the incurrence of indebtedness, whether secured or unsecured,
by ACI and its subsidiaries, on the disposition of assets, on transactions
with affiliates, on guarantees of the obligations of ACI by any of its
subsidiaries, on the sale or issuance of stock by the subsidiaries of ACI and
on the merger, consolidation or sale of substantially all of the assets of
ACI.
Upon the occurrence of a "Change of Control", as defined in the ACI 14%
Notes Indenture, each holder of ACI 14% Notes has the right to require that
ACI repurchase such holder's ACI 14% Notes at a repurchase price in cash equal
to 102% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of repurchase. The following constitute a Change of Control
under the ACI 14% Notes Indenture: (i) the acquisition by a person or group of
beneficial ownership of the majority of the securities of ACI or Arch having
the right to vote in the election of directors; (ii) certain changes in the
boards of directors of ACI or Arch; (iii) the sale or transfer of all or
substantially all of the assets of ACI or (iv) the merger or consolidation of
ACI or Arch with or into another corporation or the merger of another
corporation with or into ACI or Arch with the effect that (A) a person or
group shall have become the beneficial owner of the majority securities of the
surviving corporation having the right to vote in the election of directors or
(B) the securities of ACI or Arch outstanding immediately prior to such
transaction and which represent 100% of the voting securities having the right
to vote in the election of directors are exchanged for cash, securities or
property unless such securities are changed into or exchanged for securities
of the surviving corporation representing a majority of the voting securities
having the right to vote in the election of directors.
The following constitute "Events of Default" under the ACI 14% Notes
Indenture: (i) a default in the payment of any installment of interest upon
any of the ACI 14% Notes as and when the same shall become due and payable,
and continuance of such default for a period of 30 days; (ii) a default in the
payment of all or any part of the principal of, or premium, if any, on any of
the ACI 14% Notes as and when the same shall become due and payable either at
maturity, upon any redemption or repurchase, by declaration or otherwise;
(iii) the failure of ACI to comply with the covenants limiting mergers and
sales of assets; (iv) the failure of ACI to comply with certain other
covenants limiting its ability to incur debt, make restricted payments, impose
dividend restrictions on its subsidiaries, dispose of assets, transact with
affiliates, grant liens, obtain guarantees from its subsidiaries, permit its
subsidiaries to issue stock or suffer a change of control, for a period of 30
days after notice; (v) the failure on the part of ACI duly to observe or
perform any other of the covenants or agreements on the part of ACI in the ACI
14% Notes or in the ACI 14% Notes Indenture for a period of 60 days after the
date on which written notice specifying such failure, stating that such notice
is a "Notice of Default" and demanding that ACI remedy the same, shall have
been given by registered or certified mail, return receipt requested, to ACI
by the Trustee, or ACI and the Trustee by the holders of at least 25% in
aggregate principal amount of the ACI 14% Notes at the time outstanding; (vi)
certain events of bankruptcy, insolvency or reorganization in respect of
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ACI or any of its restricted subsidiaries; (vii) (A) a default in payment of
the principal of, premium if any, or interest on any indebtedness for borrowed
money of ACI or any restricted subsidiary in principal amount aggregating $5.0
million or more, whether such indebtedness now exists or is hereafter created,
when the same shall become due and payable and continuation of such default
after any applicable period of grace or (B) an event of default as defined in
any indenture or instrument evidencing or under which ACI or any restricted
subsidiary has at the date of the indenture of shall thereafter have
outstanding at least $5.0 million aggregate principal amount of indebtedness
for borrowed money shall happen and be continuing and such indebtedness shall
have been accelerated so that the same shall be or become due and payable, and
in any case referred to in the foregoing clause (A) or (B) such non-payment or
acceleration shall not be rescinded or annulled within 10 days after notice of
such default in payment or event of default shall have been given to ACI by
the Trustee (if such event is known to it), or to ACI and the Trustee by the
holders of at least 25% in aggregate principal amount of the ACI 14% Notes at
the time outstanding; (viii) one or more judgments, orders or decrees for the
payment of money (provided that the amount of such money judgment shall be
calculated net of any insurance coverage that the insurer has irrevocably
acknowledged to ACI as covering such money judgment in whole or in part) in
excess of $5.0 million, whether individually or in an aggregate amount, shall
be entered against ACI or any restricted subsidiary of ACI or any of their
respective properties and shall not be discharged and there shall have been a
period of 60 days during which a stay of enforcement of such judgment or
order, by reason of pending appeal or otherwise, shall not be in effect; or
(ix) the holder of any indebtedness of ACI or any restricted subsidiary
aggregating at least $5.0 million in principal amount that is secured by a
lien on the property or assets of ACI or any restricted subsidiary (or any
agent of such holder of such debt or the trustee or other representative then
acting under any indenture or other instrument under which such debt is
outstanding) shall commence any proceeding, or take any action (including by
way of set-off) to retain in satisfaction of such debt or to collect on,
seize, dispose of or apply in satisfaction of such debt, property or assets of
ACI or any of its restricted subsidiaries having a fair market value in excess
of $5.0 million individually or in the aggregate (including funds on deposit
or held pursuant to lock-box or other similar arrangements).
ACI 12 3/4% NOTES
ACI has outstanding $127.5 million in aggregate principal amount of ACI 12
3/4% Notes. The ACI 12 3/4% Notes accrue interest at the rate of 12.75% per
annum, payable semi-annually on January 1 and July 1. The ACI 12 3/4% Notes
are scheduled to mature on July 1, 2007.
ACI, at its option, may redeem the ACI 12 3/4% Notes as a whole, or from
time to time in part, on or after July 1, 2003 at the following redemption
prices (expressed as percentages of the principal amount thereof) if redeemed
during the twelve-month period beginning July 1 of the years indicated below
(in each case together with accrued and unpaid interest to the redemption
date):
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2003........................ 106.375%
2004........................ 104.250%
2005........................ 102.125%
2006 and thereafter......... 100.000%
</TABLE>
In addition, on or prior to July 1, 2001, ACI, at its option, may redeem up
to 35% of the original aggregate principal amount of the 12 3/4% Notes, with
the proceeds of a qualifying equity offering at a redemption price equal to
112.75% of the principal amount thereof, to the date of redemption provided
that, immediately after giving effect to such redemption, 12 3/4% Notes with
an aggregate principal amount of at least $84,500,000 remain outstanding. ACI
shall not, however, be obligated to redeem any 12 3/4% Notes with the proceeds
of any equity offering.
The covenants in the indenture under which the 12 3/4% Notes were issued
(the "ACI 12 3/4% Notes Indenture") limit the ability of ACI and its
subsidiaries to pay dividends. Additionally, the ACI 12 3/4% Notes Indenture
imposes limitations on the incurrence of indebtedness, whether secured or
unsecured, by ACI and its
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subsidiaries, on the occurrence of liens, on the disposition of assets, on
transactions with affiliates, on the sale or issuance of stock by the
subsidiaries of ACI and on the merger or consolidation of Arch and its
subsidiaries or sale of substantially all of the assets of Arch.
Upon the occurrence of a "Change of Control", as defined in the ACI 12 3/4%
Notes Indenture, each holder of 12 3/4% Notes has the right to require Arch to
repurchase such holder's 12 3/4% Notes at a repurchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
and Liquidated Damages (as defined therein), if any, to the date of
repurchase. The following constitute a Change of Control under the ACI 12 3/4%
Notes Indenture: (i) the acquisition by a person or group of beneficial
ownership of the majority of the voting power of all classes of voting stock
of ACI or Arch; (ii) the sale or transfer of all or substantially all of the
assets of Arch or ACI or the merger or consolidation of Arch or ACI with or
into another corporation with the effect that the outstanding voting stock of
Arch or ACI is converted into or exchanged for cash, securities or other
property other than certain transactions in which (A) the voting stock of Arch
or ACI is exchanged for or converted into either capital stock of the
transferee or survivor entity or, under limited circumstances, cash,
securities or other property and (B) no person or group shall have become the
beneficial owner of the majority of the securities of the surviving
corporation having the right to vote in the election of directors; (iii)
certain changes in the Arch Board; or (iv) Arch is liquidated or dissolved.
The following constitute "Events of Default" under the ACI 12 3/4% Notes
Indenture: (i) a default in the payment of any installment of interest upon
any of the 12 3/4% Notes as and when the same shall become due and payable,
and continuance of such default for a period of 30 days; (ii) a default in the
payment of all or any part of the principal of, or premium, if any, on any of
the 12 3/4% Notes as and when the same shall become due and payable either at
maturity, upon any redemption or repurchase, by declaration or otherwise;
(iii) the failure of ACI to comply with the covenants limiting mergers and
sales of assets; (iv) the failure of the part of ACI duly to observe or
perform any other of the covenants or agreements on the part of ACI in the 12
3/4% Notes or in the ACI 12 3/4% Notes Indenture for a period of 60 days after
the date on which written notice specifying such failure shall have been given
by registered or certified mail, return receipt requested, to ACI by the
Trustee, or ACI and the Trustee by the holders of at least 25% in aggregate
principal amount of the Arch Discount Notes at the time outstanding; (vi) (A)
a default in any payment when due at final maturity on any indebtedness for
borrowed money of ACI or any restricted subsidiary in principal amount
aggregating $5.0 million or (B) an event of default as defined in any
indenture or instrument evidencing or under which Arch or any restricted
subsidiary has outstanding at least $5.0 million aggregate principal amount of
indebtedness for borrowed money shall happen and such indebtedness shall have
been accelerated so that the same shall be or become due and payable prior to
the date on which it would otherwise become due and payable; (vii) one or more
judgments, orders or decrees for the payment of money in excess of $5.0
million, whether individually or in an aggregate amount, shall be entered
against ACI or any restricted subsidiary of Arch and shall not be discharged
and there shall have been a period of 60 days during which a stay of
enforcement of such judgment or order, by reason of pending appeal or
otherwise, shall not be in effect; (viii) the holder of any indebtedness of
Arch or any restricted subsidiary aggregating at least $5.0 million in
principal amount that is secured by a lien on the property or assets of ACI or
any restricted subsidiary shall notify the Trustee of the intended sale or
disposition of any assets of ACI of any restricted subsidiary that have been
pledged to or for the benefit of such holder or shall commence any proceeding,
or take any action to retain in satisfaction of such debt or to collect on,
seize, dispose of or apply in satisfaction of such debt, property or assets of
Arch or any of its restricted subsidiaries pursuant to the terms of any
agreement or instrument evidencing any such debt of Arch or any restricted
subsidiary or in accordance with applicable law; or (ix) certain events of
bankruptcy, insolvency or reorganization in respect of ACI or any of its
restricted subsidiaries.
ARCH DISCOUNT NOTES
In March 1996, Arch issued $467.4 million in aggregate principal amount at
maturity of Arch Discount Notes. The Arch Discount Notes are scheduled to
mature on March 15, 2008. The Arch Discount Notes were issued at a substantial
discount from the principal amount due at maturity. Interest does not accrue
on the Arch
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Discount Notes prior to March 15, 2001. Thereafter, interest on the Arch
Discount Notes will accrue at the rate of 10 7/8% per annum, payable semi-
annually on March 15 and September 15, commencing September 15, 2001.
Arch, at its option, may redeem the Arch Discount Notes as a whole or from
time to time in part at any time on or after March 15, 2001 at the following
redemption prices (expressed as percentages of principal amount) if redeemed
during the twelve month period beginning on March 15 of the years indicated
below (in each case together with accrued and unpaid interest to the
redemption date):
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2001........................ 104.078%
2002........................ 102.719%
2003........................ 101.359%
2004 and thereafter......... 100.000%
</TABLE>
In addition, on or prior to March 15, 1999, Arch, at its option, may redeem
the Arch Discount Notes, in part, with the proceeds of a qualifying equity
offering at a redemption price equal to 110.875% of the accreted value (as
defined therein) to the date of redemption provided that, immediately after
giving effect to such redemption, Arch Discount Notes with an aggregate
principal amount at maturity at least equal to 66 2/3% of the original
principal amount at maturity of the Arch Discount Notes remain outstanding.
Arch shall not, however, be obligated to redeem any Arch Discount Notes with
the proceeds of any equity offering.
The covenants in the indenture under which the Arch Discount Notes were
issued (the "Arch Discount Notes Indenture") limit the ability of Arch to pay
dividends to its stockholders. Additionally, the Arch Discount Notes Indenture
imposes limitations on the incurrence of indebtedness, whether secured or
unsecured, by Arch and its subsidiaries, on the disposition of assets, on the
occurrence of liens, on transactions with affiliates, on the sale or issuance
of stock by the subsidiaries of Arch and on the merger or consolidation of
Arch and its subsidiaries or sale of substantially all of the assets of Arch.
Upon the occurrence of a "Change of Control", as defined in the Arch
Discount Notes Indenture, each holder of Arch Discount Notes has the right to
require Arch to repurchase such holder's Arch Discount Notes at a repurchase
price in cash equal to 101% of the accrued principal amount thereof plus
accrued and unpaid interest, if any, to the date of repurchase. The following
constitute a Change of Control under the Arch Discount Notes Indenture: (i)
the acquisition by a person or group of beneficial ownership of the majority
of the securities of Arch having the right to vote in the election of
directors; (ii) certain changes in the Arch Board; (iii) the sale or transfer
of all or substantially all of the assets of Arch or the merger or
consolidation of Arch with or into another corporation with the effect that
the outstanding voting stock of Arch is converted into or exchanged for cash,
securities or other property other than certain transactions in which (i) the
voting stock of Arch is exchanged for or converted into either capital stock
of the transferee or survivor entity or, under limited circumstances, cash,
securities or other property and (ii) no person or group shall have become the
beneficial owner of the majority of the securities of the surviving
corporation having the right to vote in the election of directors.
The following constitute "Events of Default" under the Arch Discount Notes
Indenture: (i) a default in the payment of any installment of interest upon
any of the Arch Discount Notes as and when the same shall become due and
payable, and continuance of such default for a period of 30 days; (ii) a
default in the payment of all or any part of the principal of, or premium, if
any, on any of the Arch Discount Notes as and when the same shall become due
and payable either at maturity, upon any redemption or repurchase, by
declaration or otherwise; (iii) the failure of Arch to comply with the
covenants limiting mergers and sales of assets; (iv) the failure on the part
of Arch duly to observe or perform any other of the covenants or agreements on
the part of Arch in the Arch Discount Notes or in the Arch Discount Notes
Indenture for a period of 60 days after the date on which written notice
specifying such failure shall have been given by registered or certified mail,
return receipt requested, to Arch by the Trustee, or Arch and the Trustee by
the holders of at least 25% in aggregate principal amount of the Arch Discount
Notes at the time outstanding; (v) certain events of bankruptcy, insolvency or
reorganization in
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respect of Arch or any of its restricted subsidiaries; (vii) (A) a default in
any payment when due at final maturity on any indebtedness for borrowed money
of Arch or any restricted subsidiary in principal amount aggregating $5.0
million or (B) an event of default as defined in any indenture or instrument
evidencing or under which Arch or any restricted subsidiary has outstanding at
least $5.0 million aggregate principal amount of indebtedness for borrowed
money shall happen and such indebtedness shall have been accelerated so that
the same shall be or become due and payable prior to the date on which it
would otherwise become due and payable; (viii) one or more judgments, orders
or decrees for the payment of money in excess of $5.0 million, whether
individually or in an aggregate amount, shall be entered against Arch or any
restricted subsidiary of Arch and shall not be discharged and there shall have
been a period of 60 days during which a stay of enforcement of such judgment
or order, by reason of pending appeal or otherwise, shall not be in effect; or
(ix) the holder of any indebtedness of Arch or any restricted subsidiary
aggregating at least $5.0 million in principal amount that is secured by a
lien on the property or assets of Arch or any restricted subsidiary shall
notify the Trustee of the intended sale or disposition of any assets of Arch
of any restricted subsidiary that have been pledged to or for the benefit of
such holder or shall commence any proceeding, or take any action to retain in
satisfaction of such debt or to collect on, seize, dispose of or apply in
satisfaction of such debt, property or assets of Arch or any of its restricted
subsidiaries pursuant to the terms of any agreement or instrument evidencing
any such debt of Arch or any restricted subsidiary or in accordance with
applicable law.
ARCH CONVERTIBLE DEBENTURES
Arch has outstanding $13.4 million in principal amount of 6 3/4% Convertible
Subordinated Debentures due 2003 (the "Arch Convertible Debentures"). The Arch
Convertible Debentures accrue interest at the rate of 6.75% per annum, payable
semi-annually on June 1 and December 1. The Arch Convertible Debentures are
scheduled to mature on December 1, 2003. The principal amount of the Arch
Convertible Debentures is convertible into Common Stock at a conversion price
of $16.75 per share at any time prior to redemption or maturity.
The Arch Convertible Debentures may be redeemed at any time at the option of
Arch, in whole or from time to time in part, at the following redemption
prices (expressed as percentages of the principal amount thereof) if redeemed
during the twelve-month period beginning December 1 of the years indicated
below (in each case together with accrued and unpaid interest to the
redemption date):
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
1997........................ 104.050%
1998........................ 103.375%
1999........................ 102.700%
2000........................ 102.025%
2001........................ 101.350%
2002........................ 100.675%
2003 and thereafter......... 100.000%
</TABLE>
Upon the occurrence of a "Fundamental Change", as defined in the indenture
under which the Arch Convertible Debentures were issued (the "Arch Debenture
Indenture"), each holder of Arch Convertible Debentures has the right, at the
holder's option, to require Arch to repurchase all of such holder's Arch
Convertible Debentures, or any portion thereof, at a price equal to 100% of
the principal amount of the Arch Convertible Debentures, plus accrued interest
to the repurchase date. The following constitute a Fundamental Change under
the Arch Debenture Indenture: (i) the acquisition by a person or group of
beneficial ownership of capital stock of Arch entitled to exercise more than
50% of the total voting power of all capital stock (unless such beneficial
ownership is approved by the board of directors of Arch prior to such person
or group acquiring such beneficial ownership); (ii) certain changes in the
Arch Board; (iii) a share exchange of Arch with, or the merger of Arch into,
any other person, any merger of another person into Arch, or any sale or
transfer of all or substantially all of the assets of Arch to another person
(subject in each case to certain exceptions); (iv) the
153
<PAGE>
purchase by Arch of beneficial ownership in shares of its Common Stock if such
purchase would result in a default under any senior debt agreements to which
Arch is a party; or (v) certain distributions by Arch of Stock.
The Arch Convertible Debentures represent senior unsecured obligations of
Arch and are subordinated to "Senior Indebtedness" of Arch, as defined in the
Arch Debenture Indenture. The Arch Debenture Indenture does not contain any
limitation or restriction on the incurrence of Senior Indebtedness or other
indebtedness or securities of Arch or its subsidiaries.
The following constitute "Events of Default" under the Arch Debenture
Indenture: (i) a default in the payment of any interest on the Arch
Convertible Debentures that continues for 30 days after the date when due;
(ii) a default in the payment of principal of or premium, if any, on any Arch
Convertible Debenture when due and payable, whether at maturity, upon
redemption or otherwise; (iii) a default in the performance of any other
covenant or agreement of Arch that continues for 30 days after written notice
of such default, requiring Arch to remedy the same; (iv) a default under any
indebtedness for money borrowed by Arch, which default results in such
indebtedness in an amount exceeding $5.0 million becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable, if such indebtedness is not discharged, or such acceleration is
not annulled, within 30 days after written notice of such default, requiring
Arch to remedy the same; or (v) the occurrence of certain events of
bankruptcy, insolvency or reorganization with respect to Arch.
154
<PAGE>
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for Arch
by Hale and Dorr LLP, 60 State Street, Boston, Massachusetts.
EXPERTS
The financial statements of Arch included in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated
in their reports with respect thereto, and are included herein in reliance
upon the authority of said firm as experts in accounting and auditing in
giving said reports. A representative of Arthur Andersen LLP is expected to be
at the Special Meeting to answer appropriate questions by stockholders and
will have the opportunity to make a statement if so desired.
The consolidated financial statements of MobileMedia at December 31, 1997
and 1996, and for each of the three years in the period ended December 31,
1997, appearing in this Prospectus have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon (which contains an
explanatory paragraph describing conditions that raise substantial doubt about
MobileMedia's ability to continue as a going concern as described in Note 1 of
MobileMedia's Notes to Consolidated Financial Statements) appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
With the exception of matters unique to MobileMedia, the descriptions of the
regulatory requirements under the Communications Act and the regulations
thereunder set forth under "Risk Factors--Risks Common to Arch and
MobileMedia--Government Regulation, Foreign Ownership and Possible Redemption"
and "Industry Overview--Regulation" have been included under the authority of
Wilkinson, Barker, Knauer & Quinn, LLP, as experts in telecommunications law.
FCC matters unique to MobileMedia included in the description of the
regulatory requirements under the Communications Act and the regulations
thereunder set forth under "Risk Factors--Risks Common to Arch and
MobileMedia--Government Regulation, Foreign Ownership and Possible Redemption"
and "Industry Overview--Regulation" have been included under the authority of
Wiley, Rein & Fielding as experts in telecommunication law. Stockholders of
Arch should not rely on Wilkinson, Barker, Knauer & Quinn, LLP or Wiley, Rein
& Fielding with respect to any other matters.
155
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Arch Communications Group, Inc.
Report of Independent Public Accountants................................ F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997 and June
30, 1998 (unaudited)................................................... F-3
Consolidated Statements of Operations for Each of the Three Years in the
Period Ended December 31, 1997 and for the Six Months Ended June 30,
1997 and 1998 (unaudited).............................................. F-4
Consolidated Statements of Stockholders' Equity (Deficit) for Each of
the Three Years in the Period Ended December 31, 1997 and for the Six
Months Ended June 30, 1998 (unaudited)................................. F-5
Consolidated Statements of Cash Flows for Each of the Three Years in the
Period Ended December 31, 1997 and for the Six Months Ended June 30,
1997 and 1998 (unaudited).............................................. F-6
Notes to Consolidated Financial Statements.............................. F-7
MobileMedia Communications, Inc. and Subsidiaries
Report of Independent Public Auditors................................... F-22
Consolidated Balance Sheets as of December 31, 1996 and 1997 and June
30, 1998 (unaudited)................................................... F-23
Consolidated Statements of Operations for Each of the Three Years in the
Period Ended December 31, 1997 and for the Six Months Ended June 30,
1997 and 1998 (unaudited).............................................. F-24
Consolidated Statement of Changes in Stockholders' Equity (Deficit) for
Each of the Three Years in the Period Ended December 31, 1997 and for
the Six Months Ended June 30, 1998 (unaudited)......................... F-25
Consolidated Statements of Cash Flows for Each of the Three Years in the
Period Ended December 31, 1997 and for the Six Months Ended June 30,
1997 and 1998 (unaudited).............................................. F-26
Notes to Consolidated Financial Statements.............................. F-27
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Arch Communications Group, Inc.:
We have audited the accompanying consolidated balance sheets of Arch
Communications Group, Inc. (a Delaware corporation) (the "Company") and
subsidiaries as of December 31, 1996 and 1997, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for
each of the three years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 Arch
Communications Group, Inc. and subsidiaries as of December 31, 1996 and 1997,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 9, 1998 (except with respect to
the matters discussed in Notes 3, 4 and 8,
as to which the date is June 29, 1998)
F-2
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 3,497 $ 3,328 $ 4,913
Accounts receivable (less reserves of
$4,111, $5,744 and $6,182 in 1996, 1997
and 1998, respectively) 25,344 30,147 32,483
Inventories.............................. 10,239 12,633 13,278
Prepaid expenses and other............... 4,531 4,917 3,582
---------- ---------- ---------
Total current assets................... 43,611 51,025 54,256
---------- ---------- ---------
Property and equipment, at cost:
Land, buildings and improvements......... 8,780 10,089 10,297
Paging and computer equipment............ 339,391 361,713 382,053
Furniture, fixtures and vehicles......... 9,921 16,233 16,990
---------- ---------- ---------
358,092 388,035 409,340
Less accumulated depreciation and
amortization............................ 96,448 146,542 179,478
---------- ---------- ---------
Property and equipment, net.............. 261,644 241,493 229,862
---------- ---------- ---------
Intangible and other assets (less
accumulated amortization of $141,710,
$260,932 and $311,160 in 1996, 1997 and
1998, respectively)....................... 841,501 728,202 687,431
---------- ---------- ---------
$1,146,756 $1,020,720 $ 971,549
========== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Current maturities of long-term debt..... $ 46 $ 24,513 $ --
Accounts payable......................... 17,395 22,486 22,951
Accrued restructuring charge............. -- -- 15,846
Accrued expenses......................... 14,287 11,894 12,850
Accrued interest......................... 10,264 11,249 7,453
Customer deposits........................ 6,698 6,150 5,585
Deferred revenue......................... 7,181 8,787 10,696
---------- ---------- ---------
Total current liabilities.............. 55,871 85,079 75,381
---------- ---------- ---------
Long-term debt, less current maturities.... 918,150 968,896 1,003,357
---------- ---------- ---------
Other long-term liabilities................ 21,172 -- 10,240
---------- ---------- ---------
Commitments and contingencies
Redeemable preferred stock................. 3,712 -- --
---------- ---------- ---------
Stockholders' equity (deficit):
Preferred stock--$.01 par value,
authorized 10,000,000 shares, 250,000
shares issued ($25,011 aggregate
liquidation preference)................. -- -- 3
Common stock--$.01 par value, authorized
75,000,000 shares, issued and
outstanding: 20,712,220, 20,863,563 and
21,067,110 shares in 1996, 1997 and
1998, respectively...................... 207 209 211
Additional paid-in capital............... 350,444 351,210 376,867
Accumulated deficit...................... (202,800) (384,674) (494,510)
---------- ---------- ---------
Total stockholders' equity (deficit)... 147,851 (33,255) (117,429)
---------- ---------- ---------
$1,146,756 $1,020,720 $ 971,549
========== ========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------- ----------------------
1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Service, rental and
maintenance revenues... $ 138,466 $ 291,399 $ 351,944 $ 171,978 $ 184,280
Product sales........... 24,132 39,971 44,897 22,290 21,305
---------- ---------- ---------- ---------- ----------
Total revenues...... 162,598 331,370 396,841 194,268 205,585
Cost of products sold... (20,789) (27,469) (29,158) (14,291) (14,690)
---------- ---------- ---------- ---------- ----------
141,809 303,901 367,683 179,977 190,895
---------- ---------- ---------- ---------- ----------
Operating expenses:
Service, rental and
maintenance.......... 29,673 64,957 79,836 38,111 40,409
Selling............... 24,502 46,962 51,474 26,632 24,244
General and
administrative....... 40,448 86,181 106,041 51,345 56,516
Depreciation and
amortization......... 60,205 191,871 232,347 120,167 108,400
Restructuring charge.. -- -- -- -- 16,100
---------- ---------- ---------- ---------- ----------
Total operating
expenses........... 154,828 389,971 469,698 236,255 245,669
---------- ---------- ---------- ---------- ----------
Operating income
(loss)................. (13,019) (86,070) (102,015) (56,278) (54,774)
Interest expense........ (22,560) (77,353) (98,063) (48,126) (51,903)
Interest income......... 38 1,426 904 411 780
Equity in loss of
affiliate.............. (3,977) (1,968) (3,872) (1,812) (2,219)
---------- ---------- ---------- ---------- ----------
Income (loss) before
income tax benefit and
extraordinary item..... (39,518) (163,965) (203,046) (105,805) (108,116)
Benefit from income tax-
es..................... 4,600 51,207 21,172 10,600 --
---------- ---------- ---------- ---------- ----------
Income (loss) before ex-
traordinary item....... (34,918) (112,758) (181,874) (95,205) (108,116)
Extraordinary charge
from early
extinguishment of
debt................... (1,684) (1,904) -- -- (1,720)
---------- ---------- ---------- ---------- ----------
Net income (loss)....... (36,602) (114,662) (181,874) (95,205) (109,836)
Accretion of redeemable
preferred stock........ (102) (336) (32) (32) --
---------- ---------- ---------- ---------- ----------
Net income (loss) to
common stockholders.... $ (36,704) $ (114,998) $ (181,906) $ (95,237) $ (109,836)
========== ========== ========== ========== ==========
Basic income (loss) per
common share before
extraordinary item..... $ (2.60) $ (5.53) $ (8.77) $ (4.60) $ (5.17)
Extraordinary charge
from early
extinguishment of debt
per basic common
share.................. $ (.12) $ (.09) $ -- $ -- $ (.08)
---------- ---------- ---------- ---------- ----------
Basic net income (loss)
per common share....... $ (2.72) $ (5.62) $ (8.77) $ (4.60) $ (5.25)
========== ========== ========== ========== ==========
Basic weighted average
number of common shares
outstanding............ 13,497,734 20,445,943 20,746,240 20,713,578 20,918,048
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
TOTAL
ADDITIONAL STOCKHOLDERS'
PREFERRED COMMON PAID-IN ACCUMULATED EQUITY
STOCK STOCK CAPITAL DEFICIT (DEFICIT)
--------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1994.................... $-- $ 81 $ 60,823 $ (51,536) $ 9,368
Exercise of options to
purchase 475,903
shares of common
stock................. -- 5 5,137 -- 5,142
Issuance of 7,994,493
shares of common stock
to acquire stock of
paging companies...... -- 80 215,819 -- 215,899
Issuance of 2,706,659
shares of common stock
(net of issuance costs
of $3,016)............ -- 27 46,354 -- 46,381
Issuance of 417,311
shares of common stock
upon conversion of
convertible
subordinated
debentures (net of
costs of conversion of
$192)................. -- 4 6,794 -- 6,798
Accretion of redeemable
preferred stock....... -- -- (102) -- (102)
Net loss............... -- -- -- (36,602) (36,602)
---- ---- -------- --------- ---------
Balance, December 31,
1995.................... -- 197 334,825 (88,138) 246,884
Exercise of options to
purchase 169,308
shares of common
stock................. -- 2 1,469 -- 1,471
Issuance of 46,842
shares of common stock
under Arch's Employee
Stock Purchase Plan... -- -- 373 -- 373
Issuance of 843,039
shares of common stock
upon conversion of
convertible
subordinated
debentures............ -- 8 14,113 -- 14,121
Accretion of redeemable
preferred stock....... -- -- (336) -- (336)
Net loss............... -- -- -- (114,662) (114,662)
---- ---- -------- --------- ---------
Balance, December 31,
1996.................... -- 207 350,444 (202,800) 147,851
Issuance of 151,343
shares of common stock
under Arch's Employee
Stock Purchase Plan... -- 2 798 -- 800
Accretion of redeemable
preferred stock....... -- -- (32) -- (32)
Net loss............... -- -- -- (181,874) (181,874)
---- ---- -------- --------- ---------
Balance, December 31,
1997.................... -- 209 351,210 (384,674) (33,255)
Exercise of options to
purchase 94,032 shares
of common stock
(unaudited)........... -- 1 293 -- 294
Issuance of 250,000
shares of preferred
stock (unaudited)..... 3 -- 24,997 -- 25,000
Issuance of 109,515
shares of common stock
under Arch's Employee
Stock Purchase Plan
(unaudited)........... -- 1 367 -- 368
Net loss (unaudited)... -- -- -- (109,836) (109,836)
---- ---- -------- --------- ---------
Balance, June 30, 1998
(unaudited)............. $ 3 $211 $376,867 $(494,510) $(117,429)
==== ==== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------ -------------------
1995 1996 1997 1997 1998
-------- --------- --------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)....... $(36,602) $(114,662) $(181,874) $(95,205) $(109,836)
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities:
Depreciation and
amortization........... 60,205 191,871 232,347 120,167 108,400
Deferred income tax
benefit................ (4,600) (51,207) (21,172) (10,600) --
Extraordinary charge
from early
extinguishment of
debt................... 1,684 1,904 -- -- 1,720
Equity in loss of
affiliate.............. 3,977 1,968 3,872 1,812 2,219
Accretion of discount on
senior notes........... -- 24,273 33,259 16,189 17,997
Accounts receivable loss
provision.............. 3,915 8,198 7,181 3,783 3,873
Changes in assets and
liabilities, net of
effect from
acquisitions of paging
companies:
Accounts receivable.... (9,582) (15,513) (11,984) (7,390) (6,209)
Inventories............ (3,176) 1,845 (2,394) (3,674) (645)
Prepaid expenses and
other................. (511) 89 (386) 817 1,335
Accounts payable and
accrued expenses...... (551) (12,520) 3,683 7,155 13,471
Customer deposits and
deferred revenue...... (10) 1,556 1,058 2,443 1,344
Other long-term
liabilities........... -- -- -- -- 10,240
-------- --------- --------- -------- ---------
Net cash provided by
operating activities.... 14,749 37,802 63,590 35,497 43,909
-------- --------- --------- -------- ---------
Cash flows from investing
activities:
Additions to property
and equipment, net..... (45,331) (138,899) (87,868) (48,720) (38,353)
Additions to intangible
and other assets....... (15,137) (26,307) (14,901) (7,724) (21,584)
Acquisition of paging
companies, net of cash
acquired............... (132,081) (325,420) -- -- --
-------- --------- --------- -------- ---------
Net cash used for
investing activities.... (192,549) (490,626) (102,769) (56,444) (59,937)
-------- --------- --------- -------- ---------
Cash flows from financing
activities:
Issuance of long-term
debt................... 191,617 676,000 91,000 82,000 450,964
Repayment of long-term
debt................... (63,705) (225,166) (49,046) (56,024) (459,013)
Repayment of redeemable
preferred stock........ -- -- (3,744) (3,744) --
Net proceeds from sale
of preferred stock..... -- -- -- -- 25,000
Net proceeds from sale
of common stock........ 51,180 1,844 800 418 662
-------- --------- --------- -------- ---------
Net cash provided by
financing activities.... 179,092 452,678 39,010 22,650 17,613
-------- --------- --------- -------- ---------
Net increase (decrease)
in cash and cash
equivalents............. 1,292 (146) (169) 1,703 1,585
Cash and cash
equivalents, beginning
of period............... 2,351 3,643 3,497 3,497 3,328
-------- --------- --------- -------- ---------
Cash and cash
equivalents, end of
period.................. $ 3,643 $ 3,497 $ 3,328 $ 5,200 $ 4,913
======== ========= ========= ======== =========
Supplemental disclosure:
Interest paid........... $ 20,933 $ 48,905 $ 62,231 $ 30,119 $ 36,372
======== ========= ========= ======== =========
Issuance of common stock
for acquisition of
paging companies....... $215,899 $ -- $ -- $ -- $ --
======== ========= ========= ======== =========
Issuance of common stock
for convertible
debentures............. $ 6,990 $ 14,121 $ -- $ -- $ --
======== ========= ========= ======== =========
Accretion of redeemable
preferred stock........ $ 102 $ 336 $ 32 $ 32 $ --
======== ========= ========= ======== =========
Liabilities assumed in
acquisition of paging
companies.............. $314,139 $ 58,233 $ -- $ -- $ --
======== ========= ========= ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization--Arch Communications Group, Inc. ("Arch" or the "Company") is a
leading provider of wireless messaging services, primarily paging services,
and is the second largest paging company in the United States (based on
EBITDA). The Company had 4.1 million pagers in service at June 30, 1998.
Unaudited Interim Consolidated Financial Statements--The consolidated
balance sheet as of June 30, 1998, the consolidated statements of operations
and cash flows for the six months ended June 30, 1997 and 1998 and the
consolidated statement of stockholders' equity (deficit) for the six months
ended June 30, 1998 are unaudited and, in the opinion of the Company's
management, include all adjustments and accruals, consisting only of normal
recurring accrual adjustments, which are necessary for a fair presentation of
the Company's consolidated financial position, results of operations and cash
flows. The results of operations for the six months ended June 30, 1998 are
not necessarily indicative of the results that may be expected for the full
year.
Principles of Consolidation--The accompanying consolidated financial
statements include the accounts of the Company, and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
Revenue Recognition--Arch recognizes revenue under rental and service
agreements with customers as the related services are performed. Maintenance
revenues and related costs are recognized ratably over the respective terms of
the agreements. Sales of equipment are recognized upon delivery. Commissions
are recognized as an expense when incurred.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents--Cash equivalents include short-term, interest-bearing
instruments purchased with remaining maturities of three months or less. The
carrying amount approximates fair value due to the relatively short period to
maturity of these instruments.
Inventories--Inventories consist of new 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 and Equipment--Pagers sold or otherwise retired are removed from
the accounts at their net book value using the first-in, first-out method.
Property and equipment is stated at cost and is depreciated using the
straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
ASSET CLASSIFICATION LIFE
-------------------- ----------
<S> <C>
Buildings and improvements.................................... 20 Years
Leasehold improvements........................................ Lease Term
Pagers........................................................ 3 Years
Paging and computer equipment................................. 5-8 Years
Furniture and fixtures........................................ 5-8 Years
Vehicles...................................................... 3 Years
</TABLE>
Effective October 1, 1995, Arch changed its estimate of the useful life of
pagers from four years to three years. This change was made to better reflect
the estimated period during which pagers will produce equipment rental
revenue. The change did not have a material effect on depreciation expense or
net loss in the quarter ended December 31, 1995.
F-7
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation and amortization expense related to property and equipment
totaled $25.0 million, $87.5 million and $108.0 million for the years ended
December 31, 1995, 1996 and 1997, respectively.
Intangible and Other Assets--Intangible and other assets, net of accumulated
amortization, are composed of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Goodwill.................................... $351,969 $312,017 $291,898
Purchased FCC licenses...................... 330,483 293,922 275,224
Purchased subscriber lists.................. 120,981 87,281 71,933
Deferred financing costs.................... 12,449 8,752 20,813
Investment in CONXUS Communications, Inc.... 6,500 6,500 6,500
Investment in Benbow PCS Ventures, Inc...... 3,642 6,189 9,942
Non-competition agreements.................. 3,594 2,783 2,268
Other....................................... 11,883 10,758 8,853
-------- -------- --------
$841,501 $728,202 $687,431
======== ======== ========
</TABLE>
Amortization expense related to intangible and other assets totaled $35.2
million, $104.4 million and $124.3 million for the years ended December 31,
1995, 1996 and 1997, respectively.
Subscriber lists, Federal Communications Commission ("FCC") licenses and
goodwill are amortized over their estimated useful lives, ranging from five to
ten years using the straight-line method. Non-competition agreements are
amortized over the terms of the agreements using the straight-line method.
Other assets consist of contract rights, organizational and FCC application
and development costs which are amortized using the straight-line method over
their estimated useful lives not exceeding ten years. Development and start up
costs include nonrecurring, direct costs incurred in the development and
expansion of paging systems, and are amortized over a two-year period.
Deferred financing costs incurred in connection with Arch's credit
agreements (see Note 3) are being amortized over periods not to exceed the
terms of the related agreements. As credit agreements are amended or
renegotiated, unamortized deferred financing costs are written-off as an
extraordinary charge. During 1995, 1996 and the six months ended June 30,
1998, charges of $1.7 million, $1.9 million and $1.7 million, respectively,
were recognized in connection with the closing of new credit facilities.
On November 8, 1994, CONXUS Communications, Inc. ("CONXUS"), formerly PCS
Development Corporation, was successful in acquiring the rights to a two-way
paging license in five designated regions in the United States in the FCC
narrowband wireless spectrum auction. As of December 31, 1997, Arch's
investment in CONXUS totaled $6.5 million representing an equity interest of
10.5% accounted for under the cost method.
In connection with Arch's May 1996 acquisition of Westlink Holdings, Inc.
("Westlink") (see Note 2), Arch acquired Westlink's 49.9% share of the capital
stock of Benbow PCS Ventures, Inc. ("Benbow"). Benbow has exclusive rights to
a 50kHz outbound/12.5kHz inbound narrowband personal communications license in
each of the central and western regions of the United States. Arch is
obligated, to the extent such funds are not available to Benbow from other
sources and subject to the approval of Arch's designee on Benbow's Board of
Directors, to advance Benbow sufficient funds to service debt obligations
incurred by Benbow in connection with its acquisition of its narrowband PCS
licenses and to finance the build out of a regional narrowband PCS system.
Arch's investment in Benbow is accounted for under the equity method whereby
Arch's share of Benbow's losses since the acquisition date of Westlink are
recognized in Arch's accompanying consolidated statements of operations under
the caption equity in loss of affiliate.
F-8
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to Be Disposed Of" Arch evaluates the recoverability of its carrying value of
the Company's long-lived assets and certain intangible assets based on
estimated undiscounted cash flows to be generated from each of such assets as
compared to the original estimates used in measuring the assets. To the extent
impairment is identified, Arch reduces the carrying value of such impaired
assets. To date, Arch has not had any such impairments.
Fair Value of Financial Instruments--Arch's financial instruments, as
defined under SFAS No. 107 "Disclosures about Fair Value of Financial
Instruments", include its cash, its debt financing and interest rate
protection agreements. The fair value of cash is equal to the carrying value
at December 31, 1996 and 1997.
As discussed in Note 3, Arch's debt financing primarily consists of (1)
senior bank debt, (2) fixed rate senior notes and (3) convertible subordinated
debentures. Arch considers the fair value of senior bank debt to be equal to
the carrying value since the related facilities bear a current market rate of
interest. Arch's fixed rate senior notes are traded publicly. The following
table depicts the fair value of the fixed rate senior notes and the
convertible subordinated debentures based on the current market quote as of
December 31, 1996 and 1997 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- -----------------
CARRYING FAIR CARRYING FAIR
DESCRIPTION VALUE VALUE VALUE VALUE
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
10 7/8% Senior Discount Notes due
2008................................ $299,273 $265,236 $332,532 $288,418
9 1/2% Senior Notes due 2004......... 125,000 117,500 125,000 122,488
14% Senior Notes due 2004............ 100,000 115,000 100,000 112,540
6 3/4% Convertible Subordinated De-
bentures due 2003................... 13,364 12,211 13,364 7,968
</TABLE>
Arch had off balance sheet interest rate protection agreements consisting of
interest rate swaps and interest rate caps with notional amounts of $165.0
million and $55.0 million, respectively, at December 31, 1996 and $140.0
million and $80.0 million, respectively, at December 31, 1997. The fair values
of the interest rate swaps and interest rate caps were $361,000 and $10,000,
respectively, at December 31, 1996 and $47,000 and $9,000, respectively, at
December 31, 1997.
Basic Net Income (Loss) Per Common Share -- In February 1997, the Financial
Accounting Standards Board issued SFAS No. 128 "Earnings Per Share". The
Company adopted this standard in 1997. The adoption of this standard did not
have an effect on the Company's financial position, results of operations or
income (loss) per share. Basic net income (loss) per common share is based on
the weighted average number of common shares outstanding. Shares of stock
issuable pursuant to stock options and upon conversion of the subordinated
debentures (see Note 3) or the Series C Preferred Stock (see Note 4) have not
been considered, as their effect would be anti-dilutive and thus diluted net
income (loss) per common share is the same as basic net income (loss) per
common share.
Reclassifications--Certain amounts of prior periods were reclassified to
conform with the 1997 presentation.
2. ACQUISITIONS
In May 1996, Arch completed its acquisition of all the outstanding capital
stock of Westlink for $325.4 million in cash, including direct transaction
costs. The purchase price was allocated based on the fair values of assets
acquired and liabilities assumed (including deferred income taxes arising in
purchase accounting), which amounted to $383.6 million and $58.2 million,
respectively.
F-9
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On September 7, 1995, Arch completed its acquisition of USA Mobile
Communications Holdings, Inc. ("USA Mobile"). The acquisition was completed in
two steps. First, in May 1995, Arch acquired approximately 37%, or 5,450,000
shares, of USA Mobile's then outstanding common stock for $83.9 million in
cash, funded by borrowings under the Arch Enterprises Credit Facility (see
Note 3). Accordingly, Arch accounted for its investment in USA Mobile under
the equity method of accounting. Arch recorded a charge of $4.0 million for
the year ended December 31, 1995 representing its pro rata share of USA
Mobile's net loss from May until the acquisition was completed. Second, on
September 7, 1995, the acquisition was completed through the merger of Arch
with and into USA Mobile ("the USAM Merger"). Upon consummation of the USAM
Merger, USA Mobile was renamed Arch Communications Group, Inc. In the USAM
Merger, each share of USA Mobile's outstanding common stock was exchanged for
Stock on a .8020-for-one basis (an aggregate of 7,599,493 shares of Stock) and
the 5,450,000 USA Mobile shares purchased by Arch in May 1995 were retired.
Outstanding shares of USA Mobile's Series A Redeemable Preferred Stock were
not affected by the USAM Merger (see Note 4). Arch is treated as the acquirer
in the USAM Merger for accounting and financial reporting purposes and the
purchase price was allocated based upon the fair market values of assets
acquired and liabilities assumed. The aggregate consideration paid or
exchanged in the USAM Merger was $582.2 million, consisting of cash paid of
$88.9 million, including direct transaction costs, 7,599,493 shares of Stock
valued at $209.0 million and the assumption of liabilities of $284.3 million,
including $241.2 million of long-term debt.
During the year ended December 31, 1995, Arch completed five acquisitions of
paging companies, in addition to the USAM Merger, for purchase prices
aggregating approximately $43.0 million, consisting of cash of $36.1 million
and 395,000 shares of Stock valued at $6.9 million. Goodwill resulting from
the acquisitions and the USAM Merger is being amortized over a ten-year period
using the straight-line method.
These acquisitions (including the USAM Merger) have been accounted for as
purchases, and the results of their operations have been included in the
consolidated financial statements from the dates of the respective
acquisitions. The following unaudited pro forma summary presents the
consolidated results of operations as if the acquisitions had occurred at the
beginning of the periods presented, after giving effect to certain
adjustments, including depreciation and amortization of acquired assets and
interest expense on acquisition debt. These pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
what would have occurred had the acquisitions been made at the beginning of
the period presented, or of results that may occur in the future.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1995 1996
-------- ---------
(UNAUDITED AND IN
THOUSANDS EXCEPT
FOR PER SHARE
AMOUNTS)
<S> <C> <C>
Revenues............................................ $321,963 $ 358,900
Income (loss) before extraordinary item............. (92,395) (128,444)
Net income (loss)................................... (94,079) (130,348)
Basic net income (loss) per common share............ (6.97) (6.39)
</TABLE>
F-10
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Senior Bank Debt............................ $380,500 $422,500 $ 287,000
10 7/8% Senior Discount Notes due 2008...... 299,273 332,532 350,529
9 1/2% Senior Notes due 2004................ 125,000 125,000 125,000
14% Senior Notes due 2004................... 100,000 100,000 100,000
12 3/4% Senior Notes due 2007............... -- -- 127,464
Convertible Subordinated Debentures......... 13,364 13,364 13,364
Other....................................... 59 13 --
-------- -------- ----------
918,196 993,409 1,003,357
Less-current maturities..................... 46 24,513 --
-------- -------- ----------
Long-term debt.............................. $918,150 $968,896 $1,003,357
======== ======== ==========
</TABLE>
Senior Bank Debt--The Company, through its operating subsidiaries, entered
into two credit agreements. Arch Communications Enterprise, Inc. ("ACE")
entered into a credit facility dated May 5, 1995, as amended, with a group of
banks and financial institutions who agreed, subject to certain terms and
conditions, to provide (i) a $250 million, seven-year reducing revolver
facility (the "ACE Revolver"), (ii) a $150 million, seven-year term loan (the
"Tranche A Term Loan"), and (iii) a $100 million, eight-year term loan (the
"Tranche B Term Loan"). The ACE Revolver, which was available for working
capital and other purposes, the Tranche A Term Loan and the Tranche B Term
Loan are collectively referred to as the ACE Credit Facility. The ACE Credit
Facility is secured by all assets of the operating subsidiaries of ACE and a
pledge of all the stock of Arch's direct and indirect subsidiaries. In
addition, Arch and the operating subsidiaries of ACE guaranteed all
obligations under the ACE Credit Facility.
The ACE Revolver was subject to scheduled mandatory reductions commencing on
December 31, 1999. The Tranche A Term Loan and Tranche B Term Loan were to be
amortized in quarterly installments commencing on March 31, 1998.
Except for the Tranche B Term Loan, borrowings under the ACE Credit Facility
bear interest based on a reference rate equal to either (i) the agent bank's
Alternate Base Rate, or (ii) the agent bank's LIBOR rate, in each case plus a
margin which is based on the ratio of total debt to annualized operating cash
flow. Borrowings under the Tranche B Term Loan bear interest at either the
agent bank's Alternate Base Rate or LIBOR rate, in each case plus a margin
based on the ratio of total debt to annualized EBITDA. Interest is payable
quarterly in arrears. In addition, an annual commitment fee is payable based
on the average daily unused portion of the ACE Revolver.
ACE is also required to maintain interest rate protection on at least 50% of
outstanding borrowings under the ACE Credit Facility, and has therefore
entered into interest rate swap and interest rate cap agreements. Entering
into interest rate cap and swap agreements involves both the credit risk of
dealing with counterparties and their ability to meet the terms of the
contracts and interest rate risk. In the event of non-performance by the
counterparty to these interest rate protection agreements, ACE would be
subject to the prevailing interest rates specified in the ACE Credit Facility.
F-11
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Under the interest rate swap agreements, the Company will pay the difference
between LIBOR and the fixed swap rate if the swap rate exceeds LIBOR, and the
Company will receive the difference between LIBOR and the fixed swap rate if
LIBOR exceeds the swap rate. Settlement occurs on the quarterly reset dates
specified by the terms of the contracts. The notional principal amount of the
interest rate swaps outstanding was $140 million at December 31, 1997. The
weighted average fixed payment rate was 5.818% while the weighted average rate
of variable interest payments under the ACE Credit Facility was 5.872% at
December 31, 1997. At December 31, 1996 and 1997, the Company had a net
payable of $124,000 and a net receivable of $18,000, respectively, on the
interest rate swaps.
The interest rate cap agreements will pay the Company the difference between
LIBOR and the cap level if LIBOR exceeds the cap levels at any of the
quarterly reset dates. If LIBOR remains below the cap level, no payment is
made to the Company. The total notional amount of the interest rate cap
agreements was $80 million with cap levels between 7.5% and 8% at December 31,
1997. The transaction fees for these instruments are being amortized over the
terms of the agreements.
The ACE Credit Facility contains restrictive and financial covenants which,
among other things, limit the ability of ACE to: incur additional
indebtedness, advance funds to Benbow (see Note 1), pay dividends, grant liens
on its assets, merge, sell or acquire assets; repurchase or redeem capital
stock; incur capital expenditures; and prepay indebtedness other than
indebtedness under the ACE Credit Facility. As of December 31, 1997, ACE and
its operating subsidiaries were in compliance with the covenants of the ACE
Credit Facility.
As of December 31, 1997, $359.5 million was outstanding and $28.7 million
was available under the ACE Credit Facility. At December 31, 1997, such
advances bore interest at an average annual rate of 8.76%.
USA Mobile Communications, Inc. II ("USAM") and the direct subsidiaries of
USAM (the "USAM Borrowing Subsidiaries") are parties to a $110 million
reducing revolving credit facility dated March 19, 1997, as amended, with a
group of banks pursuant to which the banks have agreed to make advances for
working capital and other purposes (the "USAM Credit Facility").
Upon the closing of the USAM Credit Facility, the banks did not require the
contemporaneous grant of a security interest in the assets of USAM and its
subsidiaries but they have reserved the right to require such a security
interest upon the occurrence of certain triggering events. Arch and USAM have
guaranteed the obligations of the USAM Borrowing Subsidiaries under the USAM
Credit Facility. Arch's guarantee is secured by the pledge of the stock of ACE
and USAM.
Obligations under the USAM Credit Facility bear interest based on a
reference rate equal to either (i) the agent bank's Alternate Base Rate or
(ii) the agent bank's LIBOR rate, in each case plus a margin based on the
ratio of USAM's total indebtedness to annualized operating cash flow. The
annual commitment fee is payable based on the average daily unused portion of
the USAM Credit Facility.
The USAM Credit Facility contains restrictive and financial covenants which,
among other things, limit the ability of USAM to: incur additional
indebtedness, pay dividends, grant liens on its assets, merge, sell or acquire
assets; repurchase or redeem capital stock; incur capital expenditures; and
prepay indebtedness other than indebtedness under the USAM Credit Facility. As
of December 31, 1997, USAM and the USAM Borrowing Subsidiaries were in
compliance with the covenants of the USAM Credit Facility.
As of December 31, 1997, $63.0 million was outstanding and $4.6 million was
available under the USAM Credit Facility. At December 31, 1997, such advances
bore interest at an average annual rate of 8.55%.
F-12
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On June 29, 1998, ACE was merged (the "ACI Merger") into a subsidiary of
USAM named Arch Paging, Inc. ("API"). In connection with the Merger, USAM
changed its name to Arch Communications, Inc. ("ACI"). Contemporaneously with
the ACI Merger, ACE's existing credit facility was amended and restated to
establish senior secured revolving credit and term loan facilities with API,
as borrower, in the aggregate amount of $400.0 million (collectively, the "API
Credit Facility") consisting of (i) a $175.0 million reducing revolving credit
facility (the "Tranche A Facility"), (ii) a $100.0 million 364-day revolving
credit facility under which the principal amount outstanding on the 364th day
following the closing will convert to a term loan (the "Tranche B Facility")
and (iii) a $125.0 million term loan which was available in a single drawing
on the closing date (the "Tranche C Facility").
The Tranche A Facility will be subject to scheduled quarterly reductions
commencing on September 30, 2000 and will mature on June 30, 2005. The term
loan portion of the Tranche B Facility will be amortized in quarterly
installments commencing September 30, 2000, with an ultimate maturity date of
June 30, 2005. The Tranche C Facility will be amortized in annual installments
commencing December 31, 1999, with an ultimate maturity date of June 30, 2006.
API's obligations under the API Credit Facility are secured by its pledge of
the capital stock of the former ACE operating subsidiaries. The API Credit
Facility is guaranteed by Arch, ACI and the former ACE operating subsidiaries.
Arch's guarantee is secured by a pledge of Arch's stock and notes in ACI, and
the guarantees of the former ACE operating subsidiaries are secured by a
security interest in those assets of such subsidiaries which were pledged
under ACE's former credit facility.
Borrowings under the API Credit Facility bear interest based on a reference
rate equal to either the Bank's Alternate Base Rate or LIBOR rate, in each
case plus a margin based on ACI's or API's ratio of total debt to annualized
EBITDA.
The API Credit Facility requires payment of fees on the daily average amount
available to be borrowed under the Tranche A Facility and the Tranche B
Facility, which fees vary depending on ACI's or API's ratio of total debt to
annualized EBITDA.
The API Credit Facility contains restrictions that limit, among other
things: additional indebtedness and encumbrances on assets; cash dividends and
other distributions; mergers and sales of assets; the repurchase or redemption
of capital stock; investments; acquisitions that exceed certain dollar
limitations without the lenders' prior approval; and prepayment of
indebtedness other than indebtedness under the API Credit Facility. In
addition, the API Credit Facility requires API and its subsidiaries to meet
certain financial covenants, including covenants with respect to ratios of
EBITDA to fixed charges, EBITDA to debt service, EBITDA to interest service
and total indebtedness to EBITDA.
Senior Notes--On March 12, 1996, Arch completed a public offering of 10 7/8%
Senior Discount Notes due 2008 (the "Senior Discount Notes") in the aggregate
principal amount at maturity of $467.4 million ($275.0 million initial
accreted value). Interest does not accrue on the Senior Discount Notes prior
to March 15, 2001. Commencing September 15, 2001, interest on the Senior
Discount Notes is payable semi-annually at an annual rate of 10 7/8%. The
$266.1 million net proceeds from the issuance of the Senior Discount Notes,
after deducting underwriting discounts and commissions and offering expenses,
were used principally to fund a portion of the purchase price of Arch's
acquisition of Westlink (see Note 2).
Interest on the ACI 14% Notes and the ACI 9 1/2% Notes (collectively, the
"Senior Notes") is payable semiannually. The Senior Discount Notes and Senior
Notes contain certain restrictive and financial covenants which, among other
things, limit the ability of Arch or ACI to: incur additional indebtedness;
pay dividends;
F-13
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
grant liens on its assets; sell assets; enter into transactions with related
parties; merge, consolidate or transfer substantially all of its assets;
redeem capital stock or subordinated debt; and make certain investments.
On June 29, 1998, ACI issued and sold $130.0 million principal amount of 12
3/4% Senior Notes due 2007 (the "Notes") for net proceeds of $122.6 million
(after deducting the discount to the Initial Purchasers and estimated offering
expenses payable by ACI) in a private placement (the "Note Offering") under
Rule 144A under the Securities Act of 1933. The Notes were sold at an initial
price to investors of 98.049%. The Notes mature on July 1, 2007 and bear
interest at a rate of 12 3/4% per annum, payable semi-annually in arrears on
January 1 and July 1 of each year, commencing January 1, 1999.
The covenants in the indenture under which the 12 3/4% Notes were issued
("the Indenture") contain certain covenants that, among other things, limit
the ability of ACI to incur additional indebtedness, issue preferred stock,
pay dividends or make other distributions, repurchase Capital Stock (as
defined in the Indenture), repay subordinated indebtedness or make other
Restricted Payments (as defined in the Indenture), create certain liens, enter
into certain transactions with affiliates, sell assets, issue or sell Capital
Stock of ACI's Restricted Subsidiaries (as defined in the Indenture) or enter
into certain mergers and consolidations.
Convertible Subordinated Debentures--On March 6, 1996, the holders of $14.1
million principal amount of Arch's 6 3/4% Convertible Subordinated Debentures
due 2003 ("Arch Convertible Debentures") elected to convert their Arch
Convertible Debentures into Stock at a conversion price of $16.75 per share
and received approximately 843,000 shares of Stock together with a $1.6
million cash premium.
Interest on the remaining outstanding Arch Convertible Debentures is payable
semiannually on June 1 and December 1. The Arch Convertible Debentures are
unsecured and are subordinated to all existing indebtedness of Arch.
The Arch Convertible Debentures are redeemable, at the option of Arch, in
whole or in part, at certain prices declining annually to 100% of the
principal amount at maturity plus accrued interest. The Arch Convertible
Debentures also are subject to redemption at the option of the holders, at a
price of 100% of the principal amount plus accrued interest, upon the
occurrence of certain events.
The Arch Convertible Debentures are convertible at their principal amount
into shares of Arch's common stock at any time prior to redemption or maturity
at an initial conversion price of $16.75 per share, subject to adjustment.
Maturities of Debt--Scheduled long-term debt maturities at December 31, 1997
and at June 30, 1998, are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
YEAR ENDING DECEMBER 31, 1997 1998
------------------------ ------------ -----------
(UNAUDITED)
<S> <C> <C>
1998........................... $ 24,513 $ --
1999........................... 37,750 --
2000........................... 83,000 1,250
2001........................... 74,750 23,250
2002........................... 122,500 41,250
Thereafter..................... 650,896 937,607
-------- ----------
$993,409 $1,003,357
======== ==========
</TABLE>
F-14
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Redeemable Preferred Stock--In connection with the USAM Merger (see Note 2),
Arch assumed the obligations associated with 22,530 outstanding shares of
Series A Redeemable Preferred Stock issued by USA Mobile. The preferred stock
is recorded at its accreted redemption value, based on 10% annual accretion
through the redemption date. On January 30, 1997, all outstanding preferred
stock was redeemed for $3.7 million in cash.
Redeemable Series C Cumulative Convertible Preferred Stock--On June 29,
1998, two partnerships managed by Sandler Capital Management Company, Inc., an
investment management firm ("Sandler"), together with certain other private
investors, made an equity investment in Arch of $25.0 million in the form of
Series C Convertible Preferred Stock of Arch ("Series C Preferred Stock"). The
Series C Preferred Stock: (i) is convertible into Common Stock of Arch at an
initial conversion price of $5.50 per share, subject to certain adjustments;
(ii) bears dividends at an annual rate of 8.0%, (A) payable quarterly in cash
or, at Arch's option, through the issuance of shares of Arch's Common Stock
valued at 95% of the then prevailing market price or (B) if not paid
quarterly, accumulating and payable upon redemption or conversion of the
Series C Preferred Stock or liquidation of Arch; (iii) permits the holders
after seven years to require Arch, at Arch's option, to redeem the Series C
Preferred Stock for cash or convert such shares into Arch's Common Stock
valued at 95% of the then prevailing market price of Arch's Common Stock; (iv)
is subject to redemption for cash or conversion into Arch's Common Stock at
Arch's option in certain circumstances; (v) in the event of a "Change of
Control" as defined in the indenture governing Arch's 10 7/8% Senior Discount
Notes due 2008 (the "Arch Discount Notes Indenture"), requires Arch, at its
option, to redeem the Series C Preferred Stock for cash or convert such shares
into Arch's Common Stock valued at 95% of the then prevailing market price of
Arch's Common Stock, with such cash redemption or conversion being at a price
equal to 105% of the sum of the original purchase price plus accumulated
dividends; (vi) limits certain mergers or asset sales by Arch; (vii) so long
as at least 50% of the Series C Preferred Stock remains outstanding, limits
the incurrence of indebtedness and "restricted payments" in the same manner as
contained in the Arch Discount Notes Indenture; and (viii) has certain voting
and preemptive rights. Upon an event of redemption or conversion, Arch
currently intends to convert such Series C Preferred Stock into shares of
Stock.
Stock Options--Arch has a 1989 Stock Option Plan (the "1989 Plan") and a
1997 Stock Option Plan (the "1997 Plan") which provide for the grant of
incentive and nonqualified stock options to key employees, directors and
consultants to purchase Arch's common stock. Incentive stock options are
granted at exercise prices not less than the fair market value on the date of
grant. Options generally vest over a five-year period from the date of grant
with the first such vesting (20% of granted options) occurring one year from
the date of grant and continuing ratably at 5% on a quarterly basis
thereafter. However, in certain circumstances, options may be immediately
exercised in full. Options generally have a duration of 10 years. The 1989
Plan provides for the granting of options to purchase a total of 1,128,944
shares of common stock. All outstanding options on September 7, 1995, under
the 1989 Plan, became fully exercisable and vested as a result of the USAM
Merger. The 1997 Plan provides for the granting of options to purchase a total
of 1,500,000 shares of common stock.
Effective October 23, 1996, the Compensation Committee of the Board of
Directors of Arch authorized the grant of new options to each employee who had
an outstanding option at a price greater than $12.50 (the fair market value of
Arch's common stock on October 23, 1996). The new option would be for the
total number of shares (both vested and unvested) subject to each employee's
outstanding stock option agreement(s). As a result of this action 424,206
options were terminated and regranted at a price of $12.50. The Company
treated this as a cancellation and reissuance under APB opinion No. 25
"Accounting for Stock Issued to Employees".
As a result of the USAM Merger, Arch assumed a stock option plan originally
adopted by USA Mobile in 1994 and amended and restated on January 26, 1995
(the "1994 Plan"), which provides for the grant of up to 601,500 options to
purchase Arch's common stock. Under the 1994 Plan, incentive stock options may
be granted
F-15
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
to employees and nonqualified stock options may be granted to employees,
directors and consultants. Incentive stock options are granted at exercise
prices not less than the fair market value on the date of grant. Option
duration and vesting provisions are similar to the 1989 Plan. All outstanding
options under the 1994 Plan became fully exercisable and vested as a result of
the USAM Merger.
In January 1995, Arch adopted a 1995 Outside Directors' Stock Option Plan
(the "1995 Directors' Plan"), which terminated upon completion of the USAM
Merger. Prior to termination of the 1995 Directors' Plan, 15,000 options were
granted at an exercise price of $18.50 per share. Options have a duration of
ten years and vest over a five-year period from the date of grant with the
first such vesting (20% of granted options) occurring one year from the date
of grant and continuing ratably at 5% on a quarterly basis thereafter.
As a result of the USAM Merger, Arch assumed from USA Mobile the Non-
Employee Directors' Stock Option Plan (the "Outside Directors Plan"), which
provides for the grant of up to 80,200 options to purchase Arch's common stock
to non-employee directors of Arch. Outside directors receive a grant of 3,000
options annually under the Outside Directors Plan, and newly elected or
appointed outside directors receive options to purchase 3,000 shares of common
stock as of the date of their initial election or appointment. Options are
granted at fair market value of Arch's common stock on the date of grant.
Options have a duration of ten years and vest over a three-year period from
the date of grant with the first such vesting (25% of granted options)
occurring on the date of grant and future vesting of 25% of granted options
occurring on each of the first three anniversaries of the date of grant.
On December 16, 1997, the Compensation Committee of the Board of Directors
of Arch authorized the Company to offer an election to its employees who had
outstanding options at a price greater than $5.06 to cancel such options and
accept new options at a lower price. In January 1998, as a result of this
election by certain of its employees, the Company canceled 1,083,216 options
with exercise prices ranging from $5.94 to $20.63 and granted the same number
of new options with an exercise price of $5.06 per share, the fair market
value of the stock on December 16, 1997.
On December 29, 1997, Arch adopted a Deferred Compensation Plan for
Nonemployee Directors. Under this plan, outside directors may elect to defer,
for a specified period of time, receipt of some or all of the annual and
meeting fees which would otherwise be payable for service as a director. A
portion of the deferred compensation may be converted into phantom stock
units, at the election of the director. The number of phantom stock units
granted equals the amount of compensation to be deferred as phantom stock
divided by the fair value of Arch's common stock on the date the compensation
would have otherwise been paid. At the end of the deferral period, the phantom
stock units will be converted to cash based on the fair market value of the
Company's common stock on the date of distribution.
F-16
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes the activity under Arch's stock option plans
for the periods presented:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
OPTIONS PRICE
--------- --------
<S> <C> <C>
Options Outstanding at August 31, 1994................ 602,744 $ 7.19
Granted............................................. 41,740 18.58
Exercised........................................... (2,000) 5.94
Terminated.......................................... -- --
--------- ------
Options Outstanding at December 31, 1994.............. 642,484 7.95
Granted............................................. 278,750 23.46
Assumed in USAM Merger.............................. 571,024 11.59
Exercised........................................... (475,903) 10.80
Terminated.......................................... (10,600) 17.57
--------- ------
Options Outstanding at December 31, 1995.............. 1,005,755 13.02
Granted............................................. 695,206 15.46
Exercised........................................... (169,308) 8.69
Terminated.......................................... (484,456) 21.60
--------- ------
Options Outstanding at December 31, 1996.............. 1,047,197 11.37
Granted............................................. 500,394 6.68
Exercised........................................... -- --
Terminated.......................................... (190,636) 10.58
--------- ------
Options Outstanding at December 31, 1997.............. 1,356,955 $ 9.75
========= ======
Options Exercisable at December 31, 1997.............. 639,439 $ 9.64
========= ======
</TABLE>
The following table summarizes the options outstanding and options
exercisable by price range at December 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
--------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 3.13 - $ 5.94 186,284 1.58 $ 4.39 169,784 $ 4.36
6.25 - 8.25 617,654 7.45 7.09 195,010 7.77
10.29 - 14.10 410,377 8.08 12.34 209,853 12.19
15.85 - 20.63 124,640 8.10 20.12 51,292 19.66
23.50 - 27.56 18,000 7.84 25.53 13,500 25.53
--------------- --------- ---- ------ ------- ------
$ 3.13 - $27.56 1,356,955 6.90 $ 9.75 639,439 $ 9.64
=============== ========= ==== ====== ======= ======
</TABLE>
Employee Stock Purchase Plan--On May 28, 1996, the stockholders approved the
1996 Employee Stock Purchase Plan (ESPP). The ESPP allows eligible employees
the right to purchase common stock, through payroll deductions not exceeding
10% of their compensation, at the lower of 85% of the market price at the
beginning or the end of each six-month offering period. During 1996 and 1997,
46,842 and 151,343 shares were issued at an average price per share of $7.97
and $5.29, respectively. At December 31, 1997, 51,815 shares are available for
future issuance. On May 19, 1998, the stockholders approved an amendment to
the plan to increase the number of shares available for future issuance by
250,000.
Accounting for Stock-Based Compensation--Arch accounts for its stock option
and stock purchase plans under APB Opinion No. 25 "Accounting for Stock Issued
to Employees". Since all options have been issued at
F-17
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
a grant price equal to fair market value, no compensation cost has been
recognized in the Statement of Operations. Had compensation cost for these
plans been determined consistent with SFAS No. 123 "Accounting for Stock-Based
Compensation", Arch's net income (loss) and income (loss) per share would have
been increased to the following pro forma amounts:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1996 1997
-------- --------- ---------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net income (loss): As reported $(36,602) $(114,662) $(181,874)
Pro forma (36,740) (115,786) (183,470)
Basic net income (loss) per
common share: As reported (2.72) (5.62) (8.77)
Pro forma (2.73) (5.68) (8.85)
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to the
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years. The
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model. In computing these pro forma amounts, Arch
has assumed a risk-free interest rate of 6%, an expected life of 5 years, an
expected dividend yield of zero and an expected volatility of 50% - 60%.
The weighted average fair values (computed consistent with SFAS No. 123) of
options granted under all plans in 1995, 1996 and 1997 were $11.89, $4.95 and
$3.37, respectively. The weighted average fair value of shares sold under the
ESPP in 1996 and 1997 was $5.46 and $2.83, respectively.
Stockholders Rights Plan--Upon completion of the USAM Merger, Arch's
existing stockholders rights plan was terminated. In October 1995, Arch's
Board of Directors adopted a new stockholders rights plan (the "Rights") and
declared a dividend of one preferred stock purchase right (a "Right") for each
outstanding share of common stock to stockholders of record at the close of
business on October 25, 1995. Each Right entitles the registered holder to
purchase from Arch one one-thousandth of a share of Series B Junior
Participating Preferred Stock, at a cash purchase price of $150, subject to
adjustment. Pursuant to the Plan, the Rights automatically attach to and trade
together with each share of common stock. The Rights will not be exercisable
or transferable separately from the shares of common stock to which they are
attached until the occurrence of certain events. The Rights will expire on
October 25, 2005, unless earlier redeemed or exchanged by Arch in accordance
with the Plan.
5. INCOME TAXES
Arch accounts for income taxes under the provisions of SFAS No. 109
"Accounting for Income Taxes". Deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax
bases of assets and liabilities given the provisions of enacted laws.
The components of the net deferred tax asset (liability) recognized in the
accompanying consolidated balance sheets at December 31, 1996 and 1997 are as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Deferred tax assets.................................. $ 94,597 $134,944
Deferred tax liabilities............................. (115,769) (90,122)
-------- --------
(21,172) 44,822
Valuation allowance.................................. -- (44,822)
-------- --------
$(21,172) $ --
======== ========
</TABLE>
F-18
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The approximate effect of each type of temporary difference and carryforward
at December 31, 1996 and 1997 is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
--------- --------
<S> <C> <C>
Net operating losses................................ $ 89,764 $106,214
Intangibles and other assets........................ (115,769) (87,444)
Depreciation of property & equipment................ 3,692 24,388
Accruals and reserves............................... 1,141 1,664
--------- --------
(21,172) 44,822
Valuation allowance................................. -- (44,822)
--------- --------
$(21,172) $ --
========= ========
</TABLE>
The effective income tax rate differs from the statutory federal tax rate
primarily due to the nondeductibility of goodwill amortization. The net
operating loss (NOL) carryforwards expire at various dates through 2012. The
Internal Revenue Code contains provisions that may limit the NOL carryforwards
available to be used in any given year if certain events occur, including
significant changes in ownership, as defined.
The Company has established a valuation reserve against its net deferred tax
asset until it becomes more likely than not that this asset will be realized
in the foreseeable future.
6. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company and its subsidiaries are
defendants in a variety of judicial proceedings. In the opinion of management,
there is no proceeding pending, or to the knowledge of management threatened,
which in the event of an adverse decision, would result in a material adverse
change in the financial condition of the Company.
Arch has operating leases for office and transmitting sites with lease terms
ranging from one month to approximately ten years. In most cases, Arch expects
that, in the normal course of business, leases will be renewed or replaced by
other leases.
Future minimum lease payments under noncancellable operating leases at
December 31, 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998............................. $16,909
1999............................. 7,706
2000............................. 4,546
2001............................. 2,689
2002............................. 950
Thereafter....................... 1,680
-------
Total.......................... $34,480
=======
</TABLE>
Total rent expense under operating leases for the years ended December 31,
1995, 1996 and 1997 approximated $6.4 million, $14.7 million, and $19.8
million, respectively.
F-19
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. EMPLOYEE BENEFIT PLANS
Retirement Savings Plan--Arch has a retirement savings plan, qualifying
under Section 401(k) of the Internal Revenue Code covering eligible employees,
as defined. Under the plan, a participant may elect to defer receipt of a
stated percentage of the compensation which would otherwise be payable to the
participant for any plan year (the deferred amount) provided, however, that
the deferred amount shall not exceed the maximum amount permitted under
Section 401(k) of the Internal Revenue Code. The plan provides for employer
matching contributions. Matching contributions for the years ended December
31, 1995, 1996 and 1997 approximated $124,000, $217,000 and $302,000,
respectively.
8. TOWER SITE SALE
In April 1998, Arch announced an agreement to sell certain of its tower site
assets (the "Tower Site Sale") for approximately $38.0 million in cash
(subject to adjustment), of which $1.3 million will be paid to a subsidiary of
Benbow in payment for certain assets owned by such subsidiary and included in
the Tower Site Sale. In the Tower Site Sale, Arch is selling communications
towers, real estate, site management contracts and/or leasehold interests
involving 134 sites in 22 states and leasing back space on the towers on which
it currently operates communications equipment to service its own paging
network. Arch will use its net proceeds from the Tower Site Sale (estimated to
be $36.0 million) to repay indebtedness under the API Credit Facility. Arch
held the initial closing of the Tower Site Sale on June 26, 1998 with gross
proceeds to Arch of approximately $12.0 million (excluding $1.3 million which
was paid to Benbow for certain assets which it sold as part of this
transaction) and currently expects to hold the final closing for the balance
of the transaction in the third quarter of 1998, although no assurance can be
given that the final closing will be held as expected.
9. DIVISIONAL REORGANIZATION (UNAUDITED)
In June 1998, Arch's Board of Directors approved a reorganization of Arch's
operations (the "Divisional Reorganization"). As part of the Divisional
Reorganization, which will be implemented over a period of 18 to 24 months,
Arch plans to consolidate its seven operating divisions into four operating
divisions and consolidate certain regional administrative support functions,
resulting in various operating efficiencies. In connection with the Divisional
Reorganization, Arch (i) anticipates a net reduction of approximately 10% of
its workforce, (ii) plans to close certain office locations and redeploy other
real estate assets and (iii) has recorded a restructuring charge of $16.1
million, or $0.77 per share (basic and diluted) in the second quarter of 1998.
The restructuring charge consists of approximately (i) $9.7 million for
employee severance and benefits, (ii) $3.5 million for lease obligations and
terminations and, (iii) $2.9 million for the writedown of related assets.
The write-down of fixed assets relates to a non-cash charge which will
reduce the carrying amount of certain leasehold improvements and other fixed
assets that the Company will not continue to utilize following the Divisional
Reorganization, to their estimated net realizable value as of the date such
assets are projected to be disposed of or abandoned by the Company. The net
realizable value of these assets was determined based on management's
estimates, which considered such factors as the nature and age of the assets
to be disposed of, the timing of the assets' disposal and the method and
potential costs of the disposal. Such estimates are subject to change.
The provision for lease obligations and terminations relates primarily to
future lease commitments on local, regional and divisional office facilities
that will be closed as part of the Divisional Reorganization. The charge
represents future lease obligations, on such leases past the dates the offices
will be closed by the Company, or for certain leases, the cost of terminating
the leases prior to their scheduled expiration. Cash payments on the leases
and lease terminations will occur over the remaining lease terms, the majority
of which expire prior to 2001.
F-20
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Through the elimination of certain local and regional administrative
operations and the consolidation of certain support functions, the Company
will eliminate approximately 280 net positions. As a result of eliminating
these positions, the Company will involuntarily terminate an estimated 900
personnel. The majority of the positions to be eliminated are in the local and
regional offices which will be closed as a result of the Divisional
Reorganization. The majority of the severance and benefits costs to be paid by
the Company will be paid during the remainder of 1998 and in 1999.
The Company's restructuring activity as of June 30, 1998 is as follows (in
thousands):
<TABLE>
<CAPTION>
RESERVE UTILIZATION OF RESERVE
INITIALLY ------------------------- REMAINING
ESTABLISHED CASH NON-CASH RESERVE
----------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
Severance costs.......... $ 9,700 $ 205 $ -- $ 9,495
Lease obligation costs... 3,500 20 -- 3,480
Write-down of related as-
sets.................... 2,900 29 -- 2,871
------- ----------- ----------- -------
Total.................. $16,100 $ 254 $ -- $15,846
======= =========== =========== =======
</TABLE>
10. QUARTERLY FINANCIAL RESULTS (UNAUDITED)
Quarterly financial information for the years ended December 31, 1996 and
1997 is summarized below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
Revenues........................... $ 67,171 $ 78,983 $ 90,886 $ 94,330
Operating income (loss)............ (12,949) (18,821) (23,647) (30,653)
Income (loss) before extraordinary
item.............................. (19,377) (25,678) (32,178) (35,525)
Extraordinary charge............... -- (1,904) -- --
Net income (loss).................. (19,377) (27,582) (32,178) (35,525)
Basic net income (loss) per common
share:
Income (loss) before extraordi-
nary item....................... (.98) (1.26) (1.56) (1.72)
Extraordinary charge............. -- (.09) -- --
Net income (loss)................ (.98) (1.35) (1.56) (1.72)
YEAR ENDED DECEMBER 31, 1997:
Revenues........................... $ 95,539 $ 98,729 $101,331 $101,242
Operating income (loss)............ (26,632) (29,646) (27,208) (18,529)
Net income (loss).................. (45,815) (49,390) (47,645) (39,024)
Basic net income (loss) per common
share:
Net income (loss)................ (2.21) (2.38) (2.29) (1.88)
</TABLE>
F-21
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
MobileMedia Communications, Inc.
We have audited the accompanying consolidated balance sheets of MobileMedia
Communications, Inc. and Subsidiaries ("MobileMedia") as of December 31, 1996
and 1997, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of MobileMedia Communications, Inc. and Subsidiaries at December 31, 1996 and
1997 and the consolidated results of their operations and cash flows for each
of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
MobileMedia will continue as a going concern. As more fully described in Note
1, on January 30, 1997, MobileMedia Corporation and substantially all of its
subsidiaries filed voluntary petitions for reorganization under Chapter 11 of
the United States Bankruptcy Code in the United States Bankruptcy Court for
the District of Delaware (the Bankruptcy Court). Additionally, as more fully
described in Note 12, on April 8, 1997, the Federal Communications Commission
("FCC") issued a Public Notice commencing an administrative hearing into the
qualification of MobileMedia to remain a licensee, which hearing has been
stayed by the FCC until October 6, 1998. These events, and circumstances
relating to the Chapter 11 filing with the Bankruptcy Court, including
MobileMedia's highly leveraged financial structure, non-compliance with
certain covenants of loan agreements with banks and note indentures, net
working capital deficiency and recurring losses from operations, raise
substantial doubt about MobileMedia's ability to continue as a going concern.
Although MobileMedia is currently operating the business as debtors-in-
possession under the jurisdiction of the Bankruptcy Court, the continuation of
the business as a going concern is contingent upon, among other things, the
ability to (a) formulate a plan of reorganization which will gain approval of
the creditors and confirmation by the Bankruptcy Court, (b) maintain
compliance with all covenants under the debtor-in-possession financing
agreement, (c) achieve satisfactory levels of future operating profit and (d)
retain FCC qualification as a licensee. The financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification
of liabilities that may result from the outcome of these uncertainties.
/s/ Ernst & Young LLP
MetroPark, New Jersey
July 31, 1998
except for Note 15, as to which the date is
September 3, 1998
F-22
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.............. $ 23,160 $ 10,920 $ 11,559
Accounts receivable (less allowance
for uncollectible accounts of
$56,189, $26,497 and $20,166 in 1996,
1997 and 1998, respectively).......... 66,709 55,432 39,890
Inventories............................ 13,382 868 916
Prepaid expense........................ 1,118 5,108 5,837
Other.................................. 1,583 2,783 5,117
----------- ----------- -----------
Total current assets................. 105,952 75,111 63,319
----------- ----------- -----------
Investment in net assets of equity
affiliate.............................. 1,857 1,788 1,734
Property and equipment, net............. 327,757 257,937 227,699
Intangible assets, net.................. 325,753 295,358 280,666
Other assets............................ 28,911 24,940 22,945
----------- ----------- -----------
Total assets......................... $ 790,230 $ 655,134 $ 596,363
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Liabilities not subject to compromise
Debtor-In-Possession (DIP) credit
facility.............................. $ -- $ 10,000 $ --
Accrued restructuring costs............ -- 4,897 5,041
Accrued wages, benefits and payroll.... -- 11,894 7,614
Accounts payable--post petition........ -- 2,362 3,815
Accrued interest....................... -- 4,777 5,436
Accrued expenses and other current
liabilities........................... 6,703 35,959 32,736
Advance billing and customer
deposits.............................. 37,022 34,252 32,446
----------- ----------- -----------
Total liabilities not subject to
compromise.......................... 43,725 104,141 87,088
----------- ----------- -----------
Liabilities subject to compromise
Accrued wages, benefits and payroll
taxes................................. 9,443 562 562
Accrued interest....................... 31,443 18,450 17,601
Accounts payable--pre petition......... 45,484 19,646 16,124
Accrued expenses and other current
liabilities........................... 48,215 20,663 20,658
Debt................................... 1,074,196 1,075,681 1,075,681
Other.................................. 3,460 2,915 2,842
----------- ----------- -----------
Total liabilities subject to
compromise.......................... 1,212,241 1,137,917 1,133,468
----------- ----------- -----------
Deferred tax liabilities............... 2,655 2,655 2,655
Stockholders' equity (deficit)
Common stock (1 share, no par value,
issued and outstanding at December
31, 1996 and 1997 and June 30,
1998)................................. -- -- --
Additional paid-in-capital............. 672,629 676,025 676,025
Accumulated deficit--pre petition...... (1,141,020) (1,154,420) (1,154,420)
Accumulated deficit--post petition..... -- (111,184) (148,453)
----------- ----------- -----------
Total stockholders' equity
(deficit)........................... (468,391) (589,579) (626,848)
----------- ----------- -----------
Total liabilities and stockholders'
equity (deficit).................... $ 790,230 $ 655,134 $ 596,363
=========== =========== ===========
</TABLE>
See accompanying notes.
F-23
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------- --------------------
1995 1996 1997 1997 1998
--------- ------------ ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue
Services, rents and
maintenance.......... $ 220,745 $ 568,892 $ 491,174 $ 257,420 $ 215,109
Product sales......... 32,251 71,818 36,218 18,048 13,794
--------- ------------ ---------- --------- ---------
Total revenues...... 252,996 640,710 527,392 275,468 228,903
Cost of products sold... (26,885) (72,595) (35,843) (16,948) (10,774)
--------- ------------ ---------- --------- ---------
226,111 568,115 491,549 258,520 218,129
Operating expenses
Services, rents and
maintenance.......... 59,800 144,050 139,333 74,009 56,028
Selling............... 45,203 96,817 69,544 37,201 31,460
General and
administrative....... 59,034 218,607 179,599 101,115 68,752
Impairment of long-
lived assets......... -- 792,478 -- -- --
Restructuring costs... -- 4,256 19,811 10,952 9,250
Depreciation.......... 50,399 136,434 110,376 56,275 45,807
Amortization.......... 21,009 212,264 29,862 14,893 14,941
--------- ------------ ---------- --------- ---------
Total operating
expenses........... 235,445 1,604,906 548,525 294,445 226,238
--------- ------------ ---------- --------- ---------
Operating (loss)........ (9,334) (1,036,791) (56,976) (35,925) (8,109)
Other income (expense)
Interest expense, net
..................... (31,745) (92,663) (67,611) (35,467) (29,113)
Gain (loss) on sale of
assets............... -- 68 3 -- (47)
--------- ------------ ---------- --------- ---------
Total other ex-
pense.............. (31,745) (92,595) (67,608) (35,467) (29,160)
--------- ------------ ---------- --------- ---------
Loss before income taxes
(benefit).............. (41,079) (1,129,386) (124,584) (71,392) (37,269)
Income taxes (benefit).. -- (69,442) -- -- --
--------- ------------ ---------- --------- ---------
Net loss................ $ (41,079) $ (1,059,944) $ (124,584) $ (71,392) $ (37,269)
========= ============ ========== ========= =========
</TABLE>
See accompanying notes.
F-24
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED
ADDITIONAL DEFICIT DEFICIT
PAID IN PRE- POST-
CAPITAL PETITION PETITION TOTAL
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31,
1994........................ $141,497 $ (39,997) $ 0 $ 101,500
Capital contribution from
MobileMedia................. 518,332 518,332
Net loss..................... (41,079) (41,079)
-------- ----------- --------- -----------
Balance at December 31,
1995........................ 659,829 (81,076) 0 578,753
Capital contribution from
MobileMedia................. 12,800 12,800
Net loss..................... (1,059,944) (1,059,944)
-------- ----------- --------- -----------
Balance at December 31,
1996........................ 672,629 (1,141,020) 0 (468,391)
Capital contribution from
MobileMedia................. 3,396 3,396
Net loss..................... (13,400) (111,184) (124,584)
-------- ----------- --------- -----------
Balance at December 31,
1997........................ 676,025 (1,154,420) (111,184) (589,579)
Net loss (unaudited)......... (37,269) (37,269)
-------- ----------- --------- -----------
Balance at June 30, 1998
(unaudited)................. $676,025 $(1,154,420) $(148,453) $ (626,848)
======== =========== ========= ===========
</TABLE>
See accompanying notes.
F-25
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------- ------------------
1995 1996 1997 1997 1998
----------- ----------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities
Net loss............... $ (41,079) $(1,059,944) $(124,584) $(71,392) $(37,269)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation and
amortization.......... 71,408 348,698 140,238 71,168 60,748
Income tax benefit..... (69,442)
Accretion of note
payable discount...... 15,159 16,792 1,485 1,486
Provision for
uncollectible
accounts.............. 4,259 56,556 65,181 40,616 9,671
Write-off of
unamortized debt
issuance costs........ 5,391
Impairment of long-
lived assets.......... 792,478
Undistributed earnings
of affiliate, net..... (303) 160 69 (144) 54
Change in operating
assets and liabilities:
Accounts receivable.... (17,595) (55,965) (53,904) (42,371) 5,871
Inventories............ (3,353) 2,433 12,514 6,806 (48)
Prepaid expenses and
other assets.......... 133 12,145 (686) (1,149) (1,317)
Accounts payable,
accrued expenses and
other liabilities..... 9,829 13,283 (25,393) (18,761) (11,502)
----------- ----------- --------- -------- --------
Net cash provided by
(used in) operating
activities............ 43,849 57,194 14,920 (13,741) 26,208
----------- ----------- --------- -------- --------
Investing activities:
Construction and
capital expenditures,
including net changes
in pager assets....... (86,163) (161,861) (40,556) (23,756) (15,569)
Investment in net
assets of equity
affiliates............ (1,641)
Acquisition of
businesses............ (171,223) (866,460)
MAP Mobile channel
exchange agreement.... (10,175)
Cash paid to FCC for
PCS license........... (42,935)
Other.................. (561)
----------- ----------- --------- -------- --------
Net cash used in
investing activities... (312,698) (1,028,321) (40,556) (23,756) (15,569)
----------- ----------- --------- -------- --------
Financing activities:
Capital contribution by
MobileMedia
Corporation........... 518,332 12,800 3,396 3,396
Proceeds from sale of
notes, net............ 245,863
Repayment of Dial
Page.................. (83,430)
Payment of debt issue
costs................. (22,721) (6,939)
Borrowing from
revolving credit
facilities............ 1,071,000 580,250
Repayments on revolving
credit facilities..... (1,057,250)
Borrowing from DIP
credit facilities..... 47,000 15,000
Repayments on DIP
credit facilities..... (37,000) (10,000)
----------- ----------- --------- -------- --------
Net cash provided by
(used in) financing
activities............. 671,794 586,111 13,396 18,396 (10,000)
----------- ----------- --------- -------- --------
Net (decrease) increase
in cash, cash
equivalents designated
and cash designated for
the MobileComm
acquisition............ 402,945 (385,016) (12,240) (19,101) 639
Cash and cash
equivalents at
beginning of period.... 5,231 408,176 23,160 23,160 10,920
----------- ----------- --------- -------- --------
Cash and cash
equivalents at end of
period................. $ 408,176 $ 23,160 $ 10,920 $ 4,059 $ 11,559
=========== =========== ========= ======== ========
</TABLE>
See accompanying notes.
F-26
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CHAPTER 11 REORGANIZATION AND BASIS OF PRESENTATION
On January 30, 1997 (the "Petition date"), MobileMedia Corporation
("Parent"), its wholly owned subsidiary MobileMedia Communications, Inc., and
all seventeen of MobileMedia Communication's Inc.'s subsidiaries
("MobileMedia") (collectively with Parent and MobileMedia, the "Debtors"),
filed for protection under Chapter 11 of Title 11 of the United States Code
(the "Bankruptcy Code"). The Debtors are operating as debtors-in-possession
and are subject to the jurisdiction of the United States Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court"). Chapter 11 is the principal
business reorganization chapter of the Bankruptcy Code. Under Chapter 11 of
the Bankruptcy Code, a debtor is authorized to reorganize its business for the
benefit of its creditors and stockholders. In addition to permitting
rehabilitation of the debtor, another goal of Chapter 11 is to promote
equality of treatment of creditors and equity security holders of equal rank
with respect to the restructuring of debt. In furtherance of these two goals,
upon the filing of a petition for reorganization under Chapter 11, section
362(a) of the Bankruptcy Code generally provides for an automatic stay of
substantially all acts and proceedings against the debtor and its property,
including all attempts to collect claims or enforce liens that arose prior to
the commencement of the debtor's case under Chapter 11.
The Bankruptcy Court has exercised supervisory powers over the operations of
the Debtors with respect to the employment of attorneys, investment bankers
and other professionals, and transactions out of the Debtors' ordinary course
of business or otherwise requiring bankruptcy court approval under the
Bankruptcy Code. The Debtors have been paying undisputed obligations that have
arisen subsequent to the Petition date on a timely basis.
Since the Petition date, the Bankruptcy Court has entered orders allowing
the Debtors (i) to pay certain customer refunds and deposits in the ordinary
course of business, (ii) to pay wages, salaries and benefits owing to
employees, and (iii) to pay specified pre-petition taxes owing to various
governmental entities. On February 6, 1997, the Bankruptcy Court entered an
order authorizing the Debtors to pay approximately $46 million in pre-petition
amounts owing to certain essential vendors.
Under the Bankruptcy Code, the Debtors may elect to assume or reject real
estate leases, employment contracts, personal property leases, service
contracts and other unexpired executory pre-petition leases and contracts,
subject to Bankruptcy Court approval. Assumption of a contract requires the
Debtors, among other things, to cure all defaults under the contract,
including payment of all pre-petition liabilities. Rejection of a contract
constitutes a breach of that contract as of the moment immediately preceding
the Chapter 11 filing and the other party has the right to assert a general,
unsecured claim against the bankruptcy estate for damages arising out of such
breach. These parties may also seek to assert post-petition administrative
claims against the Debtors to the extent that the Debtors utilize the
collateral or services of such parties subsequent to the commencement of the
Chapter 11 proceedings. The Debtors cannot presently determine or reasonably
estimate the ultimate liability which may result from payments required to
cure defaults under assumed leases and contracts or from the filing of claims
for all leases and contracts which may be rejected.
In connection with the Chapter 11 filing, the Debtors notified all known
claimants that pursuant to an order of the Court, all proofs of claims, on
account of pre-petition obligations, other than for certain governmental
entities, were required to be filed by June 16, 1997 (the "Bar Date").
Approximately 2,400 proofs of claim have been filed against the Debtors.
Included among the claims filed are claims of unspecified and undeterminable
amounts. The Debtors consider the amounts set forth in certain proofs of claim
to be inaccurate estimates of the Debtors' liabilities. As of June 30, 1998,
the Debtors had secured orders of the Bankruptcy Court reducing approximately
1,260 claims filed in an aggregate amount of approximately $91.4 million to an
allowed amount of $3.65 million. The Debtors expect the objection process to
continue.
F-27
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Confirmation and consummation of a plan of reorganization are the principal
objectives of a Chapter 11 reorganization case. A plan of reorganization sets
forth the means for satisfying claims against, and interests in, a debtor.
Confirmation of a plan requires, among other things, the affirmative vote of
creditors holding at least two-thirds in total dollar amount and more than
one-half in number of the allowed claims in each impaired class of claims that
have voted on the plan, and two-thirds in amount of equity interests in each
impaired class of interests that voted on the plan. Section 1129(b) of the
Bankruptcy Code--commonly referred to as the "cramdown" provision--permits
confirmation of a plan over the objection of an impaired class under certain
circumstances. Confirmation of a plan of reorganization by a bankruptcy court
makes the plan binding upon the debtor, any issuer of securities under the
plan, any person acquiring property under the plan and any creditor or equity
security holder of the debtor. Subject to certain limited exceptions, the
confirmation order discharges the debtor from any debt that arose prior to the
date of confirmation of the plan and substitutes therefore the obligations
specified under the confirmed plan.
MobileMedia filed a Joint Plan of Reorganization with the Bankruptcy Court
on January 27, 1998, and its related Disclosure Statement on February 2, 1998.
This Plan was filed with the support of the Steering Committee for
MobileMedia's secured creditors (the "Secured Creditors Committee"), but
without the support of the Official Committee of Unsecured Creditors (the
"Unsecured Creditors Committee").
As addressed below in Footnote 15, "Subsequent Events", the Debtors filed a
First Amended Joint Plan of Reorganization (the "Plan"). The Plan contemplates
a merger of the Debtors with Arch Communications Group, Inc.
The consolidated financial statements at December 31, 1996 and 1997 and June
30, 1998 (unaudited) have been prepared on a going concern basis which assumes
continuity of operations and realization of assets and liquidation of
liabilities in the ordinary course of business. As discussed herein, there are
significant uncertainties relating to the ability of MobileMedia to continue
as a going concern. The consolidated financial statements do not include any
adjustments relating to the recoverability and classification of recorded
asset amounts, or the amounts and classification of liabilities that might be
necessary as a result of the outcome of the uncertainties discussed herein.
2. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
MobileMedia provides paging and wireless messaging services in the United
States, including the 100 largest metropolitan areas.
Consolidation
The consolidated financial statements include the accounts of MobileMedia
and it's wholly-owned subsidiaries (MobileMedia Communications of California,
Inc., MobileMedia Paging, Inc., MobileMedia DP Properties, Inc., Dial Page
Southeast, Inc., RadioCall Company of Virginia, Inc., MobileMedia PCS, Inc.,
Mobile Communications Corporation of America, MobileComm of Florida, Inc.,
MobileComm of Tennessee, Inc., MobileComm of the Midsouth, Inc., MobileComm
Nationwide Operations, Inc., MobileComm of the West, Inc., MobileComm of the
Northeast, Inc., MobileComm of the Southeast, Inc., MobileComm of the
Southeast Private Carrier Operations, Inc., MobileComm of the Southwest, Inc.
and FWS Radio, Inc.). All significant intercompany accounts and transactions
have been eliminated.
F-28
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cash Equivalents
MobileMedia considers all highly-liquid securities with an original maturity
of less than three months to be cash equivalents.
Concentrations of Credit Risk
Financial instruments that potentially subject MobileMedia to concentrations
of credit risk consist principally of temporary cash investments and accounts
receivable. MobileMedia places its temporary cash investments with high-
quality institutions and, by policy, limits its credit exposure to any one
institution. Although MobileMedia faces significant credit risk from its
customers, which has been aggravated due to MobileMedia's operating problems,
such risk does not result from a concentration of credit risk as a result of
the large number of customers which comprise MobileMedia's customer base.
MobileMedia generally does not require collateral or other security to support
customer receivables.
Inventories
MobileMedia values inventories at the lower of specific cost or market
value. Inventories consist of pagers held specifically for resale by
MobileMedia.
Revenue Recognition
MobileMedia recognizes revenue under service, rent and maintenance
agreements with customers at the time the related services are performed.
Advance billings for services are deferred and recognized as revenue when
earned. MobileMedia leases (as lessor) certain pagers under operating leases.
Sales of pagers are recognized upon delivery.
Reclassifications
Certain 1995 financial statement items have been reclassified to conform to
the 1996 and 1997 presentation.
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 these estimates.
Property and Equipment
Effective October 1, 1997, MobileMedia shortened the estimated useful life
of pagers from four to three years. This change resulted in additional
depreciation expense of approximately $2,500 in 1997.
Property and equipment are stated at cost, less accumulated depreciation.
While several companies manufacture pagers, MobileMedia purchases a
significant percentage of its pagers from one supplier. Any disruption of such
supply could have a material impact on MobileMedia's operations.
Expenditures for maintenance are charged to expense as incurred.
Upon retirement of pagers, the cost and related accumulated depreciation are
removed from the accounts and the net book value, if any, is charged to
depreciation expense. Upon the sale of pagers, the net book value is charged
to cost of products sold.
F-29
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation and amortization are computed using the straight-line method
over the following estimated useful lives:
<TABLE>
<S> <C>
Pagers............................................................ 3 years
Radio transmission equipment...................................... 10 years
Computer equipment................................................ 4 years
Furniture and fixtures............................................ 5 years
Leasehold improvements............................................ 1-10 years
Buildings......................................................... 30 years
</TABLE>
Intangible Assets
Intangible assets consist primarily of customer lists, FCC licenses, a non-
competition agreement, software and the excess of consideration paid over fair
values of net assets acquired and are being amortized principally using the
straight-line method over periods ranging from 1 to 40 years. In connection
with the impairment writedown discussed below, MobileMedia revised the lives
of FCC licenses and customer lists to 25 years and 3 years, respectively.
Impairment of Long-Lived Assets
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of", MobileMedia records impairment losses on long-lived assets
used in operations when events and circumstances indicate that the assets
might be impaired and the undiscounted cash flows estimated to be generated by
those assets are less than the net book value of those assets. In 1997,
MobileMedia determined impairment existed with respect to its long-lived
assets as of December 31, 1996. Such determination was based upon the
existence of adverse business circumstances, such as MobileMedia's bankruptcy,
its 1996 operating results and the uncertainty associated with the pending FCC
proceeding. In July 1998, MobileMedia evaluated the ongoing value of its long-
lived assets effective December 31, 1996 and, based on this evaluation,
MobileMedia determined that intangible assets with a net book value of
$1,118,231 were impaired and wrote them down by $792,478 to their estimated
fair value. Fair value was determined through the application of generally
accepted valuation methods to MobileMedia's projected cash flows, discounted
at an estimated market rate of interest. The remaining carrying amount of
long-lived assets are expected to be recovered based on MobileMedia's
estimates of cash flows. However, it is possible that such estimates could
change based upon the uncertainties of the bankruptcy process and because
future operating and financial results may differ from those projected which
may require further writedowns to fair value.
Debt Issue Costs
Debt issue costs, which relate to the long term debt discussed in Note 6,
are reported as "Other assets" in the accompanying balance sheets. Such costs
amounted to $26,582 at December 31, 1996, $22,939 at December 31, 1997 and
$21,117 at June 30, 1998 (unaudited) and are being amortized on a straight
line basis over the term of the related debt.
Restructuring Costs
Restructuring costs are primarily comprised of professional fees
constituting administrative expenses incurred by MobileMedia as a result of
reorganization under Chapter 11 of the Bankruptcy Code.
Income Taxes
Income taxes are accounted for by the liability method in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes".
F-30
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Unaudited Interim Financial Statements
The interim financial information as of June 30, 1998 and the six months
ended June 30, 1997 and 1998 contained herein is unaudited but, in the opinion
of management, includes all adjustments of a normal recurring nature that are
necessary for a fair presentation of the financial position, results of
operations, and cash flows for the periods presented. Results of operations
for the interim periods presented are not necessarily indicative of results of
operations for the entire year.
New Authoritative Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" (SFAS
No. 130), which is effective for years beginning after December 15, 1997. SFAS
No. 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full
set of general-purpose financial statements. This Statement requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. SFAS No.
130 is effective for financial statements for fiscal years beginning after
December 15, 1997, and therefore MobileMedia will adopt the new requirements
retroactively in 1998. Management does not anticipate that the adoption of
SFAS No. 130 will have a significant effect on MobileMedia's reporting.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131), which is effective for
years beginning after December 15, 1997. SFAS No. 131 establishes standards
for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. SFAS No. 131 is
effective for financial statements for fiscal years beginning after December
15, 1997. Management has not completed its review of SFAS No. 131, but does
not anticipate that the adoption of this statement will have any effect on
MobileMedia's reporting.
In April 1998, the Accounting Standards Executive Committee of the Financial
Accounting Standards Board issued Statement of Position 98-5 ("SOP 98-5")
"Reporting on the Costs of Start-Up Activities". SOP 98-5 requires costs of
start-up activities and organization costs to be expensed as incurred. Initial
application of SOP 98-5 will be reported as the cumulative effect of a change
in accounting principle. MobileMedia intends to adopt SOP 98-5 effective
January 1, 1999. The adoption of SOP 98-5 is not expected to have a material
effect on MobileMedia's financial position or results of operations.
3. ACQUISITIONS AND DIVESTITURES
On January 4, 1996, MobileMedia completed its acquisition of MobileComm,
BellSouth's paging and wireless messaging unit, and an associated nationwide
two-way narrowband 50/12.5 kHz PCS license, and BellSouth agreed to enter into
a two-year non-compete agreement and a five-year reseller agreement with
MobileMedia (the "MobileComm Acquisition"). The aggregate consideration paid
for the MobileComm Acquisition (excluding fees and expenses and related
financing costs) was approximately $928,709.
The MobileComm Acquisition has been accounted for as a purchase transaction
in accordance with Accounting Principles Board Opinion No. 16 and,
accordingly, the financial statements for the periods subsequent to January 4,
1996 reflect the purchase price and transaction costs of $24,328, allocated to
tangible
F-31
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
and intangible assets acquired and liabilities assumed based on their
estimated fair values as of January 4, 1996. The allocation of the purchase
price is summarized as follows:
<TABLE>
<S> <C>
Current assets................................................... $ 55,301
Property and equipment........................................... 112,986
Intangible assets................................................ 934,269
Other assets..................................................... 143
Liabilities assumed.............................................. (149,662)
---------
$ 953,037
=========
</TABLE>
On August 31, 1995, MobileMedia purchased the paging assets and messaging
services business (the "Paging Business") of Dial Page, Inc. ("Dial Page"),
including the capital stock of two wholly-owned Dial Page subsidiaries, and
assumed certain liabilities of the Paging Business (the "Dial Page
Acquisition"). The purchase price for the Paging Business was $187,396,
comprised of cash and the assumption by MobileMedia of the aggregate principal
amount of and accrued interest on certain indebtedness of Dial Page.
The Dial Page Acquisition has been accounted for as a purchase transaction
in accordance with Accounting Principles Board Opinion No. 16 and,
accordingly, the financial statements for the periods subsequent to August 31,
1995 reflect the purchase price, including bond tender premium and consent,
and fees of $7,444 and transaction costs of $5,339, allocated to tangible and
intangible assets acquired and liabilities assumed based on their estimated
fair values as of August 31, 1995.
The allocation of the purchase price is summarized as follows:
<TABLE>
<S> <C>
Current assets.................................................... $ 3,441
Property and equipment............................................ 37,406
Intangible assets................................................. 167,101
Other assets...................................................... 74
Liabilities assumed............................................... (7,843)
--------
$200,179
========
</TABLE>
Results of operations for the year ended December 31, 1995 include results
of Dial Page subsequent to August 31, 1995. The following unaudited pro forma
information reflects the results of operations of MobileMedia assuming the
Dial Page and MobileComm acquisitions had occurred as of January 1, 1995.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Net revenue................................................ $ 559,236
Net loss................................................... $(213,173)
</TABLE>
On October 23, 1995, MobileMedia completed the purchase of additional
capacity for its nationwide Private Carrier Paging channel for $10,175 from
MAP Mobile Communications, Inc.
F-32
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Pagers............................................ $228,924 $196,791 $179,154
Radio transmission equipment...................... 191,952 202,296 204,940
Computer equipment................................ 25,641 30,896 31,884
Furniture and fixtures............................ 19,435 20,918 21,544
Leasehold improvements............................ 14,943 14,652 15,730
Construction in progress.......................... 1,494 1,128 2,905
Land, buildings and other......................... 12,947 7,911 8,351
-------- -------- --------
495,336 474,592 464,508
Accumulated depreciation.......................... 167,579 216,655 236,809
-------- -------- --------
Property and equipment, net....................... $327,757 $257,937 $227,699
======== ======== ========
</TABLE>
5. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------------
1996 1997 JUNE 30, 1998 (UNAUDITED)
-------------------------------------------- ------------------------------ ------------------------------
FAS 121
ACCUMULATED IMPAIRMENT ADJUSTED ACCUMULATED ADJUSTED ACCUMULATED
COST AMORTIZATION CHARGE NET COST AMORTIZATION NET COST AMORTIZATION NET
---------- ------------ ---------- -------- -------- ------------ -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FCC Licenses.... $ 774,731 $ (22,757) $(490,651) $261,323 $261,323 $ (8,918) $252,405 $261,323 $(12,872) $248,451
Customer lists.. 288,137 (102,735) (120,972) 64,430 64,430 (21,477) 42,953 64,430 (32,215) 32,215
Software........ 3,500 (1,167) (2,333) -- -- -- -- -- -- --
Non-competition
agreement...... 125,999 (114,029) (11,970) -- -- -- -- -- -- --
Excess of
consideration
paid over fair
value of net
assets
acquired....... 176,646 (10,094) (166,552) -- -- -- -- -- -- --
---------- --------- --------- -------- -------- -------- -------- -------- -------- --------
$1,369,013 $(250,782) $(792,478) $325,753 $325,753 $(30,395) $295,358 $325,753 $(45,087) $280,666
========== ========= ========= ======== ======== ======== ======== ======== ======== ========
</TABLE>
MobileMedia is not amortizing the cost of two nationwide Personal
Communications Services ("PCS") licenses, one acquired directly from the FCC
and the other as a result of the MobileComm acquisition, since the
construction of paging networks related to such licenses has not been
completed.
F-33
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. DEBT
Debt is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
DIP credit facility......................... $ -- $ 10,000 $ --
Revolving loan.............................. 99,000 99,000 99,000
Term loan................................... 550,000 550,000 550,000
10 1/2% Senior Subordinated Deferred Coupon
Notes due December 1, 2003................. 172,628 174,125 174,125
9 3/8% Senior Subordinated Notes due
November 1, 2007........................... 250,000 250,000 250,000
Dial Page Notes............................. 1,570 1,570 1,570
Note Payable................................ 998 986 986
---------- ---------- ----------
Total debt................................ $1,074,196 $1,085,681 $1,075,681
========== ========== ==========
</TABLE>
The debt obligations of MobileMedia include:
1) A debtor-in-possession credit facility ("DIP Facility") with a
syndicate of lenders including The Chase Manhattan Bank, as Agent (the "DIP
Lenders"). As of June 30, 1998 there were no funded borrowings and as of
December 31, 1997, there was $10,000 of borrowings outstanding under this
facility. MobileMedia is subject to certain financial and operating
restrictions customary to credit facilities of this type including a
limitation on periodic capital expenditures, minimum allowable periodic
EBITDA and retention of a turnaround professional. Additionally,
MobileMedia is required to make monthly interest payments to the DIP
Lenders. The DIP Facility bears interest at a rate of LIBOR plus 250 basis
points or Base Rate plus 150 basis points, at the option of MobileMedia.
During 1997, the debtors drew down $47 million of borrowings and repaid $37
million under the DIP Facility. During January and February, 1998 the
Debtors repaid an additional $10 million. As of June 30, 1998 there were no
borrowings under the DIP Facility and a $0.5 million letter of credit
issued in 1997 remained a contingent obligation of the Debtors under the
DIP Facility. On January 27, 1998, the DIP Facility was amended and reduced
from $200,000 to $100,000. On July 28, 1998, the Company received interim
approval from the Bankruptcy Court to extend the DIP Facility to March 31,
1999 and further reduce it from $100,000 to $75,000. This approval is
expected to become final on August 12, 1998.
2) A $750,000 senior secured and guaranteed credit agreement (the "Pre-
Petition Credit Agreement") with a syndicate of lenders including The Chase
Manhattan Bank, as Agent. As of June 30, 1998 there was $649,000
outstanding under this facility consisting of term loans of $137,500 and
$412,500 and loans under a revolving credit facility totaling $99,000. This
agreement was entered into on December 4, 1995, in connection with the
financing of the MobileComm Acquisition. Commencing in 1996 MobileMedia was
in default under this agreement. As a result of such default and the
bankruptcy filing, MobileMedia has no borrowing capacity under this
agreement. Since the Petition date, MobileMedia has brought current its
interest payments and has been making monthly payments to the lenders under
the Pre-Petition Credit Agreement equal to the amount of interest accruing
under such agreement. (See Note 15)
3) $250,000 Senior Subordinated Notes due November 1, 2007 (the "9 3/8%
Notes") issued in November 1995, concurrent with MobileMedia's second
offering of Class A Common Stock (See Note 11). These notes bear interest
at a rate of 9 3/8% payable semiannually on May 1 and November 1 of each
year. On November 1, 1996, MobileMedia did not make its scheduled interest
payment on its 9 3/8% Notes which constituted an event of default. The note
holders have not exercised any rights or remedies afforded such
F-34
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
holders (which rights include, but are not limited to, acceleration of the
stated maturity of the notes). Since the Petition date, any such right or
remedy is subject to the automatic stay created by the Bankruptcy Code.
4) $210,000 of Senior Subordinated Deferred Coupon Notes (the "Deferred
Coupon Notes") issued, at a discount, in November 1993. The Deferred Coupon
Notes accrete at a rate of 10 1/2%, compounded semiannually, to an
aggregate principal amount of $210,000 by December 1, 1998 after which
interest is paid in cash at a rate of 10 1/2% and is payable semiannually.
By virtue of the missed interest payments on the 9 3/8% Notes and the Pre-
Petition Credit Agreement an event of default has occurred. The note
holders have not exercised any rights or remedies afforded such holders
(which rights include, but are not limited to, acceleration of the stated
maturity of the notes). Since the Petition date, any such right or remedy
is subject to the automatic stay created by the Bankruptcy Code.
Interest Expense on Debt
Interest paid during the years ended December 31, 1995, 1996 and 1997, and
the six months ended June 30, 1997 and 1998 (unaudited) was $9,828, $65,978,
$76,624, $41,279 and $27,540, respectively. Total interest cost incurred for
the years ended December 31, 1995, 1996 and 1997 was $31,952, $94,231 and
$68,409, respectively of which $1,249, $1,292 and $176 was capitalized. Total
interest cost incurred for the six months ended June 30, 1997 and 1998 was
$36,017 and $29,517, respectively of which $88 and $59 was capitalized.
Subsequent to the Petition date, interest was accrued and paid only on the
Pre-Petition Credit Agreement and the DIP Facility. If not for the filing,
interest expense for the year ended December 31, 1997 and the six months ended
June 30, 1997 and 1998 (unaudited) would have been approximately $98,775,
$49,386 and $48,514, respectively.
7. RELATED PARTY TRANSACTIONS
On February 8, 1995 Parent called upon certain investors for an additional
$25,000 of capital which was required to be contributed to MobileMedia in
exchange for 137,095 shares of Class A and 2,362,900 shares of Class B common
stock at $10 per share and warrants to purchase 51,014 shares of Class A
Common Stock. On June 13, 1995, MobileMedia received the $25,000 from the
exercise of such call.
8. INCOME TAXES
The components of income tax benefit (expense) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1996 1997
------- --------- -------
<S> <C> <C> <C>
Current:
Federal.......................................... $ -- $ -- $ --
State and local.................................. -- -- --
------- --------- -------
Deferred:
Federal.......................................... -- 52,081 --
State and local.................................. -- 17,361 --
------- --------- -------
Total.......................................... $ -- $ 69,442 $ --
======= ========= =======
</TABLE>
MobileMedia is included in the Parent's consolidated federal income tax
return. Income taxes are presented in the accompanying financial statements as
if MobileMedia filed tax returns as a separate consolidated entity.
F-35
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A reconciliation of income tax benefit and the amount computed by applying
the statutory federal income tax rate to loss before income taxes is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
-------- --------- --------
<S> <C> <C> <C>
Tax benefit at federal statutory rate....... $ 14,377 $ 395,285 $ 43,604
Goodwill and intangible amortization and
writedown.................................. -- (95,362) --
Valuation allowance on federal deferred tax
assets..................................... (14,377) (230,481) (43,604)
-------- --------- --------
Total..................................... $ -- $ 69,442 $ --
======== ========= ========
</TABLE>
The effect of the valuation allowance shown above represents federal tax
effects on income from continuing operations.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for federal and state income tax purposes. The
components of deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Difference in book and tax basis of fixed assets... $ -- $ 10,206
Other.............................................. -- 68
--------- ---------
Net deferred tax liabilities..................... -- 10,274
Deferred tax assets:
Accounts receivable reserves....................... 22,476 10,578
Differences between the book and tax basis of
intangible assets................................. 136,492 128,462
Difference between book and tax basis of accrued
liabilities....................................... 3,425 5,089
Net operating loss carryforward.................... 80,440 161,840
Difference between book and tax basis of fixed
assets............................................ 2,208 --
Other.............................................. 1,357 --
--------- ---------
Total deferred assets............................ 246,398 305,969
Valuation allowances for deferred tax assets..... (249,053) (298,350)
--------- ---------
Net deferred tax assets.......................... (2,655) 7,619
========= =========
Net deferred tax liabilities..................... $ 2,655 $ 2,655
========= =========
</TABLE>
As of December 31, 1997, MobileMedia has available net operating loss
carryforwards for tax purposes of approximately $400,000 which expire in years
2008 through 2012. Utilization of these losses may be limited under Section
382 of the Internal Revenue Code.
MobileMedia believes consummation of the public offering of 15,525,000
shares of Class A Common Stock on November 7, 1995 caused an ownership change
for MobileMedia for purposes of Section 382 of the Code. As a result, the use
of MobileMedia's pre-ownership change net operating loss carryforwards will be
limited annually by the Section 382 Limitation, which is estimated to be
approximately $40.0 million. If a second ownership change occurred subsequent
to November 7, 1995, which has not been determined, use of MobileMedia's net
operating losses would be severely limited. It is also anticipated that the
net operating loss carryforwards and possibly other tax attributes will be
substantially reduced as a result of consummation of the Plan.
F-36
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. LEASES
Certain facilities and equipment used in operations are held under operating
leases. In accordance with the Bankruptcy Code, all lease contracts will be
reviewed, and subject to Court approval, are subject to rejection. Rental
expenses under operating leases were $14,983, $44,574, $43,453, $22,436, and
$20,794 for the years ended December 31, 1995, 1996 and 1997 and the six
months ended June 30, 1997 and 1998 (unaudited), respectively. At December 31,
1997, the aggregate minimum rental commitments under leases were as follows:
<TABLE>
<S> <C>
1998................................................................ $ 23,566
1999................................................................ 18,953
2000................................................................ 14,037
2001................................................................ 7,625
2002................................................................ 4,788
Thereafter.......................................................... 7,707
--------
$ 76,676
========
</TABLE>
On March 23, 1998, MobileMedia moved into a new headquarters facility
pursuant to a lease with Miller Freeman, Inc. entered into with Bankruptcy
Court approval. On April 1, 1998, MobileMedia, with Bankruptcy Court approval,
assigned its prior lease of rental property used for its Headquarters office
to Southwestern Bell Yellow Pages, Inc. The lease expires in June, 2001. The
estimated annual savings related to this lease assignment and the lease with
Miller Freeman, Inc. is approximately $1,400. The cost savings is not
reflected in the above minimum rental commitments.
10. EMPLOYEE BENEFIT PLANS
MobileMedia has adopted a retirement savings plan that allows all employees
who have been employed for one year and have at least 1,000 hours of credited
service to contribute and defer up to 15% of their compensation. Effective
February 1, 1996, MobileMedia began a matching contribution of 50% of the
first 2% of the elected deferral plus an additional 25% of the next 4% of the
elected deferral. MobileMedia's matching contribution was $700 in 1996, $730
in 1997 and $386 and $327 for the six months ended June 30, 1997 and 1998
(unaudited), respectively.
Employees of MobileComm and Dial Page who were hired by MobileMedia were
eligible to participate in MobileMedia's retirement savings plan based on
their recognized MobileComm and Dial Page service date. As of the date of the
MobileComm and Dial Page Acquisitions employees with one year and at least
1,000 hours of credited service were eligible to participate.
11. COMMON STOCK, STOCK OPTION PLANS AND STOCK WARRANTS
On July 6, 1995, Parent issued an aggregate of 8,000,000 shares of Class A
Common Stock in a public offering at a price of $18.50 per share. Parent
received net proceeds from the sale of approximately $137,975. In addition, on
July 25, 1995, the underwriters exercised their over-allotment option to
purchase an additional 800,000 shares of Class A Common Stock at the initial
public offering price. Accordingly, Parent received additional net proceeds of
$13,910 for the over-allotment shares. On November 13, 1995, Parent issued an
aggregate of 13,500,000 shares of Class A Common Stock at a public offering
price of $23.75 resulting in net proceeds of approximately $308,755. In
addition, the underwriters exercised their over-allotment option to purchase
an additional 2,025,000 shares of Class A Common Stock at the public offering
price resulting in additional net proceeds of approximately $46,170.
F-37
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Non-Employee Directors
MobileMedia adopted a stock option plan under which options to purchase
MobileMedia's Class A Common Stock would be granted to the Company's non-
employee directors. Options for a total of 121,800 shares of Class A Common
Stock were issued under the Plan since the beginning of the Plan. All exercise
prices per share were considered to be the fair market value at the date of
grant. The plan was amended in 1997 to provide that no additional options may
be granted. Accordingly, no additional options were granted after 1996 under
the Plan. At December 31, 1996, options for a total of 92,040 shares of Class
A Common Stock, at exercise prices ranging from $10.00 to $26.38, were
outstanding. At December 31, 1997, options for a total of 90,290 shares of
Class A Common Stock were outstanding.
Employees
MobileMedia has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations in
accounting for its employee stock options because the alternative fair value
accounting provided for under FASB Statement No. 123, "Accounting for Stock-
Based Compensation," requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, because the
exercise price of MobileMedia's employee stock option equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized. In light of MobileMedia's current circumstances, the pro forma
effect of stock compensation expense pursuant to SFAS No. 123 has not been
calculated. MobileMedia adopted the 1993 MobileMedia Corporation Stock Option
Plan (the "Option Plan") under which options to purchase shares of
MobileMedia's Class A Common Stock may be granted to officers and key
employees of MobileMedia.
Two types of options may be granted under the Option Plan: options intended
to qualify as incentive stock options under Section 422 of the Code, and "non-
qualified" stock options not specifically authorized or qualified for
favorable federal income tax treatment under the Code. The option exercise
price for incentive stock options granted under the Option Plan may not be
less than the fair market value (as defined in the Option Plan) of Parent's
Class A Common Stock on the date the option is granted. The exercise price of
non-qualified stock options may be set by the Board of Directors at a discount
from fair market value. Prior to the Petition date, qualified and non-
qualified options issued to certain current and former officers and key
employees of MobileMedia to purchase up to 1,618,740, 1,414,893 and 1,240,518,
shares of Class A Common Stock at December 31, 1996 and 1997 and June 30,
1998, respectively, at exercise prices ranging from $6.81 to $10.00 per share,
were outstanding.
12. COMMITMENTS AND CONTINGENCIES
MobileMedia is party to a number of lawsuits and other matters arising in
the ordinary course of business.
As announced on September 27, 1996 and October 21, 1996, MobileMedia
discovered misrepresentations and other violations that occurred during the
licensing process for as many as 400 to 500, or approximately 6% to 7%, of its
approximately 8,000 local transmission one-way paging stations. MobileMedia
caused an investigation to be conducted by its outside counsel, and a
comprehensive report regarding these matters was provided to the FCC in the
fall of 1996. In cooperation with the FCC, outside counsel's investigation was
expanded to examine all MobileMedia's paging licenses, and the results of that
investigation were submitted to the FCC on November 8, 1996.
On January 13, 1997, the FCC issued a Public Notice relating to the status
of certain FCC authorizations held by MobileMedia. Pursuant to the Public
Notice, the FCC announced that it had (i) automatically terminated
approximately 185 authorizations for paging facilities that were not
constructed by the expiration date of their construction permits and remained
unconstructed, (ii) dismissed approximately 94 applications for fill-in sites
F-38
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
around existing paging stations (which had been filed under the so-called "40-
mile rule") as defective because they were predicated upon unconstructed
facilities and (iii) automatically terminated approximately 99 other
authorizations for paging facilities that were constructed after the
expiration date of their construction permits. With respect to the
approximately 99 authorizations where the underlying station was untimely
constructed, the FCC granted MobileMedia interim operating authority subject
to further action by the FCC.
On April 8, 1997, the FCC adopted an order commencing an administrative
hearing into the qualification of MobileMedia to remain a licensee. The order
directed an Administrative Law Judge to take evidence and develop a full
factual record on directed issues concerning MobileMedia's filing of false
forms and applications. MobileMedia was permitted to operate its licensed
facilities and provide service to the public during the pendency of the
hearing.
On June 6, 1997, the FCC issued an order staying the hearing proceeding for
ten months in order to allow MobileMedia to develop and consummate a plan of
reorganization that provides for a change of control of MobileMedia and a
permissible transfer of MobileMedia's FCC licenses. The order, which is based
on an FCC doctrine known as Second Thursday, provides that if there is a
change of control that meets the conditions of Second Thursday, the regulatory
issues designated for administrative hearing will be resolved by the transfer
of MobileMedia's FCC licenses to the new owners of MobileMedia and the hearing
will not proceed. MobileMedia believes that a reorganization plan that
provides for either a conversion of certain existing debt to equity, in which
case existing MobileMedia shares will be eliminated, or a sale or merger of
MobileMedia will result in a change of control that will satisfy the Second
Thursday doctrine. MobileMedia has requested, and the FCC granted, an
extension of the order staying the hearing for an additional six months to
October 6, 1998. If MobileMedia is unable to present the FCC with a plan of
reorganization that satisfies the conditions of Second Thursday prior to the
expiration of the stay of the hearing, MobileMedia may be required to proceed
with the hearing, which, if adversely determined, could result in the loss of
MobileMedia's licenses or substantial monetary fines, or both. Such an outcome
would have a material adverse effect on MobileMedia's financial condition and
results of operations.
Prior to the Petition date, five actions allegedly arising under the federal
securities laws were filed against MobileMedia and certain of its present and
former officers, directors and underwriters in the United States District
Court for the District of New Jersey. These actions were subsequently
consolidated as In re MobileMedia Securities Litigation, No. 96-5723 (AJL)
(the "New Jersey Actions"). A consolidated amended complaint (the "Complaint")
was filed on November 21, 1997. The Complaint does not name MobileMedia as a
defendant.
In June 1997, the Debtors initiated an Adversary Proceeding in the
Bankruptcy Court to stay the prosecution of the New Jersey Actions. Pursuant
to a Stipulation entered into among the Debtors and the plaintiffs in the New
Jersey Actions and "So Ordered" by the Bankruptcy Court on October 31, 1997,
the plaintiffs in the New Jersey Actions may conduct only limited discovery in
connection with the New Jersey Actions and may not file any pleadings, except
responses to motions to dismiss, until the earlier of September 30, 1998 and
the effective date pursuant to a plan of reorganization.
In addition to the New Jersey Actions, two lawsuits (together, the
"California Actions" and, together with the New Jersey Actions, the
"Securities Actions") were filed in September 1997 in the United States
District Court for the Northern District of California and the Superior Court
of California naming as defendants certain former officers and certain present
and former directors of MobileMedia, certain investment entities and the
Debtors' independent auditors. None of the Debtors is named as defendant in
the California Actions.
On November 4, 1997, the Debtors commenced an adversary proceeding in the
Bankruptcy Court seeking to stay the prosecution of the California Actions
against the named defendants. At hearings held on December 10,
F-39
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1997 and May 29, 1998, the Bankruptcy Court enjoined the plaintiffs in the
California Actions until September 15, 1998 from taking certain actions in
connection with the California Actions, with certain exceptions.
Neither the New Jersey Actions nor the California Actions name any of the
Debtors as a defendant. However, proofs of claim have been filed against the
Debtors by the plaintiffs in the New Jersey Actions, and both the New Jersey
Actions and the California Actions may give rise to claims against the
Debtors' Directors, Officers and Corporate Liability Insurance Policy. It is
anticipated that under any plan of reorganization for MobileMedia these Claims
will receive no distributions.
Three former employees have pre-petition agreements which provide an
incentive payment of up to $300 to each of them if MobileMedia's EBITDA for
1996, excluding operations of businesses acquired after Metromedia Paging
Services ("AMPS"), equals or exceeds $82,200, subject to certain adjustments
(the "1996 Target"), and of up to $1,000 to each of them if MobileMedia's
EBITDA for 1998, (excluding operations of businesses acquired after MPS),
equals or exceeds $125,100, subject to certain adjustments (the "1998
Target"). One current and four former employees have pre-petition agreements
which provide for incentive payments of up to $150 to each of them if
MobileMedia meets the 1996 Target and of up to $300 to each of them if
MobileMedia meets the 1998 Target. Several former employees have submitted
proofs of claim with the Bankruptcy Court with respect to these incentive
payments. MobileMedia intends to object to these unsecured claims.
13. OTHER INVESTMENTS
On March 21, 1995, MobileMedia purchased a 33% interest in Abacus
Communications Partners, L.P., a Delaware limited partnership, from Abacus
Business Services, Inc. for $1,641. Abacus Communications Partners, L.P. is
one of MobileMedia's alphanumeric dispatch services providers. The investment
has been accounted for under the equity method in accordance with Accounting
Principles Board Opinion No. 18. Under the equity method, original investments
are recorded at cost and adjusted by MobileMedia's share of undistributed
earnings or losses of the purchased company. MobileMedia's share of income
(loss) of affiliate, net of distribution, for the years ended December 31,
1995, 1996 and 1997 and for the six months ended June 30, 1997 and 1998
(unaudited), was $(303), $162, $69, $(144) and $54, respectively.
14. IMPACT OF YEAR 2000 (UNAUDITED)
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of
MobileMedia's computer programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
While MobileMedia is aware that certain of its software and paging systems
require modification, it is in the process of determining the full extent to
which it will be required to modify or replace significant portions of its
software and paging systems so that its systems function properly with respect
to dates in the year 2000 and thereafter. At present, MobileMedia does not yet
have an estimate of the cost that may be incurred to comply with the Year 2000
issue. If such modifications and conversions are not made, or are not
completed on a timely basis, the Year 2000 issue could have a material adverse
effect on the operations of MobileMedia.
15. SUBSEQUENT EVENTS
On July 7, 1998, MobileMedia entered into an agreement to sell 163
transmission towers and 49 parcels of land related thereto to Pinnacle Towers
Inc. ("Pinnacle") for proceeds of $170 million. The transaction also includes
the assignment of leases related to towers included in the sale. The
aforementioned sale was completed on September 3, 1998 and the proceeds
thereof were paid to MobileMedia's secured creditors whose claims total $649
million.
F-40
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In connection with the transaction, MobileMedia entered into a lease
agreement with Pinnacle under which MobileMedia will lease space on towers for
683 transmitters for a period of fifteen years at a cost of approximately
$10.7 million per year.
On August 20, 1998, MobileMedia announced that it had executed a merger
agreement with Arch Communications Group, Inc. ("Arch"), pursuant to which
MobileMedia Communications, Inc. will be merged with and into a wholly-owned
subsidiary of Arch. Immediately prior to the Merger, Parent will contribute
all of its assets to MobileMedia Communications, Inc. Concurrently, the
Debtors filed a First Amended Joint Plan of Reorganization (the "Plan") that
reflects the proposed merger with Arch. The Plan has the support of both the
Secured Creditors Committee and the Unsecured Creditors Committee. Under the
Plan, most creditors of the Debtors will receive cash or equity securities of
Arch in satisfaction of their pre-petition claims against the Debtors. Because
there are a variety of conditions precedent to the consummation of the Plan
and the merger with Arch, there can be no assurance that the transactions
contemplated thereby will be consummated.
F-41
<PAGE>
ANNEX A
DISCLOSURE SCHEDULE TO DEBTORS'
SECOND AMENDED JOINT PLAN
OF REORGANIZATION
TO BE FILED BY AMENDMENT
<PAGE>
ANNEX B
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ARCH COMMUNICATIONS GROUP, INC.,
FARM TEAM CORP.,
MOBILEMEDIA CORPORATION
AND
MOBILEMEDIA COMMUNICATIONS, INC.
DATED AS OF AUGUST 18, 1998
AND AMENDED AS OF SEPTEMBER 3, 1998
COMPOSITE COPY
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
THE MERGER
<C> <S> <C>
1.1 The Merger; Effective Time..................................... 2
1.2 The Closing.................................................... 2
1.3 Actions at the Closing......................................... 3
1.4 Additional Action.............................................. 3
1.5 Conversion of Securities....................................... 3
Appointment of Exchange Agent; Distributions in Accordance with
1.6 Amended Plan................................................... 4
1.7 Distribution to Holders of Buyer Common Stock.................. 4
1.8 Certificate of Incorporation................................... 4
1.9 By-laws........................................................ 4
1.10 Directors and Officers......................................... 4
1.11 Payment of Administrative Claims and Expenses.................. 5
<CAPTION>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE COMPANY
<C> <S> <C>
2.1 Organization, Qualification, Corporate Power and Authority..... 5
2.2 Capitalization................................................. 6
2.3 Noncontravention............................................... 6
2.4 Business Entities.............................................. 6
2.5 Financial Statements; Accounts Receivable; Inventory........... 7
2.6 Absence of Certain Changes..................................... 7
2.7 Undisclosed Liabilities........................................ 8
2.8 Tax Matters.................................................... 9
2.9 Tangible Assets................................................ 9
2.10 Owned Real Property............................................ 9
2.11 Intellectual Property.......................................... 10
2.12 Real Property Leases........................................... 11
2.13 Contracts...................................................... 11
2.14 Licenses and Authorizations.................................... 12
2.15 Litigation..................................................... 13
2.16 Employees...................................................... 13
2.17 Employee Benefits.............................................. 13
2.18 Environmental Matters.......................................... 15
2.19 Legal Compliance............................................... 16
2.20 Subscriber Cancellations; Suppliers............................ 16
2.21 Capital Expenditures........................................... 16
2.22 Brokers' Fees.................................................. 16
2.23 Certain Information............................................ 17
2.24 Disclosure..................................................... 17
<CAPTION>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
<C> <S> <C>
3.1 Organization Qualification, Corporate Power and Authority...... 18
3.2 Capitalization................................................. 19
3.3 Noncontravention............................................... 20
3.4 Business Entities.............................................. 20
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
3.5 Reports and Financial Statements................................. 21
3.6 Absence of Certain Changes....................................... 21
3.7 Undisclosed Liabilities.......................................... 21
3.8 Tax Matters...................................................... 21
3.9 Tangible Assets.................................................. 23
3.10 Owned Real Property.............................................. 23
3.11 Intellectual Property............................................ 23
3.12 Real Property Leases............................................. 23
3.13 Contracts........................................................ 24
3.14 Licenses and Authorizations...................................... 24
3.15 Litigation....................................................... 25
3.16 Employees........................................................ 26
3.17 Employee Benefits................................................ 26
3.18 Environmental Matters............................................ 27
3.19 Legal Compliance................................................. 28
3.20 Merger Subsidiary................................................ 28
3.21 Capital Expenditures; Suppliers.................................. 28
3.22 Brokers' Fees.................................................... 28
3.23 Rights Agreement; Section 203.................................... 28
3.24 Opinion of Financial Advisor..................................... 28
3.25 Required Vote of the Buyer's Stockholders........................ 29
3.26 Certain Information.............................................. 29
3.27 Disclosure....................................................... 29
<CAPTION>
ARTICLE IV
COVENANTS
<C> <S> <C>
4.1 Best Efforts..................................................... 29
4.2 Approvals; Consents.............................................. 29
4.3 Buyer Not To Control............................................. 30
4.4 Bankruptcy Covenants............................................. 30
4.5 Operation of Business............................................ 31
4.6 Notice of Breaches............................................... 34
4.7 Exclusivity...................................................... 34
4.8 Breakup Fee Provisions........................................... 36
4.9 Nasdaq National Market Quotation................................. 36
4.10 Delivery of Financial Statements................................. 37
4.11 Full Access...................................................... 37
4.12 Stockholders Approval; Meeting................................... 37
4.13 Proxy Statement, Disclosure Statement, Etc....................... 37
4.14 Application of Pinnacle Proceeds................................. 38
4.15 FCC Filing....................................................... 38
4.16 Indemnification; Director and Officers Insurance................. 39
4.17 State Takeover Laws.............................................. 39
4.18 Employees........................................................ 39
4.19 Rights Agreement................................................. 40
4.20 Buyer Rights Offering; Registration Statement.................... 40
4.21 Reimbursement of Buyer's Expenses................................ 41
4.22 Stockholder Rights Offering...................................... 41
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
ARTICLE V
CONDITIONS TO CLOSING
<C> <S> <C> <C>
5.1 Conditions to Obligations of Each Party...................... 42
5.2 Conditions to Obligations of the Buyer....................... 44
5.3 Conditions to Obligations of the Company..................... 44
<CAPTION>
ARTICLE VI
TERMINATION
<C> <S> <C> <C>
6.1 Termination of Agreement..................................... 45
6.2 Effect of Termination........................................ 46
<CAPTION>
ARTICLE VII
DEFINITIONS
ARTICLE VIII
GENERAL PROVISIONS
<C> <S> <C> <C>
8.1 Press Releases and Announcements............................. 51
8.2 No Third Party Beneficiaries................................. 51
8.3 Entire Agreement............................................. 51
8.4 Succession and Assignment.................................... 51
8.5 Counterparts................................................. 51
8.6 Headings..................................................... 51
8.7 Notices...................................................... 51
8.8 Governing Law................................................ 52
8.9 Amendments and Waivers....................................... 52
8.10 Severability................................................. 52
8.11 Expenses..................................................... 52
8.12 Specific Performance......................................... 52
8.13 Construction................................................. 52
8.14 Incorporation of Exhibits and Schedules...................... 52
8.15 Knowledge.................................................... 52
8.16 Survival of Representations.................................. 53
8.17 Bankruptcy Process........................................... 53
</TABLE>
iii
<PAGE>
LIST OF EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A Second Amended Joint Plan of Reorganization
EXHIBIT B Buyer Warrant Agreement
EXHIBIT B-1 Buyer Participation Warrant Agreement
EXHIBIT C Registration Rights Agreement
EXHIBIT D Amendment to Buyer's Rights Agreement dated as of August 18, 1998
EXHIBIT D-1 Amendment to Buyer's Rights Agreement dated as of September 3, 1998
EXHIBIT E Opinion of Buyer's Financial Advisor
EXHIBIT F Buyer Charter Amendment
EXHIBITS G,H,I,J,K&L Standby Purchase Commitments
LIST OF SCHEDULES
SCHEDULE I Subsidiaries of the Company
SCHEDULE II Pricing Mechanism
SCHEDULE III Rights Offering Term Sheet
SCHEDULE IV Stockholder Rights Offering Term Sheet
</TABLE>
iv
<PAGE>
COMPOSITE AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") entered into as of
August 18, 1998 (the date of this Agreement or the "Agreement Date") and
amended as of September 3, 1998 by and among Arch Communications Group, Inc.,
a Delaware corporation (the "Buyer"), Farm Team Corp., a Delaware corporation
and a wholly-owned subsidiary of Buyer (the "Merger Subsidiary"), MobileMedia
Corporation, a Delaware corporation (the "Parent"), and MobileMedia
Communications, Inc., a Delaware corporation and a wholly-owned subsidiary of
the Parent (the "Company" and, together with the Buyer, the Merger Subsidiary
and the Parent, the "Parties").
PRELIMINARY STATEMENT
A. The Parent, the Company and those subsidiaries of the Company set forth
in Schedule I attached hereto (collectively, the "Debtors" and each,
individually, a "Debtor") are debtors in possession in Chapter 11 cases (Case
Nos. 97-174 (PJW) through and including 97-192 (PJW)) (collectively the
"Chapter 11 Proceeding") pending before the United States Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court"). The Debtors have previously
filed a proposed Joint Plan of Reorganization dated January 27, 1998 (the
"Prior Plan") with the Bankruptcy Court.
B. This Agreement contemplates a merger of the Company into the Merger
Subsidiary. As a result of such merger, the separate corporate existence of
the Company shall cease and the Merger Subsidiary shall continue as the
Surviving Corporation (as defined in Section 1.1). For federal income tax
purposes, it is intended that such merger will qualify as a reorganization
under the provisions of Section 368(a)(2)(D) of the Internal Revenue Code of
1986, as amended (the "Code").
C. The merger contemplated by this Agreement shall constitute the basis for
the Debtor's Second Amended Joint Plan of Reorganization in the form attached
hereto as Exhibit A, as amended from time to time as permitted hereby and
thereby (the "Amended Plan"). Pursuant to the Amended Plan, which shall be
filed with the Bankruptcy Court as soon as practicable after the date of this
Agreement (but not later than August 20, 1998 in any event): (i) all the
outstanding equity interests in the Company and the Parent shall be canceled
without consideration, and the Parent shall be dissolved; (ii) all allowed
prepetition claims against, and prepetition obligations and indebtedness of,
the Debtors (the "Allowed Claims") shall be (a) satisfied by the distribution
of cash, shares of capital stock of the Buyer, Rights (as defined in paragraph
(E) below) and/or certain other consideration to the holders of the Allowed
Claims or (b) otherwise discharged; (iii) the commitments under the DIP Loan
Agreement (as defined in Section 1.11) shall be terminated and all amounts
owed under or in respect of the DIP Loan Agreement shall be paid in full in
cash; and (iv) the Merger Subsidiary shall remain a wholly owned subsidiary of
the Buyer.
D. This Agreement contemplates that the Buyer shall cause the Surviving
Corporation (as defined in Section 1.1) to pay or assume all allowed
administrative and priority claims and expenses of the Debtors and shall make
available to the Surviving Corporation the monies necessary for the timely
payment thereof.
E. In connection with the Merger (as defined in Section 1.1) and as part of
the Amended Plan, the Buyer intends to conduct the Rights Offering (as defined
in Section 4.20), in which it will issue to holders of certain Allowed Claims
transferable Rights to purchase (i) if a Rights Offering Adjustment (as
defined in Schedule II attached hereto) shall not have occurred, units
consisting of (a) shares of Common Stock, $0.01 par value per share, of the
Buyer ("Buyer Common Stock") or shares of Buyer Class B Common Stock, if
applicable, and (b) warrants to purchase shares of Buyer Common Stock ("Buyer
Warrants"), such Buyer Warrants to be issued pursuant to a warrant agreement
in the form attached hereto as Exhibit B (the "Buyer Warrant Agreement"), or
(ii) if a Rights Offering Adjustment shall have occurred, shares of Buyer
Common Stock or shares of Buyer
Class B Common Stock, if applicable. Contemporaneously with the execution and
delivery of this Agreement, certain holders of Allowed Claims (the "Standby
Purchasers") are making certain commitments in connection
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with the Rights Offering (as the same may be amended from time to time, the
"Standby Purchase Commitments"), copies of which are attached as Exhibits G,
H, I, J, K & L hereto. In partial consideration for the Standby Purchase
Commitments, the Buyer will issue to the Standby Purchasers (x) if a Rights
Offering Adjustment shall not have occurred, Buyer Warrants, or (y) if a
Rights Offering Adjustment shall have occurred, warrants to purchase shares of
Buyer Common Stock ("Buyer Participation Warrants"), such Buyer Participation
Warrants to be issued pursuant to a warrant agreement in the form attached
hereto as Exhibit B-1 (the "Buyer Participation Warrant Agreement"), as
provided in the Standby Purchase Commitments. In addition, in connection with
the Standby Purchase Commitments, the Buyer and the Standby Purchasers will
enter into a registration rights agreement in the form attached hereto as
Exhibit C (as the same may be amended from time to time, the "Registration
Rights Agreement").
F. If a Rights Offering Adjustment shall not have occurred, immediately
following the Merger, the Buyer will issue Buyer Warrants to the stockholders
of the Buyer that were holders of record immediately prior to such Merger. The
Buyer will conduct the Stockholder Rights Offering (as defined in Section
4.22), in which it will issue to holders of Buyer Stock (as defined in Section
1.7) as of a record date to be determined by the Board of Directors of the
Buyer (the "Buyer Record Date"), such holders being referred to herein as the
"Stockholder Rights Holders", non-transferable rights ("Stockholder Rights")
(except that, at the Buyer's election, the Stockholder Rights will transfer
with the underlying shares in respect of which the Stockholder Rights are
distributed) to acquire shares of Buyer Common Stock if a Rights Offering
Adjustment shall have occurred. In connection therewith, if a Rights Offering
Adjustment shall have occurred, immediately following the Merger, the Buyer
will issue to the stockholders of the Buyer one Buyer Participation Warrant
for each Stockholder Right issued to such Stockholder Rights Holder that was
not exercised.
G. The transactions contemplated by this Agreement, including the Merger,
shall be consummated pursuant to the Amended Plan as confirmed by an order of
the Bankruptcy Court entered pursuant to Section 1129 of the Bankruptcy Code
(as defined in Section 2.1(a)) (the "Confirmation Order"). Unless otherwise
defined herein, capitalized terms used herein shall have the meanings ascribed
to them in the Amended Plan.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties further
agree as follows:
ARTICLE I
The Merger
1.1 The Merger; Effective Time. Upon the terms and subject to the conditions
of this Agreement and in accordance with the Delaware General Corporation Law
(the "DGCL"), the Company shall merge with and into the Merger Subsidiary
(such merger being referred to herein as the "Merger") at the Effective Time
(as defined below in this Section 1.1). The Merger shall have the effects set
forth in Section 259 of the DGCL. At the Effective Time, the separate
corporate existence of the Company shall cease and thereafter the Merger
Subsidiary shall continue as the surviving corporation in the Merger (the
"Surviving Corporation"), and all the rights, privileges, immunities, powers
and franchises (of a public as well as of a private nature) of the Company and
the Merger Subsidiary and all property (real, personal and mixed) of the
Company and the Merger Subsidiary shall vest in the Surviving Corporation. The
"Effective Time" shall be the time at which the Company and the Merger
Subsidiary file a certificate of merger or other appropriate documents
prepared and executed in accordance with the relevant provisions of the DGCL
(the "Certificate of Merger") with the Secretary of State of the State of
Delaware or such later time as may be specified in the Certificate of Merger.
1.2 The Closing. Unless this Agreement shall have been terminated pursuant
to Article VI hereof, the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, commencing at 10:00 a.m.,
local time, on a
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date to be mutually agreed by the Company and the Buyer, which date shall be
at least seven, but no more than ten, business days after the date upon which
all the conditions to the obligations of the Parties to consummate the
transactions contemplated hereby set forth in Section 5.1 (other than Section
5.1(j)) have first been satisfied or waived, which date shall be the same date
as the Effective Date under the Amended Plan (the "Closing Date"); provided
that the Closing shall not occur until the condition set forth in Section
5.1(j) shall have been satisfied and the conditions set forth in Sections 5.2
and 5.3 shall have been satisfied or waived. Notwithstanding anything
contained herein to the contrary, in no event will the Closing be earlier than
twelve business days after the Buyer delivers to the Standby Purchasers the
written notice required pursuant to Section 4(c)(i) of the Standby Purchase
Commitments.
1.3 Actions at the Closing. At the Closing, (a) the Parent and the Company
shall deliver to the Buyer and the Merger Subsidiary the various certificates,
instruments and documents referred to in Section 5.2, (b) the Buyer and the
Merger Subsidiary shall deliver to the Company the various certificates,
instruments and documents referred to in Section 5.3, (c) the Buyer shall file
with the Secretary of State of the State of Delaware the Buyer Charter
Amendment (as defined in Section 4.12), (d) the Company and the Merger
Subsidiary shall immediately thereafter file with the Secretary of State of
the State of Delaware the Certificate of Merger, (e)(i) the Buyer shall
deliver (A) to the Pre-Petition Agent, for the benefit of the Pre-Petition
Lenders, immediately available funds equal to the excess of (x) $649,000,000
over (y) the Company Tower Sale Proceeds (as defined in Section 5.2(f)), (B)
to the Company immediately available funds when and as required in amounts
sufficient to pay allowed administrative and priority claims and expenses of
the Debtors, whether allowed prior to or after the Effective Time, as set
forth in the Amended Plan (collectively, the "Plan Cash") and (C) to a bank
trust company or other entity reasonably satisfactory to the Company and the
Buyer appointed by the Buyer to act as the exchange agent (the "Exchange
Agent") pursuant to Section 1.6(a), certificates representing an aggregate
number of shares of Buyer Common Stock determined in accordance with the
pricing mechanism set forth in Schedule II attached hereto (the "Plan Shares")
to be distributed as contemplated by Section 1.6(b), (ii) the Buyer shall
issue the Buyer Common Stock (and Buyer Class B Common Stock, if applicable)
and, if a Rights Offering Adjustment shall not have occurred, (A) Buyer
Warrants purchased through the exercise of Rights and (B) Buyer Warrants
purchased by or otherwise issued to the Standby Purchasers in connection with
the Standby Purchase Commitments, and (iii) if a Rights Offering Adjustment
shall have occurred, the Buyer shall issue the Buyer Common Stock purchased
through the exercise of the Stockholder Rights and, to the extent such
Stockholder Rights are not exercised, the Buyer shall issue the Buyer
Participation Warrants.
1.4 Additional Action. The Surviving Corporation may, at any time after the
Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the Merger
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
1.5 Conversion of Securities. At the Effective Time, by virtue of the Merger
and the Amended Plan and without any further action on the part of any person
or entity:
(a) Each share of common stock, $0.01 par value per share, of the Merger
Subsidiary issued and outstanding immediately prior to the Effective Time
shall remain issued and outstanding and shall evidence one share of common
stock, $0.01 par value per share, of the Surviving Corporation.
(b) Each share of capital stock of the Parent (collectively, the
"Company Stock") that is either outstanding or held in the treasury of the
Parent immediately prior to the Effective Time, each share of capital stock
of the Company, each share of capital stock of each of the other Debtors
held by any person or entity other than the Debtors, and each option,
warrant or other right issued by any of the Debtors to acquire any such
capital stock and outstanding immediately prior to the Effective Time shall
be canceled without payment of any consideration therefor and shall cease
to exist. Pursuant to Section 303 of the DGCL and the Amended Plan, holders
of the Company Stock shall have no statutory right of appraisal in
connection with the Merger, and such holders shall have no right to approve
or disapprove the Merger or this Agreement.
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1.6 Appointment of Exchange Agent; Distributions in Accordance with Amended
Plan.
(a) Prior to the Effective Time, the Buyer shall appoint the Exchange Agent
to effect, pursuant to and in accordance with the Amended Plan, the
distribution of Plan Shares in exchange for, and in satisfaction of, certain
Allowed Class 6 Claims.
(b) The Buyer and the Surviving Corporation shall cause the Exchange Agent,
promptly after the Effective Time, to commence the distribution of Plan Shares
(which Plan Shares are defined in the Amended Plan as the "Creditor Stock
Pool") to holders of Allowed Class 6 Claims in exchange for, and in
satisfaction of, such Allowed Class 6 Claims, all as provided in the Amended
Plan.
1.7 Distribution to Holders of Buyer Common Stock
(a) If a Rights Offering Adjustment shall not have occurred, the Buyer
shall, as soon as practicable after receipt of the Confirmation Order,
declare and make, subject to and effective immediately after the occurrence
of the Effective Time, a distribution of Buyer Warrants on the shares of
Buyer Common Stock and the Buyer's Series C Convertible Preferred Stock,
$.01 par value per share (the "Buyer Preferred Stock" and, together with
the Buyer Common Stock, the "Buyer Stock"), outstanding immediately prior
to the Effective Time . The Buyer Warrants to be distributed pursuant to
this Section 1.7(a) will entitle the holders thereof to purchase, in the
aggregate, a number of shares of Buyer Common Stock equal to 7.00% of the
aggregate number of shares of issued and outstanding Buyer Common Stock
and, if applicable, Buyer Class B Common Stock on the date the Initial
Buyer Market Price is determined in accordance with Schedule II attached
hereto, computed on a Fully Diluted Basis after giving effect to the
Amended Plan as if the Effective Date had occurred on such date and
assuming 21,067,110 shares of Buyer Common Stock were issued and
outstanding immediately prior thereto.
(b) The Buyer shall conduct the Stockholder Rights Offering in accordance
with Section 4.22, and, if a Rights Offering Adjustment shall have
occurred, the Buyer shall, as soon as practicable after the occurrence of
the Effective Time, declare and make a distribution to each Stockholder
Rights Holder of one Buyer Participation Warrant for each Stockholder Right
of such Stockholder Rights Holder that shall not have been exercised.
(c) Notwithstanding the foregoing, no fractional Buyer Warrants or Buyer
Participation Warrants, as the case may be, shall be issued in the
distribution of Buyer Warrants or Buyer Participation Warrants to be made
pursuant to this Section 1.7 (the "Buyer Distribution"); in lieu thereof,
fractional Buyer Warrants or Buyer Participation Warrants, as the case may
be, that would otherwise be issued in the Buyer Distribution will be
rounded up to the nearest whole number of Buyer Warrants or Buyer
Participation Warrants, as the case may be.
1.8 Certificate of IncorporationI. From and after the Effective Time, the
Certificate of Incorporation of the Merger Subsidiary, as in effect
immediately prior to the Effective Time (except that the name of the
corporation set forth therein shall be changed to the name of the Company) and
as amended by the Certificate of Merger, shall be the Certificate of
Incorporation of the Surviving Corporation, until thereafter further amended
as provided by law and such Certificate of Incorporation.
1.9 By-laws. From and after the Effective Time, the By-laws of the Merger
Subsidiary, as in effect immediately prior to the Effective Time (except that
the name of the corporation set forth therein shall be changed to the name of
the Company), shall be the By-Laws of the Surviving Corporation, until
thereafter further amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation and such By-laws.
1.10 Directors and Officers. From and after the Effective Time, the
directors and officers of the Merger Subsidiary immediately prior to the
Effective Time shall be and continue as directors and officers, respectively,
of the Surviving Corporation as of the Effective Time, until thereafter
changed in accordance with the Certificate of Incorporation and the By-Laws of
the Surviving Corporation.
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1.11 Payment of Administrative Claims and Expenses. At the Effective Time,
the Buyer shall cause the Surviving Corporation to pay or assume the allowed
administrative and priority claims and expenses of the Debtors, whether
allowed prior to or after the Effective Time (including, without limitation,
(a) the payment of obligations under the existing debtor-in-possession
financing facility (the "DIP Loan Agreement") and (b) the assumption of post-
petition trade payables arising in the Ordinary Course of Business (as defined
in Section 2.3)), as specified in the Amended Plan. The Buyer shall make
available to the Surviving Corporation any monies necessary for the Surviving
Corporation to make timely payment of such claims and expenses.
ARTICLE II
Representations and Warranties of the Parent and the Company
Each of the Parent and the Company represents and warrants to the Buyer that
the statements contained in this Article II are true and complete, except as
set forth in the disclosure schedule of the Company delivered to the Buyer
simultaneously with the execution and delivery hereof (the "Company Disclosure
Schedule"). The Company Disclosure Schedule shall be arranged in sections and
paragraphs corresponding to the numbered and lettered sections and paragraphs
contained in this Article II, and the disclosures in any section or paragraph
of the Company Disclosure Schedule shall qualify other sections or paragraphs
in this Article II only to the extent that it is reasonably clear from a
reading of the disclosure that such disclosure is applicable to such other
sections or paragraphs. For purposes of this Agreement, a "Debtor Material
Adverse Effect" shall mean a material adverse effect on the businesses, assets
(including licenses, franchises and other intangible assets), financial
condition, operating income and prospects of the Debtors, taken as a whole,
excluding any effect generally applicable to the economy or the industry in
which the Company conducts its business.
2.1 Organization, Qualification, Corporate Power and Authority.
(a) Each of the Debtors is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation. Each
of the Debtors is duly qualified to conduct business and is in good standing
under the laws of each jurisdiction (each such jurisdiction being set forth in
Section 2.1(a) of the Company Disclosure Schedule) in which the nature of its
businesses or the ownership or leasing of its properties requires such
qualification, other than where the failure to be so qualified would not in
the aggregate have a Debtor Material Adverse Effect. Subject to supervision by
the Bankruptcy Court in accordance with Title 11 of the United States Code
(the "Bankruptcy Code"), each of the Debtors has all requisite corporate power
and authority to carry on the businesses in which it is engaged and to own and
use the properties owned and used by it. Each of the Debtors has furnished to
the Buyer true and complete copies of its charter and by-laws, each as amended
and as in effect on the date hereof. Each of the Debtors has at all times
complied with, and is not in default under or in violation of, any provision
of its charter or by-laws, other than where the failure to so comply and such
defaults and violations would not in the aggregate have a Debtor Material
Adverse Effect.
(b) Subject to the entry of the Initial Merger Order (as defined in Section
4.4(a)), with respect to the Company Breakup Fee, the Buyer Breakup Fee and
the Buyer Reimbursement (each as defined in Article 4), and subject to the
entry of the Confirmation Order, with respect to the remaining terms and
conditions of this Agreement, each of the Parent and the Company has all
requisite power and authority to execute and deliver this Agreement. Subject
to the entry of the Initial Merger Order, with respect to the Company Breakup
Fee, the Buyer Breakup Fee and the Buyer Reimbursement, and subject to the
entry of the Confirmation Order, with respect to the remaining terms and
conditions of this Agreement, this Agreement has been (i) duly and validly
executed and delivered by the Parent and the Company and (ii) duly and validly
authorized by all necessary corporate action on the part of the Parent and the
Company. Subject to the entry of the Initial Merger Order, with respect to the
Company Breakup Fee, the Buyer Breakup Fee and the Buyer Reimbursement, and
subject to the entry of the Confirmation Order, with respect to the remaining
terms and conditions of this Agreement, this Agreement constitutes a valid and
binding obligation of the Parent and the Company enforceable against the
Parent and the Company in accordance with its terms.
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(c) Each of the Debtors has the requisite power and authority to execute and
file with the Bankruptcy Court the Amended Plan. The Amended Plan has been (i)
duly and validly executed by each Debtor and (ii) duly and validly authorized
by all necessary corporate action on the part of each Debtor. Upon the entry
of the Confirmation Order, the Amended Plan will constitute a valid and
binding obligation of each Debtor enforceable against each Debtor in
accordance with its terms.
2.2 Capitalization. On the Closing Date, after giving effect to the Amended
Plan (but immediately prior to the Merger), the authorized capital stock of
each Debtor will be as set forth in Section 2.2 of the Company Disclosure
Schedule. On the Closing Date, after giving effect to the Amended Plan, there
will be no outstanding Company Stock and no outstanding or authorized options,
warrants, rights, calls, convertible instruments, agreements or commitments to
which any of the Debtors is a party or which are binding upon any of the
Debtors providing for the issuance, disposition or acquisition of any of its
capital stock or stock appreciation, phantom stock or similar rights.
2.3 Noncontravention. Except for the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), any applicable state
and foreign securities laws, the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), the Communications Act of 1934, as
amended (the "Communications Act"), and the regulations of the Federal
Communications Commission (the "FCC"), state public utility, telecommunication
or public service laws, and the Bankruptcy Code, the Confirmation Order and
the Amended Plan, none of the execution and delivery of this Agreement by the
Parent and the Company, the execution and filing with the Bankruptcy Court of
the Amended Plan by the Debtors or the consummation of the transactions
contemplated hereby or thereby will (a) conflict with or violate any provision
of the charter or by-laws of any Debtor; (b) require on the part of any Debtor
any filing with, or any permit, authorization, consent or approval of, any
court, arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (a "Governmental Entity"),
other than where the failure to make or obtain such filings, permits,
authorizations, consents or approvals would not in the aggregate have a Debtor
Material Adverse Effect or materially adversely affect the ability of the
Reorganized Debtors (which, for purposes of this Agreement, shall mean the
"Reorganized Debtors" as defined in the Amended Plan, together with "License
Co. L.L.C." as defined in the Amended Plan) to operate the business of the
Debtors following the Effective Time; (c) conflict with, result in a breach
of, constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of, create in any party any right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any post-petition contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest (as defined below in this
Section 2.3) or other arrangement to which any Debtor is a party or by which
any Debtor is bound or to which any of their respective assets is subject or
any judgment, order, writ, injunction, decree, statute, rule or regulation
applicable to any Debtor or any of their respective properties or assets,
other than such conflicts, violations, breaches, defaults, accelerations,
terminations, modifications, cancellations or notices, consents or waivers as
would not in the aggregate have a Debtor Material Adverse Effect; or (d)
result in the imposition of any Security Interest upon any assets of any
Debtor. For purposes of this Agreement, "Security Interest" means any
mortgage, pledge, security interest, encumbrance, charge or other lien
(whether arising by contract or by operation of law), other than liens arising
in the ordinary course of business consistent with past custom and practice,
including with respect to frequency and amount (the "Ordinary Course of
Business").
2.4 Business Entities.
(a) Section 2.4(a) of the Company Disclosure Schedule sets forth a true and
complete list of each corporation, partnership, limited liability company or
other form of business association (a "Business Entity") in which any Debtor,
directly or indirectly, owns any equity interest or any security convertible
into or exchangeable for an equity interest (each a "Debtor Business Entity")
which is material to the Parent and the Company.
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(b) The Debtor Business Entities listed in Section 2.4(b) of the Company
Disclosure Schedule are the only Debtor Business Entities which have conducted
any operations, trade or businesses of the Debtors since January 30, 1997,
hold any Debtor Authorizations (as defined in Section 2.14(a)) or own any
assets necessary for the conduct of the businesses of the Debtors as currently
conducted.
(c) The Debtors own all the outstanding equity interests in each Debtor
Business Entity.
(d) No Debtor is in default under or in violation of any provision of its
organizational documents. To the knowledge of the Parent or the Company, all
the issued and outstanding equity interests of each Debtor Business Entity are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. On the Closing Date, after giving effect to the
effectiveness of the Amended Plan, all equity interests of each Debtor
Business Entity that are held of record or owned beneficially by the Parent,
the Company or another Debtor immediately prior to the Effective Time will be
held or owned by the respective Reorganized Debtors free and clear of any
restrictions on transfer (other than restrictions under the Securities Act and
state or foreign securities laws), claims, Security Interests, options,
warrants, rights, contracts, calls, commitments, equities and demands.
(e) There are no voting trusts, proxies or other agreements or
understandings with respect to the voting of any equity interests of any
Debtor Business Entity to which any Debtor is a party or by which it is bound,
or, to the Parent's or the Company's knowledge, any other such trusts,
proxies, agreements or understandings.
2.5 Financial Statements; Accounts Receivable; Inventory.
(a) The Debtors have previously provided to the Buyer (i) the audited
consolidated balance sheets and statements of operations and changes in
stockholders' equity and cash flows of the Company as of December 31, 1996 and
1997 and for the years ended December 31, 1995, 1996 and 1997 (the "Audited
Company Financial Statements") and (ii) the unaudited consolidated balance
sheet (which indicates separately liabilities arising on or after January 30,
1997 (the "Filing Date")) (the "June 30 Unaudited Company Balance Sheet") and
the unaudited consolidated statements of operations and changes in
stockholders' equity and cash flows of the Company as of and for the six-month
period ended June 30, 1998 (the "Company Balance Sheet Date"). Such financial
statements (collectively, the "Company Financial Statements"), (i) comply as
to form in all material respects with applicable accounting requirements and
the published rules and regulations of the U. S. Securities and Exchange
Commission (the "SEC") with respect thereto; (ii) have been prepared in
accordance with United States generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto and, in the case
of interim financial statements, as permitted by Form 10-Q under the Exchange
Act); (iii) fairly present the consolidated financial condition, results of
operations and cash flows of the Company as of the respective dates thereof
and for the periods referred to therein; and (iv) are consistent with the
books and records of the Company, subject, in the case of clauses (i), (ii)
and (iii), (a) to the paragraph in the report of independent auditors on the
Audited Company Financial Statements describing conditions that raise
substantial doubt about the Company's ability to continue as a going concern,
and (b) to the Company Financial Statements not including any adjustments to
reflect the possible future effects on the recoverability and classification
of assets or the amounts and classification of liabilities that may result
from the outcome of these uncertainties.
(b) The accounts receivable of the Debtors reflected on the June 30
Unaudited Company Balance Sheet, and those arising since the date of the June
30 Unaudited Company Balance Sheet, are valid receivables subject to no set-
offs or counterclaims, net of a reserve for bad debts, which reserve is
reflected on the June 30 Unaudited Company Balance Sheet. The inventories of
the Debtors reflected on the June 30 Unaudited Company Balance Sheet are of a
quality and quantity useable and/or saleable in the Ordinary Course of
Business, except as written down to net realizable value on the June 30
Unaudited Company Balance Sheet. All inventory shown on the June 30 Unaudited
Company Balance Sheet has been priced at the lower of cost or net realizable
value.
2.6 Absence of Certain Changes. Since the Company Balance Sheet Date, (a)
there has not been any Debtor Material Adverse Effect, nor has there occurred
any event or development that would have a Debtor Material Adverse Effect, and
(b) no Debtor has taken any action that would be prohibited by subsection (a)
of
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Section 4.5 below if taken from and after the date of this Agreement. Except
as set forth in amendments thereto currently being prepared that decrease the
Debtors' liabilities thereunder, the Statement of Affairs and Schedules of
Assets and Liabilities and Executory Contracts of the Debtors filed with the
Bankruptcy Court in the Chapter 11 Proceeding, as amended, includes a list
which is true and complete in all material respects of all the material
creditors, whether secured or unsecured, of the Debtors at the Filing Date.
2.7 Undisclosed Liabilities. None of the Debtors has any liability (whether
known or unknown, whether absolute or contingent, whether liquidated or
unliquidated, whether due or to become due and whether arising prior to or
subsequent to the Filing Date), except for (a) liabilities that will be fully
discharged in the Chapter 11 Proceeding at the Effective Time, paid from the
Plan Cash and the Plan Shares in accordance with the terms of the Amended Plan
or, with respect to obligations arising under the DIP Loan Agreement,
otherwise paid in full in cash; (b) liabilities arising after the Filing Date
separately shown or expressly reserved for separately on the June 30 Unaudited
Company Balance Sheet; (c) liabilities that have arisen since the Company
Balance Sheet Date in the Ordinary Course of Business of the Debtors and that
are similar in nature and amount to the liabilities that arose during the
comparable period of time in the immediately preceding fiscal period; and (d)
liabilities incurred in the Ordinary Course of Business of the Debtors that
are not required by GAAP to be reflected on the June 30 Unaudited Company
Balance Sheet and that are not in the aggregate material. Section 2.7 of the
Company Disclosure Statement sets forth all amounts due under the Dial Page
Indenture at June 30, 1998.
2.8 Tax Matters.
(a) (i) Each of the Debtors has filed all Tax Returns (as defined below in
this Section 2.8(a)) that it was required to file, and all such Tax Returns
were true and complete in all material respects. (ii) No Debtor is or has ever
been a member of a group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary Tax Returns, other than a
group of which only the Debtors are or were members. (iii) The Debtors have
paid all Taxes (as defined below in this Section 2.8(a)) of the Debtors that
were due and payable prior to the date hereof. (iv) All Taxes that any Debtor
is or was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental Entity. For purposes of this Agreement, "Taxes" means all taxes,
charges, fees, levies or other similar assessments or liabilities, including,
without limitation, income, gross receipts, ad valorem, premium, value-added,
excise, real property, personal property, sales, use, transfer, withholding,
employment, payroll and franchise taxes imposed by the United States of
America or any state, local or foreign government, or any agency thereof, or
other political subdivision of the United States or any such government, and
any interest, fines, penalties, assessments or additions to tax resulting
from, attributable to or incurred in connection with any tax or any contest or
dispute thereof. For purposes of this Agreement, "Tax Returns" means all
reports, returns, declarations, statements or other information required to be
supplied to a taxing authority in connection with Taxes.
(b) (i) The Debtors have delivered or otherwise made available to the Buyer
true and complete copies of all federal income Tax Returns for the "affiliated
group" (as defined in Section 1504(a) of the Code) of which the Parent is the
common parent and the Debtors are members (the "Company Group"), together with
all related examination reports and statements of deficiency, for all periods
commencing on or after December 1, 1993 and, to the extent in the possession
of the Debtors, true and complete copies of the portion of the federal income
Tax Returns of any member of a Debtor Affiliated Group (as defined below),
together with all related examination reports and statements of deficiency,
relating to the activities of any Debtor for all Debtor Affiliated Periods (as
defined below). For purposes of this Section 2.8, "Debtor Affiliated Group"
means each group of corporations with which any Debtor has filed (or was
required to file) consolidated, combined, unitary or similar Tax Returns and
"Debtor Affiliated Period" means a period in which a Debtor was a member of a
Debtor Affiliated Group. (ii) The federal income Tax Returns of the Company
Group have been audited by the Internal Revenue Service or are closed by the
applicable statute of limitations for all taxable years through the taxable
year specified in Section 2.8(b) of the Company Disclosure Schedule. (iii) The
Debtors have made available to the Buyer true and complete copies of all other
Tax Returns of the Debtors in the possession of the Debtors, together with all
related examination reports and statements of deficiency, and, to the extent
in the possession of the Debtors, true and complete copies of the portion of
all other Tax Returns of any member of a Debtor Affiliated Group, together
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with all related examination reports and statements of deficiency, relating to
the activities of any Debtor for all Debtor Affiliated Periods. (iv) No
examination or audit of any Tax Return of any Debtor by any Governmental
Entity is currently in progress, threatened or contemplated. (v) No Debtor has
been informed by any jurisdiction that the jurisdiction believes that the
Debtor was required to file any Tax Return that has not since been timely
filed or, if not timely filed, with respect to which an assessed amount has
not since been paid. (vi) No Debtor has waived any statute of limitations with
respect to Taxes or agreed to an extension of time with respect to a Tax
assessment or deficiency which waiver or extension of time is still in effect.
(c) No Debtor (i) is a "consenting corporation" within the meaning of
Section 341(f) of the Code and none of the assets of the Debtors is subject to
an election under Section 341(f) of the Code; (ii) has made any payments, is
obligated to make any payments, or is a party to any agreement that could
obligate it to make any payments that may be treated as an "excess parachute
payment" under Section 280G of the Code; (iii) has any actual or potential
liability for any Taxes of any person (other than the Debtors) under Treasury
Regulation Section 1.1502-6 (or any similar provision of federal, state,
local, or foreign law), or as a transferee or successor, by contract, or
otherwise; or (iv) is or has been required to make a basis reduction pursuant
to Treasury Regulation Section 1.1502-20(b) or Treasury Regulation Section
1.337(d)-2(b) other than a reduction required by reason of the transactions
contemplated by this Agreement, if any.
(d) None of the assets of any Debtor: (i) is property that is required to be
treated as being owned by any other person pursuant to the provisions of
former Section 168(f)(8) of the Code; (ii) is "tax-exempt use property" within
the meaning of Section 168(h) of the Code; or (iii) directly or indirectly
secures any debt the interest on which is tax exempt under Section 103(a) of
the Code.
(e) No Debtor will have undergone a change in its method of accounting
requiring an inclusion in its taxable income of an adjustment pursuant to
Section 481(c) of the Code for any taxable period beginning on or after the
Closing Date other than a change occurring by reason of the transactions
contemplated by this Agreement, if any.
(f) No state or federal "net operating loss" of the Debtors determined as of
the Closing Date is subject to limitation on its use pursuant to Section 382
of the Code or comparable provisions of state law as a result of any
"ownership change" within the meaning of Section 382(g) of the Code occurring
prior to the Closing Date.
(g) Section 2.8(g) of the Company Disclosure Schedule sets forth in
reasonable detail the following information with respect to the Debtors as of
the most recent practicable date: (i) the basis of the Debtors in their
assets; (ii) the basis of the stockholder(s) of the Debtors (other than the
Company) in its stock (or the amount of any "excess loss account"); (iii) the
amount of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution allocable to the
Debtors; and (iv) the amount of any deferred gain or loss allocable to the
Debtors arising out of any "deferred intercompany transaction."
(h) Neither the Parent nor the Company has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
2.9 Tangible Assets. The Debtors own or lease all tangible assets necessary
for the conduct of their respective businesses as presently conducted. Each
such tangible asset is free from material defects, has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear) and is suitable for the purposes for
which it is presently used, other than where the failures or defects would not
in the aggregate have a Debtor Material Adverse Effect.
2.10 Owned Real Property. The Company has previously made available to the
Buyer a true and complete listing of all material real property that has been
owned by the Debtors at any time on or after January 30, 1997 (other than the
real property that the Debtors have agreed to sell pursuant to the Purchase
Agreement dated as of July 7, 1998 among the Debtors and Pinnacle Towers Inc.
("Pinnacle") (as approved by order of the Bankruptcy Court entered on August
10, 1998, and as such agreement may be amended in accordance with the terms
hereof
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and thereof and in accordance with the terms of such order of the Bankruptcy
Court, the "Debtor Tower Agreement"). With respect to each such parcel of real
property which is currently owned by the Debtors, the identified owner has
good record and marketable title to such parcel, free and clear of any
Security Interest, easement, covenant or other restriction, except for
Security Interests in favor of the lenders under the DIP Loan Agreement, and
Security Interests, easements, covenants and other restrictions which do not
materially impair the use, occupancy or value of such parcel as presently used
in the Debtors' businesses.
2.11 Intellectual Property.
(a) The Debtors own, license or otherwise have the legally enforceable right
to use all patents, trademarks, trade names, service marks, copyrights, and
any applications for such patents, trademarks, trade names, service marks and
copyrights, schematics, technology, know-how, computer software programs or
applications and tangible or intangible proprietary information or material
used in the operation of the businesses of the Debtors or necessary for the
operation of the businesses of the Debtors as presently conducted by the
Debtors (collectively, "Debtors' Intellectual Property"). Each such item of
Debtors' Intellectual Property owned or available for use by the Debtors
immediately prior to Closing will be owned or available for use by the
Reorganized Debtors and the Buyer on substantially similar terms and
conditions immediately following the Closing. No other person or entity has
any rights to any of the Debtors' Intellectual Property, and no other person
or entity is infringing, violating or misappropriating any of the Debtors'
Intellectual Property used in the businesses of the Debtors, other than such
infringements, violations or misappropriations as would not in the aggregate
have a Debtor Material Adverse Effect.
(b) The business, operations and activities of each Debtor as presently
conducted or as conducted at any time within the two years prior to the date
of this Agreement have not materially infringed or violated, or constituted a
material misappropriation of, and do not now materially infringe or violate,
or constitute a material misappropriation of, any intellectual property rights
of any other person or entity. Since January 30, 1997, no Debtor has received
any written, or to its knowledge, verbal, complaint, claim or notice alleging
any such infringement, violation or misappropriation which has not been
disposed of through a settlement agreement described in Section 2.11(b) of the
Company Disclosure Schedule.
(c) Section 2.11(c) of the Company Disclosure Schedule sets forth each
patent or trademark registration which has been issued to or is owned by any
Debtor with respect to any Debtors' Intellectual Property, identifies each
pending patent or trademark application or application for registration which
any Debtor has made or which any Debtor owns with respect to any Debtors'
Intellectual Property, identifies, with respect to each such patent or
trademark registration or application: (i) the jurisdiction or jurisdictions
where such filings have been made; and (ii) an estimate of the aggregate
application, renewal, continuation or other fees payable with respect to such
patent or trademark registrations and applications within six months of the
date of this Agreement, and identifies each license or other agreement
pursuant to which any Debtor has granted (other than in the Ordinary Course of
Business) any rights to any third party with respect to any Debtors'
Intellectual Property. The Debtors have delivered or otherwise made available
to the Buyer true and complete copies of all such licenses and agreements
(each as amended to date) and have made available to the Buyer true and
complete copies of all other written documentation evidencing ownership of,
and any claims or disputes relating to, each such item, as well as all patents
and trademark registrations and applications.
(d) Section 2.11(d) of the Company Disclosure Schedule sets forth each item
of Debtors' Intellectual Property (other than commercially available software
generally available to the public at a license fee of less than $10,000) used
by any Debtor in the operation of its business that is owned by a party other
than the party using it. The Debtors have delivered or otherwise made
available to the Buyer true and complete copies of all licenses, sublicenses
or other agreements (each as amended to date) pursuant to which any Debtor
uses such Debtors' Intellectual Property, all of which are set forth in
Section 2.11(d) of the Company Disclosure Schedule.
(e) The Debtors have previously delivered or otherwise made available to the
Buyer true and complete copies of all internal reports, investigations,
analyses or other documents concerning the Debtors' Year 2000 compliance.
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2.12 Real Property Leases. Section 2.12 of the Company Disclosure Schedule
lists all real property (other than tower sites) leased or subleased to the
Debtors, indicating, in each case, the term of the lease and any extension and
expansion options and the rent payable under such lease. The Debtors have made
available to the Buyer true and complete copies of all such leases and
subleases (each as amended to date), together with true and complete lists of
the tower sites omitted from Section 2.12 of the Company Disclosure Schedule.
With respect to each such lease and sublease:
(a) the lease or sublease is legal, valid, binding, enforceable and in
full force and effect, subject to the effect of the Chapter 11 Proceeding
and bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and except as the availability
of equitable remedies may be limited by general principles of equity;
(b) if assumed pursuant to the Amended Plan, the lease or sublease will
continue to be legal, valid, binding, enforceable and in full force and
effect immediately following the Closing with the same terms as in effect
immediately prior to the Closing, subject to the effect of bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and except as the availability of equitable
remedies may be limited by general principles of equity;
(c) none of the Debtors, nor, to the Parent's or the Company's knowledge,
any other party to the lease or sublease, is in material breach or default,
and no event (other than (i) the nonpayment of rent or other charges by the
Debtors with respect to periods prior to the Filing Date or (ii) the
commencement of the Chapter 11 Proceeding) has occurred which, with notice
or lapse of time, would constitute a material breach or default by the
Debtors or, to the Parent's or the Company's knowledge, by any such other
party, or permit termination, modification or acceleration thereunder;
(d) to the knowledge of the Debtors, there are no material disputes, oral
agreements or forbearance programs in effect as to the lease or sublease;
(e) none of the Debtors has assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or
subleasehold;
(f) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said
facilities; and
(g) other than in the Ordinary Course of Business, no construction,
alteration or other leasehold improvement work with respect to the lease or
sublease remains to be paid for or performed by the Debtors (except amounts
owing for periods prior to the Filing Date).
2.13 Contracts.
(a) Section 2.13 of the Company Disclosure Schedule sets forth a true and
complete list of all written arrangements (including, without limitation,
written agreements) to which any Debtor is a party which, pursuant to the
rules and regulations of the SEC, would have to be attached as exhibits as
material contracts to an Annual Report on Form 10-K filed by the Parent or the
Company if such Annual Report were filed on the date of this Agreement.
(b) The Debtors have delivered or otherwise made available to the Buyer a
true and complete copy of each written arrangement (each as amended to date)
required to be listed in Section 2.13 of the Company Disclosure Schedule. With
respect to each written arrangement so listed: (i) as to a prepetition
agreement susceptible of assumption, upon the assumption thereof by the
Debtors pursuant to Section 365 of the Bankruptcy Code as specified in the
Amended Plan, the written arrangement will continue to be legal, valid,
binding, enforceable and in full force and effect immediately following the
Closing with the same terms as in effect immediately prior to the Closing,
subject to the effect of bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and except as
the availability of equitable remedies may be limited by general principles of
equity; and (ii) none of the Debtors nor, to the Parent's or the Company's
knowledge, any other party, is in material breach or default, and no event
(other than (x) the failure by the Debtor to pay an
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amount due thereunder with respect to goods or services rendered prior to the
Filing Date, (y) the failure by the Debtor to render goods or services
thereunto prior to the Filing Date or (z) the commencement of the Chapter 11
Proceeding) has occurred which with notice or lapse of time would constitute a
material breach or default by the Debtors or, to the Parent's or the Company's
knowledge, by any such other party, or permit termination, modification or
acceleration, under the written arrangement. None of the Debtors is a party to
any oral contract, agreement or other arrangement which, if reduced to written
form, would be required to be listed in Section 2.13 of the Company Disclosure
Schedule under the terms of this Section 2.13. None of the Debtors is
restricted by any arrangement from carrying on its business anywhere in the
United States.
2.14 Licenses and Authorizations.
(a) The Debtors hold all licenses, permits, certificates, franchises,
ordinances, registrations, or other rights, applications and authorizations
filed with, granted or issued by, or entered by any Governmental Entity,
including, without limitation, the FCC or any state or local regulatory
authorities or any state or local public service commission or public utility
commission (each, a "State Authority") asserting jurisdiction over any Debtor
or its businesses or assets, that are required for the conduct of their
businesses as currently being conducted (each as amended to date)
(collectively, the "Debtor Authorizations"), other than such licenses,
permits, certificates, franchises, ordinances, registrations or other rights,
applications and authorizations the absence of which would not in the
aggregate materially impair the ability of either the Parent or the Company to
consummate the transactions contemplated hereby or of the Reorganized Debtors
to own and operate the properties, assets and businesses of the Debtors
following the Closing. Section 2.14(a) of the Company Disclosure Schedule
contains a true and complete list of such Debtor Authorizations.
(b) Section 2.14(b) of the Company Disclosure Schedule contains a true and
complete list of (i) each application of the Debtors pending before the FCC
(collectively, the "Debtor FCC Applications"); (ii) each FCC permit and FCC
license which is not a Debtor Authorization but in which any Debtor, directly
or indirectly, holds an interest, including as a stakeholder in the licensee
(collectively, the "Indirect Debtor Authorizations"); and (iii) all licenses,
certificates, consents, permits, approvals and authorizations for the benefit
of the Debtors pending before any State Authority (collectively, the "Debtor
State Applications"). The Debtor Authorizations, the Debtor FCC Applications,
the Indirect Debtor Authorizations and the Debtor State Applications
(collectively, the "Debtor Licenses and Authorizations") are the only federal,
state or local licenses, certificates, consents, permits, approvals and
authorizations that are required for the conduct of the business and
operations of the Debtors as presently conducted, other than such consents,
permits, approvals or authorizations the absence of which would not in the
aggregate materially impair the ability of either the Parent or the Company to
either consummate the transactions contemplated hereby or of the Reorganized
Debtors to own and operate the properties, assets and businesses of the
Debtors following the Closing.
(c) The Debtor Authorizations and, to the Parent's and the Company's
knowledge, the Indirect Debtor Authorizations are in full force and effect
and, other than Security Interests in favor of the lenders under the DIP Loan
Agreement and the Pre-Petition Lenders, have not been pledged or otherwise
encumbered, assigned, suspended, modified in any material adverse respect,
canceled or revoked, and each Debtor has operated in compliance with all terms
thereof or any renewals thereof applicable to it, other than where the failure
to so comply would not in the aggregate have a Debtor Material Adverse Effect
or materially impair the ability of either the Parent or the Company to
consummate the transactions contemplated hereby or of the Reorganized Debtors
to own and operate the properties, assets and businesses of the Debtors
following the Closing. No event has occurred with respect to any of the Debtor
Authorizations which permits, or after notice or lapse of time or both would
permit, revocation or termination thereof or would result in any other
material impairment of the rights of the holder of any such Debtor
Authorizations. To the knowledge of the Parent or the Company, there is not
pending any application, petition, objection or other pleading with the FCC,
any State Authority or any similar body having jurisdiction or authority over
the operations of the Debtors which questions the validity of or contests any
Debtor Authorization or which could reasonably be expected, if accepted or
granted, to result in the revocation, cancellation, suspension or any
materially adverse modification of any Debtor Authorization.
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(d) Except for approval by the Bankruptcy Court or by the FCC as
contemplated by Section 4.15 or as set forth in Section 2.14(d) of the Company
Disclosure Schedule, no permit, consent, approval, authorization,
qualification or registration of, or declaration to or filing with, any
Governmental Entity is required to be obtained or made by any Debtor in
connection with the transfer or deemed transfer of the Debtor Licenses and
Authorizations to the Buyer as a result of the consummation of the
transactions contemplated hereby, except where the failure to obtain or make
such permit, consent, approval, authorization, qualification, registration,
declaration or filing would not materially impair the ability of the Company
to consummate the transactions contemplated hereby or the Reorganized Debtors
to own and operate the properties, assets and businesses of the Debtors
following the Closing.
2.15 Litigation. Except as to claims arising prior to the Filing Date that
are within the jurisdiction of the Bankruptcy Court or are to be resolved in
the Chapter 11 Proceeding or by force of the discharge granted to the Debtors
in connection with the Chapter 11 proceeding, as of the date of this
Agreement: (a) there is no action, suit, proceeding or investigation to which
any Debtor is a party (either as a plaintiff or defendant) pending or, to the
Parent's or the Company's knowledge, threatened before any court, Governmental
Entity or arbitrator, and, to the Parent's or the Company's knowledge, there
is no basis for any such action, suit, proceeding or investigation; (b) none
of the Debtors nor, to the Parent's or the Company's knowledge, any officer,
director or employee of any Debtor has been permanently or temporarily
enjoined by any order, judgment or decree of any court or Governmental Entity
from engaging in or continuing to conduct the business of the Debtors; and (c)
no order, judgment or decree of any court or Governmental Entity has been
issued in any proceeding to which any Debtor is or was a party or, to the
Parent's or the Company's knowledge, in any other proceeding, that enjoins or
requires any Debtor to take action of any kind with respect to its businesses,
assets or properties. Except for the regulatory matters addressed in Section
2.14, none of the actions, suits, proceedings or investigations listed in
Section 2.15 of the Company Disclosure Schedule, individually or collectively,
if determined adversely to the interests of the Debtors, would have a Debtor
Material Adverse Effect.
2.16 Employees.
(a) Section 2.16(a) of the Company Disclosure Schedule sets forth a true and
complete list as of the most recent practicable date of all employment
contracts or agreements relating to employment to which any of the Debtors is
a party which are not terminable by the Debtors without penalty upon less than
30 or fewer days' notice.
(b) There are no collective bargaining agreements to which any of the
Debtors is a party. No Debtor has experienced any strikes, grievances, claims
of unfair labor practices or other collective bargaining disputes and, to the
Parent's or the Company's knowledge, no organizational effort is presently
being made or threatened by or on behalf of any labor union with respect to
its employees. To the knowledge of the Parent or the Company, there is no
reasonable basis to believe that any Debtor will be subject to any labor
strike or other organized work force disturbance following the Closing.
2.17 Employee Benefits.
(a) Section 2.17(a) of the Company Disclosure Schedule contains a true and
complete list of all Employee Benefit Plans (as defined below in this Section
2.17(a)) maintained, or contributed to, by any Debtor or any ERISA Affiliate
(as defined below in this Section 2.17(a)) of any Debtor ("Company Employee
Benefit Plans"). For purposes of this Agreement, "Employee Benefit Plan" means
any "employee pension benefit plan" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), any
"employee welfare benefit plan" (as defined in Section 3(l) of ERISA), and any
other material written or oral plan, agreement or arrangement involving direct
or indirect employee compensation, including, without limitation, insurance
coverage, severance benefits, disability benefits, pension, retirement plans,
profit sharing, deferred compensation, bonuses, stock options, stock purchase,
phantom stock, stock appreciation or other forms of incentive compensation or
post-retirement compensation. For purposes of this Agreement, "ERISA
Affiliate" means any member of (i) a controlled group of corporations (as
defined in Section 414(b) of the Code); (ii) a
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group of trades or businesses under common control (as defined in Section
414(c) of the Code); or (iii) an affiliated service group (as defined under
Section 414(m) of the Code or the regulations under Section 414(o) of the
Code). True and complete copies of (i) all Company Employee Benefit Plans that
have been reduced to writing; (ii) written summaries of all unwritten Company
Employee Benefit Plans; (iii) all trust agreements, insurance contracts and
summary plan descriptions related to the Company Employee Benefit Plans; (iv)
the annual report filed on IRS Form 5500, 5500C or 5500R, if applicable, for
the most recent plan year for each Company Employee Benefit Plan; and (v) the
most recent qualification letter issued by the Internal Revenue Service with
respect to each Company Employee Benefit Plan that is intended to qualify
under Section 401(a) of the Code, have been made available to the Buyer. Each
Company Employee Benefit Plan has been administered in accordance with its
terms in all material respects, and each Debtor and, to the Parent's or the
Company's knowledge, each ERISA Affiliate of any Debtor has in all material
respects met its obligations (if any) with respect to each Company Employee
Benefit Plan and has made all required contributions (if any) thereto. The
Debtors and all Company Employee Benefit Plans are in compliance in all
material respects with the currently applicable provisions (if any) of ERISA,
the Code and other applicable federal, state and foreign laws and the
regulations thereunder. Each Company Employee Benefit Plan that is intended to
qualify under Section 401(a) of the Code is so qualified. Each Company
Employee Benefit Plan that is required to satisfy Section 401(k)(3) or Section
401(m)(2) of the Code has been reviewed for compliance with, and has satisfied
the requirements of, said Sections for each plan year ending prior to the
Closing.
(b) To the Parent's or the Company's knowledge, as of the date of this
Agreement, there are no inquiries or investigations by any Governmental
Entity, termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Company Employee Benefit Plans and
proceedings with respect to qualified domestic relations orders), suits or
proceedings against or involving any Company Employee Benefit Plan or
asserting any rights or claims to benefits under any Company Employee Benefit
Plan.
(c) Neither any Debtor nor, to the Parent's or the Company's knowledge, any
ERISA Affiliate of any Debtor has ever maintained a Company Employee Benefit
Plan subject to Section 412 of the Code, Part 3 of Subtitle B of Title I of
ERISA, or Title IV of ERISA. At no time has any Debtor or, to the Parent's or
the Company's knowledge, any ERISA Affiliate of any Debtor been obligated to
contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA) that is subject to Title IV of ERISA. No act or omission has occurred
and no condition exists with respect to any Company Employee Benefit Plan that
would subject any Debtor or, to the Company's knowledge, any ERISA Affiliate
of any Debtor to any material fine, penalty, Tax or liability of any kind
imposed under ERISA or the Code. No prohibited transaction (as defined in
Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to
any Company Employee Benefit Plan that is subject to ERISA or the Code. No
Company Employee Benefit Plan, plan documentation or agreement, summary plan
description or other written communication distributed generally to employees
by its terms prohibits any Debtor from amending or terminating any such
Company Employee Benefit Plan and any Company Employee Benefit Plan may be
terminated without liability to any Debtor or the Buyer, except for benefits
accrued through the date of termination. Except as may be required by Part 6
of Title I of ERISA or similar state laws regarding continuation of benefits,
no former employees participate in any employee welfare benefit plans listed
in Section 2.17(a) of the Company Disclosure Schedule beyond the month of the
termination of his employment. No Company Employee Benefit Plan includes in
its assets any securities issued by the Debtors. No Company Employee Benefit
Plan has been subject to tax under Section 511 of the Code.
(d) Section 2.17(d) of the Company Disclosure Schedule lists each: (i)
agreement with any director, executive officer or other key employee of the
Debtors (A) the benefits of which are contingent, or the terms of which are
altered, upon the occurrence of a transaction involving the Debtors of the
nature of any of the transactions contemplated by this Agreement, (B)
providing any term of employment or compensation guarantee, or (C) providing
severance benefits or other benefits upon the consummation of any transaction
or after the termination of employment of such director, executive officer or
key employee; (ii) agreement, plan or arrangement under which any person may
receive a payment from any Debtor that may be subject to the tax imposed by
Section 4999 of the Code or may constitute a "parachute payment" under Section
280G of the Code;
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and (iii) agreement or plan binding any Debtor, including, without limitation,
any stock option plan, stock appreciation right plan, restricted stock plan,
stock purchase plan, severance benefit plan, or any Company Employee Benefit
Plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
2.18 Environmental Matters.
Except for Sections 2.5(a), 2.23 and 2.24, this Section 2.18 contains the
exclusive representations and warranties of the Parent and the Company
concerning environmental matters, including but not limited to Environmental
Laws and Materials of Environmental Concern (as both of those terms are
defined below in this Section 2.18). Each of the Parent and the Company
represents and warrants as follows:
(a) Each of the Debtors is in compliance with all applicable Environmental
Laws (as defined below in this Section 2.18(a)), other than where the failure
to be in compliance would not in the aggregate have a Debtor Material Adverse
Effect. There is no pending or, to the Parent's or the Company's knowledge,
threatened civil or criminal litigation, written notice of violation, formal
administrative proceeding, or written notice of investigation or inquiry or
written information request by any Governmental Entity, relating to any
Environmental Law involving any Debtors or their respective assets and
properties. For purposes of this Agreement, "Environmental Law" means any
foreign, federal, state or local law, statute, permits, orders, rule or
regulation or the common or decisional law relating to the environment or
occupational health and safety, including, without limitation, any statute,
regulation or order pertaining to (i) treatment, storage, disposal, generation
and transportation of industrial, toxic or hazardous substances or solid or
hazardous waste; (ii) air, water and noise pollution; (iii) groundwater and
soil contamination; (iv) the release or threatened release into the
environment of industrial, toxic or hazardous substances, or solid or
hazardous waste, including, without limitation, emissions, discharges,
injections, spills, escapes or dumping of pollutants, contaminants or
chemicals; (v) the protection of wildlife, marine sanctuaries and wetlands,
including, without limitation, all endangered and threatened species; (vi)
storage tanks, vessels and containers; (vii) underground and other storage
tanks or vessels, abandoned, disposed or discarded barrels, containers and
other closed receptacles; (viii) health and safety of employees and other
persons; and (ix) manufacture, processing, use, distribution, treatment,
storage, disposal, transportation or handling of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or oil or petroleum
products or solid or hazardous waste. For the purposes of this Agreement, the
terms "release" and "environment" shall have the meaning set forth in the
United States Comprehensive Environmental Compensation, Liability and Response
Act of 1980 ("CERCLA").
(b) There have been no releases of any Materials of Environmental Concern
(as defined below in this Section 2.18(b)) into the environment at any parcel
of real property or any facility formerly or currently owned, operated or
controlled by any Debtor for which any Debtor may be liable under any
Environmental Law of the jurisdiction in which such property or facility is
located, other than such releases as would not in the aggregate have a Debtor
Material Adverse Effect. With respect to any such releases of Materials of
Environmental Concern, the Debtor has given all required notices (if any) to
Governmental Entities (copies of which have been provided to the Buyer). There
have been no releases of Materials of Environmental Concern at parcels of real
property or facilities other than those owned, operated or controlled by the
Debtors that could reasonably be expected to have an impact on the real
property or facilities owned, operated or controlled by the Debtors, other
than such impacts as would not in the aggregate have a Debtor Material Adverse
Effect. For purposes of this Agreement, "Materials of Environmental Concern"
means any chemicals, pollutants or contaminants, hazardous substances (as such
term is defined under CERCLA or any Environmental Law), solid wastes and
hazardous wastes (as such terms are defined under the United States Resources
Conservation and Recovery Act or any Environmental Law), toxic materials, oil
or petroleum and petroleum products, or any other material subject to
regulation under any Environmental Law, except for normal office and cleaning
products.
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(c) Set forth in Section 2.18 of the Company Disclosure Schedule is a list
of all environmental reports, investigations and audits which to the knowledge
of the Parent or the Company (whether conducted by or on behalf of the Debtors
or a third party, and whether done at the initiative of the Debtors or
directed by a Governmental Entity or other third party) were issued during the
past five years relating to premises formerly or currently owned, operated or
controlled by the Debtors. True and complete copies of any such report, or the
results of any such investigation or audit, which to the knowledge of the
Parent or the Company are in the possession of the Parent or the Company (or
can be obtained by the Company through reasonable efforts), have been
delivered or otherwise made available to the Buyer.
(d) Neither the Parent nor the Company has any knowledge of any material
environmental liability of the solid and hazardous waste transporters and
treatment, storage and disposal facilities that have been utilized by Debtors.
(e) The Debtors hold all Environmental Authorizations (as defined below in
this Section 2.18(e)) that are legally required for the conduct of their
businesses as currently conducted, other than where the failure to hold such
Environmental Authorizations would not in the aggregate have a Debtor Material
Adverse Effect, and such Environmental Authorizations (if any) are listed in
Section 2.18 of the Company Disclosure Schedule. For purposes of this
Agreement, the term "Environmental Authorization" means any license, permit,
certificate, or other authorization from a Governmental Entity under any
applicable Environmental Law. Each of the Debtors is and has been in
compliance with all such Environmental Authorizations, other than such
noncompliance as would not in the aggregate have a Debtor Material Adverse
Effect.
(f) None of the transactions contemplated by this Agreement or the Amended
Plan will require the Company or the Debtors to comply with an Environmental
Property Transfer Act (as defined below in this Section 2.18(f)). For purposes
of this Agreement, the term "Environmental Property Transfer Act" means any
applicable law (including rules, regulations and administrative orders
thereunder) of any federal, state, local or foreign government that requires
any notification or disclosure of environmental conditions in connection with
the transfer, sale, lease or closure of any property.
2.19 Legal Compliance. Each Debtor and the conduct and operation of its
respective business is and has been in compliance with each law (including
rules, regulations and administrative orders thereunder) of any federal,
state, local or foreign government, or any Governmental Entity, that (a)
affects or relates to this Agreement or the transactions contemplated hereby
or (b) is applicable to the Debtors or their respective businesses, other than
where the failure to be or to have been in compliance would not in the
aggregate have a Debtor Material Adverse Effect or materially impair the
ability of the Parent or the Company to consummate the transactions
contemplated hereby or the Reorganized Debtors to own and operate the
properties, assets and businesses of the Debtors following the Closing.
2.20 Subscriber Cancellations; Suppliers. The Debtors have previously
delivered or otherwise made available to the Buyer true and complete reports
of the number of paging units the Debtors had in service on a quarterly basis
for its most recent fiscal year and the interim period covered by the Company
Financial Statements, and the number of subscriber cancellations the Debtors
had for each such period. To the knowledge of the Parent or the Company, no
material supplier of any Debtors has indicated within the past year that it
will stop, or decrease the rate of, supplying materials, products or services
to them.
2.21 Capital Expenditures. The Debtors have previously delivered to the
Buyer a true and complete list of all capital expenditures in an amount in
excess of $300,000 incurred by the Debtors during 1997, which list is attached
as Section 4.5(a) of the Company Disclosure Schedule.
2.22 Brokers' Fees. None of the Debtors has any liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
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2.23 Certain Information. None of the information supplied by the Debtors
for inclusion or incorporation by reference in (i) the Proxy Statement and
Registration Statement (each as defined in Section 4.13) or (ii) any document
to be filed with the SEC, the FCC or any other Governmental Entity in
connection with the transactions contemplated hereby will, at the respective
times filed with the SEC, the FCC or other Governmental Entity and, in
addition, (A) in the case of the Proxy Statement, at the time it or any
amendment or supplement thereto is mailed to the Buyer's stockholders and at
the time of the Meeting (as defined in Section 4.12) and at the Closing and,
(B) in the case of the Registration Statement, at the time it becomes
effective under the Securities Act, contain any untrue statement of the
Debtors of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing, no representation is made by the Debtors with respect to statements
made in any of the foregoing documents based upon information supplied by the
Buyer.
2.24 Disclosure. No representation or warranty by the Debtors contained in
this Agreement, and no statement contained in the Company Disclosure Schedule
or any other document, certificate or other instrument delivered to or to be
delivered by or on behalf of the Debtors pursuant to this Agreement, contains
or will as of the Closing Date contain any untrue statement of a material fact
or omits or will as of the Closing Date omit to state any material fact
necessary, in light of the circumstances under which it was or will be made,
in order to make the statements herein or therein not misleading.
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ARTICLE III
Representrations and Warrants of the Buyer
The Buyer represents and warrants to the Parent and the Company that the
statements contained in this Article III are true and complete, except as set
forth in the disclosure schedule of the Buyer delivered to the Company
simultaneously with the execution and delivery hereof (the "Buyer Disclosure
Schedule"). The Buyer Disclosure Schedule shall be arranged in sections and
paragraphs corresponding to the numbered and lettered sections and paragraphs
contained in this Article III, and the disclosures in any section or paragraph
of the Buyer Disclosure Schedule shall qualify other sections or paragraphs in
this Article III only to the extent that it is reasonably clear from a reading
of the disclosure that such disclosure is applicable to such other sections or
paragraphs. For purposes of this Agreement, a "Buyer Material Adverse Effect"
shall mean a material adverse effect on the businesses, assets (including
licenses, franchises and other intangible assets), financial condition,
operating income and prospects of the Buyer and its subsidiaries, taken as a
whole, excluding any effect generally applicable to the economy or the
industry in which the Buyer conducts its business.
3.1 Organization Qualification, Corporate Power and Authority.
(a) Each of the Buyer and the Merger Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Each of the Buyer and the Merger Subsidiary is duly qualified to
conduct business and is in good standing under the laws of each jurisdiction
(each such jurisdiction being set forth in Section 3.1(a) of the Buyer
Disclosure Schedule) in which the nature of its businesses or the ownership or
leasing of its properties requires such qualification, other than where the
failure to be so qualified would not in the aggregate have a Buyer Material
Adverse Effect. Each of the Buyer and the Merger Subsidiary has all requisite
corporate power and authority to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it. The Buyer has
furnished to the Company true and complete copies of the Buyer's and the
Merger Subsidiary's respective certificates of incorporation and by-laws, each
as amended and as in effect on the date hereof. Each of the Buyer and the
Merger Subsidiary has at all times complied with, and is not in default under
or in violation of, any provision of its certificate of incorporation or by-
laws, other than where the failure to so comply and such defaults and
violations would not in the aggregate have a Buyer Material Adverse Effect.
(b) Each of the Buyer and the Merger Subsidiary has all requisite power and
authority to execute and deliver this Agreement. The execution and delivery of
this Agreement by the Buyer and the Merger Subsidiary and, subject to the
approval of the Buyer Charter Amendment (as defined in Section 4.12) and the
Buyer Share Issuance (as defined below in this Section 3.1(b)) by the
stockholders of the Buyer, the performance of this Agreement and the
consummation of the transactions contemplated hereby by the Buyer and the
Merger Subsidiary have been duly and validly authorized by all necessary
corporate action on the part of the Buyer and the Merger Subsidiary. This
Agreement has been duly and validly executed and delivered by the Buyer and
the Merger Subsidiary and constitutes a valid and binding obligation of the
Buyer and the Merger Subsidiary, enforceable against the Buyer and the Merger
Subsidiary in accordance with its terms. For purposes of this Agreement,
"Buyer Share Issuance" means the issuance by the Buyer of shares of its
capital stock as contemplated by this Agreement and the Amended Plan,
including (i) the issuance of the Plan Shares as contemplated by the Merger
Agreement and the Amended Plan, (ii) the issuance of shares of Buyer Common
Stock and, if applicable, shares of Class B Common Stock, par value $0.01 per
share, of the Buyer ("Buyer Class B Common Stock") having the terms specified
in the Buyer Charter Amendment upon exercise of Rights issued pursuant to the
Rights Offering or issued to the Standby Purchasers (or their assignees or
persons in substitution therefor) pursuant to the Standby Purchase Commitments
in connection with the Rights Offering and, if a Rights Offering Adjustment
shall have occurred, the issuance of shares of Buyer Common Stock upon
exercise of Stockholder Rights issued pursuant to the Stockholder Rights
Offering, and (iii) (A) if a Rights Offering Adjustment shall not have
occurred, the issuance of the Buyer Warrants by the Buyer (x) pursuant to the
Rights Offering, (y) to the Standby Purchasers in connection with the Rights
Offering, and (z) pursuant to the Buyer Distribution, and the issuance of
shares of Buyer Common Stock upon exercise of any of the foregoing
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Buyer Warrants, or (B) if a Rights Offering Adjustment shall have occurred,
the issuance of the Buyer Participation Warrants by the Buyer (x) to the
Standby Purchasers in connection with the Rights Offering and (y) pursuant to
the Buyer Distribution, and the issuance of shares of Buyer Common Stock upon
exercise of any of the foregoing Buyer Participation Warrants.
3.2 Capitalization.
(a) The authorized capital stock of the Buyer consists of 75,000,000 shares
of Buyer Common Stock and 10,000,000 shares of preferred stock, $.01 par value
("Buyer Preferred Stock"), of which 100,000 shares have been designated as
Series B Junior Participating Preferred Stock and 250,000 shares have been
designated as Series C Convertible Preferred Stock. As of the date hereof, (i)
21,067,110 shares of Buyer Common Stock are issued and outstanding, (ii) no
shares of Buyer Common Stock are held in the treasury of the Buyer, (iii)
2,740,381 shares of Buyer Common Stock are issuable upon exercise of certain
outstanding options or are reserved for issuance pursuant to the Buyer's
existing stock option and purchase plans, and (iv) 5,343,305 shares of Buyer
Common Stock are reserved for issuance upon exercise of other convertible
securities of the Buyer. As of the date hereof, no shares of Series B Junior
Participating Preferred Stock and 250,000 shares of Series C Convertible
Preferred Stock are issued and outstanding, and no shares of Buyer Preferred
Stock are held in the treasury of the Buyer. Except for such options and such
other convertible securities and except for the rights to purchase shares of
Series B Junior Participating Preferred Stock of the Buyer (the "Preferred
Rights") issued pursuant to the Rights Agreement dated as of October 13, 1995
(the "Rights Agreement"), between the Buyer and The Bank of New York, as
Rights Agent, there are no options, warrants, rights, calls, convertible
instruments, agreements or commitments to which the Buyer or any Buyer
Subsidiary is a party or which are binding upon any of them (other than this
Agreement) providing for the issuance, disposition or acquisition of any of
its capital stock or stock appreciation, phantom stock or similar rights. All
the issued and outstanding shares of the Buyer's capital stock are duly
authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights.
(b) All the outstanding shares of capital stock of each of the Buyer
Subsidiaries are beneficially owned by the Buyer, directly or indirectly, free
and clear of any restrictions on transfer (other than restrictions under the
Securities Act and state or foreign securities laws), claims, Security
Interests, options, warrants, rights, contracts, calls, commitments, equities
or demands, and all such shares are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights.
(c) There are no voting trusts, proxies or other agreements or
understandings to which the Buyer or any of the Buyer Subsidiaries is a party
with respect to the voting of the capital stock of the Buyer or any Buyer
Subsidiary. None of the Buyer or the Buyer Subsidiaries is required to redeem,
repurchase or otherwise acquire shares of capital stock or debt securities of
the Buyer or of any Buyer Subsidiary as a result of the transactions
contemplated by this Agreement.
(d) The authorized capital stock of the Merger Subsidiary consists of 1,000
shares of common stock, $.01 par value, all of which are issued and
outstanding and held beneficially and of record by the Buyer.
(e) (i) The Plan Shares to be issued and distributed as contemplated by
Sections 1.3(e) and 1.6 of this Agreement, (ii) the shares of Buyer Common
Stock to be issued and distributed pursuant to the Stockholder Rights
Offering, (iii) the shares of Buyer Common Stock and the shares of Buyer Class
B Common Stock, if applicable, to be issued and delivered pursuant to the
Rights Offering (as defined in Section 4.20(a)) or as contemplated by the
Standby Purchase Commitments, (iv) the shares of Buyer Common Stock to be
issued and delivered upon conversion of shares of Buyer Class B Common Stock,
if applicable, when so converted in accordance with the Buyer Charter
Amendment (as defined in Section 4.12), (v) either (A), if a Rights Offering
Adjustment shall not have occurred, the Buyer Warrants to be issued and
distributed pursuant to the Rights Offering or as otherwise contemplated by
the Standby Purchase Commitments or (B) if a Rights Offering Adjustment shall
have occurred, the Buyer Participation Warrants to be issued and delivered as
contemplated by the Standby Purchase Commitments, in either case when so
issued and distributed or delivered, as the case may be, and (vi) either (A),
if a Rights Offering Adjustment shall not have occurred, the shares of Buyer
Common
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Stock to be issued and delivered upon exercise of Buyer Warrants, when issued,
paid for and delivered as provided in the Buyer Warrant Agreement or (B) if a
Rights Offering Adjustment shall have occurred, the shares of Buyer Common
Stock to be issued and delivered upon exercise of Buyer Participation
Warrants, when issued, paid for and delivered as provided in the Buyer
Participation Warrant Agreement, will all be duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights.
3.3 Noncontravention. Except for the applicable requirements of the
Securities Act and the Exchange Act, any applicable state and foreign
securities laws, the HSR Act, the Communications Act and the regulations of
the FCC, and state public utility, telecommunication or public service laws,
neither the execution and delivery of this Agreement by each of the Buyer and
the Merger Subsidiary nor the consummation of the transactions contemplated
hereby will (a) conflict with or violate any provision of the Buyer's or
Merger Subsidiary's respective certificate of incorporation or by-laws, (b)
require on the part of the Buyer and/or the Merger Subsidiary any filing with,
or any permit, authorization, consent or approval of, any Governmental Entity,
other than where the failure to make or obtain such filings, permits,
authorizations, consents or approvals would not in the aggregate have a Buyer
Material Adverse Effect or materially adversely affect the ability of the
Buyer to operate the business of the Buyer following the Effective Time, (c)
conflict with, result in a breach of, constitute (with or without due notice
or lapse of time or both) a default under, result in the acceleration of,
create in any party any right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest or other
arrangement to which the Buyer or any Buyer Subsidiary is a party or by which
the Buyer or any Buyer Subsidiary is bound or to which any of their respective
assets are subject or any judgment, order, writ, injunction, decree, statute,
rule or regulation applicable to the Buyer or any Buyer Subsidiary or any of
their respective properties or assets, other than such conflicts, violations,
breaches, defaults, accelerations, terminations, modifications, cancellations
or notices, consents or waivers as would not in the aggregate have a Buyer
Material Adverse Effect, or (d) result in the imposition of any Security
Interest upon any assets of the Buyer or any Buyer Subsidiary.
3.4 Business Entities.
(a) Section 3.4(a) of the Buyer Disclosure Schedule sets forth a true and
complete list of each corporation, partnership, limited liability company or
other form of business association in which the Buyer, directly or indirectly,
owns any equity interest or any security convertible into or exchangeable for
an equity interest (each a "Buyer Business Entity") which is material to the
Buyer.
(b) The Buyer Business Entities listed in Section 3.4(b) of the Buyer
Disclosure Schedule are the only Buyer Business Entities which have conducted
any operations, trade or businesses of the Buyer since January 30, 1997, hold
any Buyer Authorizations (as defined in Section 3.14(a)) or own any assets
necessary for the conduct of the businesses of the Buyer as currently
conducted.
(c) The Buyer owns all the outstanding equity interests in each Buyer
Business Entity. For purposes of this Agreement, "Buyer Subsidiary" means any
Buyer Business Entity in which the Buyer, directly or indirectly, owns a
majority of the equity interests.
(d) No Buyer Business Entity is in default under or in violation of any
provision of its organizational documents. To the knowledge of the Buyer, all
the issued and outstanding equity interests of each Buyer Business Entity are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. All equity interests of each Buyer Business Entity are held
of record or owned beneficially by the Buyer free and clear of any
restrictions on transfer (other than restrictions under the Securities Act and
state or foreign securities laws), claims, Security Interests, options,
warrants, rights, contracts, calls, commitments, equities and demands.
(e) There are no voting trusts, proxies or other agreements or
understandings with respect to the voting of any equity interests of any Buyer
Business Entity to which the Buyer or any Buyer Subsidiary is a party or by
which it is bound, or, to the Buyer's knowledge, any other such trusts,
proxies, agreements or understandings.
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3.5 Reports and Financial Statements.
(a) The Buyer has previously furnished to the Debtors true and complete
copies, each as amended or supplemented to date, of (i) the Buyer's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, as filed by
the Buyer with the SEC, and (ii) all other reports, statements, exhibits and
other documents filed by the Buyer with the SEC under Section 13 or 15 of the
Exchange Act (which are all the reports, statements, exhibits and other
documents required to be so filed) since December 31, 1997 (such materials,
together with any amendments or supplements thereto, collectively being
referred to herein as the "Buyer Reports"). As of their respective dates, the
Buyer Reports complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to such Buyer Reports and the Buyer Reports did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The audited
financial statements and unaudited interim financial statements of the Buyer
included in the Buyer Reports (i) comply as to form in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby (except as may be indicated therein or in the notes thereto,
and, in the case of interim financial statements, as permitted by Form 10-Q
under the Exchange Act), (iii) fairly present the consolidated financial
condition, results of operations and cash flows of the Buyer as of the
respective dates thereof and for the periods referred to therein, and (iv) are
consistent with the books and records of the Buyer.
(b) The accounts receivable of the Buyer and its subsidiaries reflected on
the consolidated balance sheet of the Buyer as of June 30, 1998 (the "Buyer
Balance Sheet Date"), filed by the Buyer as part of its Quarterly Report on
Form 10-Q for the quarter that ended on such date (the "Most Recent Buyer
Balance Sheet"), and those arising since the date of the Most Recent Buyer
Balance Sheet, are valid receivables subject to no set-offs or counterclaims,
net of a reserve for bad debts, which reserve is reflected on the Most Recent
Buyer Balance Sheet. The inventories of the Buyer and its subsidiaries
reflected on the Most Recent Buyer Balance Sheet are of a quality and quantity
useable and/or saleable in the Ordinary Course of Business, except as written
down to net realizable value on the Most Recent Buyer Balance Sheet. All
inventory shown on the Most Recent Buyer Balance Sheet has been priced at the
lower of cost or net realizable value.
3.6 Absence of Certain Changes. Since the Buyer Balance Sheet Date, (a)
there has not been any Buyer Material Adverse Effect, nor has there occurred
any event or development that would have a Buyer Material Adverse Effect and
(b) the Buyer has not taken any action that would be prohibited by subsection
(b) of Section 4.5 below if taken from and after the date of this Agreement.
3.7 Undisclosed Liabilities. Neither the Buyer nor any Buyer Subsidiary has
any liability (whether known or unknown, whether absolute or contingent,
whether liquidated or unliquidated, whether due or to become due), except for
(a) liabilities separately shown or expressly reserved on the Most Recent
Buyer Balance Sheet, (b) liabilities that have arisen since the Buyer Balance
Sheet Date in the Ordinary Course of Business of the Buyer or any Subsidiary
and that are similar in nature and amount to the liabilities that arose during
the comparable period of time in the immediately preceding fiscal period; and
(c) liabilities incurred in the Ordinary Course of Business of the Buyer that
are not required by GAAP to be reflected on the Most Recent Buyer Balance
Sheet and that are not in the aggregate material.
3.8 Tax Matters.
(a) Each of the Buyer and the Buyer Subsidiaries has filed all Tax Returns
that it was required to file, and all such Tax Returns were true and complete
in all material respects. Neither the Buyer nor any Buyer Subsidiary is or has
even been a member of a group of corporations which has filed (or been
required to file) consolidated, combined or unitary Tax Returns, other than a
group of which the Buyer and the Buyer Subsidiaries are or were members.
Except as described in Section 3.8(a) of the Buyer Disclosure Schedule, (i)
each group of corporations with which the Buyer has filed (or was required to
file) consolidated, combined, unitary or similar Tax Returns
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(a "Buyer Affiliated Group") has filed all Tax Returns that it was required to
file with respect to any period in which the Buyer was a member of such Buyer
Affiliated Group (a "Buyer Affiliated Period") and (ii) all such Tax Returns
were true and complete in all material respects. Each of the Buyer and the
Buyer Subsidiaries has paid on a timely basis all Taxes (as defined below)
that were due and payable and, to the Buyer's knowledge, each member of a
Buyer Affiliated Group has paid all Taxes that were due and payable with
respect to all Buyer Affiliated Periods. The unpaid Taxes of the Buyer for tax
periods through the Most Recent Buyer Balance Sheet do not exceed the accruals
and reserves (other than accruals and reserves established to reflect timing
differences between book and tax income) for Taxes reflected on the Most
Recent Buyer Balance Sheet. All Taxes that the Buyer or any Buyer Subsidiary
is or was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental Entity.
(b) The Buyer has delivered or otherwise made available to the Company true
and complete copies of all federal income Tax Returns of the Buyer and the
Buyer Subsidiaries, together with all related examination reports and
statements of deficiencies, for all periods commencing after December 31, 1993
and, to the extent in the possession of the Buyer, true and complete copies of
the portion of the federal income Tax Returns of any member of a Buyer
Affiliated Group, together with all related examination reports and statements
of deficiency, relating to the activities of the Buyer or any Buyer Subsidiary
for all Buyer Affiliated Periods commencing after December 31, 1993. The
federal income Tax Returns of each of the Buyer, any Buyer Subsidiary and,
each member of a Buyer Affiliated Group have been audited by the Internal
Revenue Service or are closed by the applicable statute of limitations for all
taxable years through the taxable year specified in Section 3.8(b) of the
Buyer Disclosure Schedule. The Buyer has delivered or otherwise made available
to the Company true and complete copies of all other Tax Returns of the Buyer
and each Buyer Subsidiary, together with all related examination reports and
statements of deficiency, for all periods commencing after December 31, 1993
and, to the extent in the possession of the Buyer, true and complete copies of
the portion of all other Tax Returns, of any member of a Buyer Affiliated
Group, together with all related examination reports and statements of
deficiency, relating to the activities of the Buyer or any Buyer Subsidiary
for all Affiliated Periods commencing after December 31, 1993. No examination
or audit of any Tax Return of the Buyer, any Buyer Subsidiary or, to the
Buyer's knowledge, any member of a Buyer Affiliated Group with respect to an
Affiliated Period by any Governmental Entity is currently in progress or, to
the knowledge of the Buyer, threatened or contemplated. Neither the Buyer, any
Buyer Subsidiary nor, to the Buyer's knowledge, any member of a Buyer
Affiliated Group has been informed by any jurisdiction that the jurisdiction
believes that the Buyer or any Buyer Subsidiary or any member of a Buyer
Affiliated Group was required to file any Tax Return that was not filed on a
timely basis. Neither the Buyer, any Buyer Subsidiary nor, to the Buyer's
Knowledge, any member of a Buyer Affiliated Group has waived any statute of
limitations with respect to Taxes or agreed to an extension of time with
respect to a Tax assessment or deficiency.
(c) Neither the Buyer nor any Buyer Subsidiary (i) is a "consenting
corporation" within the meaning of Section 341(f) of the Code and none of the
assets of the Buyer or any Buyer Subsidiary is subject to an election under
Section 341(f) of the Code; (ii) has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code; (iii)
has made any payments, is obligated to make any payments, or is a party to any
agreement that could obligate it to make any payments that may be treated as
an "excess parachute payment" under Section 280G of the Code; (iv) has any
actual or potential liability for any Taxes of any person (other than the
Buyer or any Buyer Subsidiary) under Treasury Regulation Section 1.1502-6 (or
any similar provision of federal, state, local, or foreign law), or as a
transferee or successor, by contract, or otherwise; or (v) is or has been
required to make a basis reduction pursuant to Treasury Regulation Section
1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(d) None of the assets of the Buyer or any Buyer Subsidiary: (i) is property
that is required to be treated as being owned by any other person pursuant to
the provisions of former Section 168(f)(8) of the Code; (ii) is "tax-exempt
use property" within the meaning of Section 168(h) of the Code; or (iii)
directly or indirectly secures any debt the interest on which is tax exempt
under Section 103(a) of the Code.
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(e) Neither the Buyer nor any Buyer Subsidiary has undergone a change in its
method of accounting resulting in an adjustment to its taxable income pursuant
to Section 481(h) of the Code.
(f) No state or federal "net operating loss" of the Buyer or any Buyer
Subsidiary determined as of the Closing Date is subject to limitation on its
use pursuant to Section 382 of the Code or comparable provisions of state law
as a result of any "ownership change" within the meaning of Section 382(g) of
the Code occurring prior to the Closing Date.
(g) Section 3.8(g) of the Buyer Disclosure Schedule sets forth in reasonable
detail the following information with respect to the Buyer and each Buyer
Subsidiary as of the most recent practicable date: (i) the basis of the Buyer
and each Buyer Subsidiary in their respective assets; (ii) the basis of the
stockholder(s) in its stock (or the amount of any "excess loss account");
(iii) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax, or excess charitable
contribution allocable; and (iv) the amount of any deferred gain or loss
allocable arising out of any "deferred intercompany transaction."
3.9 Tangible Assets. The Buyer and the Buyer Subsidiaries own or lease all
tangible assets necessary for the conduct of their respective businesses as
presently conducted. Each such tangible asset is free from material defects,
has been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear) and is
suitable for the purposes for which it is presently used, other than where the
failures or defects would not in the aggregate have a Buyer Material Adverse
Effect.
3.10 Owned Real Property. The Buyer has previously made available to the
Company a true and complete listing of all material real property that has
been owned by the Buyer or any Buyer Subsidiary at any time on or after
January 30, 1997. With respect to each parcel of real property which is
currently owned by the Buyer or any Buyer Subsidiary, the identified owner has
good record and marketable title to such parcel, free and clear of any
Security Interest, easement, covenant or other restriction, except for
Security Interests, easements, covenants and other restrictions which do not
materially impair the use, occupancy or value of such parcel as presently used
in the Buyer's or Buyer Subsidiaries' businesses.
3.11 Intellectual Property.
(a) The Buyer owns, licenses or otherwise has the legally enforceable right
to use all patents, trademarks, trade names, service marks, copyrights, and
any applications for such patents, trademarks, trade names, service marks and
copyrights, schematics, technology, know-how, computer software programs or
applications and tangible or intangible proprietary information or material
used in the operation of the business of the Buyer or any Buyer Subsidiary or
necessary for the operation of the business of the Buyer or any Buyer
Subsidiary as presently conducted by the Buyer or any Buyer Subsidiary
(collectively "Buyer Intellectual Property"). Each such item of Buyer
Intellectual Property owned or available for use by the Buyer or a Buyer
Subsidiary immediately prior to Closing will be owned or available for use by
the Buyer or the Buyer Subsidiary on substantially similar terms and
conditions immediately following the Closing. No other person or entity has
any rights to any of the Buyer Intellectual Property, and no other person or
entity is infringing, violating or misappropriating any of, the Buyer
Intellectual Property used in the business of the Buyer, other than such
infringements, violations or misappropriations as would not in the aggregate
have a Buyer Material Adverse Effect.
(b) The business, operations and activities of the Buyer and each Buyer
Subsidiary as presently conducted or as conducted at any time within the two
years prior to the date of this Agreement have not materially infringed or
violated, or constituted a material misappropriation of, and do not now
materially infringe or violate, or constitute a material misappropriation of,
any intellectual property rights of any other person or entity. Since January
30, 1997, neither the Buyer nor any Buyer Subsidiary has received any written,
or to its knowledge, verbal, complaint, claim or notice alleging any such
infringement, violation or misappropriation which has not been disposed of
through a settlement agreement described in Section 3.11(b) of the Buyer
Disclosure Schedule.
3.12 Real Property Leases. Section 3.12 of the Buyer Disclosure Schedule
lists all real property (other than tower sites) leased or subleased to the
Buyer or any Buyer Subsidiary, indicating, in each case, the term of
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the lease and the rent payable under such lease. The Buyer has made available
to the Company true and complete copies of all such leases and subleases (each
as amended to date). With respect to each such lease and sublease:
(a) the lease or sublease is legal, valid, binding, enforceable and in
full force and effect, subject to the effect of bankruptcy, insolvency,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally and except as the availability of equitable remedies may
be limited by general principles of equity;
(b) neither the Buyer nor any Buyer Subsidiary nor, to the Buyer's
knowledge, any other party to the lease or sublease, is in material breach
or default, and no event has occurred which, with notice or lapse of time,
would constitute a material breach or default by the Buyer or any Buyer
Subsidiary or, to the Buyer's knowledge, by any such other party, or permit
termination, modification or acceleration thereunder;
(c) to the knowledge of the Buyer, there are no material disputes, oral
agreements or forbearance programs in effect as to the lease or sublease;
(d) neither the Buyer nor any Buyer Subsidiary has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the
leasehold or subleasehold;
(e) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said
facilities; and
(f) other than in the Ordinary Course of Business, no construction,
alteration or other leasehold improvement work with respect to the lease or
sublease remains to be paid for or performed by the Buyer or any Buyer
Subsidiary.
3.13 Contracts. The Buyer has delivered or otherwise made available to the
Company a true and complete copy of each written arrangement (each as amended
to date) filed as an exhibit to any Buyer Report. With respect to each written
arrangement (i) each written agreement will continue to be legal, valid,
binding, enforceable and in full force and effect immediately following the
Closing with the same terms as in effect immediately prior to the Closing,
subject to the effect of bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and except as
the availability of equitable remedies may be limited by general principles of
equity; and (ii) neither the Buyer nor any Buyer Subsidiary nor, to the
Buyer's knowledge, any other party, is in material breach or default, and no
event has occurred which with notice or lapse of time would constitute a
material breach or default by the Buyer or any Buyer Subsidiary or, to the
Buyer's knowledge, by any such other party, or permit termination,
modification or acceleration, under the written arrangement. Neither the Buyer
nor any Buyer Subsidiary is a party to any oral contract, agreement or other
arrangement which, if reduced to written form, would be required to be filed
as an exhibit as a material contract to an Annual Report on Form 10-K filed by
the Buyer. Neither the Buyer nor any Buyer Subsidiary is restricted by any
arrangement from carrying on its business anywhere in the United States.
3.14 Licenses and Authorizations
(a) The Buyer and the Buyer Subsidiaries hold all licenses, permits,
certificates, franchises, ordinances, registrations, or other rights,
applications and authorizations filed with, granted or issued by, or entered
by any Governmental Entity, including, without limitation, the FCC or any
State Authority asserting jurisdiction over the Buyer or any Buyer Subsidiary
or its business or assets, that are required for the conduct of their
businesses as currently being conducted (each as amended to date) (the "Buyer
Authorizations"), other than such licenses, permits, certificates, franchises,
ordinances, registrations or other rights, applications and authorizations the
absence of which would not in the aggregate materially impair the ability of
the Buyer to consummate the transactions contemplated hereby or of the Buyer
to own and operate the properties, assets and businesses of the Buyer
following the Closing. The Buyer has heretofore delivered to the Company a
true and complete list of such Buyer Authorizations.
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(b) The Buyer has previously made available to the Company a true and
complete list of (i) each application of the Buyer and/or any Buyer Subsidiary
pending before the FCC (collectively, the "Buyer FCC Applications"); (ii) each
FCC permit and FCC license which is not a Buyer Authorization but in which the
Buyer or any Buyer Subsidiary, directly or indirectly, holds an interest,
including as a stakeholder in the licensee (collectively, the "Indirect Buyer
Authorizations"); and (iii) all licenses, certificates, consents, permits,
approvals and authorizations for the benefit of the Buyer and the Buyer
Subsidiaries, as applicable, pending before any State Authority (collectively,
the "Buyer State Applications"). The Buyer Authorizations, the Buyer FCC
Applications, the Indirect Buyer Authorizations and the Buyer State
Applications (collectively, the "Buyer Licenses and Authorizations") are the
only federal, state or local licenses, certificates, consents, permits,
approvals and authorizations that are required for the conduct of the business
and operations of the Buyer and the Buyer Subsidiaries as presently conducted,
other than such consents, permits, approvals or authorizations the absence of
which would not in the aggregate materially impair the ability of the Buyer
and the Merger Subsidiary to either consummate the transactions contemplated
hereby or of the Buyer and the Buyer Subsidiaries to own and operate the
properties, assets and businesses of the Buyer and the Buyer Subsidiaries
following the Closing.
(c) The Buyer Authorizations and, to the Buyer's knowledge, the Indirect
Buyer Authorizations are in full force and effect and have not been pledged or
otherwise encumbered, assigned, suspended, modified in any material adverse
respect, canceled or revoked, and the Buyer and the Buyer Subsidiaries have
each operated in compliance with all terms thereof or any renewals thereof
applicable to them, other than where the failure to so comply would not in the
aggregate have a Buyer Material Adverse Effect or materially impair the
ability of the Buyer to consummate the transactions contemplated hereby or of
the Buyer to own and operate the properties, assets and businesses of the
Buyer following the Closing. No event has occurred with respect to any of the
Buyer Authorizations which permits, or after notice or lapse of time or both
would permit, revocation or termination thereof or would result in any other
material impairment of the rights of the holder of any such Buyer
Authorizations. To the knowledge of the Buyer, there is not pending any
application, petition, objection or other pleading with the FCC, any State
Authority or any similar body having jurisdiction or authority over the
operations of the Buyer and the Buyer Subsidiaries which questions the
validity of or contests any Buyer Authorization or which could reasonably be
expected, if accepted or granted, to result in the revocation, cancellation,
suspension or any materially adverse modification of any Buyer Authorization.
(d) Except for approval by the Bankruptcy Court or by the FCC as
contemplated by Section 4.15, or as set forth in Section 3.14(d) of the Buyer
Disclosure Schedule, no permit, consent, approval, authorization,
qualification or registration of, or declaration to or filing with, any
Governmental Entity is required to be obtained or made by the Buyer or any
Buyer Subsidiary in connection with the transfer or deemed transfer of the
Buyer Licenses and Authorizations as a result of the consummation of the
transactions contemplated hereby, except where the failure to obtain or make
such permit, consent, approval, authorization, qualification, registration,
declaration or filing would not materially impair the ability of the Buyer to
consummate the transactions contemplated hereby or the Buyer to own and
operate the properties, assets and businesses of the Buyer following the
Closing.
3.15 Litigation. Except as described in the Buyer Reports, as of the date of
this Agreement: (a) there is no action, suit, proceeding or investigation to
which the Buyer or any Buyer Subsidiary is a party (either as a plaintiff or
defendant) pending or, to the Buyer's knowledge, threatened before any court,
Governmental Entity or arbitrator, and, to the Buyer's knowledge, there is no
basis for any such action, suit, proceeding or investigation; (b) neither the
Buyer nor any Buyer Subsidiary nor, to the Buyer's knowledge, any officer,
director or employee of the Buyer or any Buyer Subsidiary has been permanently
or temporarily enjoined by any order, judgment or decree of any court or
Governmental Entity from engaging in or continuing to conduct the business of
the Buyer or any Buyer Subsidiary; and (c) no order, judgment or decree of any
court or Governmental Entity has been issued in any proceeding to which the
Buyer or any Buyer Subsidiary is or was a party or, to the Buyer's knowledge,
in any other proceeding, that enjoins or requires the Buyer or any Buyer
Subsidiary to take action of any kind with respect to its business, assets or
properties. None of the actions, suits, proceedings or investigations listed
in Section 3.15 of the Buyer Disclosure Schedule, individually or
collectively, if determined adversely to the interests of the Buyer or any
Buyer Subsidiary, would have a Buyer Material Adverse Effect.
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3.16 Employees.
(a) There are no collective bargaining agreements to which Buyer or any
Buyer Subsidiary is a party. Neither the Buyer nor any Buyer Subsidiary has
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes and, to the Buyer's knowledge, no
organizational effort is presently being made or threatened by or on behalf of
any labor union with respect to its employees. To the knowledge of the Buyer
or any Buyer Subsidiary there is no reasonable basis to believe that the Buyer
or any Buyer Subsidiary will be subject to any labor strike or other organized
work force disturbance following the Closing.
3.17 Employee Benefits.
(a) Section 3.17(a) of the Buyer Disclosure Schedule contains a true and
complete list of all Employee Benefit Plans maintained, or contributed to, by
the Buyer or any Buyer Subsidiary or any ERISA Affiliate of the Buyer or any
Buyer Subsidiary (the "Buyer Employee Benefit Plan"). True and complete copies
of (i) all Buyer Employee Benefit Plans that have been reduced to writing;
(ii) written summaries of all unwritten Buyer Employee Benefit Plans; (iii)
all trust agreements, insurance contracts and summary plan descriptions
related to the Buyer Employee Benefit Plans; (iv) the annual report filed on
IRS Form 5500, 5500C or 5500R, if applicable, for the most recent plan year
for each Buyer Employee Benefit Plan; and (v) the most recent qualification
letter issued by the Internal Revenue Service with respect to each Buyer
Employee Benefit Plan that is intended to qualify under Section 401(a) of the
Code, have been made available to the Company. Each Buyer Employee Benefit
Plan has been administered in accordance with its terms in all material
respects, and the Buyer and each Buyer Subsidiary and, to the Buyer's
knowledge, each ERISA Affiliate of the Buyer or any Buyer Subsidiary has in
all material respects met its obligations (if any) with respect to each Buyer
Employee Benefit Plan and has made all required contributions (if any)
thereto. The Buyer, all Buyer Subsidiaries and all Buyer Employee Benefit
Plans are in compliance in all material respects with the currently applicable
provisions (if any) of ERISA, the Code and other applicable federal, state and
foreign laws and the regulations thereunder. Each Buyer Employee Benefit Plan
that is intended to qualify under Section 401(a) of the Code is so qualified.
Each Buyer Employee Benefit Plan that is required to satisfy Section 401(k)(3)
or Section 401(m)(2) of the Code has been reviewed for compliance with, and
has satisfied the requirements of, said Sections for each plan year ending
prior to the Closing.
(b) To the Buyer's knowledge, as of the date of this Agreement, there are no
inquiries or investigations by any Governmental Entity, termination
proceedings or other claims (except claims for benefits payable in the normal
operation of the Buyer Employee Benefit Plans and proceedings with respect to
qualified domestic relations orders), suits or proceedings against or
involving any Buyer Employee Benefit Plan or asserting any rights or claims to
benefits under any Buyer Employee Benefit Plan.
(c) Neither the Buyer or any Buyer Subsidiary nor, to the Buyer's knowledge,
any ERISA Affiliate of the Buyer or any Buyer Subsidiary has ever maintained
an Buyer Employee Benefit Plan subject to Section 412 of the Code, Part 3 of
Subtitle B of Title I of ERISA, or Title IV of ERISA. At no time has the Buyer
or any Buyer Subsidiary or, to the Buyer's knowledge, any ERISA Affiliate of
the Buyer or any Buyer Subsidiary been obligated to contribute to any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) that is
subject to Title IV of ERISA. No act or omission has occurred and no condition
exists with respect to any Buyer Employee Benefit Plan that would subject the
Buyer, any Buyer Subsidiary or, to the Buyer's knowledge, any ERISA Affiliate
of the Buyer or any Buyer Subsidiary to any material fine, penalty, Tax or
liability of any kind imposed under ERISA or the Code. No prohibited
transaction (as defined in Section 406 of ERISA or Section 4975 of the Code)
has occurred with respect to any Buyer Employee Benefit Plan that is subject
to ERISA or the Code. No Buyer Employee Benefit Plan, plan documentation or
agreement, summary plan description or other written communication distributed
generally to employees by its terms prohibits the Buyer from amending or
terminating any such Buyer Employee Benefit Plan and any Buyer Employee
Benefit Plan may be terminated without liability to the Buyer or any Buyer
Subsidiary, except for benefits accrued through the date of termination.
Except as may be required by Part 6 of Title I of ERISA or similar state laws
regarding continuation
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of benefits, no former employees participate in any employee welfare benefit
plans listed in Section 3.17(a) of the Buyer Disclosure Schedule beyond the
month of the termination of his employment. No Buyer Employee Benefit Plan
includes in its assets any securities issued by the Buyer. No Employee Benefit
Plan has been subject to tax under Section 511 of the Code.
(d) Section 3.17(d) of the Buyer Disclosure Schedule lists each: (i)
agreement with any director, executive officer or other key employee of the
Buyer or any Buyer Subsidiary (A) the benefits of which are contingent, or the
terms of which are altered, upon the occurrence of a transaction involving the
Buyer or any Buyer Subsidiary of the nature of any of the transactions
contemplated by this Agreement; (B) providing any term of employment or
compensation guarantee or (C) providing severance benefits or other benefits
upon the consummation of any transaction or after the termination of
employment of such director, executive officer or key employee; (ii)
agreement, plan or arrangement under which any person may receive payments
from the Buyer or any Buyer Subsidiary that may be subject to the tax imposed
by Section 4999 of the Code or may constitute a "parachute payment" under
Section 280G of the Code; and (iii) agreement or plan binding the Buyer or any
Buyer Subsidiary, including, without limitation, any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan, severance
benefit plan, or any Employee Benefit Plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Agreement.
3.18 Environmental Matters.
Except for Sections 3.5(a), 3.26, and 3.27, this Section 3.18 contains the
exclusive representations and warranties of the Buyer concerning environmental
matters, including but not limited to Environmental Laws and Materials of
Environmental Concern. The Buyer represents and warrants as follows:
(a) Each of the Buyer and each Buyer Subsidiary is in compliance with all
applicable Environmental Laws, other than where the failure to be in
compliance would not in the aggregate have a Buyer Material Adverse Effect.
There is no pending or, to the knowledge of the Buyer or any Buyer Subsidiary,
threatened civil or criminal litigation, written notice of violation, formal
administrative proceeding, or written notice of investigation or inquiry or
written information request by any Governmental Entity, relating to any
Environmental Law involving the Buyer or any Buyer Subsidiary or their
respective assets and properties.
(b) There have been no releases of any Materials of Environmental Concern
into the environment at any parcel of real property or any facility formerly
or currently owned, operated or controlled by the Buyer or any Buyer
Subsidiary for which the Buyer or any Buyer Subsidiary may be liable under any
Environmental Law of the jurisdiction in which such property or facility is
located, other than such releases as would not in the aggregate have a Buyer
Material Adverse Effect. With respect to any such releases of Materials of
Environmental Concern, the Buyer or such Buyer Subsidiary has given all
required notices (if any) to Governmental Entities (copies of which have been
provided to the Company). There have been no releases of Materials of
Environmental Concern at parcels of real property or facilities other than
those owned, operated or controlled by the Buyer or any Buyer Subsidiary that
could reasonably be expected to have an impact on the real property or
facilities owned, operated or controlled by the Buyer or any Buyer Subsidiary
other than such impacts as would not in the aggregate have a Debtor Material
Adverse Effect.
(c) Set forth in Section 3.18 of the Buyer Disclosure Schedule is a list of
all environmental reports, investigations and audits which to the knowledge of
the Buyer (whether conducted by or on behalf of the Buyer or any Buyer
Subsidiary or a third party, and whether done at the initiative of the Buyer
or any Buyer Subsidiary or directed by a Governmental Entity or other third
party) were issued during the past five years relating to premises formerly or
currently owned, operated or controlled by the Buyer or any Buyer Subsidiary.
True and complete copies of any such report, or the results of any such
investigation or audit, which to the knowledge of the Buyer are in the
possession of Buyer or any Buyer Subsidiary (or can be obtained by Buyer or
any Buyer Subsidiary through reasonable efforts), have been delivered or
otherwise made available to the Company.
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(d) Neither the Buyer nor any Buyer Subsidiary has any knowledge of any
material environmental liability of the solid and hazardous waste transporters
and treatment, storage and disposal facilities that have been utilized by the
Buyer or any Buyer Subsidiary.
(e) The Buyer and the Buyer Subsidiaries hold all Environmental
Authorizations that are legally required for the conduct of their businesses
as currently conducted, other than where the failure to hold such
Environmental Authorizations would not in the aggregate have a Buyer Material
Adverse Effect, and such Environmental Authorizations (if any) are listed in
Section 3.18 of the Buyer Disclosure Schedule. The Buyer and each of the Buyer
Subsidiaries is and has been in compliance with all such Environmental
Authorizations, other than such noncompliance as would not in the aggregate
have a Buyer Material Adverse Effect.
(f) None of the transactions contemplated by this Agreement or the Amended
Plan will require the Buyer or any Buyer Subsidiary to comply with an
Environmental Property Transfer Act.
3.19 Legal Compliance. Each of the Buyer and each Buyer Subsidiary and the
conduct and operation of its respective business, is and has been in
compliance with each law (including rules, regulations and administrative
orders thereunder) of any federal, state, local or foreign government, or any
Governmental Entity, that (a) affects or relates to this Agreement or the
transactions contemplated hereby or (b) is applicable to the Buyer or any
Buyer Subsidiary or their respective businesses, other than where the failure
to be or to have been in compliance would not in the aggregate have a Buyer
Material Adverse Effect or materially impair the ability of the Buyer to
consummate the transactions contemplated hereby or the Buyer to own and
operate the properties, assets and businesses of the Buyer following the
Closing.
3.20 Merger Subsidiary. The Merger Subsidiary was formed solely for the
purpose of effecting the transactions contemplated by this Agreement and,
except for such obligations or liabilities incurred in connection with its
incorporation or organization, and except for this Agreement and any other
agreements or arrangements contemplated by this Agreement, the Merger
Subsidiary has not and will not have incurred, directly or indirectly, any
obligations or liabilities or engaged in any business activities of any type
or kind whatsoever or entered into any agreements or arrangements with any
person.
3.21 Capital Expenditures; Suppliers. The Buyer has previously delivered to
the Company a true and complete accounting of all capital expenditures
incurred by it or the Buyer Subsidiaries during 1997 and their projected
capital expenditure budget for calendar years 1998 and 1999. To the knowledge
of the Buyer or any Buyer Subsidiary no material supplier of the Buyer or any
Buyer Subsidiary has indicated within the past year that it will stop, or
decrease the rate of, supplying materials, products or services to them.
3.22 Brokers' Fees. Neither the Buyer nor any Buyer Subsidiary has any
liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement
except to Bear, Stearns & Co. Inc. ("Bear Stearns"), the financial advisor to
the Buyer.
3.23 Rights Agreement; Section 203.
(a) The Buyer has executed amendments dated as of August 18, 1998 and
September 3, 1998 to its Rights Agreement dated as of October 13, 1995 in the
forms attached hereto as Exhibit D, and Exhibit D-1, respectively.
(b) The Board of Directors of the Buyer has approved this Agreement, the
Merger and the Amended Plan together with the transactions contemplated hereby
and thereby (including without limitation the acquisition by the Standby
Purchasers of Buyer Warrants or Buyer Participation Warrants, as the case may
be, and Buyer Common Stock or Buyer Class B Common Stock, if applicable,
pursuant to this Agreement, the Amended Plan and the Standby Purchase
Commitments, or of Buyer Common Stock pursuant to the Buyer Warrants or Buyer
Participation Warrants, as the case may be), including for purposes of Section
203 of the DGCL.
3.24 Opinion of Financial Advisor. The Buyer has received an opinion of Bear
Stearns & Co. Inc., a copy of which is attached hereto as Exhibit E.
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3.25 Required Vote of the Buyer's Stockholders. The affirmative vote of a
majority of the votes cast by holders of Buyer Stock is required to approve
the Buyer Share Issuance and the affirmative vote of a majority of the votes
entitled to be cast by holders of Buyer Stock is required to approve the Buyer
Charter Amendment. No other vote of the security holders of the Buyer or of
any Buyer Subsidiary is required by law, the respective organization documents
thereof or otherwise in order for the Buyer to consummate the Merger and the
other transactions contemplated hereby and by the Amended Plan.
3.26 Certain Information. None of the information supplied by the Buyer or
any Buyer Subsidiary for inclusion or incorporation by reference in (i) the
Proxy Statement (as defined in Section 4.13(a)) and Registration Statement (as
defined in Section 4.20(c)) or (ii) any document to be filed with the SEC, the
FCC or any other Governmental Entity in connection with the transactions
contemplated hereby will, at the respective times filed with the SEC, the FCC
or other Governmental Entity and, in addition, (A) in the case of the Proxy
Statement, at the time it or any amendment or supplement thereto is mailed to
the Buyer's stockholders and at the time of the Meeting (as defined in Section
4.12) and at the Closing and, (B) in the case of the Registration Statement,
at the time it becomes effective under the Securities Act, contain any untrue
statement of the Buyer or any Buyer Subsidiary of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, no representation is made by
the Buyer or any Buyer Subsidiary with respect to statements made in any of
the foregoing documents based upon information supplied by the Company.
3.27 Disclosure. No representation or warranty by the Buyer contained in
this Agreement, and no statement contained in the Buyer Disclosure Schedule or
any other document, certificate or other instrument delivered to or to be
delivered by or on behalf of the Buyer pursuant to this Agreement, contains or
will as of the Closing Date contain any untrue statement of a material fact or
omits or will as of the Closing Date omit to state any material fact
necessary, in light of the circumstances under which it was or will be made,
in order to make the statements herein or therein not misleading.
ARTICLE IV
Covenants
4.1 Best Efforts. Except, in the case of the Parent and the Company, to the
extent required by Bankruptcy-Related Requirements (as defined in Section
4.5), each Party shall use its best efforts to cause the transactions
contemplated by this Agreement and the Amended Plan to be consummated in
accordance with the terms hereof and thereof, and without limiting the
generality of the foregoing shall use its best efforts to obtain all necessary
approvals, waivers, consents, permits, licenses, registrations and other
authorizations required in connection with this Agreement and the Amended Plan
and the transactions contemplated hereby and thereby and, in the case of the
Buyer, to assist the Parent and the Company in the preparation of a Disclosure
Statement related to the Amended Plan and, in the case of the Parent and the
Company, to assist the Buyer in the preparation of the Proxy Statement and
Registration Statement, including, without limitation, entry of the
Confirmation Order, and to make all filings with and to give all notices to
third parties which may be necessary or reasonably required of it in order to
consummate the transactions contemplated hereby and thereby, provided,
however, that actions taken by the Parent and the Company in compliance with
Section 4.7(b) and actions taken by the Buyer in accordance with Section
4.7(e) shall not be deemed a breach by the Parent or the Company, on the one
hand, or the Buyer, on the other hand, of this Section 4.1.
4.2 Approvals; Consents. Each Party shall obtain and maintain in full force
and effect all approvals, consents, permits, licenses and other authorizations
from all Governmental Entities reasonably necessary or required for the
operation of their respective businesses as presently conducted, as and when
such approvals, consents, permits, licenses or other authorizations are
necessary or required, except where the failure to do so would not have a
Debtor Material Adverse Effect or a Buyer Material Adverse Effect, as
applicable, or materially impair the ability of the Company or the Buyer to
consummate the transactions contemplated hereby or the
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Reorganized Debtors or the Buyer to own and operate the properties, assets and
businesses of the Debtors following the Closing. Without limiting the
generality of the foregoing, each Party shall maintain its respective
authorizations in full force and effect, shall not take any action which could
reasonably be expected to have a material adverse effect on such
authorizations or any licenses and authorizations, shall diligently pursue all
applications and shall, prior to the expiration date of any material
authorization, timely file for the renewal of any such authorization. Neither
Party shall make any material commitments to any Governmental Entity relating
to any material approval, consent, permit, license or other authorization
without the prior written consent of the other Parties. The Parties shall
consult with one another as to the approach to be taken with any Governmental
Entity with respect to obtaining any necessary consent to the transactions
contemplated hereby and by the Amended Plan, and each of the Parties shall
keep the other Parties reasonably informed as to the status of any such
communications with any Governmental Entity. Without limiting the generality
of the foregoing, the Buyer, the Parent and the Company shall, and shall cause
each of the Buyer Subsidiaries or each of the other Debtors, as applicable, to
make the necessary preliminary filings under the HSR Act no later than ten
days following the date of this Agreement and shall seek early termination of
all applicable waiting periods. The Buyer, the Parent and the Company shall,
and shall cause each of the Buyer Subsidiaries or each of the other Debtors,
as applicable, to use their reasonable best efforts to resolve any competitive
issues relating to or arising under the HSR Act or any other federal or state
antitrust or fair trade law raised by any Governmental Entity. The Parties
will consult and cooperate with one another, and consider in good faith the
views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any Party in connection with proceedings under or
relating to the HSR Act or any other federal or state antitrust or fair trade
law. In the event of a challenge to the transactions contemplated by this
Agreement pursuant to the HSR Act, the Buyer, the Parent and the Company
shall, and shall cause each of the Buyer Subsidiaries or each of the other
Debtors, as applicable, to use their reasonable best efforts to defeat such
challenge, including by institution and defense of litigation, or to settle
such challenge on terms that permit the consummation of the transactions
contemplated by this Agreement; provided, however, that nothing herein shall
require the Buyer to divest or hold separate any portion of its business or
otherwise take any action, which divestiture or holding separate or taking
such action would be materially adverse to the continued conduct of the
Buyer's or the Debtor's businesses. The Buyer shall pay all filing fees
payable by any Party in connection with the HSR Act.
4.3 Buyer Not To Control. Notwithstanding any provision of this Agreement
that may be construed to the contrary, pending the consummation of the
transactions contemplated hereby, the Buyer shall not obtain actual (de facto)
or legal (de jure) control over the Debtors. Specifically, and without
limitation, the responsibility for the operation of the Debtors shall, pending
the consummation of the transactions contemplated hereby, reside with the
Boards of Directors of the Debtors (subject to the jurisdiction of the
Bankruptcy Court), including, but not limited to, responsibility for the
following matters: access to and the use of the facilities of and equipment
owned by the Debtors; control of the daily operation of the Debtors; creation
and implementation of policy decisions; employment and supervision of
employees; payment of financing obligations and expenses incurred in the
operation of the Debtors; receipt and distribution of monies and profits
derived from the operation of the Debtors; and execution and approval of all
contracts and applications prepared and filed before regulatory agencies.
Notwithstanding the foregoing, the Parties shall consult and cooperate with
one another, and consider in good faith the views of one another with respect
to the assumption or rejection by the Debtors prior to Closing of any
unexpired lease, license or other executory contract.
4.4 Bankruptcy Covenants.
(a) Promptly after the execution of this Agreement, the Parent and the
Company shall, and shall cause each of the other Debtors to, file a motion
(the "Initial Merger Motion") for expedited determination of approval of the
Exclusivity Provisions (as defined in Section 4.7(a)), the Company Breakup Fee
and the Buyer Breakup Fee (as defined in Section 4.8(a)) and the Buyer
Reimbursement (as defined in Section 4.21) provided for in this Agreement in
form and substance acceptable to the Buyer. The Parent and the Company shall,
and shall cause each of the other Debtors to, use its best efforts to obtain
an order approving the Initial Merger Motion (the
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"Initial Merger Order") within 15 days after the date of this Agreement, which
order shall be in form and substance acceptable to the Buyer, the Parent and
the Company with only such changes as shall be agreed to by all the Parties in
writing.
(b) As soon as practicable following the execution of this Agreement (and in
no event later than August 20, 1998), the Parent and the Company shall, and
shall cause each of the other Debtors to, file with the Bankruptcy Court the
Amended Plan. As soon as practicable following the filing of the Amended Plan
(and in no event later than August 24, 1998), the Parent and the Company
shall, and shall cause each of the Debtors to, file with the Bankruptcy Court
a Disclosure Statement related thereto in form and substance reasonably
acceptable to the Buyer and the Company (the "Disclosure Statement").
Thereafter, without the prior written consent of the Buyer, the Parent and the
Company shall not, and shall cause each of the other Debtors not to, amend or
modify any material provision of the Amended Plan or the Disclosure Statement
or, except as provided in Section 4.7(b), withdraw the Amended Plan or file
any other plan of reorganization of the Debtors.
(c) The Parent and the Company shall, and shall cause each of the other
Debtors to, promptly provide the Buyer with drafts of all documents, motions,
orders, filings or pleadings that the Parent, the Company or any other Debtor
proposes to file with the Bankruptcy Court which relate to the consummation or
approval of the Amended Plan, this Agreement or any provision therein or
herein, and will provide the Buyer with reasonable opportunity to review such
filings to the extent reasonably practicable. The Parent and the Company
shall, and shall cause each of the other Debtors to, consult and cooperate
with the Buyer, and consider in good faith the views of the Buyer, as
contemplated by the Amended Plan, with respect to all such filings and the
acceptance or rejection prior to Closing of any unexpired lease, license or
other executory contract. The Parent and the Company shall, and shall cause
each of the other Debtors to, promptly (and, in any event, within 48 hours
after receipt of such pleadings by the Debtors) provide the Buyer with copies
of all pleadings (other than proofs of claim below $10,000 in amount) received
by or served by or upon any of the Debtors in connection with the Chapter 11
Proceeding after the date hereof, which either the Parent or the Company knows
have not otherwise been served on the Buyer.
4.5 Operation of Business. Except as otherwise contemplated by this
Agreement or the Amended Plan and, in the case of the Debtors, to the
Bankruptcy Code, the Bankruptcy Rules, the operation and information
requirements of the Office of United States Trustee, and any orders entered or
approvals or authorizations granted by the Bankruptcy Court in the Chapter 11
Proceeding during the period prior to the Closing (collectively, "Bankruptcy-
Related Requirements"), each of the Company, the Parent or the Company, on the
one hand, or the Buyer, on the other hand, shall, and shall cause each of the
other Debtors or each of the Buyer Subsidiaries, as applicable, to, conduct
its operations in the Ordinary Course of Business and in compliance with all
other applicable laws and regulations, and, to the extent consistent
therewith, use all reasonable efforts to preserve intact its current business
organization, keep its physical assets in good working condition, pay all
Taxes (all post-petition Taxes in the case of the Debtors) as they become due
and payable, maintain insurance on its business and assets (in amounts and
types consistent with past practice), keep available the services of its
current officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it to the end that its
goodwill and ongoing business shall not be impaired in any material respect.
(a) Without limiting the generality of the foregoing, prior to the Closing,
and, except to the extent required by any Bankruptcy-Related Requirements, the
Parent and the Company shall not and shall not permit any other Debtor to,
without the prior written consent of the Buyer and except as otherwise
contemplated by this Agreement or the Amended Plan, or as otherwise provided
in Section 4.5 of the Company Disclosure Schedule:
(i) except for assets not in excess of $2,500,000 in aggregate fair
market value, sell, lease, mortgage, pledge, encumber or dispose
(collectively, "Dispose") of any of its assets, other than in the Ordinary
Course of Business;
(ii) except for borrowings under the existing DIP Loan Agreement in an
aggregate amount outstanding at any one time equal to the sum of (x)
amounts representing costs incurred or committed as of the date hereof in
connection with the Company's NPCS network construction as set forth in
Section 4.5(a) of the
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Company Disclosure Schedule ("NPCS Construction") plus any additional costs
for NPCS Construction approved by the Buyer (which approval shall be given
or withheld in writing within ten (10) business days after the written
request for such approval) and (y) (1) at any time on or before December
31, 1998 up to a maximum of $20 million, and (2) at any time between
January 1, 1999 and June 30, 1999 up to a maximum of $30 million, create,
incur or assume any indebtedness for borrowed money not currently
outstanding (including obligations in respect of capital leases); assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person; or make any loans, advances or capital contributions to, or
investments in, any other person;
(iii) except for changes to Debtors' payroll program as previously
disclosed to the Buyer, enter into, adopt or amend any Company Employee
Benefit Plan or any employment or severance agreement or arrangement of the
type described in Section 2.17, or (except for normal adjustments in the
Ordinary Course of Business) increase in any material respect the
compensation or fringe benefits of, or modify the employment terms of its
directors, officers or employees generally or pay any benefit not required
by the terms in effect on the date hereof of any existing Company Employee
Benefit Plan;
(iv) change in any material respect its accounting methods, principles or
practices, except insofar as may be required by a generally applicable
change in GAAP;
(v) pay any pre-petition liability other than (x) liabilities in
connection with the assumption of pre-petition contracts and with respect
to wages, taxes, customer refunds and other related expenses that the
Debtors are authorized to pay by the Bankruptcy Court and (y) adequate
protection payments and the payment of the Net Cash Proceeds (as defined in
the DIP Loan Agreement) under the Debtor Tower Agreement to the Pre-
Petition Lenders, in each case as authorized by the Bankruptcy Court;
(vi) amend its certificate of incorporation, by-laws or other comparable
organizational documents;
(vii) sell, assign, transfer or license any material Debtor Licenses and
Authorizations or Debtors' Intellectual Property, other than in the
Ordinary Course of Business;
(viii) enter into, materially amend, terminate, take or omit to take any
action that would constitute a material violation of or default under, or
waive any material rights under, any of the Debtor Licenses and
Authorizations, or any contract or agreement which, if existing on the date
hereof, would be required to be set forth in Section 2.13 of the Company
Disclosure Schedule, other than in the Ordinary Course of Business;
provided, that (x) without such consent, the Company may enter into the
Master Lease (as defined in the Debtor Tower Agreement) and (y) with such
consent, which shall not be unreasonably withheld, terminate the Debtor
Tower Agreement and, in connection therewith, enter into a Replacement
Tower Agreement and a Comparable Tower Lease;
(ix) make or commit to make any capital expenditure not set forth in the
capital expense budget set forth as Section 4.5(a) to the Company
Disclosure Schedule;
(x) (A) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, securities or other property) in respect
of, any of its outstanding capital stock (other than, with respect to a
Debtor other than the Company, to its corporate parent), (B) split, combine
or reclassify any of its outstanding capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of its outstanding capital stock, or (C) purchase,
redeem or otherwise acquire any shares of outstanding capital stock or any
rights, warrants or options to acquire any such shares;
(xi) issue, sell, grant or pledge any shares of its capital stock, any
other voting securities or any securities convertible into or exchangeable
for, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible or exchangeable securities, other than upon the
exercise of options, or upon the conversion or exchange of securities,
outstanding on the date of this Agreement;
(xii) settle or compromise any material Tax liability or any pending or
threatened suit or action other than consistent with the Company's practice
since the Filing Date or pursuant to the terms of the Amended Plan or make
any material Tax election;
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(xiii) establish, or transfer any assets to, a trust for purposes of
funding any Debtor Employee Benefit Plan, including, without limitation, a
so-called "rabbi trust," except as required by applicable law; or
(xiv) agree in writing or otherwise to take any of the foregoing actions.
(b) Without limiting the generality of the foregoing, prior to the Closing,
the Buyer shall not, and shall not permit any Buyer Subsidiary to, without the
prior written consent of the Company, and except as otherwise contemplated by
this Agreement or the Amended Plan, or as otherwise provided in Section 4.5 of
the Buyer Disclosure Schedule:
(i) Dispose of any of its assets or acquire or Dispose of any assets or
shares or other equity interests in or securities of any Business Entity,
other than in the Ordinary Course of Business, except for (A) the mortgage,
pledge or encumbering of such assets, shares, equity interests or
securities pursuant to agreements existing as of the date of this Agreement
or agreements entered into to provide funding, in whole or in part, for the
amounts payable by the Buyer under this Agreement or the Amended Plan or
(B) the acquisition of such assets, shares, equity interests or securities
of any other Person with an aggregate purchase price not exceeding
$25,000,000;
(ii) except for borrowings under the terms of its Second Amended and
Restated Credit Agreement (Tranche A and Tranche C Facilities), dated as of
June 29, 1998, by and among Arch Paging, Inc., The Bank of New York, Royal
Bank of Canada, Toronto Dominion (Texas), Inc. and the other parties
thereto, and its Second Amended and Restated Credit Agreement (Tranche B
Facility), dated as of June 29, 1998, by and among Arch Paging, Inc., The
Bank of New York, Royal Bank of Canada, Toronto Dominion (Texas), Inc. and
the other parties thereto, each as amended from time to time, or borrowings
to provide funding for the amounts payable by Buyer under this Agreement or
the Amended Plan, create, incur or assume any indebtedness for borrowed
money not currently outstanding (including obligations in respect of
capital leases); assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other person; or make any loans, advances or capital
contributions to, or investments in, any other person;
(iii) change in any material respect its accounting methods, principles
or practices, except insofar as may be required by a generally applicable
change in GAAP;
(iv) amend its certificate of incorporation, by-laws or other comparable
organizational documents;
(v) sell, assign, transfer or license any material Buyer Licenses and
Authorizations or Buyer Intellectual Property, other than in the Ordinary
Course of Business;
(vi) enter into, materially amend, terminate, take or omit to take any
action that would constitute a material violation of or default under, or
waive any material rights under, any of the Buyer Licenses and
Authorizations or any contract or agreement which, if existing on the date
hereof, would be required to be set forth in Section 3.13 of the Buyer
Disclosure Schedule, other than in the Ordinary Course of Business;
(vii) make or commit to make any capital expenditure not set forth in the
capital expense budget attached as Section 4.5(b) to the Buyer Disclosure
Schedule;
(viii) except as required under agreements existing as of the date of
this Agreement, (A) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, securities or other property) in
respect of, any of its outstanding capital stock (other than, with respect
to any Buyer Subsidiary, to its corporate parent), (B) split, combine or
reclassify any of its outstanding capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its outstanding capital stock, or (C) purchase,
redeem or otherwise acquire any shares of outstanding capital stock or any
rights, warrants or options to acquire any such shares, except, in the case
of this clause (C), for the acquisition of shares from holders of options
in full or partial payment of the exercise price payable by such holder
upon exercise of options;
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(ix) issue, sell, grant, pledge or, if outstanding as of the date hereof,
change the material terms of, any shares of its capital stock, any other
voting securities or any securities convertible into or exchangeable for,
or any rights, warrants or options to acquire, any such shares, voting
securities or convertible or exchangeable securities, other than pursuant
to the terms of any benefit plan as in effect on the date of this Agreement
in accordance with past practice or upon the exercise of options, or upon
the conversion or exchange of securities, outstanding on the date of this
Agreement;
(x) make any material Tax election or settle or compromise any material
Tax liability or any pending or threatened suit or action;
(xi) establish, or transfer any assets to, a trust for purposes of
funding any Buyer Employee Benefit Plan, including, without limitation, a
so-called "rabbi trust," except as required by applicable law; or
(xii) agree in writing or otherwise to take any of the foregoing actions.
4.6 Notice of Breaches. Each Party shall promptly deliver to the other
Parties written notice of any event or development that would (a) render any
statement, representation or warranty of such Party in this Agreement
(including its respective Disclosure Schedule) inaccurate or incomplete in any
respect, or (b) constitute or result in a breach by such Party of, or a
failure by such Party to comply with, any agreement or covenant in this
Agreement applicable to such Party. No such disclosure shall be deemed to
avoid or cure any such misrepresentation or breach.
4.7 Exclusivity.
(a) Except as contemplated by the Debtor Tower Agreement, from and after the
date hereof, the Parent and the Company shall not, and shall cause each other
Debtor and each of their respective directors, officers, employees, financial
advisors, representatives or agents not to, directly or indirectly, (i)
solicit, initiate, engage or participate in or encourage discussions or
negotiations with any person or entity (other than the Buyer) concerning any
merger, consolidation, sale of material assets, tender offer for,
recapitalization of or accumulation or acquisition of securities issued by any
Debtor, proxy solicitation or other business combination involving any Debtor
(collectively, "Company Acquisition Proposals") or (ii) provide any non-public
information concerning the business, properties or assets of any Debtor to any
person or entity (other than to the Buyer and to the Debtors' creditors in
accordance with existing confidentiality arrangements). The Parent and the
Company shall, and shall cause each of the other Debtors to, immediately cease
any and all existing activities, discussions or negotiations with any person
other than the Buyer with respect to any Company Acquisition Proposal. The
Parent and the Company shall immediately notify the Buyer of, and shall
disclose to the Buyer all details of, any inquiries, discussions or
negotiations of the nature described in the first sentence of this Section
4.7. The provisions of this Section 4.7 are referred to in this Agreement as
the "Exclusivity Provisions".
(b) Notwithstanding the provisions of subsection (a) above, prior to the
entry of the Confirmation Order, the Debtors may, to the extent required by
the Bankruptcy-Related Requirements, or to the extent that the Board of
Directors of the Company determines, in good faith after consultation with
outside legal counsel, that such Board's fiduciary duties under applicable law
require it to do so, participate in discussions or negotiations with, and,
subject to the requirements of paragraph (c) below, furnish information to any
person, entity or group after such person, entity or group has delivered to
the Debtors, in writing, an unsolicited bona fide offer to effect a Company
Acquisition Proposal that the Board of Directors of the Company in its good
faith judgment determines, after consultation with its independent financial
advisors, would result in a transaction more favorable to the stakeholders of
the Debtors from a financial point of view than the transactions contemplated
hereby and for which financing, to the extent required, is then committed (or
which, in the good faith judgment of such Board, is reasonably capable of
being obtained) and which (in the good faith judgment of such Board) is likely
to be consummated (a "Company Superior Proposal"). In the event the Debtors
receive a Company Superior Proposal, nothing contained in this Agreement (but
subject to the terms hereof) will prevent the Board of Directors of the
Company from approving such Company Superior Proposal or requesting
authorization of such Company Superior Proposal from the Bankruptcy Court, if
such Board determines, in good faith, after
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consultation with outside legal counsel, that such action is required by its
fiduciary duties under applicable law; in such case, the Board of Directors of
the Company may terminate this Agreement pursuant to Section 6.1(e) hereof;
provided, however, that the Company shall not terminate this Agreement until
at least 48 hours after the Buyer's receipt of a copy of such Company Superior
Proposal.
(c) Notwithstanding anything to the contrary in this Section 4.7, the Parent
and the Company shall not, and shall cause each of the other Debtors not to,
provide any non-public information to a third party unless: (i) the Debtors
provide such non-public information pursuant to a non-disclosure agreement
with terms regarding the protection of confidential information at least as
restrictive as such terms in the Confidentiality Agreements between the Parent
and the Buyer dated March 26, 1998 and June 10, 1998 (the "Confidentiality
Agreement"); and (ii) such non-public information has previously been
delivered or made available to the Buyer.
(d) Except as contemplated by the Asset Purchase and Sale Agreement between
certain subsidiaries of Arch Communications Group, Inc., and OmniAmerica,
Inc., dated April 10, 1998, from and after the date hereof the Buyer shall
not, and shall cause each Buyer Subsidiary and each of their respective
directors, officers, employees, financial advisors, representatives or agents
not to, directly or indirectly, (i) solicit, initiate, engage or participate
in or encourage discussions or negotiations with any person or entity (other
than the Parent, the Company and, in connection with the transactions
contemplated by this Agreement, the Official Committee of Unsecured Creditors
of the Company) concerning any merger (other than mergers of the Buyer
Subsidiaries in connection with acquisitions of other businesses by the Buyer
(x) with a fair market value not in excess of $25,000,000 and (y) that would
not upon the closing thereof be in breach of the Buyer's obligations under
Section 4.5), consolidation, sale of material assets, tender offer for,
recapitalization of or accumulation or acquisition of securities issued by the
Buyer or any of the Buyer Subsidiaries, proxy solicitation or other business
combination (other than business combinations of the Buyer Subsidiaries in
connection with acquisitions of other businesses by the Buyer (x) with a fair
market value not in excess of $25,000,000 and (y) that would not upon the
closing thereof be in breach of the Buyer's obligations under Section 4.5),
involving the Buyer or any Buyer Subsidiary (collectively, "Buyer Acquisition
Proposals") or (ii) except as permitted by the foregoing clause (i), provide
any non-public information concerning the business, properties or assets of
the Buyer or any Buyer Subsidiary to any person or entity (other than the
Debtors or any of the Buyer's financing sources). The Buyer and the Buyer
Subsidiaries will immediately cease any and all existing activities,
discussions or negotiations with any person other than the Company with
respect to any Buyer Acquisition Proposal. The Buyer shall immediately notify
the Company of, and shall disclose to the Company all details of, any
inquiries, discussions or negotiations of the nature described in the first
sentence of this Section 4.7(d).
(e) Notwithstanding the provisions of subsection (d) above, prior to the
Meeting (as defined in Section 4.12), the Buyer may, to the extent that the
Board of Directors of the Buyer determines, in good faith, after consultation
with outside legal counsel, that such Board's fiduciary duties under
applicable law require it to do so, participate in discussions or negotiations
with, and, subject to the requirements of paragraph (f) below, furnish
information to any person, entity or group after such person, entity or group
has delivered to the Buyer, in writing, an unsolicited bona fide offer to
effect a Buyer Acquisition Proposal that the Board of Directors of the Buyer
in its good faith judgment determines, after consultation with its independent
financial advisors, would result in a transaction more favorable to the
shareholders of the Buyer from a financial point of view than the transactions
contemplated hereby and for which financing, to the extent required, is then
committed (or which, in the good faith judgment of such Board, is reasonably
capable of being obtained) and which (in the good faith judgment of such
Board) is likely to be consummated (a "Buyer Superior Proposal"). In the event
the Buyer receives a Buyer Superior Proposal, nothing contained in this
Agreement (but subject to the terms hereof) will prevent the Board of
Directors of the Buyer from recommending to the Buyer's shareholders such
Buyer Superior Proposal if such Board determines, in good faith, after
consultation with outside legal counsel, that such action is required by its
fiduciary duties under applicable law.
(f) Notwithstanding anything to the contrary in this Section 4.7, the Buyer
shall not provide any non-public information to a third party unless: (i) the
Buyer provides such non-public information pursuant to a non-
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disclosure agreement with terms regarding the protection of confidential
information at least as restrictive as such terms in the Confidentiality
Agreement; and (ii) such non-public information has previously been delivered
or made available to the Company.
4.8 Breakup Fee Provisions. (a) In the event that (i) the Buyer terminates
this Agreement pursuant to Section 6.1(b) or Section 6.1(i) or (ii) the
Company or the Buyer terminates this Agreement pursuant to Section 6.1(c) or
6.1(d) (in either case as a result of the failure of the condition set forth
in Section 5.1(h) to be satisfied due to (A) the failure of the creditors of
the Debtors entitled to vote on the Amended Plan (other than holders of Class
7, 8 or 9 Claims) to vote in favor of the Amended Plan, (B) the withdrawal of
the Amended Plan by the Debtors, the filing of any other plan of
reorganization by the Debtors, or the modification or amendment of any
material provision of the Amended Plan by the Debtors, in each case without
the prior written consent of the Buyer, or (C) the confirmation of any other
plan of reorganization filed by any person other than the Debtors), (iii)
except as set forth in Section 4.8(a) of the Company Disclosure Schedule, the
Debtors sell or otherwise transfer (other than to the Buyer or the Buyer
Subsidiaries) all or any substantial portion of their assets as part of a sale
approved pursuant to Section 363 of the Bankruptcy Code, (iv) the Company has
terminated this Agreement pursuant to Section 6.1(e) (a termination under (i),
(ii), (iii) or (iv) being herein called a "Major Breakup Event"), or (v) the
Buyer or the Company terminates this Agreement pursuant to Section 6.1(j) (a
"Minor Breakup Event"; together with the Major Breakup Events, the "Breakup
Events"), and at the time of any such Breakup Event the Buyer is not in
material breach of any material covenant or obligation required to be
performed by the Buyer hereunder at or before such time, and is not in breach
of its representations and warranties contained in this Agreement (except
where the matters in respect of which such representations and warranties are
in breach would not in the aggregate have a Buyer Material Adverse Effect),
then the Company shall pay to the Buyer as promptly as practicable after
demand therefor (but in no event later than the third Business Day thereafter
and, in the case of a Minor Breakup Event, only if and when any Pinnacle
Breakup Amount referred to below is actually received by the Debtors) (x) in
the case of a Major Breakup Event, the amount of $25,000,000, and (y) in the
case of a Minor Breakup Event, an amount equal to one-half of any amount
("Pinnacle Breakup Amount") actually received by the Debtors pursuant to
Section 7.05 of the Debtor Tower Agreement (or pursuant to a settlement with
Pinnacle in lieu thereof) (in either case, the "Buyer Breakup Fee"). The
claims of the Buyer to the Buyer Breakup Fee shall constitute a first priority
administrative expense under 11 U.S.C. (S)507(a)(1).
(b) In the event that (i) the Company terminates this Agreement pursuant to
Section 6.1(b) or (g), or (ii) the Buyer or the Company terminates this
Agreement after June 30, 1999 pursuant to Section 6.1(c) or (d) (in either
case as a result of the Closing not occurring due to the Buyer's failure to
obtain the financing necessary to effect the transactions contemplated hereby
and by the Amended Plan under circumstances when all the conditions set forth
in Section 5.1 (other than the condition set forth in Section 5.1(j)) and
Section 5.2 are satisfied, or would have been satisfied had such financing
been obtained) and at the time of such termination each of the Company and the
Parent is not in material breach of any material covenant or obligation
required to be performed by the Company or the Parent hereunder at or before
such time and is not in breach of its representations and warranties contained
in this Agreement (except where the matters in respect of which such
representations and warranties are in breach would not in the aggregate have a
Debtor Material Adverse Effect), then the Buyer shall pay to the Company as
promptly as practicable after demand therefor (but in no event later than the
third Business Day thereafter) the amount of $32,500,000 (the "Company Breakup
Fee").
(c) This Section 4.8 shall be effective only from and after the date the
Initial Merger Order is signed by the Bankruptcy Court.
4.9 Nasdaq National Market Quotation. The Buyer shall use its best efforts
to have the shares of Buyer Common Stock (including all such shares issuable
upon conversion of the Buyer Class B Common Stock and upon exercise of the
Buyer Warrants or Buyer Participation Warrants, as the case may be) and Buyer
Warrants or Buyer Participation Warrants, as the case may be, to be issued as
contemplated by the Amended Plan and this Agreement approved for quotation on
the Nasdaq National Market prior to the Closing.
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4.10 Delivery of Financial Statements. As promptly as possible following the
last day of each month after the date of this Agreement until the Closing
Date, and in any event within 35 days after the end of each such month, each
of the Buyer and the Company shall deliver to the other its unaudited
consolidated balance sheet and the related consolidated statements of
operations and cash flows for the one-month period then ended, all certified
by its chief financial officer to the effect that such interim financial
statements are prepared in accordance with GAAP (except as otherwise described
therein) on a consistent basis as with each Party's audited financial
statements and fairly present the consolidated financial condition and results
of operations of each Party as of the date thereof and for the period covered
thereby (collectively, the "Interim Monthly Financial Statements"). As
promptly as possible following the last day of each fiscal quarter, and in any
event within 45 days after the end of each such quarter, each of the Buyer and
the Company shall deliver to the other its unaudited consolidated balance
sheet and the related unaudited consolidated statements of operations and cash
flows for the year-to-date period then ended, prepared in accordance with GAAP
(except as otherwise described therein) applied on a consistent basis as with
the Audited Financial Statements, which comply as to form with the applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto (collectively, the "Unaudited Quarterly Financial
Statements"). The Company shall furnish the Buyer with all information
(including, without limitation, the Audited Financial Statements and the
Unaudited Quarterly Financial Statements, pro forma financial information and
projections included in the Disclosure Statement) and shall take such other
action including obtaining any necessary consents and comfort letters (in
customary form and scope) from its accountants, as the Buyer may reasonably
request in connection with any offering of securities of the Buyer used to
fund the amounts to be paid by the Buyer under the Amended Plan or the working
capital requirements of the Buyer following the Closing.
4.11 Full Access. Each of the Buyer, the Parent and the Company shall permit
representatives of the other to have full access (at all reasonable times, and
in a manner so as not to interfere with normal business operations) to all
premises, properties, financial and accounting records, contracts, other
records and documents, and personnel, of or pertaining to such Party. Each of
the Buyer, the Parent and the Company shall cause its officers and management
to cooperate fully with the representatives and agents of such other Party and
shall make themselves available to the extent reasonably necessary to complete
the due diligence process and the consummation of the transactions
contemplated hereby. The Parent and the Company shall, at the request of the
Buyer, introduce the Buyer to its principal suppliers and employees to
facilitate discussions between such persons and the Buyer in regard to the
conduct of the businesses of the Surviving Corporation following the Closing.
4.12 Stockholders Approval; Meeting. The Buyer shall take all action
reasonably necessary in accordance with applicable law, the rules of the
Nasdaq National Market, this Agreement and the Buyer's Restated Certificate of
Incorporation, as amended, and By-laws, as amended, duly to convene a meeting
of its stockholders (the "Meeting") as promptly as practicable to consider and
vote upon (i) the Buyer Charter Amendment in the form attached as Exhibit F
hereto (the "Buyer Charter Amendment") and (ii) the Buyer Share Issuance. The
Buyer will (i) subject to Section 4.7(e), recommend in the Proxy Statement (as
defined in Section 4.13(a)) that its stockholders vote in favor of the Buyer
Charter Amendment and the Buyer Share Issuance (the "Buyer Recommendation")
and (ii) subject to Section 4.7(e), use its best efforts to cause to be
solicited proxies from stockholders of the Buyer to be voted at the Meeting in
favor of the Buyer Charter Amendment and the Buyer Share Issuance and to take
all other actions necessary or advisable to secure the vote or consent of
stockholders required to approve the Buyer Charter Amendment and the Buyer
Share Issuance.
4.13 Proxy Statement, Disclosure Statement, Etc.
(a) The Buyer shall promptly after execution of this Agreement prepare and
file with the SEC under the Exchange Act, and shall use its best efforts to
have declared effective by the SEC as soon as practicable thereafter and shall
thereafter promptly mail to its stockholders, a proxy statement/prospectus for
the Meeting and to effect the Stockholder Rights Offering (the "Proxy
Statement"). The Buyer shall also take any action required to be taken under
state blue sky laws or other securities laws in connection with the
Stockholder Rights Offering. The Proxy Statement shall be mailed to
stockholders of the Buyer at least 20 business days in advance of the date of
the Meeting. The Company shall furnish the Buyer with all information
(including, without limitation, its
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Audited Financial Statements and the Unaudited Quarterly Financial Statements,
pro forma financial information and projections included in the Disclosure
Statement) and shall take such other action (including obtaining any necessary
consents from the accountants) as the Buyer may reasonably request in
connection with the Proxy Statement. The Buyer shall consult with the Company
and its counsel in connection with, and shall permit the Company and its
counsel to participate in, the preparation of the Proxy Statement and any
amendments or supplements thereto.
(b) The Buyer shall promptly notify the Company of the receipt of the
comments of the SEC and of any requests by the SEC for amendments or
supplements to the Proxy Statement or for additional information, and shall
promptly supply the Debtors with copies of all correspondence between it (or
its representatives) and the SEC (or its staff) with respect thereto, and
shall permit counsel for the Company to participate in any telephone
conferences or meetings with the staff of the SEC. If, at any time prior to
the Meeting, any event should occur relating to or affecting a Party or its
officers or directors, which event should be described in an amendment or
supplement to the Proxy Statement, such Party shall promptly inform the other
Party and shall cooperate in promptly preparing, filing and clearing with the
SEC and, if required by applicable securities law, mailing to the Buyer's
stockholders, as the case may be, such amendment or supplement.
(c) The Buyer shall furnish the Company with all information (including
historical and pro forma financial information and projections of the Buyer)
and shall take such other action as the Company may reasonably request in
connection with the Disclosure Statement. The Company shall consult with the
Buyer and its counsel in connection with, and shall permit the Buyer and its
counsel to participate in, the preparation and Bankruptcy Court approval
process of the Disclosure Statement and any amendments or supplements thereto.
4.14 Application of Pinnacle Proceeds Application of Pinnacle Proceeds. The
Buyer, the Parent and the Company agree that the net proceeds from the Closing
(as defined in the Debtor Tower Agreement) shall promptly be paid to the Pre-
Petition Agent for the benefit of the Pre-Petition Lenders.
4.15 FCC Filing. As soon as practicable following the date of this Agreement
and in no event later than the later to occur of the date fifteen days
following the execution hereof or the date ten days following the filing with
the Bankruptcy Court of the Amended Plan, the Parties shall jointly prepare
and file applications (the "FCC Applications") on the appropriate FCC forms in
accordance with all applicable FCC rules and regulations requesting (i) the
FCC's consent to the transfer of the control of the Debtor Authorizations to
the Buyer, (ii) to the extent that such consent is required, the FCC's consent
to the transfer of control of the Buyer Authorizations from the Buyer's
current stockholders to the Buyer's stockholders immediately following the
consummation of the transactions contemplated hereby in accordance with the
Amended Plan, (iii) the termination of the hearing in WT Docket No. 97-115, In
the Matter of MobileMedia Corporation, et al. (the "Hearing") without any
further findings adverse to the Debtors, or to the Debtor Authorizations or
otherwise materially restricting the Buyer's or the Reorganized Debtors'
ability to own or operate the properties, assets and businesses of the Debtors
following the Closing, and (iv) the grant to the Buyer of permanent license
authority to operate those stations listed on Attachment C of Public Notice DA
97-78 (January 13, 1997) (the "Attachment C Stations"), as to which Debtors
are currently operating under a grant of interim operating authority, or in
the Ralternative, a determination by the FCC that as to such stations, the
Buyer will enjoy protection from, and rights of incumbency as to, any future
Market Area Licensee authorized to operate on the frequencies licensed under
interim operating authority. The Parties shall cooperate in providing all
information and taking all steps necessary to expedite the preparation, filing
and prosecution of the FCC Applications with the FCC. In the event any person
or entity petitions the FCC to deny any FCC Application, or petitions for any
further proceedings in the Hearing, or otherwise challenges the grant of any
FCC Application before the FCC, or in the event the FCC approves the transfer
of control of the Debtor Authorizations (and, if necessary, the Buyer
Authorizations), and any person requests reconsideration or judicial review of
such order, then the Parties shall take such reasonable actions as are
necessary to oppose such petition or challenge before the FCC or defend such
action and the order of the FCC before the judiciary diligently and in good
faith; provided, however, that nothing contained herein shall be deemed to
require the Buyer to intervene in the Hearing or otherwise to defend the
Debtors as to any allegations
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or proceedings relating to the allegations before the FCC in the Hearing,
except as reasonably required to support the transfer of control of the Debtor
Authorizations to the Buyer. The Company shall provide the Buyer (whether or
not the Buyer intervenes or otherwise participates in the Hearing) with
reasonable advance notice of, and a right to participate in, any meetings or
hearings relating to the FCC Applications or the Hearing, and a right to
review in advance any correspondence, agreements, or pleadings which may be
submitted by the Debtors to the FCC or any other party to the Hearing with
regard to the FCC Applications or any proceedings relating to the Hearing. In
each such case, each Party shall bear its own costs and expenses of
prosecuting such application to a favorable conclusion, to the end that the
transactions contemplated by this Agreement and the Amended Plan may be
consummated.
The Parent and the Company each covenants that it will continue to use
reasonable best efforts to complete the program, voluntarily undertaken by the
Debtors and monitored by its independent regulatory consultant, to inspect and
audit the Debtors' transmitter site facilities and license data, within the
time frames established by Debtors' independent regulatory consultant and
reported to the FCC, and will provide Buyer with periodic updates of the
progress of the program, including copies of status reports prepared by the
Debtors' independent regulatory consultant and furnished to the Company's
Board of Directors.
4.16 Indemnification; Director and Officers Insurance. (a) The Buyer agrees
that, to the extent set forth in the Amended Plan and only to such extent, all
rights to indemnification and exculpation from liabilities for acts or
omissions occurring prior to the Effective Time now existing in favor of the
current or former directors or officers of the Debtors as provided in their
respective charters or by-laws (or comparable organization documents) and any
indemnification agreements of the Debtors (including with Alvarez & Marsal,
Inc.) shall survive the Merger and shall continue in full force and effect in
accordance with their terms for a period of not less than three years from the
Effective Time and the obligations of the Debtors in connection therewith
shall be assumed by the Buyer. To the extent set forth in the Amended Plan and
only to such extent, the Buyer shall provide, or shall cause the Surviving
Corporation to provide, the Debtors' current directors and officers an
insurance and indemnification policy (including any fiduciary liability
policy) that provides coverage with respect to any claims made during the
three-year period following the Effective Time for events occurring prior to
the Effective Time.
(b) The provisions of this Section 4.16 are intended to be for the benefit
of, and shall be enforceable by, each person who is or has been a director or
officer of any of the Debtors (except for such Persons who are not entitled to
indemnification as provided for in the Amended Plan) and such director's or
officer's heirs and personal representatives and shall be binding on all
successors and assigns of the Buyer and the Surviving Corporation.
4.17 State Takeover Laws. If any "fair price", "business combination" or
"control share acquisition" statute or other similar statute or regulation
shall become applicable to the transactions contemplated hereby, the Buyer,
the Parent and the Company and their respective Boards of Directors shall use
all reasonable efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and shall otherwise
act to minimize the effects of any such statute or regulation on the
transactions contemplated hereby.
4.18 Employees.
(a) Buyer's Benefits for Affected Employees. As promptly as practicable
following the Effective Time, the Buyer shall transfer to one or more employee
benefit plans maintained by the Buyer any employee of the Parent, the Company
or any of the Company's Subsidiaries who becomes an employee of the Buyer or
any of its Subsidiaries (collectively, the "Affected Employees"). Prior to
such transfer, the Buyer shall maintain, or shall cause the Company and its
Subsidiaries to maintain, compensation and employee benefits plans and
arrangements for the Affected Employees that are comparable to those provided
for under the compensation arrangements and Company Employee Benefit Plans as
in effect on the date hereof; provided, that for such period, the Buyer shall
not reduce the severance benefits payable to any terminated employee or
Affected Employee below the level
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currently provided to such terminated employee or Affected Employee by the
Company. Notwithstanding the foregoing, the Buyer shall have the right,
following the Effective Time, in the good faith exercise of its managerial
discretion, to terminate the employment of any employee. Nothing in this
Agreement shall be construed as granting to any employee any rights of
continuing employment.
(b) Honoring Accrued Vacation and 1998 Employee Incentive Plan. Without
limiting the generality of the foregoing subsection, and to the extent
permitted by law, the Buyer shall (i) honor all vacation, holiday, sickness
and personal days accrued by Affected Employees and, to the extent applicable,
former employees of the Parent, the Company and its Subsidiaries ("Former
Employees") as of the Effective Time and (ii) for purposes of the Company's
1998 Employee Incentive Plan, in the event the payments under the 1998
Employee Incentive Plan would be paid or payable after the Closing, (x) use
the evaluations of the executives covered by such plan prepared in good faith,
and to be provided by the Company to the Buyer at least five business days
prior to the Closing and (y) calculate the Company's 1998 EBITDA in a manner
consistent with the Company's current accounting practices, in connection with
the 1998 Employee Incentive Plan and without deduction for any restructuring
or other special or one-time charge relating to the transactions contemplated
by this Agreement.
(c) Participation in Benefit Plans. Employees and, to the extent applicable,
Former Employees shall be given credit, to the extent permitted by law, for
all service with the Parent, the Company and its Subsidiaries (or service
credited by the Company or such Subsidiaries) under all Buyer Employee Benefit
Plans currently maintained by the Buyer or any of its Subsidiaries in which
they are or become participants for purposes of eligibility, vesting, level of
participant contributions and benefit accruals (but subject to an offset, if
necessary, to avoid duplication of benefits) to the same extent as if rendered
to the Buyer or any of its Subsidiaries other than as otherwise provided in
clause (a) or (b) of this Section 4.18. The Buyer shall cause to be waived any
pre-existing condition limitation under its welfare plans that might otherwise
apply to an Affected Employee or, to the extent applicable, a Former Employee.
The Buyer agrees to recognize (or cause to be recognized) the dollar amount of
all expenses incurred by Affected Employees or, to the extent applicable,
Former Employees, during the calendar year in which the Effective Time occurs
for purposes of satisfying the calendar year deductions and co-payment
limitations for such year under the relevant benefit plans of the Buyer and
the Buyer Subsidiaries.
4.19 Rights Agreement. The Buyer shall not (i) amend the Rights Agreement
other than as contemplated by Section 3.23 or (ii) take any action with
respect to, or make any determination under, the Rights Agreement (including a
redemption of the Preferred Rights) with the purpose of facilitating a Buyer
Acquisition Proposal.
4.20 Buyer Rights Offering; Registration Statement. (a) As specified in the
Amended Plan, the Buyer will issue (the "Rights Offering") to the holders of
certain Allowed Claims as specified in the Amended Plan Rights to purchase,
for an aggregate consideration of $217 million, shares of Buyer Common Stock,
Buyer Class B Common Stock, if applicable, and, if a Rights Offering
Adjustment shall not have occurred, Buyer Warrants. The Rights Offering will
be made substantially on the terms set forth in Schedule III hereto.
(b) Concurrently with the execution of this Agreement, the Company and the
Buyer have entered into a Standby Purchase Commitment with each Standby
Purchaser and, prior to or at the Closing, the Buyer will execute and deliver
to each of the Standby Purchasers the Registration Rights Agreement.
(c) The Buyer will file with the SEC a registration statement as required
under the Securities Act to effect the Rights Offering as contemplated hereby
(the "Registration Statement") as promptly as practicable (in any event within
15 days) after the date of this Agreement, and the Buyer will use its best
efforts to have the Registration Statement declared effective by the SEC as
promptly as practicable thereafter. The Buyer shall also take any action
required to be taken under state blue sky laws or other securities laws in
connection with the Rights Offering. The Parent and the Company shall furnish
the Buyer with all information (including, without limitation, the Audited
Financial Statements and the Unaudited Quarterly Financial Statements, pro
forma financial information and projections included in the Disclosure
Statement) and shall take such other action, including obtaining any necessary
consents and comfort letters (in customary form and scope) from its
accountants, as the Buyer may reasonably request in connection with the
Registration Statement. The Buyer shall consult with the Parent and the
Company and its counsel in connection with, and shall permit the Parent and
the
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Company and its counsel to participate in, the preparation of the Registration
Statement. The Buyer shall cause the Rights to be issued as specified in the
Amended Plan as soon as practicable after the date the Registration Statement
becomes effective but not before approval of Disclosure Statement by the
Bankruptcy Court.
(d) The Buyer shall promptly notify the Parent and the Company of the
receipt of the comments of the SEC and of any requests by the SEC for
amendment or supplements to the Registration Statement or for additional
information, and shall promptly supply the Parent and the Company with copies
of all correspondence between it (or its representatives) and the SEC (or its
staff) with respect thereto, and shall permit counsel for the Parent and the
Company to participate in any telephone conferences or meetings with the staff
of the SEC. If, at any time prior to the Effective Date, any event should
occur relating to or affecting a Party or its officers or directors, which
event should be described in an amendment or supplement to the Registration
Statement, such Party shall promptly inform the other Party and shall
cooperate in promptly preparing, filing and clearing with the SEC and, if
required by applicable securities law, distributing such amendment or
supplement.
4.21 Reimbursement of Buyer's Expenses. As soon as practicable after the
date of receipt of the Initial Merger Order (but in no event later than the
third Business Day thereafter), the Company shall pay to the Buyer, by wire
transfer to a bank account of the Buyer specified in a prior written notice
from the Buyer to the Company, $500,000 in next day funds in partial
reimbursement of the Buyer's expenses in connection with the negotiation and
execution of this Agreement (the "Buyer Reimbursement").
4.22 Stockholder Rights Offering. If a Rights Offering Adjustment shall have
occurred, the Buyer will offer (the "Stockholder Rights Offering") to the
Stockholder Rights Holders Stockholder Rights to purchase for cash shares of
Buyer Common Stock. The Stockholder Rights Offering will be made substantially
on the terms set forth in Schedule IV hereto.
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ARTICLE V
Conditions to Closing
5.1 Conditions to Obligations of Each Party. The respective obligation of
each Party to consummate the transactions to be performed by it in connection
with the Closing is subject to the satisfaction, or waiver by such Parties, of
the following conditions:
(a) each of the Buyer Charter Amendment and the Buyer Share Issuance
shall have been approved by the requisite vote of the holders of Buyer
Stock in accordance with the DGCL and the restated certificate of
incorporation, as amended, and by-laws, as amended, of the Buyer;
(b) no statute, rule, order, decree or regulation shall have been enacted
or promulgated by any foreign or domestic Governmental Entity which
prohibits the consummation of the transactions contemplated hereby and all
consents, orders and approvals from all Governmental Entities and other
persons or entities listed in Section 2.3 of the Company Disclosure
Schedule or Section 3.3 of the Buyer Disclosure Schedule shall have been
obtained and shall be in effect;
(c) there shall be no order or injunction of a foreign or United States
federal or state court or other governmental authority of competent
jurisdiction in effect precluding, restraining, enjoining or prohibiting
consummation of the transactions contemplated hereby;
(d) the expiration or early termination of any waiting period under the
HSR Act shall have occurred;
(e) (1) the FCC shall have issued an order (the "FCC Grant") both (i)
consenting to the transfer of the Debtor Authorizations and, to the extent
requested by the Parties, to the transfer of the Buyer Authorizations
without any conditions that would have a Buyer FCC Material Adverse Effect
(as defined below in this Section 5.1(e)) or a Debtor FCC Material Adverse
Effect (as defined below in this Section 5.1(e)) and (ii) terminating the
Hearing without any findings or conclusions (x) that are materially adverse
to the Reorganized Debtors or the Debtor Authorizations or which would have
a material adverse effect on the use of the Debtor Authorizations by the
Reorganized Debtors following the Closing, or (y) which impose any material
monetary forfeiture on the Debtors or the Reorganized Debtors or retain
jurisdiction to impose any material monetary forfeitures in the future on
the Buyer or the Reorganized Debtors based on the activities of the Debtors
prior to the Closing, or (z) which would have a Buyer FCC Material Adverse
Effect or a Debtor FCC Material Adverse Effect; and (2) either (i) the FCC
Grant has become a Final Order (as defined below in this Section 5.1(e)) or
(ii)(a) any condition or conditions under the Bank Lending Documents to the
effect that the FCC Grant shall have become a Final Order (or any condition
or conditions therein having a substantially similar effect) shall have
been satisfied or, if not satisfied, the Bank Lenders shall have waived any
such condition or conditions (or any such condition or conditions having a
substantially similar effect) and (b) any condition or conditions under the
Other Lending Documents to the effect that the FCC Grant shall have become
a Final Order (or any condition or conditions therein having a
substantially similar effect) shall have been satisfied or, if not
satisfied, the Other Lenders shall have waived any such condition or
conditions (or any such condition or conditions having a substantially
similar effect); it being agreed that, for purposes of this Section 5.1(e)
and Section 5.1(h), (A) "Bank Lenders" shall mean, collectively, the
Existing Lenders (as defined in the Bank Commitment Letter) and the Credit
Parties (as so defined), as the same in each case shall exist at the
Closing, (B) "Bank Lending Documents" shall mean the Existing Credit
Agreements (as defined in the Bank Commitment Letter) as amended and
modified by the Amendments (as so defined), (C) "Bank Commitment Letter"
shall mean the Commitment Letter of even date herewith between Arch Paging,
Inc. and the Credit Parties, including the Term Sheet (as defined in such
Bank Commitment Letter), copies of which has been delivered to the Company
by the Buyer, as the same may be amended or modified, (D) "Other Lenders"
shall mean the Lenders (as defined in the Bridge Commitment Letter), as the
same shall exist at the Closing, or, if applicable, any other lenders which
lend funds to Arch Communications, Inc. (or the Buyer or any other Buyer
Subsidiary) pursuant to a Substitute Loan Agreement (as defined below), (E)
"Other Lending Documents" shall mean the Bridge Commitment Letter, Bridge
Loan Agreement (as defined in the Bridge Commitment Letter) or any other
loan agreement,
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indenture or similar agreement (the "Substitute Loan Agreement") entered
into by the Buyer or any Buyer Subsidiary in lieu thereof for purposes of
funding a material portion of the consideration required by the Buyer for
the transactions contemplated by this Agreement, (F) "Bridge Commitment
Letter" shall mean the Bridge Commitment Letter, the Bridge Fee Letter and
the Bridge Engagement Letter, each of even date herewith, between the Buyer
and Arch Communications, Inc., on the one hand, and the Other Lenders, on
the other hand, a copy of which has been delivered by the Buyer to the
Company, as the same may be amended or modified, (G) "Buyer FCC Material
Adverse Effect" shall mean a material adverse effect on the financial
condition and operating income of the Buyer and its subsidiaries, taken as
a whole, excluding any effect generally applicable to the economy or the
industry in which Buyer conducts its business, and (H) "Debtor FCC Material
Adverse Effect" shall mean a material adverse effect on the financial
condition and operating income of the Debtors, taken as a whole, excluding
any effect generally applicable to the economy or the industry in which the
Company conducts its business; and it being further agreed that, for
purposes of this Section 5.1(e), the FCC Grant shall become a "Final Order"
when no request for a stay is pending, no stay is in effect and any
deadline for filing such a request that may be designated by statute or
regulation is past; no petition for rehearing or reconsideration or
application for review is pending and the time for filing any such petition
or application is passed; the FCC does not have the action or decision
under reconsideration on its own motion and the time for initiating any
such reconsideration that may be designated by statute or rule has passed;
and no appeal is pending or in effect and any deadline for filing any such
appeal that may be designated by statute or rule has passed;
(f) each of the Registration Statement and the Proxy Statement shall
have been declared effective and no stop order with respect to either of
the Registration Statement or the Proxy Statement shall be in effect;
(g) the shares of Buyer Common Stock (including all such shares issuable
upon conversion of the Buyer Class B Common Stock and the Buyer Warrants or
Buyer Participation Warrants, as the case may be) to be issued as
contemplated by the Amended Plan and this Agreement shall have been
approved for quotation on the Nasdaq National Market;
(h) (1) the Confirmation Order (which shall authorize and approve the
assumption by the Debtors of the Assumed Contracts), in a form reasonably
satisfactory to each of the Parties, shall have been entered by the
Bankruptcy Court; and (2) either (i) the Confirmation Order has become a
Final Order (as defined below in this Section 5.1(h)) or (ii) (a) any
condition or conditions under the Bank Lending Documents to the effect that
the Confirmation Order shall have become a Final Order (or any condition or
conditions therein having a substantially similar effect) shall have been
satisfied or, if not satisfied, the Bank Lenders shall have waived any such
condition or conditions (or any such condition or conditions having a
substantially similar effect), and (b) any condition or conditions under
the Other Lending Documents to the effect that the Confirmation Order shall
have become a Final Order (or any condition or conditions therein having a
substantially similar effect) shall have been satisfied or, if not
satisfied, the Other Lenders shall have waived any such condition or
conditions (or any such condition or conditions having a substantially
similar effect), it being agreed that, for purposes of this Section 5.1(h),
the Confirmation Order shall become a "Final Order" when it shall have been
in full force and effect for eleven days without any stay or material
modification or amendment thereof, and when the time to appeal or petition
for certiorari designated by statute or regulation has expired and no
appeal or petition for certiorari is pending or, if an appeal or petition
for certiorari has been timely filed or taken, the order or judgment of the
tribunal has been affirmed (or such appeal or petition has been dismissed
as moot) by the highest court (or other tribunal having appellate
jurisdiction over the order or judgment) to which the order was appealed or
the petition for certiorari has been denied, and the time to take any
further appeal or to seek further certiorari designated by statute or
regulation has expired;
(i) no action, suit or proceeding shall be pending or threatened by any
Governmental Entity challenging the validity of the actions taken by the
Buyer, the Debtors or any of their respective Subsidiaries in connection
with the confirmation of the Amended Plan;
(j) the Effective Date (as defined in the Amended Plan) shall have
occurred; and
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(k) the Plan Shares to be issued and distributed as contemplated by
Section 1.3(e) and Section 1.6 shall, when so issued and distributed, be
(i) issued and distributed pursuant to the exemption from registration
under the Securities Act provided by Section 1145 of the Bankruptcy Code,
(ii) freely tradeable by holders thereof who are not then affiliates of the
Buyer or "underwriters" under the Securities Act or 1145(b)(1) of the
Bankruptcy Code and, (iii) except for certificates issuable to such
affiliates or underwriters, represented by certificates bearing no
restrictive legend.
5.2 Conditions to Obligations of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by the Buyer in connection with
the Closing is subject to the satisfaction, or waiver by the Buyer, of the
following conditions:
(a) the representations and warranties of the Parent and the Company
contained in this Agreement, which representations and warranties shall be
deemed for purposes of this Section 5.2(a) not to include any qualification
or limitation with respect to materiality (whether by reference to a
"Debtor Material Adverse Effect" or otherwise), shall be true and correct
as of the Effective Time, with the same effect as though such
representations and warranties were made as of the Effective Time, except
where the matters in respect of which such representations and warranties
are not true and correct, result from actions permitted by this Agreement
or would not in the aggregate have a Debtor Material Adverse Effect;
(b) the Parent and the Company shall each have performed or complied with
its material agreements and covenants required to be performed or complied
with under this Agreement as of or prior to the Closing in all material
respects;
(c) there shall not have occurred between the Agreement Date and the
Closing Date a Debtor Material Adverse Effect;
(d) the Parent and the Company shall have delivered to the Buyer a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified in clauses
(a) through (c) of this Section 5.2 is satisfied in all respects;
(e) after each of the Registration Statement and the Proxy Statement has
been declared effective, each of the Rights Offering and the Stockholder
Rights Offering shall have expired and the Buyer shall have received
aggregate proceeds therefrom (and/or from the closings contemplated by the
Standby Purchase Commitments) of at least $217.0 million; and
(f) the Debtors shall have on or prior to the Closing Date paid to the
Pre-Petition Agent for the benefit of the Pre-Petition Lenders at least
$165 million in net proceeds under the Debtor Tower Agreement or a
Replacement Tower Agreement (the "Company Tower Sale Proceeds").
5.3 Conditions to Obligations of the Company. The obligations of the Parent
and the Company to consummate the transactions to be performed by each of them
in connection with the Closing is subject to the satisfaction, or waiver by
the Parent and the Company, of the following conditions:
(a) the representations and warranties of the Buyer contained in this
Agreement, which representations and warranties shall be deemed for
purposes of this Section 5.3(a) not to include any qualification or
limitation with respect to materiality (whether by reference to a "Buyer
Material Adverse Effect" or otherwise), shall be true and correct as of the
Effective Time with the same effect as though such representations and
warranties were made as of the Effective Time, except where the matters in
respect of which such representations and warranties are not true and
correct result from actions permitted by this Agreement or would not in the
aggregate have a Buyer Material Adverse Effect;
(b) the Buyer shall have performed or complied with its material
agreements and covenants required to be performed or complied with under
this Agreement as of or prior to the Closing in all material respects;
(c) there shall not have occurred between the Agreement Date and the
Closing Date a Buyer Material Adverse Effect;
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(d) the Preferred Rights shall not have become nonredeemable,
exercisable, distributed or triggered pursuant to the terms of the Rights
Agreement; and
(e) the Buyer shall have delivered to the Company a certificate (without
qualification as to knowledge or materiality or otherwise) to the effect
that each of the conditions specified in clauses (a) through (d) of this
Section 5.3 is satisfied in all respects.
ARTICLE VI
Termination
6.1 Termination of Agreement. The Parties may terminate this Agreement prior
to the Closing Date only as provided below:
(a) the Parties may terminate this Agreement by mutual written consent;
(b) either the Buyer or the Company may terminate this Agreement by
giving written notice to the other in the event the other is in breach (i)
of its representations and warranties contained in this Agreement, which
representations and warranties shall be deemed for purposes of this Section
6.1(b) not to include any qualification or limitation with respect to
materiality (whether by reference to a "Debtor Material Adverse Effect",
"Buyer Material Adverse Effect" or otherwise), except where the matters in
respect of which such representations and warranties are in breach would
not in the aggregate have a Debtor Material Adverse Effect or a Buyer
Material Adverse Effect, as the case may be, or (ii) of its material
covenants or agreements contained in this Agreement in any material
respect, and in either case such breach is not remedied within 20 business
days of delivery of such written notice thereof (which notice shall specify
in reasonable detail the nature of such breach);
(c) (i) after March 31, 1999, the Buyer may terminate this Agreement by
written notice to the Company if the Confirmation Order has not been
entered by the Bankruptcy Court on or prior to such date (unless such
failure results primarily from a breach by the Buyer of any representation,
warranty or covenant contained in this Agreement) or (ii) after June 30,
1999, the Buyer may terminate this Agreement by giving written notice to
the Company if the Closing shall not have occurred on or before such date
(unless the failure results primarily from a breach by the Buyer of any
representation, warranty or covenant contained in this Agreement);
(d) (i) after March 31, 1999, the Company may terminate this Agreement by
written notice to the Buyer if the Confirmation Order has not been entered
by the Bankruptcy Court on or prior to such date (unless the failure
results primarily from a breach by the Company of any representation,
warranty or covenant contained in this Agreement) or (ii) after June 30,
1999, the Company may terminate this Agreement by giving written notice to
the Buyer if the Closing shall not have occurred on or before such date
(unless the failure results primarily from a breach by the Company of any
representation, warranty or covenant contained in this Agreement);
(e) the Company may terminate this Agreement pursuant to and in
accordance with the provisions of Section 4.7 by giving written notice to
the Buyer, provided that on or before such termination the Debtors shall
have paid to the Buyer the applicable Buyer Breakup Fee;
(f) the Buyer may terminate this Agreement by giving written notice to
the Company if the Initial Merger Order has not been entered by the
Bankruptcy Court on or prior to September 4, 1998, provided, however, that
such termination shall not be effective unless such notice is delivered on
or before October 4, 1998;
(g) The Company may terminate this Agreement by giving written notice to
the Buyer if (i) the Buyer's Board of Directors does not issue the Buyer
Recommendation prior to the Meeting or withdraws or amends in a manner
adverse to the Company the Buyer Recommendation or otherwise materially
breaches the first sentence of Section 4.12 or of Section 4.13(a) or (ii)
at the Meeting the Buyer Charter Amendment or the Buyer Share Issuance is
not approved by the requisite vote of the holders of Buyer Common Stock;
45
<PAGE>
(h) the Buyer may terminate this Agreement by giving written notice to
the Company if the Company or any other Debtor files either an amendment to
the Amended Plan or any other plan of reorganization in violation of
Section 4.4(b);
(i) the Buyer may terminate this Agreement by giving written notice to
the Company if (x) the Company takes any action (or omits to take any
action) that would constitute a material breach of any of its material
covenants or agreements contained in Section 4.1 or 4.5 but for the
language of such Sections that permits the Company to take actions (or omit
to take actions) required by a Bankruptcy-Related Requirement, and (y) such
action (or omission to take action) is not remedied within 20 business days
of delivery of written notice thereof (which notice shall specify in
reasonable detail the nature of such action (or omission to take action)
and the nature of the resulting breach (but for such language)); and
(j) either the Buyer or the Company may terminate this Agreement by
giving written notice to the other (i) if at the time of giving such notice
the Debtor Tower Agreement shall have been terminated in accordance with
its terms, unless, prior to or simultaneously with such termination, the
Company shall have entered into a definitive agreement (which agreement
(herein called a "Replacement Tower Agreement") shall be comparable in form
and substance to the Debtor Tower Agreement, and any lease (herein called a
"Comparable Tower Lease") entered into in connection therewith shall be
comparable in form and substance to the Master Lease (as defined in the
Debtor Tower Agreement), and a copy of which shall be delivered to Arch
promptly following execution thereof) with a bona fide third-party
purchaser providing for a sale to such third party of the assets or
substantially all the assets to be sold to Pinnacle Towers Inc. pursuant to
the Debtor Tower Agreement and which results in net proceeds to the Company
of not less than $165,000,000 (an "Acceptable Sale"), or (ii) on or after
December 31, 1998 if the Closing (as defined in the Debtor Tower Agreement)
or the closing of an Acceptable Sale shall not have occurred on or before
such date.
6.2 Effect of Termination If any Party terminates this Agreement pursuant to
Section 6.1, all obligations of the Parties hereunder shall terminate without
any liability of any Party to any other Party, except for any liability of any
Party for willful or intentional breaches of this Agreement, and except for
the Company's obligation to pay the Buyer Breakup Fee, if applicable, and the
Buyer's obligation to pay the Company Breakup Fee, if applicable, each
pursuant to Section 4.8, which shall survive any such termination; provided
that Article VIII shall also survive any such termination. Any claims arising
out of or in connection with the Company's willful or intentional breach of
any covenant or agreement herein after entry of the Confirmation Order shall
be treated as a claim for an expense of administration under 11 U.S.C.
(S)503(b)(1) of each of Debtor's bankruptcy estate.
46
<PAGE>
ARTICLE VII
Definitions
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ -------
<S> <C>
Affected Employees.................................. 4.18(a)
Agreement........................................... Introduction
Agreement Date...................................... Introduction
Allowed Claims...................................... Preliminary Statement
Amended Plan........................................ Preliminary Statement
Attachment C Stations............................... 4.15
Audited Company Financial Statements................ 2.5(a)
Bank Commitment Letter.............................. 5.1(e)
Bank Lenders........................................ 5.1(e)
Bank Lending Documents.............................. 5.1(e)
Bankruptcy Code..................................... 2.1(a)
Bankruptcy Court.................................... Preliminary Statement
Bankruptcy-Related Requirements..................... 4.5
Bear Stearns........................................ 3.22
Breakup Events...................................... 4.8(a)
Bridge Commitment Letter............................ 5.1(e)
Business Entity..................................... 2.4(a)
Buyer............................................... Introduction
Buyer Acquisition Proposals......................... 4.7(d)
Buyer Affiliated Group.............................. 3.8(a)
Buyer Affiliated Period............................. 3.8(a)
Buyer Authorizations................................ 3.14(a)
Buyer Balance Sheet Date............................ 3.5(b)
Buyer Breakup Fee................................... 4.8(a)
Buyer Business Entity............................... 3.4(a)
Buyer Class B Common Stock.......................... 3.1(b)
Buyer Common Stock.................................. Preliminary Statement
Buyer Charter Amendment............................. 4.12
Buyer Disclosure Schedule........................... Article III
Buyer Distribution.................................. 1.7(c)
Buyer Employee Benefit Plan......................... 3.17(a)
Buyer FCC Applications.............................. 3.14(b)
Buyer FCC Material Adverse Effect................... 5.1(e)
Buyer Intellectual Property......................... 3.11(a)
Buyer Licenses and Authorizations................... 3.14(b)
Buyer Material Adverse Effect....................... Article III
Buyer Participation Warrant Agreement............... Preliminary Statement
Buyer Participation Warrants........................ Preliminary Statement
Buyer Preferred Stock............................... 1.7(a)
Buyer Recommendation................................ 4.12
Buyer Record Date................................... Preliminary Statement
Buyer Reimbursement................................. 4.21
Buyer Reports....................................... 3.5(a)
Buyer Share Issuance................................ 3.1(b)
Buyer State Applications............................ 3.14(b)
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ -------
<S> <C>
Buyer Stock......................................... 1.7(a)
Buyer Subsidiary.................................... 3.4(c)
Buyer Superior Proposal............................. 4.7(e)
Buyer Warrant Agreement............................. Preliminary Statement
Buyer Warrants...................................... Preliminary Statement
CERCLA.............................................. 2.18(a)
Certificate of Merger............................... 1.1
Chapter 11 Proceeding............................... Preliminary Statement
Closing............................................. 1.2
Closing Date........................................ 1.2
Code................................................ Preliminary Statement
Communications Act.................................. 2.3
Company............................................. Introduction
Company Acquisition Proposals....................... 4.7(a)
Company Balance Sheet Date.......................... 2.5(a)
Company Breakup Fee................................. 4.8(b)
Company Disclosure Schedule......................... Article II
Company Employee Benefit Plans...................... 2.17(a)
Company Financial Statements........................ 2.5(a)
Company Group....................................... 2.8(b)(i)
Company Stock....................................... 1.5(b)
Company Superior Proposal........................... 4.7(b)
Company Tower Sale Proceeds......................... 5.2(f)
Comparable Tower Lease.............................. 6.1(j)
Confidentiality Agreement........................... 4.7(c)
Confirmation Order.................................. Preliminary Statement
Debtor.............................................. Preliminary Statement
Debtor Affiliated Group............................. 2.8(b)
Debtor Affiliated Period............................ 2.8(b)
Debtor Authorizations............................... 2.14(a)
Debtor Business Entity.............................. 2.4(a)
Debtor FCC Applications............................. 2.14(b)
Debtor FCC Material Adverse Effect.................. 5.1(e)
Debtor Licenses and Authorizations.................. 2.14(b)
Debtor Material Adverse Effect...................... Article II
Debtor State Applications........................... 2.14(b)
Debtor Tower Agreement.............................. 2.10
Debtors............................................. Preliminary Statement
Debtors' Intellectual Property...................... 2.11(a)
DGCL................................................ 1.1
DIP Loan Agreement.................................. 1.11
Disclosure Statement................................ 4.4(b)
Dispose............................................. 4.5(a)(i)
Effective Time...................................... 1.1
Employee Benefit Plan............................... 2.17(a)
Environmental Authorization......................... 2.18(e)
Environmental Law................................... 2.18(a)
Environmental Property Transfer Act................. 2.18(f)
ERISA............................................... 2.17(a)
ERISA Affiliate..................................... 2.17(a)
Exchange Act........................................ 2.3
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ -------
<S> <C>
Exchange Agent...................................... 1.3
Exclusivity Provisions.............................. 4.7(a)
FCC................................................. 2.3
FCC Applications.................................... 4.15
FCC Grant........................................... 5.1(e)
Filing Date......................................... 2.5(a)
Final Order......................................... 5.1(e)
Former Employees.................................... 4.18(b)
GAAP................................................ 2.5(a)
Governmental Entity................................. 2.3
Hearing............................................. 4.15
HSR Act............................................. 2.3
Indirect Buyer Authorizations....................... 3.14(b)
Indirect Debtor Authorizations...................... 2.14(b)
Initial Merger Motion............................... 4.4(a)
Initial Merger Order................................ 4.4(a)
Interim Monthly Financial Statements................ 4.10
June 30 Unaudited Company Balance Sheet............. 2.5(a)
knowledge........................................... 8.15
Major Breakup Event................................. 4.8(a)
Materials of Environmental Concern.................. 2.18(b)
Meeting............................................. 4.12
Merger.............................................. 1.1
Merger Subsidiary................................... Introduction
Minor Breakup Event................................. 4.8(a)
Most Recent Buyer Balance Sheet..................... 3.5(b)
Ordinary Course of Business......................... 2.3
Other Lenders....................................... 5.1(e)
Other Lending Documents............................. 5.1(e)
Parties............................................. Introduction
Parent.............................................. Introduction
Pinnacle............................................ 2.10
Pinnacle Breakup Amount............................. 4.8(a)
Plan Cash........................................... 1.3
Plan Shares......................................... 1.3
Preferred Rights.................................... 3.2(a)
Prior Plan.......................................... Preliminary Statement
Proxy Statement..................................... 4.13(a)
Registration Rights Agreement....................... Preliminary Statement
Registration Statement.............................. 4.20(c)
Replacement Tower Agreement......................... 6.1(j)
Rights Agreement.................................... 3.2(a)
Rights Offering..................................... 4.20(a)
Rights Offering Adjustment.......................... Schedule II
SEC................................................. 2.5(a)
Securities Act...................................... 2.3
Security Interest................................... 2.3
Standby Purchase Commitments........................ Preliminary Statement
Standby Purchasers.................................. Preliminary Statement
State Authority..................................... 2.14(a)
Stockholder Rights Offering......................... 4.22
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ -------
<S> <C>
Substitute Loan Agreement......................................... 5.1(e)
Surviving Corporation............................................. 1.1
Tax Returns....................................................... 2.8(a)
Taxes............................................................. 2.8(a)
Unaudited Quarterly Financial Statements.......................... 4.10
</TABLE>
50
<PAGE>
ARTICLE VIII
General Provisions
8.1 Press Releases and Announcements. No Party shall issue any press release
or announcement relating to the subject matter of this Agreement without the
prior written approval of the other Parties; provided, however, that any Party
may make any public disclosure it determines in good faith, after consultation
with counsel, is required by law or regulation (in which case the disclosing
Party shall advise the other Parties and provide them with a copy of the
proposed disclosure prior to making the disclosure).
8.2 No Third Party Beneficiaries. Except as otherwise expressly provided
herein, this Agreement shall not confer any rights or remedies upon any person
other than the Parties and their respective successors and permitted assigns.
8.3 Entire Agreement. This Agreement and the exhibits and schedules attached
hereto, including the Amended Plan, and the Confidentiality Agreement
constitute the entire agreement among the Parties and supersede any prior
understandings, agreements or representations by or among the Parties, written
or oral, that may have related in any way to the subject matter of the
Agreement.
8.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior
written approval of the other Parties; provided, that the Buyer may assign its
rights under this Agreement to another wholly owned subsidiary of the Buyer by
notice to the Company; provided, further, that the Buyer shall remain liable
for all its obligations hereunder.
8.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.6 Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.7 Notices. All notices, requests, demands, claims and other communications
hereunder shall be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly delivered three business days
after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or two business days after it is sent via a reputable
international overnight courier service, in each case to the intended
recipient as set forth below:
If to the Company: Copy to:
MobileMedia Communications, Inc. Sidley & Austin
Fort Lee Executive Park 875 Third Avenue
One Executive Drive, Suite 500 New York, NY 10022
Fort Lee, NJ 07024 Attn: James D. Johnson
Attn: Chairman--Restructuring
If to the Parent: Copy to:
MobileMedia Corporation Sidley & Austin
Fort Lee Executive Park 875 Third Avenue
One Executive Drive, Suite 500 New York, NY 10022
Fort Lee, NJ 07024 Attn: James D. Johnson
Attn: Chairman--Restructuring
51
<PAGE>
If to the Buyer: Copy to:
Arch Communications Group, Inc. Hale and Dorr LLP
1800 West Park Drive, Suite 250 60 State Street
Westborough, MA 01581 Boston, MA 02109
Attn: Chairman and Chief Executive Attn: Jay E. Bothwick
Officer
Any Party may give any notice, request, demand, claim or other communication
hereunder by personal delivery or telecopy, but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the Party for whom it is intended.
Any Party may change the address to which notices, requests, demands, claims
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State
of Delaware.
8.9 Amendments and Waivers. The Parties may mutually amend any provision of
this Agreement at any time by a written instrument signed by all of the
Parties. No waiver by any Party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence.
8.10 Severability. If any court of competent jurisdiction determines that
any material provision of this Agreement is invalid or unenforceable, then,
only to the extent the Parties agree, such provision shall be severable and
null and void, and, in such event, such determination shall in no way limit or
affect the enforceability or operative effect of any or all other portions of
this Agreement.
8.11 Expenses. Except as otherwise set forth in this Agreement, each of the
Parties shall bear its or their own costs and expenses (including fees and
expenses of their respective legal, accounting and financial advisors)
incurred in connection with this Agreement and the transactions contemplated
hereby.
8.12 Specific Performance. Each of the Parties acknowledges and agrees that
one or more of the other Parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court having jurisdiction over the Parties and the
matter, in addition to any other remedy to which it may be entitled, at law or
in equity.
8.13 Construction. The language used in this Agreement shall be deemed to be
the language chosen by the Parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against any Party. Any
reference to any federal, state, local or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise.
8.14 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
8.15 Knowledge. For purposes of this Agreement, the term "knowledge" of the
Company and the Buyer shall mean the actual knowledge, after due inquiry, of
the senior executive officers of the Buyer and each of its Subsidiaries and
the Parent, the Company and each other Debtor, respectively.
52
<PAGE>
8.16 Survival of Representations. None of the representations and warranties
made by the Parties herein or the documents or certificates contemplated
hereby, nor the covenants set forth in Article IV, shall survive the Closing.
8.17 Bankruptcy Process. Nothing contained in this Agreement shall be deemed
to limit in any manner the ability of any Debtor to take any position before
or make any motion to the Bankruptcy Court in connection with the Chapter 11
Proceeding; provided, however, that no Debtor shall take any such position or
make any such motion in support of any action or inaction by such Debtor that
would constitute a breach of any covenant of the Company contained in this
Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement and Plan of
Merger as of the date first above written.
ARCH COMMUNICATIONS GROUP, INC.
/s/ J. Roy Pottle
By: _________________________________
Name: J. ROY POTTLE
Title: Executive Vice President
and
Chief Financial Officer
FARM TEAM CORP.
/s/ J. Roy Pottle
By: _________________________________
Name: J. ROY POTTLE
Title: Executive Vice President
and
Chief Financial Officer
SUBJECT TO ENTRY OF THE PROVISION
ORDER AS TO THE PROVISIONS HEREOF
COVERED THEREBY AND TO THE RECEIPT
OF THE CONFIRMATION ORDER FROM THE
BANKRUPTCY COURT WITH RESPECT TO THE
AMENDED PLAN AS DESCRIBED HEREIN:
MOBILEMEDIA CORPORATION
/s/ Joseph A. Bondi
By: _________________________________
Name: JOSEPH A. BONDI
Title: Chairman-Restructuring
MOBILEMEDIA COMMUNICATIONS, INC.
/s/ Joseph A. Bondi
By: _________________________________
Name: JOSEPH A. BONDI
Title: Chairman-Restructuring
53
<PAGE>
ANNEX C
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re:
Chapter 11
MobileMedia Communications, Case No. 97-174 (PJW)
Inc., et al.,
(Jointly Administered)
Debtors.
DEBTORS' SECOND AMENDED JOINT PLAN OF REORGANIZATION
DATED: SEPTEMBER 3, 1998
J. Ronald Trost James L. Patton, Jr. (No. 2202)
James D. Johnson Joel A. Waite (No. 2925)
Shelley C. Chapman YOUNG CONAWAY STARGATT
Lee M. Stein & TAYLOR, LLP
SIDLEY & AUSTIN P.O. Box 391
875 Third Avenue Wilmington, Delaware 19899
New York, New York 10022 (302) 571-6600
(212) 906-2000
CO-COUNSEL TO DEBTORS AND
DEBTORS-IN-POSSESSION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
INTRODUCTION............................................................. 1
ARTICLE I
DEFINITIONS; INTERPRETATION.............................................. 1
<C> <S> <C>
1.1 Definitions..................................................... 1
1.2 Interpretation.................................................. 10
1.3 Computation of Time............................................. 10
<CAPTION>
ARTICLE II
CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS..................... 10
<C> <S> <C>
2.1 Administrative Claims........................................... 11
2.2 Priority Tax Claims............................................. 11
2.3 Class 1 Claims (Priority Claims)................................ 11
2.4 Class 2 Claims (Miscellaneous Secured Claims)................... 12
2.5 Class 3 Claims (Customer Refund Claims)......................... 12
Class 4 Claims (Claims arising under or related to the 1995
2.6 Credit Agreement)............................................... 12
Class 5 Claims (Claims arising under or related to the Dial Page
2.7 Notes).......................................................... 12
2.8 Class 6 Claims (Non-Priority Unsecured Claims).................. 13
2.9 Class 7 Claims (Note Litigation Claims)......................... 14
2.10 Class 8 Claims and Interests (Common Stock Claims and Interests
and Subordinated Indemnification Obligation Claims)............. 14
2.11 Class 9 Claims and Interests (Subsidiary Claims and Interests).. 14
<CAPTION>
ARTICLE III
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.................... 15
<C> <S> <C>
3.1 Rejection....................................................... 15
3.2 Assumption...................................................... 15
3.3 Post-Petition Contracts and Leases.............................. 16
<CAPTION>
ARTICLE IV
IMPLEMENTATION OF PLAN................................................... 16
<C> <S> <C>
4.1 Actions Occurring Prior to the Effective Date................... 16
4.2 Actions Occurring on the Effective Date......................... 16
4.3 Distributions Occurring On and After the Effective Date......... 18
4.4 Procedure For Determination of Claims and Interests............. 21
4.5 Issuance of Arch Capital Shares................................. 22
4.6 Issuance of Warrants............................................ 22
4.7 Issuance of Rights.............................................. 22
4.8 Exemption from Securities Laws.................................. 23
4.9 Registration Rights Agreement................................... 23
Effectuating Documents; Further Transactions; Exemption From
4.10 Certain Transfer Taxes.......................................... 23
4.11 Release of Security Interests................................... 23
<CAPTION>
ARTICLE V
CONDITIONS TO EFFECTIVE DATE............................................. 23
<C> <S> <C>
5.1 Conditions to Occurrence of Effective Date...................... 23
5.2 Effect of Non-occurrence of Conditions to the Effective Date.... 23
5.3 Non-consensual Confirmation..................................... 24
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VI
DISCHARGE, TERMINATION, INJUNCTION AND SUBORDINATION RIGHTS.............. 24
<C> <S> <C>
6.1 Discharge of Claims and Termination of Interests................ 24
6.2 Injunctions..................................................... 24
Termination of Subordination Rights and Settlement of Related
6.3 Claims and Controversies........................................ 25
<CAPTION>
ARTICLE VII
MISCELLANEOUS............................................................ 25
<C> <S> <C>
7.1 Retention of Jurisdiction....................................... 25
7.2 Retention and Enforcement Of Causes Of Action................... 26
7.3 Limitation of Liability......................................... 26
7.4 Releases........................................................ 27
Indemnification Obligations; Directors' and Officers' Liability
7.5 Insurance....................................................... 28
7.6 Terms Binding................................................... 29
7.7 Additional Terms of Securities and Other Instruments............ 29
7.8 Post-Consummation Effect of Evidences of Claims or Interests.... 29
7.9 Payment Dates................................................... 29
7.10 Successors and Assigns.......................................... 29
7.11 Inconsistencies................................................. 29
7.12 Compliance with Applicable Law.................................. 29
7.13 Governing Law................................................... 29
7.14 Severability.................................................... 29
7.15 Incorporation by Reference...................................... 30
</TABLE>
<TABLE>
<S> <C>
Exhibit A Registration Rights Agreement (10% Holders)
Exhibits B-1 through B-6 Standby Purchase Commitments
Schedule 1 Assumed Employment and Benefit Agreements
</TABLE>
ii
<PAGE>
MobileMedia Corporation, a Delaware corporation ("MobileMedia"), MobileMedia
Communications, Inc., a Delaware corporation ("Communications"), MobileMedia
Communications, Inc. (California), a California corporation, MobileMedia DP
Properties, Inc., a Delaware corporation, MobileMedia PCS, Inc., a Delaware
corporation, Dial Page Southeast, Inc., a Delaware corporation, Radio Call
Company of Va., Inc., a Virginia corporation, MobileMedia Paging, Inc., a
Delaware corporation, Mobile Communications Corporation of America, a
Mississippi corporation, MobileComm of the Southeast, Inc., a Delaware
corporation, MobileComm of the Northeast, Inc., a Delaware corporation,
MobileComm Nationwide Operations, Inc., a Delaware corporation, MobileComm of
Tennessee, Inc., a Tennessee corporation, MobileComm of the Southeast Private
Carrier Operations, Inc., a Georgia corporation, MobileComm of the Southwest,
Inc., a Texas corporation, MobileComm of Florida, Inc., a Florida corporation,
MobileComm of the Midsouth, Inc., a Missouri corporation, FWS Radio, Inc., a
Texas corporation, and MobileComm of the West, Inc., a California corporation,
each a debtor and debtor-in-possession herein (collectively, the "Debtors"),
propose the following First Amended Joint Plan of Reorganization (the "Plan").
INTRODUCTION
This Plan encompasses a reorganization of the Debtors pursuant to which
Communications will merge with and into Farm Team Corp., a Delaware
corporation ("Merger Subsidiary") and a subsidiary of Arch Communications
Group, Inc. ("Arch"), with Merger Subsidiary being the surviving company. The
Debtors' creditors will receive cash or equity securities of Arch. There will
be no recovery for the Debtors' equity security holders.
Reference is made to the Disclosure Statement accompanying this Plan,
including the exhibits thereto, for a discussion of the Debtors' and Arch's
history, business, results of operations and properties, and for a summary and
analysis of this Plan. All creditors are encouraged to consult the Disclosure
Statement and to read this Plan carefully before voting to accept or reject
this Plan.
NO SOLICITATION MATERIALS, OTHER THAN THE DISCLOSURE STATEMENT AND RELATED
MATERIALS TRANSMITTED THEREWITH AND APPROVED BY THE BANKRUPTCY COURT, HAVE
BEEN AUTHORIZED BY THE BANKRUPTCY COURT FOR USE IN SOLICITING ACCEPTANCES OR
REJECTIONS OF THIS PLAN.
ARTICLE I
Definitions; Interpretation
1.1 Definitions.
In addition to such other terms as are defined in other Sections of this
Plan, the following terms (which appear in this Plan as capitalized terms)
shall have the meanings set forth below. A term used in this Plan and not
defined in this Plan but that is defined in the Code has the meaning set forth
in the Code.
"9 3/8% Note Indenture" means the Indenture dated as of November 13, 1995,
between Communications, as Issuer, and State Street Bank and Trust Company, as
Trustee.
"9 3/8% Notes" means the Senior Subordinated Notes due November 1, 2007,
issued pursuant to the 9d% Note Indenture.
"10 1/2% Note Indenture" means the Indenture dated as of December 1, 1993,
between Communications, as Issuer, and First Trust USA (as successor to
BankAmerica National Trust Company), as Trustee, as amended.
"10 1/2% Notes" means the 10 1/2% Senior Subordinated Deferred Coupon Notes
due December 1, 2003, issued pursuant to the 10 1/2% Note Indenture.
<PAGE>
"1995 Credit Agreement" means the Credit Agreement dated as of December 4,
1995, as amended, among Communications, the Pre-Petition Lenders and the Pre-
Petition Agent.
"Administrative Claim" means a Claim to the extent that it is of the kind
described in section 503(b) of the Code and is entitled to priority under
section 507(a)(1) of the Code.
"Allowed" means as to any Claim (whether an Administrative Claim, Priority
Claim, Priority Tax Claim, Secured Claim or Unsecured Claim), the extent to
which such Claim:
(a) (i) was timely filed or listed in the Schedules and not listed as
disputed, contingent or unliquidated as to amount; and
(ii) the Debtors, the Reorganized Debtors or any other party in
interest entitled to do so has not and does not file an objection to such
Claim within the time period set forth for objecting in Section 4.4;
(b) is allowed by a Final Order of the Bankruptcy Court; or
(c) is allowed by this Plan.
"Arch Capital Shares" means, collectively, the Arch Common Shares and the
Arch Class B Common Shares.
"Arch Class B Common Shares" means the shares of Class B Common Stock of
Arch, par value $0.01 per share, to be authorized and issued as and when
contemplated by the Merger Agreement.
"Arch Common Shares" means the shares of Common Stock of Arch, par value
$0.01 per share, which are issued and outstanding plus additional shares which
will be authorized and issued as and when contemplated by the Merger
Agreement.
"Arch Participation Warrants" means, if a Rights Offering Adjustment shall
have occurred, warrants for the purchase of Arch Common Shares, which warrants
will be issued pursuant to a Warrant Agreement governing their issuance and
exercise that will be in the form set forth in Exhibit B-1 to the Merger
Agreement.
"Arch Series C Convertible Preferred Shares" means the shares of Series C
Convertible Preferred Stock of Arch, par value $0.01 per share.
"Arch Stockholder Rights" means non-transferable rights issued by Arch
(except that, at Arch's election, the rights will transfer with the underlying
shares in respect of which the rights are distributed) for the purchase of
Arch Common Shares.
"Arch Stockholder Rights Offering" means the issuance of Arch Stockholder
Rights to the holders of Arch Common Stock on a date to be determined by the
Board of Directors of Arch, as more fully described in Schedule IV to the
Merger Agreement.
"Arch Stockholder Rights Offering Commencement Date" has the meaning set
forth in Schedule IV to the Merger Agreement.
"Arch Warrants" means, if a Rights Offering Adjustment shall not have
occurred, warrants for the purchase of Arch Common Shares, which warrants will
be issued pursuant to a Warrant Agreement governing their issuance and
exercise that will be in the form set forth in Exhibit B to the Merger
Agreement.
"Ballot" means the ballot for voting to accept or reject this Plan
distributed by the Debtors to all holders of impaired Claims entitled to vote
on this Plan.
"Bankruptcy Court" means the United States Bankruptcy Court for the District
of Delaware in which the Cases were filed on January 30, 1997, or any other
court with jurisdiction over the Cases.
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"Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure, as
amended from time to time to the extent applicable to the Cases.
"Benefit Plan Indemnification Obligations" means Indemnification Obligations
with respect to any officer or employee serving as a fiduciary of any employee
benefit plan or program of the Debtors, pursuant to charter, by law, contract
or applicable state law for any actions taken or not taken in the discharge of
such officer's or employee's duties as a fiduciary of such employee benefit
plans or programs.
"Business Day" means any day other than a Saturday, Sunday or day on which
commercial banks in the city of New York, New York or the States of New Jersey
or Delaware are authorized or required to close.
"Capped Administrative Claims" means the Debtors' good faith estimate of the
sum of (i) Priority Tax Claims, (ii) Administrative Claims for (x) bonuses
payable to employees and professionals on or as a result of the Effective
Date, (y) amounts necessary to cure any defaults in executory contracts or
unexpired leases assumed pursuant to this Plan as required by section 365(b)
of the Code and (z) any accrued and unpaid fees and expenses of professionals
retained by the Debtors or the Committee pursuant to orders of the Bankruptcy
Court, and (iii) Claims for (x) the Allowed Class 4 Claims described in
Section 2.6(B)(ii), (iii) and (iv), (y) the Allowed Class 5 Claims described
in Section 2.7(B), and (z) Allowed Class 6 Claims of the indenture trustees
under the Subordinated Indentures described in Section 2.8(C)(3), in each case
(other than those Claims in clause (iii)(z) hereof which shall be payable
until such professionals no longer provide services to their respective
constituencies on account of the Cases), accrued and unpaid or payable as of
the Effective Date, which estimate shall be in reasonable detail (which in the
case of professional fees, shall be in substantially the same form as would be
submitted to the Bankruptcy Court) and shall be delivered to Arch (with a copy
to the Committee) twenty days prior to the Effective Date. If no objection is
made by Arch to the Debtors' estimate within ten days after receipt thereof,
the estimate shall be deemed to be the amount of Capped Administrative Claims
for purposes of Section 2.1(D). If Arch delivers to the Debtors (with a copy
to the Committee) a written objection to the Debtors' estimate within ten days
after receipt of such estimate, and the Debtors and Arch are unable to resolve
such objection, it shall be submitted to the Bankruptcy Court to be determined
on or as soon as practicable after the Effective Date.
"Cash Equivalent" means, with respect to any Right, an amount equal to the
value of such Right as determined based on the actual proceeds received from
the sale of Rights from the Rights Reserve pursuant to Section 4.1(B)(5) (or,
if the Rights Reserve is then fully depleted, the fair value thereof as of the
time such sale would have occurred based on the market price for such Right
or, if no such price is available, as determined by the Debtors, Arch and the
Committee in good faith or determined by the Bankruptcy Court if no agreement
can be reached).
"Cases" means the reorganization proceedings of the Debtors under chapter 11
of the Code, jointly administered as Case No. 97-174 (PJW).
"Causes of Action" means all claims and causes of action now owned or
hereafter acquired by the Debtors, whether arising under any contract or under
the Code or other federal or state law, including, without limitation, any
causes of action arising under sections 544, 545, 547, 548, 549, 550, 551,
553(b) or other sections of the Code.
"Claim" means "claim" as defined in section 101(5) of the Code, as
supplemented by section 102(2) of the Code, and shall, in each case, mean a
Claim against any Debtor (whether or not so designated).
"Class" means each class of Claims or Claims and Interests created under
this Plan.
"Class 6 Adjusted Pro Rata Share" means, as to any Allowed Class 6 Claim, as
of the date that is five Business Days prior to the Final Distribution Date, a
fraction (i) the numerator of which is the amount of such Allowed Class 6
Claim and (ii) the denominator of which is the aggregate amount of all Allowed
Class 6 Claims as of such date.
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<PAGE>
"Class 6 Pro Rata Share" means, as to any Allowed Claim in Class 6 on the
Effective Date or such later date (prior to the Final Distribution Date) as
such Claim becomes Allowed, a fraction (i) the numerator of which is the
amount of such Allowed Claim and (ii) the denominator of which is the sum of
(x) the Effective Date Disputed Claims, (y) the Effective Date Allowed Claims
and (z) an estimate of the aggregate amount of Claims arising from the
rejection of executory contracts and unexpired leases pursuant to Section 3.1
that are anticipated to become Allowed Claims, such estimate to be mutually
agreed upon by the Debtors, the Committee and Arch in good faith or determined
by the Bankruptcy Court if no such agreement can be reached.
"Code" means the United States Bankruptcy Code, 11 U.S.C. (S)(S) 101 et
seq., as amended from time to time to the extent applicable to the Cases.
"Committee" means the Official Committee of Unsecured Creditors appointed by
the United States Trustee for the District of Delaware on February 10, 1997.
"Common Stock" means, collectively, (i) the Class A common stock of
MobileMedia, par value $.001, issued and outstanding immediately prior to the
Effective Date, (ii) the Class B common stock of MobileMedia, par value $.001,
issued and outstanding immediately prior to the Effective Date and (iii) all
options, warrants and other rights to purchase the Class A common stock or the
Class B common stock of MobileMedia.
"Common Stock Claim" means any Claim with respect to the Common Stock of the
kind described in section 510(b) of the Code, including, without limitation,
any such Claim asserted in or by the parties to the Securities Actions and any
Claim by an officer, director or underwriter for contribution, reimbursement
or indemnification related thereto.
"Confirmation" means "confirmation" as used in section 1129 of the Code.
"Confirmation Date" means the date on which the Confirmation Order is
entered by the Bankruptcy Court.
"Confirmation Hearing" means the hearing at which the Bankruptcy Court
considers Confirmation of this Plan.
"Confirmation Order" means an order of the Bankruptcy Court confirming this
Plan, which order shall be reasonably satisfactory to Arch and, as to the
provisions relating to the treatment of Allowed Class 4 Claims, the Pre-
Petition Agent.
"Creditor" means "creditor" as defined in section 101(10) of the Code and
shall mean a creditor of any Debtor.
"Creditor Stock Pool" means a number of newly-issued Arch Common Shares
determined in accordance with Schedule II to the Merger Agreement, as such
number of shares constituting the Creditor Stock Pool may be adjusted pursuant
to Section 2.1(D).
"Customer Refund Claim" means a Claim by a customer or subscriber of any of
the Debtors for refund of amounts improperly paid or billed, or for the return
of a deposit.
"Dial Page Indenture" means the Indenture dated as of February 1, 1993,
between Dial Page, Inc., a Delaware corporation, as Issuer, and the Dial Page
Indenture Trustee, as amended.
"Dial Page Indenture Trustee" means Norwest Bank Minnesota, N.A. (as
successor to First Union Bank of South Carolina), as Trustee under the Dial
Page Indenture.
"Dial Page Notes" means the 12 1/4% Senior Notes due 2000, issued pursuant
to the Dial Page Indenture.
"Diluted Basis" means after giving effect to (i) the issuance and
distribution pursuant to this Plan of the Arch Capital Shares (including the
Arch Capital Shares issued upon exercise of the Rights issued pursuant to the
Rights Offering but excluding Arch Capital Shares issued or issuable upon
exercise of the Arch Warrants or the
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<PAGE>
Arch Participation Warrants, as the case may be) and (ii) the assumed issuance
of all Arch Common Shares issuable upon conversion of all convertible
preferred stock (including the Arch Series C Convertible Preferred Shares) and
convertible debt securities of Arch outstanding as of the date the "Buyer
Market Price" is determined in accordance with Schedule II to the Merger
Agreement.
"DIP Agent" means The Chase Manhattan Bank, in its capacity as agent for the
DIP Lenders under the DIP Credit Agreement.
"DIP Approval Orders" means, collectively, (i) the Final Order (I)
Authorizing (A) Secured Post-Petition Financing On A Super Priority Basis
Pursuant To 11 U.S.C. (S) 364, (B) Use Of Cash Collateral Pursuant to 11
U.S.C. (S) 363 and (C) Grant of Adequate Protection Pursuant To 11 U.S.C.
(S)(S) 363 And 364, dated February 19, 1997, (ii) Order (I) Authorizing
Extension of (A) Secured Post-Petition Financing On A Super Priority Basis
Pursuant To 11 U.S.C. (S) 364, (B) Use Of Cash Collateral Pursuant To 11
U.S.C. (S) 363 And (C) Grant Of Adequate Protection Pursuant To 11 U.S.C.
(S)(S) 363 And 364 And (II) Scheduling A Final Hearing Pursuant To Bankruptcy
Rule 4001(c), dated January 27, 1998 and (iii) Order (I) Authorizing Extension
of (A) Secured Post-Petition Financing On A Super Priority Basis Pursuant To
11 U.S.C. (S) 364, (B) Use Of Cash Collateral Pursuant To 11 U.S.C. (S) 363
And (C) Grant Of Adequate Protection Pursuant To 11 U.S.C. (S)(S) 363 And 364
And (II) Scheduling A Final Hearing Pursuant To Bankruptcy Rule 4001(c), dated
July 28, 1998.
"DIP Credit Agreement" means the Revolving Credit and Guarantee Agreement
dated as of January 30, 1997, as amended, among Communications, as Borrower,
MobileMedia, as Parent and Guarantor, each of the direct and indirect
subsidiaries of Communications designated as Guarantor in Schedule 3.5
thereto, as Guarantors, the DIP Agent and the DIP Lenders.
"DIP Lenders" means those financial institutions from time to time party to
the DIP Credit Agreement as lenders.
"Director Indemnification Obligations" means Indemnification Obligations
with respect to any present or former director of any of the Debtors.
"Disclosure Statement" means the Disclosure Statement respecting this Plan
approved by order of the Bankruptcy Court, and all supplements and exhibits
thereto.
"Disputed Claim" means a Claim against any of the Debtors to the extent that
such Claim is not Allowed.
"Effective Date" means the date on which this Plan becomes effective which
date shall be ten Business Days after all the conditions to the Effective Date
set forth in Section 5.1 have first been satisfied or waived, or such earlier
date (but not less than seven Business Days after such conditions have first
been satisfied or waived) as the Debtors, Arch, the Pre-Petition Agent, the
DIP Agent and the Committee shall agree.
"Effective Date Allowed Claims" means those Class 6 Claims that have been
Allowed by order of the Bankruptcy Court prior to the Effective Date or that
are Allowed pursuant to this Plan, as set forth in a schedule delivered by the
Debtors to the Exchange Agent and Arch two Business Days prior to the
Effective Date, which schedule, absent manifest error, shall be conclusive for
the purposes of calculating Class 6 Pro Rata Share and Class 6 Adjusted Pro
Rata Share.
"Effective Date Disputed Claims" means, on and as of the Effective Date, any
Class 6 Claim that is a Disputed Claim on and as of such date, in the full
amount set forth in any timely filed proof of claim or listed by the Debtors
in the Schedules, as set forth in a schedule delivered by the Debtors to the
Exchange Agent and Arch two Business Days prior to the Effective Date, which
schedule, absent manifest error, shall be conclusive for purposes of
calculating Class 6 Pro Rata Share and Class 6 Adjusted Pro Rata Share.
"Estate Representative" has the meaning given such term in Section
4.2(C)(5).
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<PAGE>
"Exchange Agent" means a bank trust company or other entity reasonably
satisfactory to MobileMedia and the Committee, appointed by Arch to act as the
exchange agent for making distributions to the holders of Allowed Class 6
Claims.
"Excluded Indemnification Obligations" means Indemnification Obligations
with respect to (i) any present or former officer of the Debtors considered as
of the Effective Date by the FCC to be an alleged wrongdoer for purposes of
the FCC Proceeding, (ii) any present or former officer of the Debtors now or
hereafter named as a defendant in the Securities Actions, as to claims arising
out of the matters alleged in the Securities Actions, (iii) any present or
former officer of the Debtors named as a defendant in any action initiated
after the date hereof based upon similar factual allegations, or alleging
similar causes of action, to the Securities Actions, as to claims arising out
of the matters alleged therein, (iv) any officer or employee of the Debtors
that is not an officer or employee as of the Effective Date, (v) present or
former professionals or advisors of the Debtors, including, without
limitation, accountants, auditors, financial consultants, underwriters or
attorneys, other than Indemnification Obligations arising out of post-petition
agreements approved by the Bankruptcy Court, and (vi) any Indemnification
Obligation of the kind described in section 510(b) of the Code.
"FCC" means the Federal Communications Commission or any governmental
authority succeeding to the rights and powers thereof.
"FCC Proceeding" means the hearing in WT Docket No. 97-115, In the Matter of
MobileMedia Corporation, et al.
"Final Distribution Date" means the tenth Business Day after the day on
which no Class 6 Claim remains a Disputed Claim.
"Final Order" means, as to any court, administrative agency or other
tribunal, an order or judgment of such tribunal as entered on its docket as to
which the time to appeal or petition for certiorari has expired and as to
which no appeal or petition for certiorari is pending or, if an appeal or
petition for certiorari has been timely filed or taken, the order or judgment
of the tribunal has been affirmed (or such appeal or petition has been
dismissed as moot) by the highest court (or other tribunal having appellate
jurisdiction over the order or judgment) to which the order was appealed or
the petition for certiorari has been denied, and the time to take any further
appeal or to seek further certiorari has expired.
"Fully Diluted Basis" means after giving effect to (i) the issuance and
distribution pursuant to this Plan of the Arch Capital Shares (including the
Arch Capital Shares issued upon exercise of the Rights issued pursuant to the
Rights Offering and upon exercise of the Stockholder Rights issued pursuant to
the Arch Stockholder Rights Offering), (ii) the assumed issuance of all Arch
Common Shares issuable upon conversion of all convertible preferred stock
(including the Arch Series C Convertible Preferred Shares) and convertible
debt securities of Arch outstanding as of the date the "Buyer Market Price" is
determined in accordance with Schedule II to the Merger Agreement, and (iii)
the assumed issuance of all Arch Common Shares issuable upon the exercise of
the Arch Warrants or the Arch Participation Warrants, as the case may be.
"Indemnification Obligations" means the obligation of any of the Debtors to
indemnify, reimburse or provide contribution to any present or former officer,
director or employee, or any present or former professionals or advisors of
the Debtors, including, without limitation, accountants, auditors, financial
consultants, underwriters or attorneys, whether pursuant to charter, by law,
contract or statute, regardless of whether the indemnification is owed in
connection with a pre-Petition Date or post-Petition occurrence.
"Interest" means all rights (including unpaid dividends) arising from any
equity security (as defined in section 101(16) of the Code) of the Debtors,
including, without limitation, the Common Stock, but excluding Common Stock
Claims.
"License Co. L.L.C." means the limited liability company formed as a wholly
owned subsidiary of MCCA that will hold the Reorganized Debtors' Licenses
after the Effective Date.
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"Licenses" means the licenses and other authorizations of the Debtors to
operate their paging networks.
"Lien" means, with respect to any interest in property, any mortgage, lien,
pledge, charge, security interest, easement or encumbrance of any kind
whatsoever affecting such interest in property.
"Merger" means the merger of Communications into Merger Subsidiary
contemplated by the Merger Agreement and Section 4.2(B).
"Merger Agreement" means the Agreement and Plan of Merger by and among Arch,
the Merger Subsidiary, MobileMedia and Communications dated as of August 18,
1998, as amended by the First Amendment thereto dated as of September 3, 1998,
and as the same may be further amended from time to time.
"MCCA" means Mobile Communications Corporation of America, a Mississippi
corporation.
"Miscellaneous Secured Claim" means a Secured Claim not classified in Class
4 under this Plan.
"Net Tower Sale Proceeds" shall be the Net Cash Proceeds (as defined in the
DIP Credit Agreement) from the Debtors' sale of their towers and certain
related assets, as set forth in the Tower Sale Agreement, which Net Cash
Proceeds shall be at least $165 million.
"Non-Priority Unsecured Claim" means any Unsecured Claim not classified in
Class 3, 5, 7, 8 or 9 under this Plan.
"Note Litigation Claim" means any Claim with respect to the Notes of the
kind described in section 510(b) of the Code, including, without limitation,
any such Claim asserted in or by the parties to the Securities Actions and any
Claim by an officer, director or underwriter for contribution, reimbursement
or indemnification related thereto.
"Notes" means, collectively, the Dial Page Notes, the 9 3/8% Notes and the
10 1/2% Notes.
"Person" means any person, including, without limitation, any individual,
partnership, joint venture, corporation, company, trust, estate,
unincorporated organization and any governmental unit.
"Personal Injury Claim" means a Claim against any of the Debtors that is
unliquidated or contingent as of the Confirmation Date and is of the kind
described in 28 U.S.C. (S) 157(b)(5).
"Petition Date" means January 30, 1997, the date on which the petitions
initiating the Cases were filed with the Bankruptcy Court.
"Plan" means this Second Amended Joint Plan of Reorganization, as amended
from time to time, and all addenda, exhibits, schedules and other attachments
hereto, as the same may be amended from time to time, pursuant to this Plan or
the Code, all of which are incorporated herein by reference.
"Pre-Petition Agent" means The Chase Manhattan Bank, in its capacity as the
agent for the Pre-Petition Lenders under the 1995 Credit Agreement.
"Pre-Petition Lenders" means those financial institutions from time to time
party to the 1995 Credit Agreement as lenders.
"Priority Claim" means a Claim to the extent that it is of the kind
described in, and entitled to priority under, section 507(a)(3), (a)(4) or
(a)(6) of the Code.
"Priority Tax Claim" means a Claim to the extent that it is of the kind
described in, and entitled to priority under, section 507(a)(8) of the Code.
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"Pro Rata Share" means proportionately, so that with respect to an Allowed
Claim other than an Allowed Class 6 Claim, the ratio of (i) the amount of
payments or other property distributable on account of a particular Allowed
Claim in a particular Class under this Plan to (ii) the amount of such Allowed
Claim in such Class is the same as the ratio of (a) the amount of payments or
other property distributable on account of all Allowed Claims in such Class to
(b) the amount of all Allowed Claims in such Class.
"Registration Rights Agreement" means a registration rights agreement to be
entered into pursuant to Section 4.9 between Arch and any Person entitled to
become a party to such registration rights agreement under Section 4.9, which
shall be in substantially the form attached as Exhibit A.
"Reorganized Communications" means, on and after the Effective Date, Merger
Subsidiary, the successor to Communications (as reorganized under and pursuant
to this Plan) and a wholly owned subsidiary of Arch as a result of the Merger.
"Reorganized Debtors" means, on and after the Effective Date, Reorganized
Communications and Reorganized MCCA.
"Reorganized Debtor's Certificate of Incorporation" means, (i) as to
Reorganized Communications, the Certificate of Incorporation of Merger
Subsidiary, as amended by the Certificate of Merger relating to the Merger and
except that the name of the corporation set forth therein shall be changed to
"MobileMedia Communications, Inc.", and (ii) as to Reorganized MCCA, the
Certificate of Incorporation of Delaware Subsidiary Co.
"Reorganized Debtor's Bylaws" means, as to Reorganized Communications, the
Bylaws of Merger Subsidiary, and as to Reorganized MCCA, the Bylaws of
Delaware Subsidiary Co.
"Reorganized MCCA" means Delaware Subsidiary Co., the successor to MCCA (as
reorganized under and pursuant to this Plan) and a wholly owned subsidiary of
Reorganized Communications.
"Rights" means certificated, transferable rights issued by Arch. The
securities to be offered pursuant to the Rights will be (i) an aggregate
number of Arch Common Shares determined in accordance with Schedule II to the
Merger Agreement and (ii) if there has been no Rights Offering Adjustment,
Arch Warrants entitling the holders thereof to purchase an aggregate number of
Arch Common Shares determined as described in Schedule II to the Merger
Agreement. Each Right will be exercisable for one Unit.
"Rights Offering" means the issuance of the Rights by Arch to holders of
Allowed Class 6 Claims on the Rights Offering Commencement Date.
"Rights Offering Adjustment" has the meaning set forth in Schedule II to the
Merger Agreement.
"Rights Offering Commencement Date" means the date on which Arch commences
the Rights Offering by mailing to holders of Allowed Class 6 Claims as of the
Rights Offering Initial Record Date certificates representing the Rights and
instructions for the exercise thereof, which date shall be as soon as
practicable after the later to occur of (i) approval by the Bankruptcy Court
of the Disclosure Statement and (ii) the effectiveness of the Registration
Statement (as defined in the Merger Agreement).
"Rights Offering Distribution Pool" means all of the Rights minus the Rights
included in the Rights Reserve.
"Rights Offering Expiration Date" means 5:00 p.m., New York City time, on
the date on which the Rights Offering terminates, which date shall be
established by Arch and Communications, on or prior to the Confirmation Date,
but shall be not less than 15 calendar days after the later to occur of (x)
the Rights Offering Adjustment Determination Date (as defined in Schedule II
to the Merger Agreement) and (y) the date on which all the conditions to
effectiveness of this Plan shall have been satisfied or waived (other than (i)
the requirement that the order entered by the FCC has become a Final Order in
connection with the condition set forth in Section 5.1(e) of the Merger
Agreement, and (ii) such conditions that by their nature are to be satisfied
on the Effective Date).
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"Rights Offering Initial Record Date" means the date that is the record date
to determine which holders of Claims are entitled to vote on this Plan.
"Rights Offering Pro Rata Share" means, as to any Allowed Class 6 Claim, a
fraction, (i) the numerator of which is the amount of such Allowed Class 6
Claim as of the date of determination and (ii) the denominator of which is the
aggregate amount of Allowed Class 6 Claims as of the Rights Offering Initial
Record Date.
"Rights Offering Supplemental Record Date" means the Confirmation Date.
"Rights Reserve" means, as of the Rights Offering Initial Record Date, a
number of Rights equal to the product of (i) the total number of Rights, and
(ii) a fraction, (A) the numerator of which is the sum of the estimated
aggregate amount of (x) Class 6 Claims that are Disputed Claims and (y) Claims
arising from the rejection of executory contracts and unexpired leases
pursuant to Section 3.1 that are anticipated to become Allowed Claims, such
estimate to be mutually agreed upon by the Debtors, the Committee and Arch, in
good faith, or determined by the Bankruptcy Court if no such agreement can be
reached, and (B) the denominator of which is the sum of the estimated
aggregate amount of (x) Class 6 Claims that are Disputed Claims, (y) Claims
arising from the rejection of executory contracts and unexpired leases
pursuant to Section 3.1 that are anticipated to become Allowed Claims, such
estimate to be mutually agreed upon by the Debtors, the Committee and Arch, in
good faith, or determined by the Bankruptcy Court if no such agreement can be
reached, and (z) all Allowed Class 6 Claims as of such date.
"Schedules" means the joint Schedules of Assets, Liabilities and Executory
Contracts filed by the Debtors with the Clerk of the Bankruptcy Court for the
District of Delaware pursuant to Bankruptcy Rule 1007, as such schedules have
been or may be amended or supplemented by the Debtors from time to time.
"Secured Claim" means a Claim that is secured by a Lien on, or interest in,
property of any of the Debtors, or that is subject to setoff under section 553
of the Code, but only to the extent of the value of the Creditor's interest
(directly or by enforceable subrogation) in the Debtor's interest in such
property, or to the extent of the amount subject to setoff, which value shall
be determined as provided in section 506(a) of the Code or as provided in this
Plan.
"Securities Actions" means, collectively, the actions styled In re
MobileMedia Securities Litigation, No. 96-5723 (AJL) (D. N.J. 1996), Allen T.
Gilliland Trust v. Hellman & Friedman Capital Partners II, L.P., et al., Civil
Action No. 97-3543 (N.D. Cal. 1997) and Allen T. Gilliland Trust v. Hellman &
Friedman MobileMedia Partners, L.L.C., et al., Case No. 989891 (Cal. Super.
Ct. 1997).
"Semi-Annual Distribution Date" means the last Business Day of each June and
December after the Effective Date and prior to the Final Distribution Date;
provided, that if the Effective Date is within 60 days before the end of June
or December, the first Semi-Annual Distribution Date will be the last Business
Day of the next succeeding June (if the Effective Date is in December) or
December (if the Effective Date is in June).
"Standby Purchase Commitment" means the various commitments of the Standby
Purchasers to purchase Units in the event any Rights are not exercised in the
Rights Offering, as evidenced by the letters attached hereto as Exhibits B-1
through B-6, as such letters may be amended from time to time.
"Standby Purchasers" means those creditors of the Debtors that have executed
a Standby Purchase Commitment.
"Subordinated Indemnification Obligation Claims" means Indemnification
Obligations that are rejected pursuant to Section 7.5(A) and any Claims
arising therefrom.
"Subordinated Indentures" means, collectively, the 9 3/8% Note Indenture and
the 10 1/2% Note Indenture.
"Subordinated Noteholder Claims" means all Claims arising under or relating
to the Subordinated Notes, the Subordinated Indentures and related agreements,
other than Note Litigation Claims.
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"Subordinated Notes" means, collectively, the 9 3/8% Notes and the 10 1/2%
Notes.
"Subsidiary Claim" means any Claim by a Debtor against another Debtor.
"Subsidiary Interest" means any Interest held by a Debtor in another Debtor,
including all options, warrants and other rights to purchase any such Interest
in a Debtor held by another Debtor.
"Tower Sale Agreement" means the Purchase Agreement between the Debtors and
Pinnacle Towers Inc. dated July 7, 1998, as approved by the Bankruptcy Court
on August 10, 1998, or as amended in accordance therewith and in accordance
with the order of the Bankruptcy Court.
"Unit" means (i) if there has not been a Rights Offering Adjustment, (x) one
Arch Capital Share and (y) 0. of an Arch Warrant/1/ and (ii) if there has
been a Rights Offering Adjustment, one Arch Capital Share.
"Unsecured Claim" means a Claim that is not an Administrative Claim, a
Priority Claim, a Priority Tax Claim or a Secured Claim.
"Voting Deadline" means that date set in an order of the Bankruptcy Court as
the deadline for the return of Ballots accepting or rejecting this Plan.
1.2 Interpretation. For purposes of this Plan: (a) whenever from the context
it is appropriate, each term, whether stated in the singular or the plural,
will include both the singular and the plural; (b) unless otherwise provided
in this Plan, any reference in this Plan to a contract, instrument, release,
indenture or other agreement or document being in a particular form or on
particular terms and conditions means that such document will be substantially
in such form or substantially on such terms and conditions; (c) unless
otherwise provided in this Plan, any reference in this Plan to an existing
document or Exhibit means such document or Exhibit, as it may have been or may
be amended, modified or supplemented pursuant to this Plan; (d) unless
otherwise specified herein, any reference to an entity as a holder of a Claim
includes that entity's successors, assigns and affiliates; (e) unless
otherwise specified, all references in this Plan to Sections, Articles and
Exhibits are references to Sections, Articles and Exhibits of or to this Plan;
(f) the words "herein" and "hereto" refer to this Plan in its entirety rather
than to a particular portion of this Plan; (g) captions and headings to
Articles and Sections are inserted for convenience of reference only and are
not intended to be part of or to affect the interpretation of this Plan; and
(h) the rules of construction set forth in section 102 of the Code will apply.
1.3 Computation of Time. In computing any period of time prescribed or
allowed by this Plan, the provisions of Bankruptcy Rule 9006(a) will apply.
ARTICLE II
Classification and Treatment of Claims and Interests
The following is a designation of the Classes of Claims and Interests
classified under this Plan, and the treatment to be provided to each such
Class.
A Claim or Interest shall be deemed classified in a particular Class only to
the extent that the Claim or Interest qualifies within the description of that
Class and shall be deemed classified in a different Class to the extent that
any remainder of the Claim or Interest qualifies within the description of
such different Class. Administrative Claims and Priority Tax Claims have not
been classified in accordance with section 1123(a)(1) of the Code, although
the treatment for such unclassified Claims is set forth below.
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(1) The fraction of an Arch Warrant that will be included in each Unit will
equal the fraction obtained by dividing (i) the total number of Arch
Warrants purchasable upon exercise of Rights by (ii) the total number of
Arch Capital Shares purchasable upon exercise of Rights (which will be
determined based on the pricing mechanism set forth in Schedule II to the
Merger Agreement).
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The treatment of and consideration to be provided on account of Claims and
Interests pursuant to this Plan shall be in full settlement, release and
discharge of such Claims and Interests; provided, that such discharge shall
not affect the liability of any other entity on, or the property of any other
entity encumbered to secure payment of, any such Claim or Interest, except as
otherwise provided in this Plan; and provided, further, that such discharge
shall not affect the Reorganized Debtors' obligations under and pursuant to
this Plan. The treatment of and consideration to be provided to Allowed Claim
and Interest holders in each Class shall apply to all of the Cases.
No Claim shall entitle the holder thereof to a distribution of cash or
securities or to other consideration pursuant to this Plan unless, and only to
the extent that, such Claim is an Allowed Claim.
UNCLASSIFIED CLAIMS
2.1 Administrative Claims.
A. General. Subject to the provisions of Section 4.4(A) and unless otherwise
agreed by the holder of an Allowed Administrative Claim (in which event such
other agreement shall govern), each holder of an Allowed Administrative Claim
shall receive on account of such Administrative Claim: (i) cash equal to the
unpaid amount of such Allowed Administrative Claim; or (ii) at the option of
Reorganized Communications, payment in accordance with the ordinary business
terms of such Allowed Administrative Claim.
B. Statutory Fees. On or before the Effective Date, Administrative Claims
for fees payable pursuant to section 1930 of title 28 of the United States
Code, 28 U.S.C. (S) 1930, as determined by the Bankruptcy Court at the
Confirmation Hearing, will be paid in cash in an amount equal to the amount of
such Administrative Claims. All such fees payable after the Effective Date
will be assumed by the Reorganized Debtors.
C. Ordinary Course Liabilities. Administrative Claims based on liabilities
incurred by the Debtors in the ordinary course of their businesses will be
assumed and paid by Reorganized MCCA pursuant to the terms and conditions of
the particular transaction giving rise to such Administrative Claim, without
any further action by the holders of such Claims.
D. Funding of Certain Administrative Claims. Arch shall make available to
Reorganized Communications any monies necessary for Reorganized Communications
to make timely payment of all Administrative Claims; provided, that in the
event the sum of Capped Administrative Claims and the costs and expenses of
the Standby Purchasers as provided in the Standby Purchase Commitment exceeds
$34,000,000, the number of Arch Common Shares constituting the Creditor Stock
Pool shall be reduced by a number of shares equal to (i) the excess of the sum
of (x) Capped Administrative Claims and (y) the costs and expenses of the
Standby Purchasers as provided in the Standby Purchase Commitment over
$34,000,000, divided by (ii) $25.315.
2.2 Priority Tax Claims. Unless otherwise agreed by the holder of an Allowed
Priority Tax Claim (in which event such other agreement shall govern), each
holder of an Allowed Priority Tax Claim against any of the Debtors shall, on
the Effective Date, receive, at Arch's option, either (a) cash equal to the
amount of such Allowed Priority Tax Claim or (b) a promissory note payable by
Reorganized Communications in a principal amount equal to the amount of such
Allowed Priority Tax Claim on which interest shall accrue from and after the
Effective Date at the rate of 7% or such higher or lower rate as is determined
by the Bankruptcy Court to be appropriate under section 1129(a)(9)(C) of the
Code and shall be paid semiannually in arrears; the principal amount of the
promissory note shall be paid in full on a date or dates six (6) years after
the date of assessment of such Allowed Priority Tax Claim.
CLASSIFIED CLAIMS AGAINST AND INTERESTS IN THE DEBTORS
2.3 Class 1 Claims (Priority Claims).
A. Classification. Class 1 consists of all Priority Claims against any of
the Debtors.
B. Allowance. Claims in Class 1 shall be allowed or disallowed in accordance
with Section 4.4(B) of this Plan and applicable provisions of the Code and
Bankruptcy Rules.
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C. Treatment. Allowed Claims in Class 1 shall be paid in full in cash on the
later of the Effective Date and a date that is as soon as practicable after
the date upon which such Claim becomes an Allowed Priority Claim.
D. Impairment and Voting. Class 1 Claims are unimpaired and are not entitled
to vote on this Plan.
2.4 Class 2 Claims (Miscellaneous Secured Claims).
A. Classification. Class 2 consists of all Miscellaneous Secured Claims
against any of the Debtors, if any.
B. Allowance. Claims in Class 2 shall be allowed or disallowed in accordance
with Section 4.4(B) of this Plan and applicable provisions of the Code and
Bankruptcy Rules.
C. Treatment. The legal, equitable and contractual rights to which each
holder of an Allowed Claim in Class 2 is entitled shall be left unaltered or,
at the option of the Reorganized Debtors, shall be left unimpaired in the
manner described in section 1124(2) of the Code.
D. Impairment and Voting. Class 2 Claims are unimpaired and are not entitled
to vote on this Plan.
2.5 Class 3 Claims (Customer Refund Claims).
A. Classification. Class 3 consists of all Customer Refund Claims against
any of the Debtors not otherwise classified in Class 1 or Class 2.
B. Allowance. Claims in Class 3 shall be allowed or disallowed in accordance
with Section 4.4(B) of this Plan and applicable provisions of the Code and
Bankruptcy Rules.
C. Treatment. The legal, equitable and contractual rights to which each
holder of an Allowed Claim in Class 3 is entitled shall be left unaltered or,
at the option of the Reorganized Debtors, shall be left unimpaired in the
manner described in section 1124(2) of the Code.
D. Impairment and Voting. Class 3 Claims are unimpaired and are not entitled
to vote on this Plan.
2.6 Class 4 Claims (Claims arising under or related to the 1995 Credit
Agreement).
A. Classification. Class 4 consists of all Secured Claims against any of the
Debtors arising under or related to the 1995 Credit Agreement.
B. Allowance. Allowed Class 4 Claims shall consist of the following unpaid
obligations arising under the 1995 Credit Agreement, and shall be Allowed in
an aggregate amount equal to: (i) $649,000,000 minus the Net Tower Sale
Proceeds actually paid to the Pre-Petition Agent on behalf of the holders of
Allowed Class 4 Claims; (ii) reasonable accrued and unpaid commitment, letter
of credit and similar fees under the 1995 Credit Agreement, in an amount, as
of the Petition Date, equal to $179,148.29, together with any such amounts
accrued after the Petition Date and unpaid as of the Effective Date; (iii) the
unpaid, reasonable costs and expenses of the Pre-Petition Agent, to the extent
provided in the 1995 Credit Agreement; and (iv) the unpaid, reasonable costs
and expenses of the members of the Steering Committee for the Pre-Petition
Lenders, other than the Pre-Petition Agent, up to the aggregate amount of
$1,000,000. Adequate protection payments in connection with, and the costs and
expenses of the Pre-Petition Agent arising under, the 1995 Credit Agreement
shall continue to be paid in cash through the Effective Date at the rate and
in the manner set forth under the DIP Approval Orders. Class 4 Claims shall
not include interest accrued at the default rate under Section 5.4(c) of the
1995 Credit Agreement or otherwise.
C. Treatment. Each holder of an Allowed Claim in Class 4 shall receive, in
full satisfaction of its Claim, cash equal to the amount of its Allowed Claim,
payable in accordance with Section 4.3(A).
D. Impairment and Voting. Class 4 Claims are impaired and are entitled to
vote on this Plan.
2.7 Class 5 Claims (Claims arising under or related to the Dial Page Notes).
A. Classification. Class 5 consists of all Claims against any of the Debtors
arising under or related to the Dial Page Notes, the Dial Page Indenture and
related agreements, other than Note Litigation Claims.
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B. Allowance. Class 5 Claims shall be Allowed Claims in the sum of: (i) the
outstanding principal amount of the Dial Page Notes; (ii) unpaid interest on
the Dial Page Notes accrued to the Effective Date calculated at the non-
default rate set forth in the Dial Page Notes; and (iii) the unpaid reasonable
fees and expenses of the trustee for the Dial Page Notes incurred prior to the
Petition Date, to the extent provided for in the Dial Page Indenture.
C. Treatment. Each holder of an Allowed Claim in Class 5 shall receive, in
full satisfaction of its Claim, cash equal to the full amount of its Allowed
Claim, payable in accordance with Section 4.3(B).
D. Impairment and Voting. Class 5 Claims are impaired and are entitled to
vote on this Plan.
2.8 Class 6 Claims (Non-Priority Unsecured Claims).
A. Classification. Class 6 consists of all Non-Priority Unsecured Claims
against any of the Debtors, including the Subordinated Noteholder Claims.
B. Allowance. (i) Class 6 Claims other than Subordinated Noteholder Claims
and Personal Injury Claims shall be allowed or disallowed in accordance with
Section 4.4(B) and applicable provisions of the Code and Bankruptcy Rules,
(ii) Subordinated Noteholder Claims other than Claims of the indenture
trustees under the Subordinated Indentures shall be Allowed Claims in the sum
of: (x) the outstanding principal amount (or outstanding accreted principal
amount, as the case may be) of the Subordinated Notes and (y) unpaid interest
on the Subordinated Notes accrued prior to the Petition Date calculated at the
non-default rate set forth in the Subordinated Notes, (iii) Subordinated
Noteholder Claims for the indenture trustees under the Subordinated Indentures
shall be Allowed Claims in an amount equal to the unpaid reasonable fees and
expenses of each such indenture trustee incurred prior to and after the
Petition Date through the Effective Date, to the extent provided for in the
Subordinated Indentures, and (iv) Personal Injury Claims shall be liquidated
and allowed or disallowed in the district court in which the Cases are
pending, or in the district court in the district in which the claim arose, as
determined by the district court in which the Cases are pending.
C. Treatment.
1. Each holder of an Allowed Claim in Class 6 (other than the indenture
trustees under the Subordinated Indentures) shall receive:
(a) for each holder of an Allowed Claim as of the Rights Offering Initial
Record Date, from Arch on the Rights Offering Commencement Date, its Rights
Offering Pro Rata Share of the Rights Offering Distribution Pool;
(b) for each holder of a Claim that becomes an Allowed Claim after the
Rights Offering Initial Record Date but before the Rights Offering
Supplemental Record Date, (i) from Arch, as soon as practicable after the
Rights Offering Supplemental Record Date, an amount of Rights from the
Rights Reserve equal to the amount of Rights that would have been such
holder's Rights Offering Pro Rata Share of the Rights Offering Distribution
Pool if such holder's Claim had been an Allowed Claim as of the Rights
Offering Initial Record Date or, (ii) if the number of Rights in the Rights
Reserve on the Rights Offering Supplemental Record Date is insufficient to
make the distribution set forth in clause (i), from Arch, (x) its ratable
share (based on such holders' respective amounts of Allowed Class 6 Claims)
of the Rights in the Rights Reserve on such date and (y) its Cash
Equivalent of each Right (or portion thereof) that would have been
distributed pursuant to clause (i) if sufficient Rights had been available
in the Rights Reserve on the Rights Offering Supplemental Record Date;
(c) from Arch on the Effective Date, if such holder has exercised any or
all of its Rights in accordance with the terms and conditions thereof, for
each Right so exercised, a Unit;
(d) for each holder of a Claim in Class 6 that is not Allowed as of the
Rights Offering Supplemental Record Date, from Arch, instead of receiving
any Rights, as soon as reasonably practical after such Claim becomes an
Allowed Claim (but no sooner than the Effective Date), its Cash Equivalent;
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(e) from the Exchange Agent (x) if such Claim is an Allowed Claim on the
Effective Date, on or as soon as practicable after the Effective Date, its
Class 6 Pro Rata Share of the Creditor Stock Pool or (y) if such Claim is
not an Allowed Claim on the Effective Date, on a later date after which the
Claim is Allowed, its Class 6 Pro Rata Share of the Creditor Stock Pool;
and
(f) from the Exchange Agent on the Final Distribution Date, its Class 6
Adjusted Pro Rata Share of the Arch Common Shares remaining in the Creditor
Stock Pool, if any, on such date; provided, that if there are fewer than
10,000 Arch Common Shares remaining in the Creditor Stock Pool on the Final
Distribution Date, no distribution will be made to holders of Allowed Class
6 Claims on such date, and the Arch Common Shares remaining in the Creditor
Stock Pool on such date shall be returned to Arch and become treasury
shares.
2. In lieu of the foregoing treatment, any holder of a Claim in Class 6 of
$1,000 or less may elect, by marking the appropriate box on the Ballot sent to
such holder, to receive cash equal to 50% of its Allowed Claim, or, if such
holder's claim is in excess of $1,000, such holder may elect to have its Claim
reduced to and Allowed at $1,000 and receive cash with respect to such reduced
Claim in accordance with this Section 2.8(C)(2).
3. On the Effective Date, the Reorganized Debtors shall pay to the indenture
trustees under the Subordinated Indentures cash equal to the amount of fees
and expenses of the indenture trustees (including the reasonable fees and
expenses of counsel retained by the indenture trustees), in accordance with
and to the extent provided for in the Subordinated Indentures, whether
incurred prior or subsequent to the Petition Date, without application by or
on behalf of the indenture trustees or their respective counsel to the
Bankruptcy Court.
D. Impairment and Voting. Class 6 Claims are impaired and are entitled to
vote on this Plan.
2.9 Class 7 Claims (Note Litigation Claims).
A. Classification. Class 7 consists of all Note Litigation Claims against
any of the Debtors.
B. Treatment. The holders of Claims in Class 7 shall not be entitled to
receive or retain any property pursuant to this Plan on account of their
Claims.
C. Impairment and Voting. Class 7 Claims are impaired and are deemed not to
have accepted this Plan.
2.10 Class 8 Claims and Interests (Common Stock Claims and Interests and
Subordinated Indemnification Obligation Claims).
A. Classification. Class 8 consists of all Interests arising from or related
to the Common Stock, all Common Stock Claims and all Subordinated
Indemnification Obligation Claims against any of the Debtors.
B. Treatment. Interests in Class 8 shall be canceled, and the holders of
Claims and Interests in Class 8 shall not be entitled to receive or retain any
property on account of their Claims and Interests.
C. Impairment and Voting. Class 8 Claims and Interests are impaired and are
deemed not to have accepted this Plan.
2.11 Class 9 Claims and Interests (Subsidiary Claims and Interests).
A. Classification. Class 9 consists of all Subsidiary Claims and Subsidiary
Interests.
B. Treatment. The Interests in Class 9 shall be canceled, except that, in
accordance with Section 4.2(B), Reorganized Communications shall retain its
Interests in Reorganized MCCA, and the holders of Claims and Interests in
Class 9 shall not be entitled to receive or retain any property on account of
such Claims and Interests.
C. Impairment and Voting. Class 9 Claims and Interests are impaired and are
deemed not to have accepted this Plan.
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ARTICLE III
Treatment of Executory Contracts and Unexpired Leases
3.1 Rejection. No later than 25 days prior to the Voting Deadline, the
Debtors, at the direction of Arch, shall prepare a schedule of the executory
contracts and unexpired leases to be rejected on the Effective Date (the
"Rejection Schedule"). The Rejection Schedule shall be filed and served on
each party to an executory contract or unexpired lease listed thereon to be
rejected by the Debtors no later than twenty days prior to the Voting
Deadline. Any claims for damages arising from the rejection of an executory
contract or unexpired lease listed on the Rejection Schedule must be filed by
the Voting Deadline and shall be determined, if necessary, at Confirmation.
The Rejection Schedule may be amended from and after the Confirmation Date for
sixty days thereafter (but in no event after the Effective Date) by the
Debtors at the direction of Arch and with notice to any party to an executory
contract or unexpired lease added to or removed from such schedule. Any claims
for damages arising from the rejection of an executory contract or unexpired
lease rejected after the Confirmation Date pursuant to this Section 3.1 must
be filed within 20 days after receipt of notice of rejection of such contract.
Any such Claims not filed within the applicable 20-day period shall be barred
and may not thereafter be asserted.
3.2 Assumption.
A. Assumed Contracts. Each executory contract or unexpired lease of the
Debtors that has not expired by its own terms prior to the Effective Date, has
not been rejected during the Cases prior to Confirmation, is not subject to a
notice of rejection and is not rejected under this Plan shall, by the terms of
this Plan, be assumed by Reorganized MCCA pursuant to sections 365 and
1123(b)(2) of the Code on the Effective Date. All such assumed contracts,
unexpired leases, franchises and permits, and any contracts or unexpired
leases assumed by the Debtors by order of the Bankruptcy Court prior to the
Confirmation Date, shall be vested in and continue in effect for the benefit
of the Reorganized Debtors.
B. Cure Payments and Release of Liability. The Debtors shall, at least
twenty days prior to the Voting Deadline, file and serve on all parties to
executory contracts and unexpired leases to be assumed as of the Effective
Date, and on the Pre-Petition Agent, the Committee and Arch a schedule setting
forth the amount of cure and compensation payments to be provided by the
Reorganized Debtors in accordance with section 365(b)(1) of the Code, which
schedule shall be acceptable to Arch. Objections to any such proposed cure
payment must be made by the Voting Deadline, and shall be determined, if
necessary, at the Confirmation Hearing. In the event the Debtors amend the
Rejection Schedule pursuant to Section 3.1 after the Confirmation Date to
remove an executory contract or unexpired lease therefrom, the Debtors shall,
within five days after such amendment to the Rejection Schedule, file and
serve on all parties to executory contracts and unexpired leases to be assumed
as a result of any such Schedule amendment, and on the Pre-Petition Agent, the
Committee and Arch, a supplemental schedule setting forth the amount of cure
and compensation payments to be provided by the Reorganized Debtors in
accordance with section 365(b)(1) of the Code, which supplemental schedule of
cure payments shall be reasonably acceptable to Arch. Objections to any
proposed cure payment set forth in the supplemental schedule must be made
within 20 days after receipt thereof. A party to an assumed executory contract
or unexpired lease that has not filed an appropriate pleading with the
Bankruptcy Court on or before the applicable 20-day period shall be deemed to
have waived its right to dispute such amount. All unpaid cure and compensation
payments under any executory contracts or unexpired leases that are assumed or
assumed and assigned under this Plan (including, without limitation, Claims
filed in the Cases or listed in the Schedules and Allowed by order of the
Bankruptcy Court prior to the Confirmation Date that relate to executory
contracts or unexpired leases that are assumed or assumed and assigned under
this Plan) shall be made by the Reorganized Debtors as soon as practicable
after the Effective Date, but not later than thirty days after the Effective
Date; provided, that, in the event of a dispute regarding the amount of any
cure and compensation payments, the Reorganized Debtors shall make such cure
and compensation payments as may be required by section 365(b)(1) of the Code
following the entry of a Final Order resolving such dispute.
C. Continuation of Employment Agreements and Benefits Agreements. On the
Effective Date, the Debtors shall assume pursuant to sections 365 and
1123(b)(2) of the Code the employment and benefit agreements set forth on
Schedule 1.
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3.3 Post-Petition Contracts and Leases. All contracts and leases entered
into by the Debtors after the Petition Date, including (a) the Tower Sale
Agreement and (b) the Master Lease between Communications and Pinnacle Towers
Inc. to be entered into pursuant to the Tower Sale Agreement, but excluding
the DIP Credit Agreement, shall be deemed assigned by the Debtors to
Reorganized MCCA on the Effective Date.
ARTICLE IV
Implementation of Plan
4.1 Actions Occurring Prior to the Effective Date.
A. Actions Occurring Before the Confirmation Date.
1. Rights Offering. Pursuant to the Merger Agreement, Arch will commence the
Rights Offering and the Arch Stockholder Rights Offering.
2. Standby Purchase Commitments. Each of the Standby Purchasers has executed
the Standby Purchase Commitment, copies of which are attached hereto as
Exhibits B-1 through B-6.
B. Actions Occurring Between the Confirmation Date and the Effective Date.
1. Management and Operation of Debtors. After the Confirmation Date and
until the Effective Date, the Debtors shall be managed by substantially the
same personnel that managed and operated the Debtors on the Confirmation Date,
subject to such changes as may be determined by the Board of Directors of a
Debtor in accordance with the Bylaws and Articles or Certificate of
Incorporation of such Debtor. During such period, the Debtors will conduct
their business in the usual, regular and ordinary course, in a manner
consistent with past practice, sound business practice and the terms of this
Plan and the Merger Agreement, and subject to their obligations as debtors-in-
possession pursuant to the Code.
2. Continuation of Committee. The Committee shall continue to exist after
the Confirmation Date until the Effective Date with the same power and
authority, and the same ability to retain and compensate professionals, as it
had prior to the Confirmation Date, and shall be dissolved on the Effective
Date.
3. Rights of Creditors and Committee. Between the Confirmation Date and the
Effective Date, the Committee, the holders of Claims against and Interests in
the Debtors and the indenture trustees for the Notes shall be parties-in-
interest in all proceedings in the Bankruptcy Court with the same rights to
participate in such proceedings as such persons had prior to Confirmation.
4. Term of Injunctions or Stays. All injunction or stays, whether by
operation of law or by order of the Bankruptcy Court, provided for in the
Cases pursuant to sections 105 or 362 of the Code or otherwise that are in
effect on the Confirmation Date shall remain in full force and effect until
the Effective Date.
5. Sale of Rights Reserve. Arch shall select an agent independent of Arch
(as such term is defined in Regulation M promulgated under the Securities
Exchange Act of 1934), which independent agent shall be reasonably acceptable
to the Debtors and the Committee, to sell Rights from the Rights Reserve in
the over-the-counter market on a date or dates no more than five business days
in advance of the Rights Offering Expiration Date. All proceeds derived from
such sale shall be distributed to Arch.
4.2 Actions Occurring on the Effective Date.
A. Revesting of Assets. Except as provided in this Plan, all property of the
estate, to the full extent of section 541 of the Code, and any and all other
rights and assets of the Debtors of every kind and nature shall, on the
Effective Date of this Plan, revest in the Reorganized Debtors free and clear
of all Liens, Claims and Interests other than those Liens, Claims and
Interests retained or created pursuant to this Plan.
B. Merger. Effective as of the Effective Date but immediately following the
discharge of the Debtors described in Section 6.1, each of the following
transactions shall occur in the order listed: (i) MobileMedia shall contribute
all of its assets to Communications and thereafter immediately dissolve, at
which time the separate
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corporate existence of MobileMedia shall cease; (ii) Communications shall
merge with and into Merger Subsidiary, and the separate corporate existence of
Communications shall cease as contemplated by the Merger Agreement; (iii) MCCA
shall merge with and into Delaware Subsidiary Co., a Delaware corporation
originally a wholly owned direct subsidiary of Communications and a wholly
owned direct subsidiary of Merger Subsidiary as a result of the merger
described in clause (ii) of this Section 4.2(B), and the separate corporate
existence of MCCA shall cease; (iv) all wholly owned direct subsidiaries of
MCCA shall be merged with and into Delaware Subsidiary Co. (as successor to
MCCA); (v) Merger Subsidiary (as successor to Communications) shall contribute
its interest in the common stock of FWS Radio, Inc. to Delaware Subsidiary Co.
(as successor to MCCA), and FWS Radio, Inc. shall then be merged with and into
Delaware Subsidiary Co. (as successor to MCCA); (vi) MobileComm of the West,
Inc., a wholly owned direct subsidiary of Delaware Subsidiary Co. (as
successor to MCCA) as a result of the mergers described in clause (iv) of this
Section 4.2(B), shall be merged with and into Delaware Subsidiary Co. (as
successor to MCCA); (vii) Dial Page Southeast, Inc., MobileMedia
Communications, Inc. (California), MobileMedia DP Properties, Inc.,
MobileMedia Paging, Inc., MobileMedia PCS, Inc. and Radio Call Co. of
Virginia, Inc., all wholly owned direct subsidiaries of Merger Subsidiary (as
successor to Communications) shall be merged with and into Delaware Subsidiary
Co. (as successor to MCCA); (viii) Merger Subsidiary shall transfer its assets
(other than its shares of Delaware Subsidiary Co.) to Delaware Subsidiary Co.;
and (ix) Delaware Subsidiary Co. shall organize License Co. L.L.C. as a wholly
owned limited liability company of Delaware Subsidiary Co. and shall transfer
the Licenses then held by it to License Co. L.L.C. It is anticipated that
License Co. L.L.C. will be taxed as a branch of Delaware Subsidiary Co.
Notwithstanding the foregoing, Arch and the Reorganized Debtors retain their
right to make such changes in the post-Effective Date corporate structure of
Arch and the Reorganized Debtors as is determined in the business judgment of
Arch and Reorganized Communications.
C. Amended Certificates of Incorporation and Corporate Governance.
1. Certificates of Incorporation. As of the Effective Date, each Reorganized
Debtor's Certificate of Incorporation shall comply with section 1123(a)(6) of
the Code.
2. Bylaws. As of the Effective Date, the bylaws of Reorganized
Communications shall be the same as the bylaws of the Merger Subsidiary as in
effect immediately prior to the Effective Date (except that the name of the
corporation set forth therein shall be changed to "MobileMedia Communications,
Inc."), and the bylaws of Reorganized MCCA shall be the same as the by laws of
Delaware Subsidiary Co. as in effect immediately prior to the Effective Date
(except that the name of the corporation set forth therein shall be changed to
"Mobile Communications Corporation of America"). Each Reorganized Debtor's
Bylaws will be effective as of the Effective Date.
3. Corporate Governance. The directors and officers of each Debtor shall
continue to serve in such capacities until the Effective Date. As of the
Effective Date, the directors and officers of each Debtor that is not a
Reorganized Debtor will be terminated, the directors and officers of Merger
Subsidiary immediately prior to the Effective Date shall become the directors
and officers of Reorganized Communications, the directors of Merger Subsidiary
immediately prior to the Effective Date shall become the directors of
Reorganized MCCA and the officers of Delaware Subsidiary Co. immediately prior
to the Effective Date shall become the officers of Reorganized MCCA. The
Debtors shall file with the Bankruptcy Court no later than ten (10) Business
Days prior to the Voting Deadline a statement setting forth the office, the
names and affiliations of, and the compensation proposed to be paid to, the
individuals intended to serve as directors and officers of each Reorganized
Debtor, as well as of Arch, on and after the Effective Date. On and after the
Effective Date, each Reorganized Debtor shall be governed in accordance with
such Reorganized Debtor's Certificate of Incorporation and such Reorganized
Debtor's Bylaws.
4. Amendments after the Effective Date. After the Effective Date, each
Reorganized Debtor's Certificate of Incorporation, each Reorganized Debtor's
Bylaws and the officers and directors of each Reorganized Debtor shall be
subject to such amendments or changes as may be made by law, or by such
Reorganized Debtor's Certificate of Incorporation or such Reorganized Debtor's
Bylaws.
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5. Estate Representative. Within 15 days after the Confirmation Date, the
Committee shall designate a person, subject to Arch's and the Debtors' consent
(which consent shall not be unreasonably withheld) (the "Estate
Representative"), who shall be responsible for the winding up of the Debtors'
estates after the Effective Date. The Estate Representative shall have the
authority to hire counsel and other advisors, to prosecute and settle Disputed
Claims, to oversee distributions by the Exchange Agent, to pursue any
preserved Causes of Action and otherwise to effect the closing of the Cases.
The Estate Representative shall be reimbursed for all reasonable expenses
incurred in the performance of his or her duties as Estate Representative by
Arch based on a monthly budget to be submitted to Arch no later than ten
Business Days prior to the end of each month after the Effective Date for the
succeeding month, which Budget shall set forth in reasonable detail the
proposed activities to be undertaken by the Estate Representative during such
month and the estimated costs and expenses therefor. If Arch does not object
to such Budget within five Business Days after receipt thereof, it shall be
the final budget for such month. At least once every calendar quarter, the
Estate Representative shall report to Arch on the material activities taken in
the prior quarter and to be taken in the succeeding quarter, which activities
shall be reasonably acceptable to Arch.
D. Cancellation of Stock. On and as of the Effective Date, the Common Stock,
and each share of capital stock of each Debtor other than MobileMedia not
owned, beneficially and of record, by MobileMedia or one of the other Debtors,
shall be canceled and rendered null and void.
4.3 Distributions Occurring On and After the Effective Date.
A. Distributions to Holders of Allowed Class 4 Claims. The cash distribution
to be made to the holders of Allowed Class 4 Claims shall be made by wire
transfer by Arch on the Effective Date or the first Business Day thereafter to
the Pre-Petition Agent, which shall, subject to the rights of the Pre-Petition
Agent, if any, against the other holders of Allowed Class 4 Claims under the
1995 Credit Agreement, promptly transmit to each such holder its Pro Rata
Share of the cash provided by Arch; provided, that, if requested by a Standby
Purchaser in writing at least two days prior to the Effective Date, any cash
to be distributed to the Standby Purchaser on account of such Standby
Purchaser's Allowed Class 4 Claim shall, in accordance with the instructions
included in such written request, be applied on behalf of the Standby
Purchaser first to the payment of any amounts required to be paid by such
Standby Purchaser in accordance with its Standby Purchase Commitment.
B. Distributions to Holders of Dial Page Notes.
1. Exchange of Notes. The cash distribution to be made to the holders of
Allowed Class 5 Claims shall be made by Reorganized Communications to the Dial
Page Indenture Trustee on the Effective Date or the first Business Day
thereafter, which shall, subject to the rights of such Dial Page Indenture
Trustee as against holders of the Dial Page Notes under the Dial Page
Indenture, transmit, upon surrender by a holder of its Dial Page Notes, the
cash to which such holder is entitled under Section 2.7(C). The reasonable
fees and expenses of the Dial Page Indenture Trustee incurred solely in
connection with making such distributions, unless otherwise paid hereunder,
shall be paid by Reorganized Communications to the extent so required by the
Dial Page Indenture or as otherwise agreed between Reorganized Communications,
the Dial Page Indenture Trustee and Arch, and in any case subject to required
approvals of the Bankruptcy Court, if any.
2. Lost Notes. If a holder of a Dial Page Note is unable to surrender such
Note because it has been destroyed, lost or stolen, such holder may receive a
distribution with respect to such Note upon request to the Dial Page Indenture
Trustee in an acceptable form with: (i) proof of such holder's title to such
Note; (ii) proof of the destruction or theft of such Note, or an affidavit to
the effect that the same has been lost and after diligent search cannot be
found; and (iii) such indemnification as may reasonably be required by the
Reorganized Debtors to indemnify Arch, the Reorganized Debtors, the Dial Page
Indenture Trustee and all other persons deemed appropriate by the Reorganized
Debtors, against any loss, action, suit or other claim whatsoever that may be
made as a result of such holder's receipt of a distribution on account of such
Dial Page Note under this Plan.
C. Distributions from Arch. Arch will distribute to each holder of an
Allowed Class 6 Claim and each Standby Purchaser that exercised its Rights in
accordance with the terms thereof (and, in the case of the Standby
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Purchasers, in accordance with the terms of the Standby Purchase Commitment),
on the Effective Date, for each Right so exercised, the Arch Common Shares or
Arch Class B Shares, as applicable, and, if no Rights Offering Adjustment
shall have occurred, Arch Warrants together comprising the Units subscribed
for. Arch will distribute to each holder of an Allowed Class 6 Claim that was
not Allowed as of the Rights Offering Supplemental Record Date, as soon as
practicable after such Claim is Allowed (but no sooner than the Effective
Date), its Cash Equivalent, as provided in Section 2.8(C)(1)(d). In the event
the exercise of Rights and the purchase of the Units would cause (i) any
"person" or "group" (as such terms are used in Section 13(d) and 14(d) of the
Securities and Exchange Act of 1934) or (ii) the Standby Purchasers
collectively, on the Effective Date, in the aggregate, to beneficially own,
within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934
and Rule 13d-3 and 13d-5 promulgated thereunder (except that a Person shall be
deemed to have beneficial ownership of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), (a) more than 49.0% of the number of shares of the
capital stock of Arch generally entitled to vote in the election of directors
or (b) more than 49.0% of the total voting power of the capital stock of Arch,
then, the "person" or "group" or the Standby Purchasers, shall receive in lieu
of the Arch Common Shares included in such Units, Arch Class B Common Shares
such that (x) such "person" or "group" or (y) the Standby Purchasers
collectively, on the Effective Date, in the aggregate, beneficially own,
within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
and Rule 13d-3 and 13d-5 promulgated thereunder (except that a Person shall be
deemed to have beneficial ownership of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), (i) no more than 49.0% of the number of shares of the
capital stock of Arch generally entitled to vote in the election of directors
and (ii) no more than 49.0% of the total voting power of the capital stock of
Arch on the Effective Date. For purposes of calculating the percentages
referred to above, it will be assumed that no additional Class 6 Claims are
Allowed after the Effective Date and all of the Arch Common Shares in the
Creditor Stock Pool are distributed to the Allowed Class 6 Claims as of the
Effective Date.
D. Distributions from the Exchange Agent. On the Effective Date, Arch will
deliver to the Exchange Agent a certificate, in the name of the Exchange
Agent, for the number of Arch Common Shares comprising the Creditor Stock
Pool. Distributions to the holders of Allowed Class 6 Claims other than on
account of the Rights, on the Effective Date and thereafter, shall be made by
the Exchange Agent on behalf of Reorganized Communications from the Arch
Common Shares evidenced by the certificate so delivered by Arch.
1. Holders of the Subordinated Notes. As soon as practicable after the
Effective Date, Reorganized Communications shall cause the Exchange Agent to
send a notice and a transmittal form (which shall specify that delivery shall
be effected and risk of loss and title to the Subordinated Notes shall pass,
only upon delivery of the Subordinated Notes to the Exchange Agent, and shall
be in such form and have such other reasonable provisions as Arch may
reasonably specify) to each holder of a Subordinated Note advising such holder
of the effectiveness of the Merger and this Plan and the procedure for
surrendering to the Exchange Agent such Subordinated Note in exchange for the
Arch Common Shares issuable to it pursuant to Section 2.8(C).
Commencing on the Effective Date, the Exchange Agent shall distribute to
each holder of an Allowed Claim that constitutes a Subordinated Noteholder
Claim, upon proper surrender of its Subordinated Notes, its Pro Rata Share of
the Creditor Stock Pool. Thereafter, on each Semi-Annual Distribution Date,
distributions of a holder's Pro Rata Share of the Creditor Stock Pool shall be
made to the holders of Allowed Class 6 Claims that constitute Subordinated
Noteholder Claims who have surrendered their Subordinated Notes since the
preceding Semi-Annual Distribution Date (or, with respect to the first Semi-
Annual Distribution Date, since the Effective Date). Final distributions of
Arch Common Shares shall be made on the Final Distribution Date to each holder
of an Allowed Class 6 Claim constituting a Subordinated Noteholder Claim based
on its Class 6 Adjusted Pro Rata Share of the remaining shares in the Creditor
Stock Pool (subject to Section 2.8(C)(1)(f)).
In the event of a transfer of ownership of Subordinated Notes that is not
registered on the transfer records of the indenture trustee for such
Subordinated Notes, the securities to be distributed may be distributed to a
transferee of the Subordinated Notes if an executed letter of transmittal in
form satisfactory to the Exchange Agent is presented to the Exchange Agent,
accompanied by such documents as are required to evidence and effect such
transfer and by evidence that any applicable transfer taxes have been paid.
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After the Effective Date, there shall be no further registration of
transfers on the record books of Reorganized Communications of the
Subordinated Notes outstanding prior to the Effective Date. If, after the
Effective Date, the Subordinated Notes are presented to Reorganized
Communications for any reason, they shall be canceled and exchanged as
provided in this Section 4.3(D)(1).
If any Arch Common Shares are to be issued in the name of a person other
than the person in whose name the Subordinated Note surrendered in exchange
therefor is registered, it shall be a condition to the issuance of such Arch
Common Shares that (i) the Subordinated Note so surrendered shall be
transferable, and shall be properly assigned and endorsed, (ii) such transfer
shall otherwise be proper and (iii) the person requesting such transfer shall
pay to the Exchange Agent any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Exchange Agent that such
taxes have been paid or are not required to be paid. Notwithstanding the
foregoing, neither the Exchange Agent nor any Person shall be liable to a
holder of Subordinated Notes for any Arch Common Shares issuable to such
holder pursuant to Section 2.8(C) that are delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
No dividends or other distributions that are payable to the holders of
record of Arch Common Shares as of a date on or after the Effective Date shall
be paid to holders of Allowed Class 6 Claims entitled to receive Arch Common
Shares pursuant to Section 2.8(C) until such holders surrender their
Subordinated Notes in accordance with this Section 4.3(D)(1). Upon such
surrender, Arch shall pay or deliver to the persons in whose name the
certificates representing such Arch Common Shares are issued any dividends or
other distributions that have been paid or are payable to the holders of
record of Arch Common Shares as of a date on or after the Effective Date and
which were paid or delivered between the Effective Date and the time of such
surrender; provided, that no such person shall be entitled to receive any
interest on such interest payments, dividends or other distributions.
If a holder of a Subordinated Note is unable to surrender such Note because
it has been destroyed, lost or stolen, such holder may receive a distribution
with respect to such Note upon request to the Exchange Agent in an acceptable
form with: (i) proof of such holder's title to such Note; (ii) proof of the
destruction or theft of such Note, or an affidavit to the effect that the same
has been lost and after diligent search cannot be found; and (iii) such
indemnification as may reasonably be required by the Reorganized Debtors to
indemnify Arch, the Reorganized Debtors, the Exchange Agent and all other
persons deemed appropriate by the Reorganized Debtors against any loss,
action, suit or other claim whatsoever that may be made as a result of such
holder's receipt of a distribution on account of such Subordinated Note under
this Plan.
2. Holders of Allowed Class 6 Claims other than the Subordinated Noteholder
Claims. On the Effective Date, the Exchange Agent shall distribute to each
holder of an Effective Date Allowed Claim other than a Subordinated Noteholder
Claim its Class 6 Pro Rata Share of the Creditor Stock Pool. Thereafter, on
each Semi-Annual Distribution Date, distributions of a holder's Pro Rata Share
of the Creditor Stock Pool shall be made to each holder of a Class 6 Claim
other than a Subordinated Noteholder Claim whose Claim has been Allowed (as
certified by the Estate Representative to the Exchange Agent) since the
preceding Semi-Annual Distribution Date (or, with respect to the first Semi-
Annual Distribution Date, since the Effective Date). Final distributions of
Arch Common Shares shall be made on the Final Distribution Date to each holder
of an Allowed Class 6 Claim other than a Subordinated Noteholder Claim based
on its Class 6 Adjusted Pro Rata Share of any shares remaining in the Creditor
Stock Pool (subject to Section 2.8(C)(1)(f)).
3. Fractional Interests. The Arch Capital Shares shall be issued and
distributed in whole shares, and not in fractional shares. To the extent that
any holder would be entitled to a fractional Arch Capital Share but for this
provision, such holder shall, at Arch's option, (i) be paid by Reorganized
Communications cash in an amount equal to the fraction of said share
multiplied by the price of an Arch Capital Share on the Effective Date, or
(ii) receive the number of whole shares determined by rounding up to the next
whole number of shares. Arch Warrants shall be issued and distributed in whole
units, and not in fractional units. To the extent that any holder would be
entitled to a fractional Arch Warrant but for this provision, such holder
shall receive the number of whole warrants determined by rounding up to the
next whole number of warrants. For purposes of this Section 4.3(D), holders of
Allowed Claims under or evidenced by the Notes shall, in the case of Notes
held in street name, mean the beneficial holders thereof.
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E. Undeliverable Distributions.
1. Method of Distribution. All property under this Plan to be distributed by
mail shall be sent to the latest mailing address filed of record with the
Bankruptcy Court for the party entitled thereto or, if no such mailing address
has been so filed, the mailing address reflected in the Schedules or, in the
case of the holder of Notes, to the latest mailing address maintained of
record by the pertinent indenture trustee or, if no mailing address is
maintained of record, to the pertinent indenture trustee.
2. Holding and Investment of Undeliverable Distributions. If any Allowed
Claim holder's distribution is returned to the Debtors, Reorganized Debtors,
Arch or the Exchange Agent as undeliverable, no further distributions will be
made to such holder unless the Debtors, Reorganized Debtors, Arch or the
Exchange Agent, as applicable, are notified in writing of such holder's then-
current address. Undeliverable distributions will remain in the possession of
the Debtors, Reorganized Debtors, Arch or the Exchange Agent, as applicable,
pursuant to this Section 4.3(E)(2) until such time as a distribution becomes
deliverable. Undeliverable cash will be held in a segregated bank account in
the name of the Reorganized Debtors for the benefit of the potential claimants
of such funds and, until such time as such cash becomes property of Arch
pursuant to Section 4.3(E)(4), such cash will not constitute property of Arch.
The Reorganized Debtors will invest any undeliverable cash in a manner
consistent with the Reorganized Debtors' investment and deposit practices.
Undeliverable shares of newly-issued Arch Common Shares will be held by the
Exchange Agent for the benefit of the potential claimants of such securities
until the expiration of the time period set forth in Section 4.3(E)(4).
3. After Distributions Become Deliverable. On each Semi-Annual Distribution
Date and on the Final Distribution Date, the Debtors, Reorganized Debtors,
Arch or the Exchange Agent, as applicable, will make all distributions that
have, prior to such date, become deliverable to holders of Allowed Claims.
Each such distribution will include, to the extent applicable, dividends or
other distributions, if any, that would have been paid in respect of the
shares of Arch Common Shares or Arch Class B Common Shares distributed to such
holder from the Effective Date through the date of such distribution (without
any interest thereon).
4. Undistributed Property. Any property that remains undeliverable to the
holders of Allowed Claims as of the later of the Final Distribution Date and
the date that is two years after the Effective Date shall be delivered to, and
become the property of, Arch.
F. Compliance with Tax Requirements.
1. In connection with this Plan, to the extent applicable, the Reorganized
Debtors will comply with all tax withholding and reporting requirements
imposed on them by any governmental unit, and all distributions pursuant to
this Plan that may be necessary or appropriate to comply with such withholding
and reporting requirements.
2. Notwithstanding any other provision of this Plan, each entity that has
received any distribution pursuant to this Plan will have sole and exclusive
responsibility for the satisfaction and payment of any tax obligation imposed
by any governmental unit, including income, withholding and other tax
obligations, on account of such distribution.
4.4 Procedure For Determination of Claims and Interests.
A. Bar Date For Administrative Claims.
1. All applications for compensation of professional persons employed by the
Debtors or the Committee pursuant to orders entered by the Bankruptcy Court
and on account of services rendered prior to the Confirmation Date and all
other requests for payment of administrative costs and expenses incurred prior
to the Confirmation Date pursuant to sections 507(a)(1) or 503(b) of the Code
(except for claims for taxes, trade debt and customer deposits and credits
incurred in the ordinary course of business after the Petition Date) shall be
served on the Reorganized Debtors, the DIP Agent, the Pre-Petition Agent, the
Committee and Arch, and filed with the Bankruptcy Court, no later than 15 days
after the Confirmation Date. Any such claim that is not filed and served
within this time shall be forever barred. Objections to any such application
must be filed within 15 days after
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receipt thereof; provided, that Arch shall have no right to object to any such
application for professional fees. From and after the hearing on such
applications, the Debtors (or the Reorganized Debtors if the hearing is after
the Effective Date) shall be authorized to pay all of its and the Committee's
professionals in full based on monthly statements delivered to the Debtors
subject to the final hearing described in Section 4.4(A)(2).
2. All applications for final compensation of professional persons employed
by the Debtors or the Committee pursuant to orders entered by the Bankruptcy
Court and on account of services rendered on or after the Confirmation Date
and prior to the Effective Date and all other requests for payment of
administrative costs and expenses incurred on or after the Confirmation Date
and prior to the Effective Date pursuant to sections 507(a)(1) or 503(b) of
the Code (except for claims for taxes, trade debt and customer deposits and
credits incurred in the ordinary course of business after the Petition Date)
shall be served on the Reorganized Debtors, the DIP Agent, the Pre-Petition
Agent, the Committee and Arch, and filed with the Bankruptcy Court, no later
than 15 days after the Effective Date. Any such claim that is not served and
filed within this time shall be forever barred. Objections to any such
application must be filed within 15 days after receipt thereof; provided, that
Arch shall have no right to object to any such application for professional
fees.
B. Objections To Claims.
1. Objections to any Administrative Claim (other than Administrative Claims
governed by Section 4.4(A)) and to any other Claim (other than Class 6 Claims
governed by the next sentence of this Section 4.4(B)(1)) must be filed no
later than the Effective Date. Objections must be filed no later than the
Rights Offering Commencement Date as to any Class 6 Claim other than Class 6
Claims relating to the rejection of executory contracts or unexpired leases
pursuant to this Plan. Objections shall be served on the holder of any Claim
being objected to and counsel for each of Arch, the Pre-Petition Agent, the
DIP Agent and the Committee. No distribution shall be made on account of any
Claim that is not Allowed. To the extent any property is distributed to an
entity on account of a Claim that is not an Allowed Claim, such property shall
be held in trust for and shall promptly be returned to the Reorganized
Debtors.
2. On and after the Effective Date, only the Estate Representative shall
have authority to continue to prosecute, settle or withdraw objections to
Claims. After the Effective Date, the Estate Representative shall be entitled
to compromise or settle any Disputed Claim without seeking approval of the
Bankruptcy Court. The Estate Representative shall be paid subject to the
budget described in Section 4.2(C)(5), but without seeking approval of the
Bankruptcy Court.
3. To the extent that a Disputed Claim ultimately becomes an Allowed Claim,
payments and distributions on account of such Allowed Claim shall be made in
accordance with the provisions of this Plan governing the Class of Claims to
which such Claim belongs. As soon as practicable after the date that the order
or judgment of the Bankruptcy Court allowing such Claim becomes a Final Order,
any property that would have been distributed prior to the date on which a
Disputed Claim becomes an Allowed Claim shall be distributed, together with
any dividends, payments or other distributions made on account of such
property from the date such distributions would have been due had such Claim
then been an Allowed Claim to the date such distributions are made (without
any interest thereon).
4.5 Issuance of Arch Capital Shares. On and as of the Effective Date, Arch
will issue the Arch Common Shares and, if applicable pursuant to Section
4.3(C), Arch Class B Common Shares to be distributed to the holders of Allowed
Class 6 Claims, to all persons that exercised Rights and, if applicable, the
Standby Purchasers.
4.6 Issuance of Warrants. On and as of the Effective Date, Arch will issue,
as applicable, the Arch Warrants or the Arch Participation Warrants, as
contemplated by this Plan, the Rights, the Standby Purchase Commitment and the
Merger Agreement.
4.7 Issuance of Rights. On and as of the Rights Offering Commencement Date,
Arch will issue the Rights, as contemplated by this Plan and the Merger
Agreement. On and as of the Arch Stockholder Rights Offering Commencement
Date, Arch will issue the Arch Stockholder Rights, as contemplated by this
Plan and the Merger Agreement.
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4.8 Exemption from Securities Laws. All notes, instruments, stock and other
securities distributed pursuant to this Plan (other than the Rights and the
Units) are entitled to the benefits and exemptions provided by section 1145 of
the Code.
4.9 Registration Rights Agreement. Each Person (other than the Standby
Purchasers) that, as a result of the transactions contemplated by this Plan,
becomes the beneficial owner (within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934) of at least 10% of the outstanding Arch
Capital Shares, shall be entitled to become a party to the Registration Rights
Agreement.
4.10 Effectuating Documents; Further Transactions; Exemption From Certain
Transfer Taxes. The Chief Executive Officer, President, Chief Financial
Officer or any Vice President of Reorganized Communications or the Debtors, or
such other persons as the Bankruptcy Court may designate at the request of the
Debtors, will be authorized to execute, deliver, file or record such
contracts, instruments, releases, indentures and other agreements or documents
and take such actions as may be necessary or appropriate to effectuate and
implement the provisions of this Plan. The Secretary or any Assistant
Secretary of each Debtor or the Reorganized Debtors or such other persons as
the Bankruptcy Court may designate at the request of the Debtors will be
authorized to certify or attest to any of the foregoing actions.
Pursuant to section 1146(c) of the Code (a) the issuance, transfer or
exchange of Arch Capital Shares, (b) the creation of any mortgage deed or
trust or other security interest and (c) the making of any agreement or
instrument in furtherance of, or in connection with, this Plan, including any
merger agreements, agreements of consolidation, restructuring, disposition,
liquidation or dissolution, deeds, bills of sale, or assignments executed in
connection with the Merger Agreement, will not be subject to any stamp, real
estate transfer tax or similar tax.
4.11 Release of Security Interests. Within ten Business Days after the
Confirmation Date, the Pre-Petition Agent shall deliver to Communications UCC-
3 termination statements and such other documents as are reasonably requested
by Communications to evidence the termination of the security interests
granted to the Pre-Petition Agent to secure amounts outstanding under the 1995
Credit Agreement, which statements and other documents shall be held by
Communications in escrow and released for filing only upon receipt by the Pre-
Petition Agent of the distribution provided for in Section 4.3(A).
ARTICLE V
Conditions to Effective Date
5.1 Conditions to Occurrence of Effective Date. Each of the following is a
condition to the Effective Date:
A. That the Confirmation Order has been entered by the Bankruptcy Court,
more than ten (10) days have elapsed since the Confirmation Date, no stay
of the Confirmation Order is in effect and the Confirmation Order has not
been reversed, modified or vacated;
B. That all conditions to the Closing under the Merger Agreement (other
than the condition set forth in Section 5.1(j) of the Merger Agreement)
have been satisfied or waived by the party entitled thereto, and the Merger
shall occur as contemplated by Section 4.2(B)(ii); and
C. The commitments under the DIP Credit Agreement shall have terminated,
all amounts owing under or in respect of the DIP Credit Agreement shall
have been paid in full in cash and any outstanding letters of credit issued
under and in connection with the DIP Credit Agreement or the 1995 Credit
Agreement shall have been terminated or satisfied, or the Debtors shall
have provided cash collateral therefor in accordance with the terms of the
DIP Credit Agreement or the 1995 Credit Agreement, as applicable.
5.2 Effect of Non-occurrence of Conditions to the Effective Date. If the
Merger Agreement is terminated in accordance with its terms, then the
Confirmation Order shall be vacated by the Bankruptcy Court unless the
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Debtors, Arch or the Committee files a motion opposing the vacation of the
Confirmation Order within ten Business Days after termination of the Merger
Agreement. The Confirmation Order may not be vacated after all the conditions
to the Effective Date have either occurred or been waived.
5.3 Non-consensual Confirmation. Because Classes 7, 8 and 9 are deemed not
to have accepted this Plan pursuant to section 1126(g) of the Code, as to such
Classes and any other Class that votes to reject this Plan, the Debtors are
seeking confirmation of this Plan in accordance with section 1129(b) of the
Code either under the terms provided herein or upon such terms as may exist if
this Plan is modified in accordance with section 1127(d) of the Code. In the
event Class 4 votes to reject this Plan, the Debtors, the Committee and Arch
each reserves the right to contest all or any portion of the amount of the
Allowed Class 4 Claims as set forth in Section 2.6(B).
ARTICLE VI
Discharge, Termination, Injunction and Subordination Rights
6.1 Discharge of Claims and Termination of Interests.
A. Except as provided in the Confirmation Order, the rights afforded under
this Plan and the treatment of Claims and Interests under this Plan will be in
exchange for and in complete satisfaction, discharge and release of all Claims
and satisfaction or termination of all Interests, including any interest
accrued on Claims from the Petition Date. Except as provided in this Plan or
the Confirmation Order, Confirmation will, as of the Effective Date: (i)
discharge the Debtors from all Claims or other debts that arose before the
Effective Date, and all debts of the kind specified in sections 502(g), 502(h)
or 502(i) of the Code, whether or not (x) a proof of claim based on such debt
is filed or deemed filed pursuant to section 501 of the Code, (y) a Claim
based on such debt is allowed pursuant to section 502 of the Code, or (z) the
holder of a Claim based on such debt has accepted this Plan and (ii) satisfy
or terminate all Interests and other rights of equity security holders in the
Debtors.
B. As of the Effective Date, except as provided in this Plan or the
Confirmation Order, all entities will be precluded from asserting against the
Debtors or the Reorganized Debtors, or their respective successors or
property, any other or further Claims, demands, debts, rights, causes of
action, liabilities or equity interests based upon any act, omission,
transaction or other activity of any kind or nature that occurred prior to the
Effective Date. In accordance with the foregoing, except as provided in this
Plan or the Confirmation Order, the Confirmation Order will be a judicial
determination, as of the Effective Date, of discharge of all such Claims and
other debts and liabilities against the Debtors and satisfaction or
termination of all Interests and other rights of equity security holders in
the Debtors, pursuant to sections 524 and 1141 of the Bankruptcy Code, and
such discharge will void any judgment obtained against the Debtors or the
Reorganized Debtors at any time, to the extent that such judgment relates to a
discharged Claim.
6.2 Injunctions.
A. Except as provided in this Plan or the Confirmation Order, as of the
Effective Date, all entities that have held, currently hold or may hold a
Claim or other debt or liability that is discharged or an Interest or other
right of an equity security holder that is terminated pursuant to the terms of
this Plan are permanently enjoined from taking any of the following actions on
account of any such discharged Claims, debts or liabilities or terminated
Interests or rights: (i) commencing or continuing in any manner any action or
other proceeding against the Debtors or the Reorganized Debtors or Arch or its
subsidiaries or their respective property; (ii) enforcing, attaching,
collecting or recovering in any manner any judgment, award, decree or order
against the Debtors or the Reorganized Debtors or Arch or its subsidiaries or
their respective property; (iii) creating, perfecting or enforcing any lien or
encumbrance against the Debtors or the Reorganized Debtors or Arch or its
subsidiaries or their respective property; (iv) asserting a setoff, right of
subrogation or recoupment of any kind against any debt, liability or
obligation due to the Debtors or the Reorganized Debtors or Arch or its
subsidiaries or their respective property; and (v) commencing or continuing
any action, in any manner, in any place that does not comply with or is
inconsistent with the provisions of this Plan.
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B. As of the Effective Date, all entities that have held, currently hold or
may hold a claim, demand, debt, right, cause of action or liability that is
released pursuant to this Plan are permanently enjoined from taking any of the
following actions on account of such released claims, demands, debts, rights,
causes of action or liabilities: (i) commencing or continuing in any manner
any action or other proceeding; (ii) enforcing, attaching, collecting or
recovering in any manner any judgment, award, decree or order; (iii) creating,
perfecting or enforcing any lien or encumbrance; (iv) asserting a setoff,
right of subrogation or recoupment of any kind against any debt, liability or
obligation due to any released entity; and (v) commencing or continuing any
action, in any manner, in any place that does not comply with or is
inconsistent with the provisions of this Plan.
C. By accepting a distribution pursuant to this Plan, each holder of an
Allowed Claim receiving such distribution pursuant to this Plan will be deemed
to have specifically consented to the injunctions set forth in this Section
6.2.
6.3 Termination of Subordination Rights and Settlement of Related Claims and
Controversies.
A. The classification and manner of satisfying all Claims and Interests
under this Plan takes into consideration all contractual, legal and equitable
subordination and turnover rights, whether arising under general principles of
equitable subordination, section 510(c) of the Code or otherwise, that a
holder of a Claim or Interest or the Debtors may have against other Claim
holders with respect to any distribution made pursuant to this Plan. On the
Effective Date, all contractual, legal, equitable subordination and turnover
rights that a holder of a Claim or Interest or the Debtors may have with
respect to any distribution to be made pursuant to this Plan will be
discharged and terminated, and all actions related to the enforcement of such
subordination rights will be permanently enjoined. Accordingly, distributions
pursuant to this Plan to holders of Allowed Claims will not be subject to
payment to a beneficiary of such terminated subordination rights, or to levy,
garnishment, attachment or other legal process by a beneficiary of such
terminated subordination rights.
B. Pursuant to Bankruptcy Rule 9019 and in consideration for the
distributions and other benefits provided under this Plan, the provisions of
this Plan will constitute a good faith compromise and settlement of all claims
or controversies relating to the enforcement or termination of all
contractual, legal and equitable subordination and turnover rights that a
holder of a Claim or Interest or the Debtors may have with respect to any
Allowed Claim or Interest, or any distribution to be made pursuant to this
Plan on account of such Claim. The entry of the Confirmation Order will
constitute the Bankruptcy Court's approval of the compromise or settlement of
all such claims or controversies and the Bankruptcy Court's finding that such
compromise or settlement is in the best interests of the Debtors and the
Reorganized Debtors and their respective property and Claim and Interest
holders, and is fair, equitable and reasonable.
ARTICLE VII
Miscellaneous
7.1 Retention of Jurisdiction. Following the Effective Date, the Bankruptcy
Court shall retain such jurisdiction as is set forth in this Plan. Without in
any manner limiting the scope of the foregoing, the Bankruptcy Court shall
retain jurisdiction for the following purposes:
A. To determine the allowability, classification, priority or subordination
of Claims and Interests upon objection, or to estimate, pursuant to section
502(c) of the Code, the amount of any Claim that is or is anticipated to be
contingent or unliquidated as of the Effective Date, or to hear proceedings to
subordinate Claims or Interests brought by any party in interest with standing
to bring such objection or proceeding;
B. To construe and to take any action authorized by the Code and requested
by the Reorganized Debtors or any other party in interest to enforce this Plan
and the documents and agreements filed in connection with this Plan, issue
such orders as may be necessary for the implementation, execution and
consummation of this Plan, including, without limiting the generality of the
foregoing, orders to expedite regulatory decisions for the
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implementation of this Plan and to ensure conformity with the terms and
conditions of this Plan, such documents and agreements and other orders of the
Bankruptcy Court, notwithstanding any otherwise applicable non-bankruptcy law;
C. To determine any and all applications for allowance of compensation and
expense reimbursement of professionals retained by the Debtors, the
Reorganized Debtors or the Committee, and for members of the Committee, for
periods on or before the Effective Date, and to determine any other request
for payment of administrative expenses;
D. To determine all matters that may be pending before the Bankruptcy Court
on or before the Effective Date;
E. To resolve any dispute regarding the implementation or interpretation of
this Plan, the Merger Agreement or any related agreement or document that
arises at any time before the Cases are closed, including determination, to
the extent a dispute arises, of the entities entitled to a distribution within
any particular Class of Claims and of the scope and nature of the Reorganized
Debtors' obligations to cure defaults under assumed contracts, leases,
franchises and permits;
F. To determine any and all applications pending on the Confirmation Date
for the rejection, assumption or assignment of executory contracts or
unexpired leases entered into prior to the Petition Date, and the allowance of
any Claim resulting therefrom;
G. To determine all applications, adversary proceedings, contested matters
and other litigated matters that were brought or that could have been brought
on or before the Effective Date;
H. To determine matters concerning local, state and federal taxes in
accordance with sections 346, 505 and 1146 of the Code, and to determine any
tax claims that may arise against the Debtors or Reorganized Debtors as a
result of the transactions contemplated by this Plan;
I. To resolve any dispute arising out of actions taken by the Estate
Representative;
J. To modify this Plan pursuant to section 1127 of the Code, or to remedy
any apparent nonmaterial defect or omission in this Plan, or to reconcile any
nonmaterial inconsistency in this Plan so as to carry out its intent and
purposes; and
K. For such other purposes as may be provided for in the Confirmation Order.
Prior to the Effective Date, the Bankruptcy Court shall retain jurisdiction
with respect to each of the foregoing items and all other matters that were
subject to its jurisdiction prior to the Confirmation Date.
7.2 Retention and Enforcement Of Causes Of Action. Pursuant to section
1123(b)(3)(B) of the Code, but subject to Sections 7.3 and 7.4 of this Plan,
the Reorganized Debtors, on behalf of themselves and holders of Allowed Claims
and Interests, shall retain all Causes of Action that the Debtors had or had
power to assert immediately prior to the Effective Date, and may commence or
continue in any appropriate court or tribunal any suit or other proceeding for
the enforcement of such Causes of Action. All Causes of Action shall remain
the property of the Reorganized Debtors. Nothing contained in this Plan shall
constitute a waiver of the rights, if any, of the Debtors or the Reorganized
Debtors to a jury trial with respect to any Cause of Action or objection to
any Claim or Interest.
7.3 Limitation of Liability. None of the Debtors, the Reorganized Debtors,
Arch or any affiliate thereof, the Committee, the Pre-Petition Agent, the Pre-
Petition Lenders, the DIP Agent, the DIP Lenders, the Standby Purchasers, the
indenture trustees for the Notes, Arch's financing sources, nor any of their
respective officers, directors, employees, members, agents, underwriters or
investment bankers, nor any other professional Persons employed by any of them
(collectively, the "Exculpated Persons"), shall have or incur any liability to
any
26
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Person for any act taken or omission made in good faith in connection with or
related to formulating, negotiating, implementing, confirming or consummating
this Plan, the Disclosure Statement or any contract, instrument, release or
other agreement or document created in connection with this Plan. The
Exculpated Persons shall have no liability to any Debtor, holder of a Claim,
holder of an Interest, other party in interest in the Cases or any other
Person for actions taken or not taken under this Plan, in connection herewith
or with respect hereto, or arising out of their administration of this Plan or
the property to be distributed under this Plan, in good faith, including,
without limitation, failure to obtain Confirmation of this Plan or to satisfy
any condition or conditions, or refusal to waive any condition or conditions,
to the occurrence of the Effective Date, and in all respects such Exculpated
Persons shall be entitled to rely upon the advice of counsel with respect to
their duties and responsibilities under this Plan.
7.4 Releases.
A. On the Effective Date, the Reorganized Debtors, on their own behalf and
as representatives of the Debtors' estates, in consideration of services
rendered in the Cases and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, release unconditionally, and
are deemed to release unconditionally, each of the Debtors' (1) present
officers and directors, (2) former officers and directors (other than those
former officers and directors considered or determined as of the Effective
Date by the FCC to be alleged or actual wrongdoers for purposes of the FCC
Proceeding), (3) the entities that elected such directors to the extent they
are or may be liable for the actions or inactions of such directors and (4)
their respective professional advisers (collectively, the "Officer and
Director Releasees"), from any and all claims, obligations, suits, judgments,
damages, rights, causes of action and liabilities whatsoever (including,
without limitation, those arising under the Code), whether known or unknown,
foreseen or unforeseen, existing or hereafter arising, in law, equity or
otherwise, based in whole or in part on any act, omission, transaction, event
or other occurrence taking place before, on or after the Petition Date up to
the Effective Date, in any way relating to the Debtors (before, on or after
the Petition Date), the Cases or this Plan (collectively, the "Released
Matters"); provided, that the foregoing release shall not apply to any action
or omission that constitutes actual fraud or criminal behavior; and provided,
further, that such release shall not be granted to any Officer or Director
Releasee who has a Disputed Claim as of the Effective Date.
B. On the Effective Date, the Reorganized Debtors, on their own behalf and
as representatives of the Debtors' estates, in consideration of services
rendered in the Cases and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, release unconditionally, and
are deemed to release unconditionally, each of (1) the Pre-Petition Lenders,
the Pre-Petition Agent, the DIP Lenders and the DIP Agent and (2) their
respective professional advisers (collectively, the "Lender Releasees"), from
the Released Matters; provided, that the foregoing release shall not apply to
any action or omission that constitutes actual fraud or criminal behavior.
C. On the Effective Date, the Reorganized Debtors, on their own behalf and
as representatives of the Debtors' estates, in consideration of services
rendered in the Cases and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, release unconditionally, and
are deemed to release unconditionally, (1) each member of the Committee, the
Committee and their respective present or former members, officers, directors,
employees, affiliates, advisors, attorneys or agents (collectively, the
"Representatives"), (2) the Standby Purchasers and their Representatives, and
(3) their respective professional advisers (collectively, the "Creditor
Releasees"), from the Released Matters; provided, that the foregoing release
shall not apply to any action or omission that constitutes actual fraud or
criminal behavior.
D. On the Effective Date, the Reorganized Debtors, on their own behalf and
as representatives of the Debtors' estates, in consideration of services
rendered in the Cases and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, release unconditionally, and
are deemed to release unconditionally, Arch, any affiliate of Arch, or Arch's
financing sources, agents, underwriters and investment bankers and their
respective professional advisers (collectively, the "Arch Releasees") from the
Released Matters; provided, that the foregoing release shall not apply to any
action or omission that constitutes actual fraud or criminal behavior.
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E. On the Effective Date, Arch and its subsidiaries shall be deemed to have
unconditionally released the Officer and Director Releasees, the Lender
Releasees and the Creditor Releasees from the Released Matters; provided, that
the foregoing release shall not apply to any action or omission that
constitutes actual fraud or criminal behavior; and provided, further, that
such release shall not be granted to any Officer or Director Releasee who has
a Disputed Claim as of the Effective Date.
F. On the Effective Date, each holder of a Claim that is entitled to vote on
this Plan shall be deemed to have unconditionally released the Officer and
Director Releasees, the Lender Releasees, the Creditor Releasees and the Arch
Releasees from the Released Matters; provided, that the foregoing release
shall not apply to any action or omission that constitutes actual fraud or
criminal behavior and shall not constitute a release of any recovery such
holder would be entitled to as a plaintiff or putative plaintiff in the
Securities Actions or any action initiated after the date hereof based upon
similar factual allegations or alleging similar causes of action to the
Securities Actions; and provided, further, that a holder (other than Arch) may
elect, by checking the appropriate box or boxes provided on the Ballot, not to
grant such release as to the Officer and Director Releasees, the Lender
Releasees, the Creditor Releasees or the Arch Releasees, or all of them.
G. The Confirmation Order shall contain a permanent injunction to effectuate
the releases granted in the foregoing Sections 7.4(A), (B), (C), (D), (E) and
(F). Any release granted pursuant to the foregoing Sections 7.4(A), (B), (C),
(D), (E) and (F) shall be ineffective and null and void automatically and
immediately upon the assertion by any released party of any claim in any
manner or in any forum against any party that granted the release, and all
Causes of Action that the Debtors had or had the power to assert immediately
prior to the Effective Date with respect to any such party shall be preserved
and become the property of the Reorganized Debtors pursuant to Section 7.2.
7.5 Indemnification Obligations; Directors' and Officers' Liability
Insurance.
A. Director Indemnification Obligations and Excluded Indemnification
Obligations shall be deemed to be, and shall be treated as if they are,
executory contracts that are rejected pursuant to section 365 of the Code. Any
Claims arising out of the rejection of the Indemnification Obligations
pursuant to this Section 7.5(A) shall be subordinated in full under sections
510(b) and 510(c) of the Code.
B. Benefit Plan Indemnification Obligations and Indemnification Obligations
with respect to officers and employees who are officers and employees of the
Debtors as of the Effective Date (other than Excluded Indemnification
Obligations) shall be deemed to be, and shall be treated as though they are,
executory contracts that are assumed agreements under this Plan and such
obligations (subject to any defenses thereto) shall remain unaffected and
shall not be discharged or impaired hereby, and any Claim for indemnification
filed by any such party shall not be an Allowed Claim hereunder; provided,
that the foregoing assumption shall not affect any release of any such
obligation given in writing to the Debtors before the Effective Date or to the
Reorganized Debtors on or after the Effective Date or any other releases under
Section 7.4.
C. On the Effective Date, the Reorganized Debtors shall purchase a "run-off"
policy for the Debtors' current and former directors and officers (other than
those former officers and directors considered or determined as of the
Effective Date by the FCC to be alleged or actual wrongdoers for purposes of
the FCC Proceeding), which policy shall provide for aggregate coverage up to
$40 million (or such lesser amount as can be purchased for a premium of
$750,000) for claims made during a period of at least three (3) years
following the Effective Date based on alleged "wrongful acts" through the
Effective Date, and shall contain such other usual and customary terms and
conditions as are approved by the Board of Directors of MobileMedia.
D. As of the Effective Date, Arch shall make available up to an aggregate
amount of $1,000,000 (the "Defense Fund") to be used by present and former
officers and directors (other than those former officers and directors
considered or determined as of the Effective Date by the FCC to be alleged or
actual wrongdoers for purposes of the FCC Proceeding) of the Debtors solely
for the costs and expenses (including reasonable attorneys' fees and expenses)
of defending the Securities Actions not otherwise covered by the Debtors'
insurance. The Defense Fund is being provided by Arch at its election and not
in exchange for any Claim or
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Interest by any officer or director. Provision of the Defense Fund hereunder
shall not negate, constitute a waiver or modification of or otherwise impair
the discharge of the Debtors and the Reorganized Debtors under sections 524
and 1141 of the Code and this Plan. As a condition to any officer or director
obtaining amounts from the Defense Fund, such officer or director shall
deliver to Arch, at Arch's request, a release, in form and substance
reasonably acceptable to Arch, confirming the unconditional release and
discharge of the Arch Releasees and the Reorganized Debtors from the Released
Matters. Any officer or director shall be required to reimburse Arch for any
amounts obtained from the Defense Fund that are subsequently covered by
insurance.
7.6 Terms BindingVII.6 Terms Binding. Upon the entry of the Confirmation
Order, all provisions of this Plan, including all agreements, instruments and
other documents filed in connection with this Plan and executed by the
Debtors, Arch or the Reorganized Debtors in connection with this Plan, shall
be binding upon the Debtors, Arch, the Reorganized Debtors, all Claim and
Interest holders and all other entities that are affected in any manner by
this Plan. All agreements, instruments and other documents filed in connection
with this Plan shall have full force and effect, and shall bind all parties
thereto as of the entry of the Confirmation Order, whether or not such
exhibits actually shall be executed by parties other than the Debtors or the
Reorganized Debtors, or shall be issued, delivered or recorded on the
Effective Date or thereafter.
7.7 Additional Terms of Securities and Other Instruments. Any modification
of the Merger Agreement, the Arch Warrants, Arch Common Shares and Arch Class
B Common Shares, and all other securities or agreements issued or entered into
pursuant to this Plan after the Voting Deadline, shall be treated as a Plan
modification and shall be governed by section 1127 of the Code.
7.8 Post-Consummation Effect of Evidences of Claims or Interests. Notes,
stock certificates and other evidence of Claims against or Interests in the
Debtors shall, effective on the Effective Date, represent only the right to
participate in the distributions contemplated by this Plan.
7.9 Payment Dates. Whenever any payment to be made under this Plan is due on
a day other than a Business Day, such payment shall instead be made, without
interest, on the next succeeding Business Day.
7.10 Successors and Assigns. The rights, benefits and obligations of any
person named or referred to in this Plan shall be binding upon, and shall
inure to the benefit of, the heir, executor, administrator, successor or
assignee of such person.
7.11 Inconsistencies. In the event that there is any inconsistency between
this Plan and the Disclosure Statement, any exhibit to this Plan or any other
instrument or document created or executed pursuant to this Plan, this Plan
shall govern.
7.12 Compliance with Applicable Law. It is intended that the provisions of
this Plan (including the implementation thereof) shall be in compliance with
applicable law, including, without limitation, the Code, the Delaware General
Corporation Law, as amended, the Communications Act of 1934, as amended, the
Securities Act of 1933, as amended, and the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, as well as, in each case, any rules and
regulations promulgated thereunder. If the Debtors shall conclude that this
Plan may not comply with any of the foregoing, then and in such event the
Debtors intend to amend this Plan in such respects as they deem necessary to
bring this Plan into compliance therewith.
7.13 Governing Law. Except to the extent that the Code or any other federal
law is applicable or to the extent the law of a different jurisdiction is
validly elected by the Debtors, the rights, duties and obligations arising
under this Plan shall be governed in accordance with the substantive laws of
the United States of America and, to the extent federal law is not applicable,
the laws of the State of Delaware.
7.14 Severability. If the Bankruptcy Court determines at the Confirmation
Hearing that any material provision of this Plan is invalid or unenforceable,
such provision, to the extent the Debtors, Arch and the Committee agree, but
subject to section 1127 of the Code, shall be severable from this Plan and
null and void, and, in such event, such determination shall in no way limit or
affect the enforceability or operative effect of any or all other portions of
this Plan.
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7.15 Incorporation by Reference. Each Exhibit or Schedule hereto is
incorporated herein by reference.
MOBILEMEDIA COMMUNICATIONS, INC.
MOBILEMEDIA CORPORATION
MOBILEMEDIA COMMUNICATIONS, INC.
(CALIFORNIA)
MOBILEMEDIA DP PROPERTIES, INC.
MOBILEMEDIA PCS, INC.
DIAL PAGE SOUTHEAST, INC.
RADIO CALL COMPANY OF VA. INC.
MOBILEMEDIA PAGING, INC.
MOBILE COMMUNICATIONS CORPORATION OF
AMERICA
MOBILECOMM OF THE SOUTHEAST, INC.
MOBILECOMM OF THE NORTHEAST, INC.
MOBILECOMM NATIONWIDE OPERATIONS,
INC.
MOBILECOMM OF TENNESSEE, INC.
MOBILECOMM OF THE SOUTHEAST PRIVATE
CARRIER OPERATIONS, INC.
MOBILECOMM OF THE SOUTHWEST, INC.
MOBILECOMM OF FLORIDA, INC.
MOBILECOMM OF THE MIDSOUTH, INC.
FWS RADIO, INC.
MOBILECOMM OF THE WEST, INC.
Debtors and Debtors-in-Possession
/s/ Joseph A. Bondi
By:__________________________________
Joseph A. Bondi
Chairman--Restructuring of
MobileMedia Corporation
J. Ronald Trost
James D. Johnson
Shelley C. Chapman
Lee M. Stein
SIDLEY & AUSTIN
875 Third Avenue
New York, New York 10022
(212) 906-2000
James L. Patton, Jr. (No. 2202)
Joel A. Waite (No. 2925)
YOUNG CONAWAY STARGATT & TAYLOR, LLP
11th Floor--Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899
(302) 571-6600
COUNSEL TO DEBTORS AND DEBTORS-IN-POSSESSION
30
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF ARCH SINCE THE DATE HEREOF OR THAT ANY INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------
SUMMARY TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 14
The Rights Offering...................................................... 26
Use of Proceeds.......................................................... 34
Dilution................................................................. 34
Selected Historical Consolidated Financial and Operating Data............ 35
Unaudited Selected Pro Forma Consolidated Financial Data................. 39
Comparative Per Share Data............................................... 40
Market Price Information and Dividend Policy............................. 41
The Merger and the Reorganization........................................ 42
The Merger Agreement..................................................... 49
The MobileMedia Plan of Reorganization................................... 64
The Combined Company..................................................... 69
Unaudited Pro Forma Condensed Consolidated Financial Statements.......... 76
Industry Overview........................................................ 82
Business................................................................. 88
Certain Federal Income Tax Considerations................................ 134
Description of Securities................................................ 139
Description of Certain Arch Indebtedness................................. 146
Legal Matters............................................................ 155
Experts.................................................................. 155
Index to Financial Statements............................................ F-1
Disclosure Statement to Debtors' Second Amended Joint Plan of
Reorganization.......................................................... A-1
Agreement and Plan of Merger
(Composite Copy)........................................................ B-1
Debtors' Second Amended Joint Plan of Reorganization .................... C-1
</TABLE>
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[LOGO]
ARCH COMMUNICATIONS GROUP, INC.
SHARES OF COMMON STOCK
SHARES OF CLASS B COMMON STOCK
STOCK PURCHASE WARRANTS
TRANSFERABLE RIGHTS TO PURCHASE SUCH STOCK AND WARRANTS
---------------
PROSPECTUS
---------------
, 1998
- -------------------------------------------------------------------------------
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Arch's Restated Certificate of Incorporation provides that Arch will, to the
fullest extent permitted by the Delaware General Corporation Law (the "DGCL"),
indemnify all persons whom it has the power to indemnify against all costs,
expenses and liabilities incurred by them by reason of having been officers or
directors of Arch, any subsidiary of Arch or any other corporation for which
such persons acted as an officer or director at the request of Arch.
Arch's Restated Certificate of Incorporation also provides that the
directors of Arch will not be personally liable for monetary damages to Arch
or its stockholders for any act or omission, provided that the foregoing shall
not eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to Arch or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL (relating to
illegal dividends or stock redemptions) or (iv) for any transaction from which
the director derived an improper personal benefit. If the DGCL is amended to
permit further elimination or limitation of the personal liability of
directors, then the liability of a director of Arch shall be eliminated or
limited to the fullest extent permitted by the DGCL as so amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
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2.1** Agreement and Plan of Merger, dated as of August 18, 1998, by and
among Arch Communications Group, Inc., Farm Team Corp., MobileMedia
Corporation and MobileMedia Communications, Inc.,
2.2** First Amendment to Agreement and Plan of Merger, dated as of
September 3, 1998, by and among Arch Communications Group, Inc., Farm
Team Corp. and MobileMedia Communications, Inc.
3.1 Restated Certificate of Incorporation. (1)
3.2 Certificate of Designations establishing the Series B Junior
Participating Preferred Stock. (2)
3.3 Certificate of Correction, filed with the Secretary of State of
Delaware on February 15, 1996. (1)
3.4 Certificate of Designations establishing the Series C Convertible
Preferred Stock. (3)
3.5** Form of Certificate of Amendment to the Restated Certificate of
Incorporation
3.6** Form of Certificate of Amendment to the Restated Certificate of
Incorporation
3.7 By-laws, as amended. (1)
4.1 Indenture, dated February 1, 1994, between Arch Communications, Inc.
(formerly known as USA Mobile Communications, Inc. II) and United
States Trust Company of New York, as Trustee, relating to the 9 1/2%
Senior Notes due 2004 of Arch Communications, Inc.(4)
4.2 Indenture, dated December 15, 1994, between Arch Communications, Inc.
(formerly known as USA Mobile Communications, Inc. II) and United
States Trust Company of New York, as Trustee, relating to the 14%
Senior Notes due 2004 of Arch Communications, Inc. (5)
4.3 Indenture, dated June 29, 1998, between Arch Communications, Inc. and
U.S. Bank Trust National Association, as Trustee, relating to the 12
3/4% Senior Notes due 2007 of Arch Communications, Inc. (3)
5.1* Opinion of Hale and Dorr LLP
8.1* Tax opinion of Hale and Dorr LLP
10.1 Second Amended and Restated Credit Agreement (Tranche A and Tranche C
Facilities), dated June 29, 1998, among Arch Paging, Inc., the
Lenders party thereto, The Bank of New York, Royal Bank of Canada and
Toronto Dominion (Texas), Inc. (3)
10.2 Second Amended and Restated Credit Agreement (Tranche B Facility),
dated June 29, 1998, among Arch Paging, Inc., the Lenders party
thereto. The Bank of New York, Royal Bank of Canada and Toronto
Dominion (Texas), Inc. (3)
10.3 Asset Purchase and Sale Agreement, dated April 10, 1998, among
OmniAmerica, Inc. and certain subsidiaries of Arch Communications
Group, Inc. (3)
10.4 Letter agreement, dated June 10, 1998, between Arch Communications
Group, Inc. and Motorola, Inc. (3)(6)
10.5** Debtors' Second Amended Joint Plan of Reorganization, dated as of
September 3, 1998, included as Annex C to the Prospectus which is a
part of this Registration Statement.
</TABLE>
II-1
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<TABLE>
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10.6** Commitment Letters to Purchase Stock and Warrants, dated as of
August 18, 1998, by and among Arch Communications Group, Inc.,
MobileMedia Communications Inc. and W. R. Huff Asset Management
Co., L.L.C., The Northwestern Mutual Life Insurance Company,
Northwestern Mutual Series Fund, Inc., Credit Suisse First Boston
Corporation and Whippoorwill Associates, Inc.
10.7** Amendments to Commitment Letters to Purchase Stock and Warrants,
dated as of September 3, 1998, by and among Arch Communications
Group, Inc., MobileMedia Communications Inc. and W.R. Huff Asset
Management Co., L.L.C., The Northwestern Mutual Life Insurance
Company, Northwestern Mutual Series Fund, Inc., Credit Suisse First
Boston Corporation and Whippoorwill Associates, Inc.
10.8** Form of Registration Rights Agreement among Arch Communications
Group, Inc. and W. R. Huff Asset Management Co., L.L.C., The
Northwestern Mutual Life Insurance Company, Northwestern Mutual
Series Fund, Inc., Credit Suisse First Boston Corporation and
Whippoorwill Associates, Inc.
10.9** Form of Registration Rights Agreement among Arch Communications
Group, Inc. and certain Stockholders.
10.10 Amendment No. 1 to Rights Agreement, dated June 29, 1998, between
Arch Communications Group, Inc. and the Bank of New York. (3)
10.11** Amendment No. 2 to Rights Agreement, dated as of August 18, 1998,
amending the Rights Agreement between Arch Communications Group,
Inc. and the Bank of New York.
10.12** Amendment No. 3 to Rights Agreement, dated September 3, 1998,
amending the Rights Agreement between Arch Communications Group,
Inc. and the Bank of New York.
10.13* Disclosure Statement to Debtors' Second Amended Joint Plan of
Reorganization, dated September 3, 1998.
10.14** Form of Warrant Agreement, between Arch Communications Group, Inc.
and the Bank of New York, as provided for in the First Amendment to
Agreement and Plan of Merger dated as of September 3, 1998, by and
among Arch Communications Group, Inc, Farm Team Corp. and
MobileMedia Communication Inc.
10.15** Commitment Letter, dated as of August 18, 1998, by and among Arch
Paging, Inc. and The Bank of New York, BNY Capital Markets, Inc.,
Toronto Dominion (Texas) Inc., TD Securities (USA) Inc., Royal Bank
of Canada and Barclays Bank PLC amending the Second and Amended
Restated Credit Agreements, dated June 29, 1998 (Tranche A, B and C
Facilities).
10.16** Bridge Commitment Letter, dated as of August 20, 1998, among Arch
Communications, Inc., Arch Communications Group, Inc. and The Bear
Stearns Companies, Inc., The Bank of New York, TD Securities (USA)
Inc. and the Royal Bank of Canada.
10.17** Amendment No. 1 to Registration Rights Agreement, dated August 19,
1998, amending the Registration Rights Agreement dated as of June
29, 1998 by and among Arch Communications Group, Inc. and the
Sandler Capital Partners IV, LP, Sandler Capital Partners IV, FTE
LP, South Fork Partners, The Georgica International Fund Limited,
Aspen Partners and Consolidated Press International Limited.
+10.18 Amended and Restated Stock Option Plan (8)
+10.19 Non-Employee Directors' Stock Option Plan (9)
+10.20 1989 Stock Option Plan, as amended (1)
+10.21 1995 Outside Directors' Stock Option Plan (10)
+10.22 1996 Employee Stock Purchase Plan (11)
+10.23 1997 Stock Option Plan (12)
+10.24 Deferred Compensation Plan for Nonemployee Directors (13)
+10.25 Form of Executive Retention Agreement by and between Messrs. Baker,
Daniels, Kuzia, Pottle and Saynor (13)
10.26 Stock Purchase Agreement, dated June 29, 1998, among Arch
Communications Group, Inc., Sandler Capital Partners IV, L.P.,
Sandler Capital Partners IV FTE, L.P., Harvey Sandler, John
Kornreich, Michael J. Marocco, Andrew Sandler, South Fork Partners,
the Georgica International Fund Limited, Aspen Partners and
Consolidated Press International Limited (3)
10.27 Registration Rights Agreement, dated June 29, 1998, among Arch
Communications Group, Inc., Sandler Capital Partners IV, L.P.,
Sandler Capital Partners IV FTE, L.P., Harvey Sandler, John
Kornreich, Michael J. Marocco, Andrew Sandler, South Fork Partners,
The Georgica International Fund Limited, Aspen Partners and
Consolidated Press International Limited (3)
10.28 Exchange Agreement, dated June 29, 1998, between Adelphia
Communications Corporation and Benbow PCS Ventures, Inc. (3)
10.29 Promissory Note, dated June 29, 1998, in the Principal amount of
$285,015, issued by Benbow PCS Ventures, Inc. to Lisa-Gaye Shearing
(3)
</TABLE>
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10.30 Guaranty, dated June 29, 1998, given by Arch Communications Group,
Inc. to Adelphia Communications Corporation (3)
10.31 Guaranty, dated June 29, 1998, given by Arch Communications Group,
Inc. to Lisa-Gaye Shearing (3)
10.32 Registration Rights Agreement, dated June 29, 1998, among Arch
Communications Group, Inc., Adelphia Communications Corporation and
Lisa-Gaye Shearing (3)
12.1* Statement re computation of earnings per share
21.1* Subsidiaries of the Registrant
23.1* Consent of Hale and Dorr LLP (contained in its opinion filed as
Exhibit 5.1)
23.2** Consent of Arthur Andersen LLP
23.3** Consent of Ernst & Young LLP
23.4** Consent of Wilkinson, Barker, Knauer & Quinn, LLP
23.5** Consent of Wiley, Rein & Fielding
24.1 Power of Attorney (included on signature page to this Registration
Statement)
27.1 Financial Data Schedule (7)
99.1** Form of Subscription Certificate and related documents
99.2** Forms of Notices of Guaranteed Delivery
</TABLE>
--------
* To be filed by amendment.
** Filed herewith.
+ Identifies exhibits constituting a management contract or compensation
plan.
(1) Incorporated by reference from the Registration Statement on Form S-3
(File No. 333-542) of Arch Communications Group, Inc.
(2) Incorporated by reference from the Current Report on Form 8-K of Arch
Communications Group, Inc. dated October 13, 1995 and filed on October
24, 1995.
(3) Incorporated by reference from the Current Report on Form 8-K of Arch
Communications Group, Inc. dated June 26, 1998 and filed on July 23,
1998.
(4) Incorporated by reference from the Registration Statement on Form S-1
(File No. 33-72646) of Arch Communications, Inc.
(5) Incorporated by reference from the Registration Statement on Form S-1
(File No. 33-85580) of Arch Communications, Inc.
(6) A Confidential Treatment Request has been filed with respect to
portions of this exhibit so incorporated by reference.
(7) Incorporated by reference from the Quarterly Report on Form 10-Q of
Arch Communications Group, Inc. for the quarter ended June 30, 1998.
(8) Incorporated by reference from the Annual Report on Form 10-K of Arch
Communications Group. Inc. (then known as USA Mobile Communications
Inc. II) for the fiscal year ended December 31, 1994.
(9) Incorporated by reference from the Registration Statement on Form S-4
(File No. 33-83648) of Arch (then known as USA Mobile Communications
Inc. II).
(10) Incorporated by reference from the Registration Statement on Form S-3
(File No. 33-87474) of Arch Communications Group, Inc.
(11) Incorporated by reference from the Annual Report on Form 10-K of Arch
Communications Group, Inc. for the fiscal year ended December 31,
1995.
(12) Incorporated by reference from the Annual Report on Form 10-K of Arch
Communications Group, Inc. for the fiscal year ended December 31,
1996.
(13) Incorporated by reference from the Annual Report on Form 10-K of Arch
Communications Group, Inc. for the fiscal year ended December 31,
1997.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any
II-3
<PAGE>
increase or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Exchange
Act that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) If the registration is a foreign private issuer, to file a post-
effective amendment to the registration statement to include any financial
statements required by Rule 3-19 of this chapter at the start of any delayed
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Securities Act need
not be furnished, provided, that the registrant includes in the prospectus, by
means of a post-effective amendment, financial statements required pursuant to
this paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment need not be
filed to include financial statements and information required by Section
10(a)(3) of the Securities Act or Rule 3-19 of this chapter if such financial
statements and information are contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
Form F-3.
(b) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such offering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(c) The registrant undertakes that every prospectus: (1) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to this registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(d) 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 section 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 this
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
(e) 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 a 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.
(f) The registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the prospectus pursuant to Items 4,
10(b), 11, or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the
date of responding to the request.
(g) The 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-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF WESTBOROUGH,
COMMONWEALTH OF MASSACHUSETTS ON SEPTEMBER 16, 1998.
Arch Communications, Inc.
/s/ C. Edward Baker, Jr.
By: _________________________________
C. EDWARD BAKER, JR.CHAIRMAN OF
THE BOARD AND CHIEF EXECUTIVE
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<S> <C>
SIGNATURE TITLE
DATE
/s/ C. Edward Baker, Jr. Chairman of the Board and September 16,
- ------------------------- Chief Executive Officer 1998
C. EDWARD BAKER, JR. Director (principal executive officer)
*/s/ J. Roy Pottle Executive Vice President and September 16,
- ------------------------- Chief Financial Officer 1998
J. ROY POTTLE (principal financial officer and
principal accounting officer)
*/s/ R. Schorr Berman Director September 16,
- ------------------------- 1998
R. SCHORR BERMAN
*/s/ James S. Hughes Director September 16,
- ------------------------- 1998
JAMES S. HUGHES
*/s/ John Kornreich Director September 16,
- ------------------------- 1998
JOHN KORNREICH
*/s/ Allan L. Rayfield Director September 16,
- ------------------------- 1998
ALLAN L. RAYFIELD
*/s/ John B. Saynor Director September 16,
- ------------------------- 1998
JOHN B. SAYNOR
*/s/ John A. Shane Director September 16,
- ------------------------- 1998
JOHN A. SHANE
*/s/ Gerald J. Cimmino
- -------------------------
GERALD J. CIMMINO
ATTORNEY-IN-FACT
</TABLE>
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<PAGE>
EXHIBIT INDEX
(A) EXHIBITS
<TABLE>
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2.1** Agreement and Plan of Merger, dated as of August 18, 1998, by and
among Arch Communications Group, Inc., Farm Team Corp., MobileMedia
Corporation and MobileMedia Communications, Inc.,
2.2** First Amendment to Agreement and Plan of Merger, dated as of
September 3, 1998, by and among Arch Communications Group, Inc.,
Farm Team Corp. and MobileMedia Communications, Inc.
3.1 Restated Certificate of Incorporation. (1)
3.2 Certificate of Designations establishing the Series B Junior
Participating Preferred Stock. (2)
3.3 Certificate of Correction, filed with the Secretary of State of
Delaware on February 15, 1996. (1)
3.4 Certificate of Designations establishing the Series C Convertible
Preferred Stock. (3)
3.5** Form of Certificate of Amendment to the Restated Certificate of
Incorporation
3.6** Form of Certificate of Amendment to the Restated Certificate of
Incorporation
3.7 By-laws, as amended. (1)
4.1 Indenture, dated February 1, 1994, between Arch Communications, Inc.
(formerly known as USA Mobile Communications, Inc. II) and United
States Trust Company of New York, as Trustee, relating to the 9 1/2%
Senior Notes due 2004 of Arch Communications, Inc.(4)
4.2 Indenture, dated December 15, 1994, between Arch Communications,
Inc. (formerly known as USA Mobile Communications, Inc. II) and
United States Trust Company of New York, as Trustee, relating to the
14% Senior Notes due 2004 of Arch Communications, Inc. (5)
4.3 Indenture, dated June 29, 1998, between Arch Communications, Inc.
and U.S. Bank Trust National Association, as Trustee, relating to
the 12 3/4% Senior Notes due 2007 of Arch Communications, Inc. (3)
5.1* Opinion of Hale and Dorr LLP
8.1* Tax opinion of Hale and Dorr LLP
10.1 Second Amended and Restated Credit Agreement (Tranche A and Tranche
C Facilities), dated June 29, 1998, among Arch Paging, Inc., the
Lenders party thereto, The Bank of New York, Royal Bank of Canada
and Toronto Dominion (Texas), Inc. (3)
10.2 Second Amended and Restated Credit Agreement (Tranche B Facility),
dated June 29, 1998, among Arch Paging, Inc., the Lenders party
thereto. The Bank of New York, Royal Bank of Canada and Toronto
Dominion (Texas), Inc. (3)
10.3 Asset Purchase and Sale Agreement, dated April 10, 1998, among
OmniAmerica, Inc. and certain subsidiaries of Arch Communications
Group, Inc. (3)
10.4 Letter agreement, dated June 10, 1998, between Arch Communications
Group, Inc. and Motorola, Inc. (3)(6)
10.5** Debtors' Second Amended Joint Plan of Reorganization, dated as of
September 3, 1998, included as Annex C to the Prospectus which is a
part of this Registration Statement.
10.6** Commitment Letters to Purchase Stock and Warrants, dated as of
August 18, 1998, by and among Arch Communications Group, Inc.,
MobileMedia Communications Inc. and W. R. Huff Asset Management Co.,
L.L.C., The Northwestern Mutual Life Insurance Company, Northwestern
Mutual Series Fund, Inc., Credit Suisse First Boston Corporation and
Whippoorwill Associates, Inc.
10.7** Amendments to Commitment Letters to Purchase Stock and Warrants,
dated as of September 3, 1998, by and among Arch Communications
Group, Inc., MobileMedia Communications Inc. and W.R. Huff Asset
Management Co., L.L.C., The Northwestern Mutual Life Insurance
Company, Northwestern Mutual Series Fund, Inc., Credit Suisse First
Boston Corporation and Whippoorwill Associates, Inc.
10.8** Form of Registration Rights Agreement among Arch Communications
Group, Inc. and W. R. Huff Asset Management Co., L.L.C., The
Northwestern Mutual Life Insurance Company, Northwestern Mutual
Series Fund, Inc., Credit Suisse First Boston Corporation and
Whippoorwill Associates, Inc.
10.9** Form of Registration Rights Agreement among Arch Communications
Group, Inc. and certain Stockholders
10.10 Amendment No. 1 to Rights Agreement, dated June 29, 1998, between
Arch Communications Group, Inc. and the Bank of New York. (3)
10.11** Amendment No. 2 to Rights Agreement, dated as of August 18, 1998,
amending the Rights Agreement between Arch Communications Group,
Inc. and the Bank of New York.
</TABLE>
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10.12** Amendment No. 3 to Rights Agreement, dated September 3, 1998,
amending the Rights Agreement between Arch Communications Group,
Inc. and the Bank of New York.
10.13* Disclosure Statement to Debtors' Second Amended Joint Plan of
Reorganization, dated September 3, 1998.
10.14** Form of Warrant Agreement, between Arch Communications Group, Inc.
and the Bank of New York, as provided for in the First Amendment to
Agreement and Plan of Merger dated as of September 3, 1998, by and
among Arch Communications Group, Inc, Farm Team Corp. and
MobileMedia Communications Inc.
10.15** Commitment Letter, dated as of August 18, 1998, by and among Arch
Paging, Inc. and The Bank of New York, BNY Capital Markets, Inc.,
Toronto Dominion (Texas) Inc., TD Securities (USA) Inc., Royal Bank
of Canada and Barclays Bank PLC amending the Second and Amended
Restated Credit Agreements, dated June 29, 1998 (Tranche A, B and C
Facilities).
10.16** Bridge Commitment Letter, dated as of August 20, 1998, among Arch
Communications, Inc., Arch Communications Group, Inc. and The Bear
Stearns Companies, Inc., The Bank of New York, TD Securities (USA)
Inc. and the Royal Bank of Canada.
10.17** Amendment No. 1 to Registration Rights Agreement, dated August 19,
1998, amending the Registration Rights Agreement dated as of June
29, 1998 by and among Arch Communications Group, Inc. and the
Sandler Capital Partners IV, LP, Sandler Capital Partners IV, FTE
LP, South Fork Partners, The Georgica International Fund Limited,
Aspen Partners and Consolidated Press International Limited.
+10.18 Amended and Restated Stock Option Plan (8)
+10.19 Non-Employee Directors' Stock Option Plan (9)
+10.20 1989 Stock Option Plan, as amended (1)
+10.21 1995 Outside Directors' Stock Option Plan (10)
+10.22 1996 Employee Stock Purchase Plan (11)
+10.23 1997 Stock Option Plan (12)
+10.24 Deferred Compensation Plan for Nonemployee Directors (13)
+10.25 Form of Executive Retention Agreement by and between Messrs. Baker,
Daniels, Kuzia, Pottle and Saynor (13)
10.26 Stock Purchase Agreement, dated June 29, 1998, among Arch
Communications Group, Inc., Sandler Capital Partners IV, L.P.,
Sandler Capital Partners IV FTE, L.P., Harvey Sandler, John
Kornreich, Michael J. Marocco, Andrew Sandler, South Fork Partners,
the Georgica International Fund Limited, Aspen Partners and
Consolidated Press International Limited (3)
10.27 Registration Rights Agreement, dated June 29, 1998, among Arch
Communications Group, Inc., Sandler Capital Partners IV, L.P.,
Sandler Capital Partners IV FTE, L.P., Harvey Sandler, John
Kornreich, Michael J. Marocco, Andrew Sandler, South Fork Partners,
The Georgica International Fund Limited, Aspen Partners and
Consolidated Press International Limited (3)
10.28 Exchange Agreement, dated June 29, 1998, between Adelphia
Communications Corporation and Benbow PCS Ventures, Inc. (3)
10.29 Promissory Note, dated June 29, 1998, in the Principal amount of
$285,015, issued by Benbow PCS Ventures, Inc. to Lisa-Gaye Shearing
(3)
10.30 Guaranty, dated June 29, 1998, given by Arch Communications Group,
Inc. to Adelphia Communications Corporation (3)
10.31 Guaranty, dated June 29, 1998, given by Arch Communications Group,
Inc. to Lisa-Gaye Shearing (3)
10.32 Registration Rights Agreement, dated June 29, 1998, among Arch
Communications Group, Inc., Adelphia Communications Corporation and
Lisa-Gaye Shearing (3)
12.1* Statement re computation of earnings per share
21.1* Subsidiaries of the Registrant
23.1* Consent of Hale and Dorr LLP (contained in its opinion filed as
Exhibit 5.1)
23.2** Consent of Arthur Andersen LLP
23.3** Consent of Ernst & Young LLP
23.4** Consent of Wilkinson, Barker, Knauer & Quinn, LLP
23.5** Consent of Wiley, Rein & Fielding
24.1 Power of Attorney (included on signature page to this Registration
Statement)
27.1 Financial Data Schedule (7)
99.1** Form of Subscription Certificate and related documents
99.2** Forms of Notices of Guaranteed Delivery
</TABLE>
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* To be filed by amendment.
** Filed herewith.
+ Identifies exhibits constituting a management contract or compensation
plan.
(1) Incorporated by reference from the Registration Statement on Form S-3
(File No. 333-542) of Arch Communications Group, Inc.
<PAGE>
(2) Incorporated by reference from the Current Report on Form 8-K of Arch
Communications Group, Inc. dated October 13, 1995 and filed on October
24, 1995.
(3) Incorporated by reference from the Current Report on Form 8-K of Arch
Communications Group, Inc. dated June 26, 1998 and filed on July 23,
1998.
(4) Incorporated by reference from the Registration Statement on Form S-1
(File No. 33-72646) of Arch Communications, Inc.
(5) Incorporated by reference from the Registration Statement on Form S-1
(File No. 33-85580) of Arch Communications, Inc.
(6) A Confidential Treatment Request has been filed with respect to
portions of this exhibit so incorporated by reference.
(7) Incorporated by reference from the Quarterly Report on Form 10-Q of
Arch Communications Group, Inc. for the quarter ended June 30, 1998.
(8) Incorporated by reference from the Annual Report on Form 10-K of Arch
Communications Group. Inc. (then known as USA Mobile Communications,
Inc. II) for the fiscal year ended December 31, 1994.
(9) Incorporated by reference from the Registration Statement on Form S-4
(File No. 33-83648) of Arch (then known as USA Mobile Communications,
Inc. II).
(10) Incorporated by reference from the Registration Statement on Form S-3
(File No. 33-87474) of Arch Communications Group, Inc.
(11) Incorporated by reference from the Annual Report on Form 10-K of Arch
Communications Group, Inc. for the fiscal year ended December 31,
1995.
(12) Incorporated by reference from the Annual Report on Form 10-K of Arch
Communications Group, Inc. for the fiscal year ended December 31,
1996.
(13) Incorporated by reference from the Annual Report on Form 10-K of Arch
Communications Group, Inc. for the fiscal year ended December 31,
1997.
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ARCH COMMUNICATIONS GROUP, INC.,
FARM TEAM CORP.,
MOBILEMEDIA CORPORATION
AND
MOBILEMEDIA COMMUNICATIONS, INC.
DATED AS OF AUGUST 18, 1998
<PAGE>
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LIST OF EXHIBITS
EXHIBIT A.......................... First Amended Joint Plan of Reorganization
EXHIBIT B.......................... Buyer Warrant Agreement
EXHIBIT C.......................... Registration Rights Agreement
EXHIBIT D.......................... Amendment to Buyer's Rights Agreement
EXHIBIT E.......................... Opinion of Buyer's Financial Advisor
EXHIBIT F.......................... Buyer Charter Amendment
EXHIBITS G, H, I, J, K & L......... Standby Purchase Commitments
LIST OF SCHEDULES
SCHEDULE........................... Subsidiaries of the Company
SCHEDULE II........................ Pricing Mechanism
SCHEDULE III....................... Terms of Rights
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
The Merger
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1.1 The Merger; Effective Time........................................ 2
1.2 The Closing....................................................... 2
1.3 Actions at the Closing............................................ 2
1.4 Additional Action................................................. 3
1.5 Conversion of Securities.......................................... 3
1.6 Appointment of Exchange Agent; Distributions in Accordance with
Amended Plan...................................................... 3
1.7 Distribution to Holders of Buyer Common Stock..................... 3
1.8 Certificate of Incorporation...................................... 4
1.9 By-laws........................................................... 4
1.10 Directors and Officers............................................ 4
1.11 Payment of Administrative Claims and Expenses..................... 4
ARTICLE II
Representations and Warranties of the Parent and the Company
2.1 Organization, Qualification, Corporate Power and Authority........ 4
2.2 Capitalization.................................................... 5
2.3 Noncontravention.................................................. 5
2.4 Business Entities................................................. 6
2.5 Financial Statements; Accounts Receivable; Inventory.............. 6
2.6 Absence of Certain Changes........................................ 7
2.7 Undisclosed Liabilities........................................... 7
2.8 Tax Matters....................................................... 7
2.9 Tangible Assets................................................... 9
2.10 Owned Real Property............................................... 9
2.11 Intellectual Property............................................. 9
2.12 Real Property Leases.............................................. 10
2.13 Contracts......................................................... 11
2.14 Licenses and Authorizations....................................... 11
2.15 Litigation........................................................ 12
2.16 Employees......................................................... 12
2.17 Employee Benefits................................................. 13
2.18 Environmental Matters............................................. 14
2.19 Legal Compliance.................................................. 15
2.20 Subscriber Cancellations; Suppliers............................... 15
2.21 Capital Expenditures.............................................. 16
2.22 Brokers' Fees..................................................... 16
2.23 Certain Information............................................... 16
2.24 Disclosure........................................................ 16
</TABLE>
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ARTICLE III
Representations and Warranties of the Buyer
<C> <S> <C>
3.1 Organization Qualification, Corporate Power and Authority........... 16
3.2 Capitalization...................................................... 17
3.3 Noncontravention.................................................... 18
3.4 Business Entities................................................... 18
3.5 Reports and Financial Statements.................................... 19
3.6 Absence of Certain Changes.......................................... 19
3.7 Undisclosed Liabilities............................................. 20
3.8 Tax Matters......................................................... 20
3.9 Tangible Assets..................................................... 21
3.10 Owned Real Property................................................. 21
3.11 Intellectual Property............................................... 21
3.12 Real Property Leases................................................ 22
3.13 Contracts........................................................... 22
3.14 Licenses and Authorizations......................................... 23
3.15 Litigation.......................................................... 24
3.16 Employees........................................................... 24
3.17 Employee Benefits................................................... 24
3.18 Environmental Matters............................................... 25
3.19 Legal Compliance.................................................... 26
3.20 Merger Subsidiary................................................... 26
3.21 Capital Expenditures; Suppliers..................................... 26
3.22 Brokers' Fees....................................................... 27
3.23 Rights Agreement; Section 203....................................... 27
3.24 Opinion of Financial Advisor........................................ 27
3.25 Required Vote of the Buyer's Stockholders........................... 27
3.26 Certain Information................................................. 27
3.27 Disclosure.......................................................... 27
ARTICLE IV
Covenants
4.1 Best Efforts........................................................ 28
4.2 Approvals; Consents................................................. 28
4.3 Buyer Not To Control................................................ 29
4.4 Bankruptcy Covenants................................................ 29
4.5 Operation of Business............................................... 29
4.6 Notice of Breaches.................................................. 32
4.7 Exclusivity......................................................... 32
4.8 Breakup Fee Provisions.............................................. 34
4.9 Nasdaq National Market Quotation.................................... 35
4.10 Delivery of Financial Statements.................................... 35
4.11 Full Access......................................................... 35
4.12 Stockholders Approval; Meeting...................................... 35
4.13 Prospectus, Disclosure Statement, Etc............................... 36
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4.14 Application of Pinnacle Proceeds.................................... 36
4.15 FCC Filing.......................................................... 36
4.16 Indemnification; Director and Officers Insurance.................... 37
4.17 State Takeover Laws................................................. 37
4.18 Employees........................................................... 38
4.19 Rights Agreement.................................................... 38
4.20 Buyer Rights Offering; Registration Statement....................... 38
4.21 Reimbursement of Buyer's Expenses................................... 39
ARTICLE V
Conditions to Closing
5.1 Conditions to Obligations of Each Party............................. 39
5.2 Conditions to Obligations of the Buyer.............................. 41
5.3 Conditions to Obligations of the Company............................ 42
ARTICLE VI
Termination
6.1 Termination of Agreement............................................ 42
6.2 Effect of Termination............................................... 43
ARTICLE VII
Definitions
ARTICLE VIII
General Provisions
8.1 Press Releases and Announcements.................................... 48
8.2 No Third Party Beneficiaries........................................ 48
8.3 Entire Agreement.................................................... 48
8.4 Succession and Assignment........................................... 48
8.5 Counterparts........................................................ 48
8.6 Headings............................................................ 48
8.7 Notices............................................................. 48
8.8 Governing Law....................................................... 49
8.9 Amendments and Waivers.............................................. 49
8.10 Severability........................................................ 49
8.11 Expenses............................................................ 49
8.12 Specific Performance................................................ 49
8.13 Construction........................................................ 49
8.14 Incorporation of Exhibits and Schedules............................. 49
8.15 Knowledge........................................................... 49
8.16 Survival of Representations......................................... 49
8.17 Bankruptcy Process.................................................. 50
</TABLE>
iii
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") entered into as of
August 18, 1998 (the date of this Agreement or the "Agreement Date") by and
among Arch Communications Group, Inc., a Delaware corporation (the "Buyer"),
Farm Team Corp., a Delaware corporation and a wholly-owned subsidiary of Buyer
(the "Merger Subsidiary"), MobileMedia Corporation, a Delaware corporation
(the "Parent"), and MobileMedia Communications, Inc., a Delaware corporation
and a wholly-owned subsidiary of the Parent (the "Company" and, together with
the Buyer, the Merger Subsidiary and the Parent, the "Parties").
Preliminary Statement
A. The Parent, the Company and those subsidiaries of the Company set forth
in Schedule I attached hereto (collectively, the "Debtors" and each,
individually, a "Debtor") are debtors in possession in Chapter 11 cases (Case
Nos. 97-174 (PJW) through and including 97-192 (PJW)) (collectively the
"Chapter 11 Proceeding") pending before the United States Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court"). The Debtors have previously
filed a proposed Joint Plan of Reorganization dated January 27, 1998 (the
"Prior Plan") with the Bankruptcy Court.
B. This Agreement contemplates a merger of the Company into the Merger
Subsidiary. As a result of such merger, the separate corporate existence of
the Company shall cease and the Merger Subsidiary shall continue as the
Surviving Corporation (as defined in Section 1.1). For federal income tax
purposes, it is intended that such merger will qualify as a reorganization
under the provisions of Section 368(a)(2)(D) of the Internal Revenue Code of
1986, as amended (the "Code").
C. The merger contemplated by this Agreement shall constitute the basis for
the Debtor's First Amended Joint Plan of Reorganization in the form attached
hereto as Exhibit A, as amended from time to time as permitted hereby and
thereby (the "Amended Plan"). Pursuant to the Amended Plan, which shall be
filed with the Bankruptcy Court as soon as practicable after the date of this
Agreement (but not later than August 20, 1998 in any event): (i) all the
outstanding equity interests in the Company and the Parent shall be canceled
without consideration, and the Parent shall be dissolved; (ii) all allowed
prepetition claims against, and prepetition obligations and indebtedness of,
the Debtors (the "Allowed Claims") shall be (a) satisfied by the distribution
of cash, shares of capital stock of the Buyer, Rights (as defined in paragraph
(E) below) and/or certain other consideration to the holders of the Allowed
Claims or (b) otherwise discharged; (iii) the commitments under the DIP Loan
Agreement (as defined in Section 1.11) shall be terminated and all amounts
owed under or in respect of the DIP Loan Agreement shall be paid in full in
cash; and (iv) the Merger Subsidiary shall remain a wholly owned subsidiary of
the Buyer.
D. This Agreement contemplates that the Buyer shall cause the Surviving
Corporation (as defined in Section 1.1) to pay or assume all allowed
administrative and priority claims and expenses of the Debtors and shall make
available to the Surviving Corporation the monies necessary for the timely
payment thereof.
E. In connection with the Merger (as defined in Section 1.1) and as part of
the Amended Plan, the Buyer intends to conduct the Rights Offering (as defined
in Section 4.20), in which it will issue to holders of certain Allowed Claims
transferable Rights to purchase (i) shares of Common Stock, $0.01 par value
per share, of the Buyer ("Buyer Common Stock") or shares of Buyer Class B
Common Stock, if applicable, and (ii) warrants to purchase shares of Buyer
Common Stock ("Buyer Warrants"), such Buyer Warrants to be issued pursuant to
a warrant agreement in the form attached hereto as Exhibit B (the "Buyer
Warrant Agreement"). Contemporaneously with the execution and delivery of this
Agreement, certain holders of Allowed Claims (the "Standby Purchasers") are
making certain commitments in connection with the Rights Offering (the
"Standby Purchase Commitments"), copies of which are attached as Exhibits G,
H, I, J, K & L hereto. In partial consideration for the Standby Purchase
Commitments, the Buyer will issue to the Standby Purchasers certain Buyer
Warrants, and in connection with the Standby Purchase Commitments the Buyer
and the Standby
<PAGE>
Purchasers will enter into a registration rights agreement in the form
attached hereto as Exhibit C (the "Registration Rights Agreement").
F. Immediately following the Merger, the Buyer will issue additional Buyer
Warrants to the stockholders of the Buyer that were holders of record
immediately prior to such Merger.
G. The transactions contemplated by this Agreement, including the Merger,
shall be consummated pursuant to the Amended Plan as confirmed by an order of
the Bankruptcy Court entered pursuant to Section 1129 of the Bankruptcy Code
(as defined in Section 2.1(a)) (the "Confirmation Order"). Unless otherwise
defined herein, capitalized terms used herein shall have the meanings ascribed
to them in the Amended Plan.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties further
agree as follows:
ARTICLE I
The Merger
1.1 The Merger; Effective Time. Upon the terms and subject to the conditions
of this Agreement and in accordance with the Delaware General Corporation Law
(the "DGCL"), the Company shall merge with and into the Merger Subsidiary
(such merger being referred to herein as the "Merger") at the Effective Time
(as defined below in this Section 1.1). The Merger shall have the effects set
forth in Section 259 of the DGCL. At the Effective Time, the separate
corporate existence of the Company shall cease and thereafter the Merger
Subsidiary shall continue as the surviving corporation in the Merger (the
"Surviving Corporation"), and all the rights, privileges, immunities, powers
and franchises (of a public as well as of a private nature) of the Company and
the Merger Subsidiary and all property (real, personal and mixed) of the
Company and the Merger Subsidiary shall vest in the Surviving Corporation. The
"Effective Time" shall be the time at which the Company and the Merger
Subsidiary file a certificate of merger or other appropriate documents
prepared and executed in accordance with the relevant provisions of the DGCL
(the "Certificate of Merger") with the Secretary of State of the State of
Delaware or such later time as may be specified in the Certificate of Merger.
1.2 The Closing. Unless this Agreement shall have been terminated pursuant
to Article VI hereof, the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, commencing at 10:00 a.m.,
local time, on a date to be mutually agreed by the Company and the Buyer,
which date shall be at least seven, but no more than ten, business days after
the date upon which all the conditions to the obligations of the Parties to
consummate the transactions contemplated hereby set forth in Section 5.1
(other than Section 5.1(j)) have first been satisfied or waived, which date
shall be the same date as the Effective Date under the Amended Plan (the
"Closing Date"); provided that the Closing shall not occur until the condition
set forth in Section 5.1(j) shall have been satisfied and the conditions set
forth in Sections 5.2 and 5.3 shall have been satisfied or waived.
1.3 Actions at the Closing. At the Closing, (a) the Parent and the Company
shall deliver to the Buyer and the Merger Subsidiary the various certificates,
instruments and documents referred to in Section 5.2, (b) the Buyer and the
Merger Subsidiary shall deliver to the Company the various certificates,
instruments and documents referred to in Section 5.3, (c) the Buyer shall file
with the Secretary of State of the State of Delaware the Buyer Charter
Amendment (as defined in Section 4.12), (d) the Company and the Merger
Subsidiary shall immediately thereafter file with the Secretary of State of
the State of Delaware the Certificate of Merger, and (e) the Buyer shall
deliver (x) to the Pre-Petition Agent, for the benefit of the Pre-Petition
Lenders, immediately available funds equal to the excess of (i) $649,000,000
over (ii) the Company Tower Sale Proceeds (as defined in Section 5.2(f)), (y)
to the Company immediately available funds when and as required in amounts
sufficient to pay allowed administrative and priority claims and expenses of
the Debtors, whether allowed prior to or after the
2
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Effective Time, as set forth in the Amended Plan (collectively, the "Plan
Cash") and (z) to a bank trust company or other entity reasonably satisfactory
to the Company and the Buyer appointed by the Buyer to act as the exchange
agent (the "Exchange Agent") pursuant to Section 1.6(a) certificates
representing an aggregate number of shares of Buyer Common Stock determined in
accordance with the pricing mechanism set forth in Schedule II attached hereto
(the "Plan Shares") to be distributed as contemplated by Section 1.6(b), and
the Buyer shall issue Buyer Common Stock (and Buyer Class B Common Stock, if
applicable) and Buyer Warrants (x) purchased through the exercise of Rights or
(y) purchased by or otherwise issued to the Standby Purchasers in connection
with the Standby Purchase Commitments.
1.4 Additional Action. The Surviving Corporation may, at any time after the
Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the Merger
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
1.5 Conversion of Securities. At the Effective Time, by virtue of the Merger
and the Amended Plan and without any further action on the part of any person
or entity:
(a) Each share of common stock, $0.01 par value per share, of the Merger
Subsidiary issued and outstanding immediately prior to the Effective Time
shall remain issued and outstanding and shall evidence one share of common
stock, $0.01 par value per share, of the Surviving Corporation.
(b) Each share of capital stock of the Parent (collectively, the "Company
Stock") that is either outstanding or held in the treasury of the Parent
immediately prior to the Effective Time, each share of capital stock of the
Company, each share of capital stock of each of the other Debtors held by
any person or entity other than the Debtors, and each option, warrant or
other right issued by any of the Debtors to acquire any such capital stock
and outstanding immediately prior to the Effective Time shall be canceled
without payment of any consideration therefor and shall cease to exist.
Pursuant to Section 303 of the DGCL and the Amended Plan, holders of the
Company Stock shall have no statutory right of appraisal in connection with
the Merger, and such holders shall have no right to approve or disapprove
the Merger or this Agreement.
1.6 Appointment of Exchange Agent; Distributions in Accordance with Amended
Plan.
(a) Prior to the Effective Time, the Buyer shall appoint the Exchange Agent
to effect, pursuant to and in accordance with the Amended Plan, the
distribution of Plan Shares in exchange for, and in satisfaction of, certain
Allowed Class 6 Claims.
(b) The Buyer and the Surviving Corporation shall cause the Exchange Agent,
promptly after the Effective Time, to commence the distribution of Plan Shares
(which Plan Shares are defined in the Amended Plan as the "Directly
Distributed Creditor Stock Pool") to holders of Allowed Class 6 Claims in
exchange for, and in satisfaction of, such Allowed Class 6 Claims, all as
provided in the Amended Plan.
1.7 Distribution to Holders of Buyer Common Stock.
(a) The Buyer shall, as soon as practicable after the receipt of the
Confirmation Order, declare, subject to and effective immediately after the
occurrence of the Effective Time, a distribution of a number of Buyer Warrants
determined in accordance with the Amended Plan on each share of Buyer Common
Stock and the Buyer's Series C Convertible Preferred Stock, $.01 par value per
share (the "Buyer Preferred Stock" and, together with the Buyer Common Stock,
the "Buyer Stock"), outstanding immediately prior to the Effective Time (the
"Buyer Distribution"). The Buyer Distribution shall be made as promptly as
practicable following the Effective Time.
(b) Notwithstanding the foregoing, no fractional Buyer Warrants shall be
issued in the Buyer Distribution. In lieu thereof, fractional Buyer Warrants
that would otherwise be issued in the Buyer Distribution will be rounded up to
the nearest whole number of Buyer Warrants.
3
<PAGE>
1.8 Certificate of Incorporation. From and after the Effective Time, the
Certificate of Incorporation of the Merger Subsidiary, as in effect
immediately prior to the Effective Time (except that the name of the
corporation set forth therein shall be changed to the name of the Company) and
as amended by the Certificate of Merger, shall be the Certificate of
Incorporation of the Surviving Corporation, until thereafter further amended
as provided by law and such Certificate of Incorporation.
1.9 By-laws. From and after the Effective Time, the By-laws of the Merger
Subsidiary, as in effect immediately prior to the Effective Time (except that
the name of the corporation set forth therein shall be changed to the name of
the Company), shall be the By-Laws of the Surviving Corporation, until
thereafter further amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation and such By-laws.
1.10 Directors and Officers. From and after the Effective Time, the
directors and officers of the Merger Subsidiary immediately prior to the
Effective Time shall be and continue as directors and officers, respectively,
of the Surviving Corporation as of the Effective Time, until thereafter
changed in accordance with the Certificate of Incorporation and the By-Laws of
the Surviving Corporation.
1.11 Payment of Administrative Claims and Expenses. At the Effective Time,
the Buyer shall cause the Surviving Corporation to pay or assume the allowed
administrative and priority claims and expenses of the Debtors, whether
allowed prior to or after the Effective Time (including, without limitation,
(a) the payment of obligations under the existing debtor-in-possession
financing facility (the "DIP Loan Agreement") and (b) the assumption of post-
petition trade payables arising in the Ordinary Course of Business (as defined
in Section 2.3)), as specified in the Amended Plan. The Buyer shall make
available to the Surviving Corporation any monies necessary for the Surviving
Corporation to make timely payment of such claims and expenses.
ARTICLE II
Representations and Warranties of the Parent and the Company
Each of the Parent and the Company represents and warrants to the Buyer that
the statements contained in this Article II are true and complete, except as
set forth in the disclosure schedule of the Company delivered to the Buyer
simultaneously with the execution and delivery hereof (the "Company Disclosure
Schedule"). The Company Disclosure Schedule shall be arranged in sections and
paragraphs corresponding to the numbered and lettered sections and paragraphs
contained in this Article II, and the disclosures in any section or paragraph
of the Company Disclosure Schedule shall qualify other sections or paragraphs
in this Article II only to the extent that it is reasonably clear from a
reading of the disclosure that such disclosure is applicable to such other
sections or paragraphs. For purposes of this Agreement, a "Debtor Material
Adverse Effect" shall mean a material adverse effect on the businesses, assets
(including licenses, franchises and other intangible assets), financial
condition, operating income and prospects of the Debtors, taken as a whole,
excluding any effect generally applicable to the economy or the industry in
which the Company conducts its business.
2.1 Organization, Qualification, Corporate Power and Authority.
(a) Each of the Debtors is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation. Each
of the Debtors is duly qualified to conduct business and is in good standing
under the laws of each jurisdiction (each such jurisdiction being set forth in
Section 2.1(a) of the Company Disclosure Schedule) in which the nature of its
businesses or the ownership or leasing of its properties requires such
qualification, other than where the failure to be so qualified would not in
the aggregate have a Debtor Material Adverse Effect. Subject to supervision by
the Bankruptcy Court in accordance with Title 11 of the United States Code
(the "Bankruptcy Code"), each of the Debtors has all requisite corporate power
and authority to carry on the businesses in which it is engaged and to own and
use the properties owned and used by it. Each of the Debtors has furnished to
the Buyer true and complete copies of its charter and by-laws, each as amended
and as in effect on the date hereof. Each of the Debtors has at all times
complied with, and is not in
4
<PAGE>
default under or in violation of, any provision of its charter or by-laws,
other than where the failure to so comply and such defaults and violations
would not in the aggregate have a Debtor Material Adverse Effect.
(b) Subject to the entry of the Initial Merger Order (as defined in Section
4.4(a)), with respect to the Company Breakup Fee, the Buyer Breakup Fee and
the Buyer Reimbursement (each as defined in Article 4), and subject to the
entry of the Confirmation Order, with respect to the remaining terms and
conditions of this Agreement, each of the Parent and the Company has all
requisite power and authority to execute and deliver this Agreement. Subject
to the entry of the Initial Merger Order, with respect to the Company Breakup
Fee, the Buyer Breakup Fee and the Buyer Reimbursement, and subject to the
entry of the Confirmation Order, with respect to the remaining terms and
conditions of this Agreement, this Agreement has been (i) duly and validly
executed and delivered by the Parent and the Company and (ii) duly and validly
authorized by all necessary corporate action on the part of the Parent and the
Company. Subject to the entry of the Initial Merger Order, with respect to the
Company Breakup Fee, the Buyer Breakup Fee and the Buyer Reimbursement, and
subject to the entry of the Confirmation Order, with respect to the remaining
terms and conditions of this Agreement, this Agreement constitutes a valid and
binding obligation of the Parent and the Company enforceable against the
Parent and the Company in accordance with its terms.
(c) Each of the Debtors has the requisite power and authority to execute and
file with the Bankruptcy Court the Amended Plan. The Amended Plan has been (i)
duly and validly executed by each Debtor and (ii) duly and validly authorized
by all necessary corporate action on the part of each Debtor. Upon the entry
of the Confirmation Order, the Amended Plan will constitute a valid and
binding obligation of each Debtor enforceable against each Debtor in
accordance with its terms.
2.2 Capitalization. On the Closing Date, after giving effect to the Amended
Plan (but immediately prior to the Merger), the authorized capital stock of
each Debtor will be as set forth in Section 2.2 of the Company Disclosure
Schedule. On the Closing Date, after giving effect to the Amended Plan, there
will be no outstanding Company Stock and no outstanding or authorized options,
warrants, rights, calls, convertible instruments, agreements or commitments to
which any of the Debtors is a party or which are binding upon any of the
Debtors providing for the issuance, disposition or acquisition of any of its
capital stock or stock appreciation, phantom stock or similar rights.
2.3 Noncontravention. Except for the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), any applicable state
and foreign securities laws, the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), the Communications Act of 1934, as
amended (the "Communications Act"), and the regulations of the Federal
Communications Commission (the "FCC"), state public utility, telecommunication
or public service laws, and the Bankruptcy Code, the Confirmation Order and
the Amended Plan, none of the execution and delivery of this Agreement by the
Parent and the Company, the execution and filing with the Bankruptcy Court of
the Amended Plan by the Debtors or the consummation of the transactions
contemplated hereby or thereby will (a) conflict with or violate any provision
of the charter or by-laws of any Debtor; (b) require on the part of any Debtor
any filing with, or any permit, authorization, consent or approval of, any
court, arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority or agency (a "Governmental Entity"),
other than where the failure to make or obtain such filings, permits,
authorizations, consents or approvals would not in the aggregate have a Debtor
Material Adverse Effect or materially adversely affect the ability of the
Reorganized Debtors (which, for purposes of this Agreement, shall mean the
"Reorganized Debtors" as defined in the Amended Plan, together with "License
Co. L.L.C." as defined in the Amended Plan) to operate the business of the
Debtors following the Effective Time; (c) conflict with, result in a breach
of, constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of, create in any party any right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any post-petition contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest (as defined below in this
Section 2.3) or other arrangement to which any Debtor is a party or by which
any Debtor is bound
5
<PAGE>
or to which any of their respective assets is subject or any judgment, order,
writ, injunction, decree, statute, rule or regulation applicable to any Debtor
or any of their respective properties or assets, other than such conflicts,
violations, breaches, defaults, accelerations, terminations, modifications,
cancellations or notices, consents or waivers as would not in the aggregate
have a Debtor Material Adverse Effect; or (d) result in the imposition of any
Security Interest upon any assets of any Debtor. For purposes of this
Agreement, "Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge or other lien (whether arising by contract or by operation
of law), other than liens arising in the ordinary course of business
consistent with past custom and practice, including with respect to frequency
and amount (the "Ordinary Course of Business").
2.4 Business Entities.
(a) Section 2.4(a) of the Company Disclosure Schedule sets forth a true and
complete list of each corporation, partnership, limited liability company or
other form of business association (a "Business Entity") in which any Debtor,
directly or indirectly, owns any equity interest or any security convertible
into or exchangeable for an equity interest (each a "Debtor Business Entity")
which is material to the Parent and the Company.
(b) The Debtor Business Entities listed in Section 2.4(b) of the Company
Disclosure Schedule are the only Debtor Business Entities which have conducted
any operations, trade or businesses of the Debtors since January 30, 1997,
hold any Debtor Authorizations (as defined in Section 2.14(a)) or own any
assets necessary for the conduct of the businesses of the Debtors as currently
conducted.
(c) The Debtors own all the outstanding equity interests in each Debtor
Business Entity.
(d) No Debtor is in default under or in violation of any provision of its
organizational documents. To the knowledge of the Parent or the Company, all
the issued and outstanding equity interests of each Debtor Business Entity are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. On the Closing Date, after giving effect to the
effectiveness of the Amended Plan, all equity interests of each Debtor
Business Entity that are held of record or owned beneficially by the Parent,
the Company or another Debtor immediately prior to the Effective Time will be
held or owned by the respective Reorganized Debtors free and clear of any
restrictions on transfer (other than restrictions under the Securities Act and
state or foreign securities laws), claims, Security Interests, options,
warrants, rights, contracts, calls, commitments, equities and demands.
(e) There are no voting trusts, proxies or other agreements or
understandings with respect to the voting of any equity interests of any
Debtor Business Entity to which any Debtor is a party or by which it is bound,
or, to the Parent's or the Company's knowledge, any other such trusts,
proxies, agreements or understandings.
2.5 Financial Statements; Accounts Receivable; Inventory.
(a) The Debtors have previously provided to the Buyer (i) the audited
consolidated balance sheets and statements of operations and changes in
stockholders' equity and cash flows of the Company as of December 31, 1996 and
1997 and for the years ended December 31, 1995, 1996 and 1997 (the "Audited
Company Financial Statements") and (ii) the unaudited consolidated balance
sheet (which indicates separately liabilities arising on or after January 30,
1997 (the "Filing Date")) (the "June 30 Unaudited Company Balance Sheet") and
the unaudited consolidated statements of operations and changes in
stockholders' equity and cash flows of the Company as of and for the six-month
period ended June 30, 1998 (the "Company Balance Sheet Date"). Such financial
statements (collectively, the "Company Financial Statements"), (i) comply as
to form in all material respects with applicable accounting requirements and
the published rules and regulations of the U. S. Securities and Exchange
Commission (the "SEC") with respect thereto; (ii) have been prepared in
accordance with United States generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto and, in the case
of interim financial statements, as permitted by Form 10-Q under the Exchange
Act); (iii) fairly present the consolidated financial condition, results of
operations and cash flows of the Company as of the respective dates thereof
and for the periods referred to therein; and (iv) are consistent with the
books and records of the Company subject, in the
6
<PAGE>
case of clauses (i), (ii) and (iii), (a) to the paragraph in the report of
independent auditors on the Audited Company Financial Statements describing
conditions that raise substantial doubt about the Company's ability to
continue as a going concern, and (b) to the Company Financial Statements not
including any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification
of liabilities that may result from the outcome of these uncertainties.
(b) The accounts receivable of the Debtors reflected on the June 30
Unaudited Company Balance Sheet, and those arising since the date of the June
30 Unaudited Company Balance Sheet, are valid receivables subject to no set-
offs or counterclaims, net of a reserve for bad debts, which reserve is
reflected on the June 30 Unaudited Company Balance Sheet. The inventories of
the Debtors reflected on the June 30 Unaudited Company Balance Sheet are of a
quality and quantity useable and/or saleable in the Ordinary Course of
Business, except as written down to net realizable value on the June 30
Unaudited Company Balance Sheet. All inventory shown on the June 30 Unaudited
Company Balance Sheet has been priced at the lower of cost or net realizable
value.
2.6 Absence of Certain Changes. Since the Company Balance Sheet Date, (a)
there has not been any Debtor Material Adverse Effect, nor has there occurred
any event or development that would have a Debtor Material Adverse Effect, and
(b) no Debtor has taken any action that would be prohibited by subsection (a)
of Section 4.5 below if taken from and after the date of this Agreement.
Except as set forth in amendments thereto currently being prepared that
decrease the Debtors' liabilities thereunder, the Statement of Affairs and
Schedules of Assets and Liabilities and Executory Contracts of the Debtors
filed with the Bankruptcy Court in the Chapter 11 Proceeding, as amended,
includes a list which is true and complete in all material respects of all the
material creditors, whether secured or unsecured, of the Debtors at the Filing
Date.
2.7 Undisclosed Liabilities. None of the Debtors has any liability (whether
known or unknown, whether absolute or contingent, whether liquidated or
unliquidated, whether due or to become due and whether arising prior to or
subsequent to the Filing Date), except for (a) liabilities that will be fully
discharged in the Chapter 11 Proceeding at the Effective Time, paid from the
Plan Cash and the Plan Shares in accordance with the terms of the Amended Plan
or, with respect to obligations arising under the DIP Loan Agreement,
otherwise paid in full in cash; (b) liabilities arising after the Filing Date
separately shown or expressly reserved for separately on the June 30 Unaudited
Company Balance Sheet; (c) liabilities that have arisen since the Company
Balance Sheet Date in the Ordinary Course of Business of the Debtors and that
are similar in nature and amount to the liabilities that arose during the
comparable period of time in the immediately preceding fiscal period; and (d)
liabilities incurred in the Ordinary Course of Business of the Debtors that
are not required by GAAP to be reflected on the June 30 Unaudited Company
Balance Sheet and that are not in the aggregate material. Section 2.7 of the
Company Disclosure Statement sets forth all amounts due under the Dial Page
Indenture at June 30, 1998.
2.8 Tax Matters.
(a) (i) Each of the Debtors has filed all Tax Returns (as defined below in
this Section 2.8(a)) that it was required to file, and all such Tax Returns
were true and complete in all material respects. (ii) No Debtor is or has ever
been a member of a group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary Tax Returns, other than a
group of which only the Debtors are or were members. (iii) The Debtors have
paid all Taxes (as defined below in this Section 2.8(a)) of the Debtors that
were due and payable prior to the date hereof. (iv) All Taxes that any Debtor
is or was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental Entity. For purposes of this Agreement, "Taxes" means all taxes,
charges, fees, levies or other similar assessments or liabilities, including,
without limitation, income, gross receipts, ad valorem, premium, value-added,
excise, real property, personal property, sales, use, transfer, withholding,
employment, payroll and franchise taxes imposed by the United States of
America or any state, local or foreign government, or any agency thereof, or
other political subdivision of the United States or any such government, and
any interest, fines, penalties, assessments or additions to tax resulting
from, attributable to or incurred in connection with any tax or any contest or
dispute thereof. For purposes of this Agreement, "Tax Returns" means all
reports, returns, declarations, statements or other information required to be
supplied to a taxing authority in connection with Taxes.
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(b) (i) The Debtors have delivered or otherwise made available to the Buyer
true and complete copies of all federal income Tax Returns for the "affiliated
group" (as defined in Section 1504(a) of the Code) of which the Parent is the
common parent and the Debtors are members (the "Company Group"), together with
all related examination reports and statements of deficiency, for all periods
commencing on or after December 1, 1993 and, to the extent in the possession
of the Debtors, true and complete copies of the portion of the federal income
Tax Returns of any member of a Debtor Affiliated Group (as defined below),
together with all related examination reports and statements of deficiency,
relating to the activities of any Debtor for all Debtor Affiliated Periods (as
defined below). For purposes of this Section 2.8, "Debtor Affiliated Group"
means each group of corporations with which any Debtor has filed (or was
required to file) consolidated, combined, unitary or similar Tax Returns and
"Debtor Affiliated Period" means a period in which a Debtor was a member of a
Debtor Affiliated Group. (ii) The federal income Tax Returns of the Company
Group have been audited by the Internal Revenue Service or are closed by the
applicable statute of limitations for all taxable years through the taxable
year specified in Section 2.8(b) of the Company Disclosure Schedule. (iii) The
Debtors have made available to the Buyer true and complete copies of all other
Tax Returns of the Debtors in the possession of the Debtors, together with all
related examination reports and statements of deficiency, and, to the extent
in the possession of the Debtors, true and complete copies of the portion of
all other Tax Returns of any member of a Debtor Affiliated Group, together
with all related examination reports and statements of deficiency, relating to
the activities of any Debtor for all Debtor Affiliated Periods. (iv) No
examination or audit of any Tax Return of any Debtor by any Governmental
Entity is currently in progress, threatened or contemplated. (v) No Debtor has
been informed by any jurisdiction that the jurisdiction believes that the
Debtor was required to file any Tax Return that has not since been timely
filed or, if not timely filed, with respect to which an assessed amount has
not since been paid. (vi) No Debtor has waived any statute of limitations with
respect to Taxes or agreed to an extension of time with respect to a Tax
assessment or deficiency which waiver or extension of time is still in effect.
(c) No Debtor (i) is a "consenting corporation" within the meaning of
Section 341(f) of the Code and none of the assets of the Debtors is subject to
an election under Section 341(f) of the Code; (ii) has made any payments, is
obligated to make any payments, or is a party to any agreement that could
obligate it to make any payments that may be treated as an "excess parachute
payment" under Section 280G of the Code; (iii) has any actual or potential
liability for any Taxes of any person (other than the Debtors) under Treasury
Regulation Section 1.1502-6 (or any similar provision of federal, state,
local, or foreign law), or as a transferee or successor, by contract, or
otherwise; or (iv) is or has been required to make a basis reduction pursuant
to Treasury Regulation Section 1.1502-20(b) or Treasury Regulation Section
1.337(d)-2(b) other than a reduction required by reason of the transactions
contemplated by this Agreement, if any.
(d) None of the assets of any Debtor: (i) is property that is required to be
treated as being owned by any other person pursuant to the provisions of
former Section 168(f)(8) of the Code; (ii) is "tax-exempt use property" within
the meaning of Section 168(h) of the Code; or (iii) directly or indirectly
secures any debt the interest on which is tax exempt under Section 103(a) of
the Code.
(e) No Debtor will have undergone a change in its method of accounting
requiring an inclusion in its taxable income of an adjustment pursuant to
Section 481(c) of the Code for any taxable period beginning on or after the
Closing Date other than a change occurring by reason of the transactions
contemplated by this Agreement, if any.
(f) No state or federal "net operating loss" of the Debtors determined as of
the Closing Date is subject to limitation on its use pursuant to Section 382
of the Code or comparable provisions of state law as a result of any
"ownership change" within the meaning of Section 382(g) of the Code occurring
prior to the Closing Date.
(g) Section 2.8(g) of the Company Disclosure Schedule sets forth in
reasonable detail the following information with respect to the Debtors as of
the most recent practicable date: (i) the basis of the Debtors in their
assets; (ii) the basis of the stockholder(s) of the Debtors (other than the
Company) in its stock (or the amount of any "excess loss account"); (iii) the
amount of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution allocable to the
Debtors; and
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(iv) the amount of any deferred gain or loss allocable to the Debtors arising
out of any "deferred intercompany transaction."
(h) Neither the Parent nor the Company has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
2.9 Tangible Assets. The Debtors own or lease all tangible assets necessary
for the conduct of their respective businesses as presently conducted. Each
such tangible asset is free from material defects, has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear) and is suitable for the purposes for
which it is presently used, other than where the failures or defects would not
in the aggregate have a Debtor Material Adverse Effect.
2.10 Owned Real Property. The Company has previously made available to the
Buyer a true and complete listing of all material real property that has been
owned by the Debtors at any time on or after January 30, 1997 (other than the
real property that the Debtors have agreed to sell pursuant to the Purchase
Agreement dated as of July 7, 1998 among the Debtors and Pinnacle Towers Inc.
("Pinnacle") (as approved by order of the Bankruptcy Court entered on August
10, 1998, and as such agreement may be amended in accordance with the terms
hereof and thereof and in accordance with the terms of such order of the
Bankruptcy Court, the "Debtor Tower Agreement"). With respect to each such
parcel of real property which is currently owned by the Debtors, the
identified owner has good record and marketable title to such parcel, free and
clear of any Security Interest, easement, covenant or other restriction,
except for Security Interests in favor of the lenders under the DIP Loan
Agreement, and Security Interests, easements, covenants and other restrictions
which do not materially impair the use, occupancy or value of such parcel as
presently used in the Debtors' businesses.
2.11 Intellectual Property.
(a) The Debtors own, license or otherwise have the legally enforceable right
to use all patents, trademarks, trade names, service marks, copyrights, and
any applications for such patents, trademarks, trade names, service marks and
copyrights, schematics, technology, know-how, computer software programs or
applications and tangible or intangible proprietary information or material
used in the operation of the businesses of the Debtors or necessary for the
operation of the businesses of the Debtors as presently conducted by the
Debtors (collectively, "Debtors' Intellectual Property"). Each such item of
Debtors' Intellectual Property owned or available for use by the Debtors
immediately prior to Closing will be owned or available for use by the
Reorganized Debtors and the Buyer on substantially similar terms and
conditions immediately following the Closing. No other person or entity has
any rights to any of the Debtors' Intellectual Property, and no other person
or entity is infringing, violating or misappropriating any of the Debtors'
Intellectual Property used in the businesses of the Debtors, other than such
infringements, violations or misappropriations as would not in the aggregate
have a Debtor Material Adverse Effect.
(b) The business, operations and activities of each Debtor as presently
conducted or as conducted at any time within the two years prior to the date
of this Agreement have not materially infringed or violated, or constituted a
material misappropriation of, and do not now materially infringe or violate,
or constitute a material misappropriation of, any intellectual property rights
of any other person or entity. Since January 30, 1997, no Debtor has received
any written, or to its knowledge, verbal, complaint, claim or notice alleging
any such infringement, violation or misappropriation which has not been
disposed of through a settlement agreement described in Section 2.11(b) of the
Company Disclosure Schedule.
(c) Section 2.11(c) of the Company Disclosure Schedule sets forth each
patent or trademark registration which has been issued to or is owned by any
Debtor with respect to any Debtors' Intellectual Property, identifies each
pending patent or trademark application or application for registration which
any Debtor has made or which any Debtor owns with respect to any Debtors'
Intellectual Property, identifies, with respect to each such patent or
trademark registration or application: (i) the jurisdiction or jurisdictions
where such filings have been made;
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and (ii) an estimate of the aggregate application, renewal, continuation or
other fees payable with respect to such patent or trademark registrations and
applications within six months of the date of this Agreement, and identifies
each license or other agreement pursuant to which any Debtor has granted
(other than in the Ordinary Course of Business) any rights to any third party
with respect to any Debtors' Intellectual Property. The Debtors have delivered
or otherwise made available to the Buyer true and complete copies of all such
licenses and agreements (each as amended to date) and have made available to
the Buyer true and complete copies of all other written documentation
evidencing ownership of, and any claims or disputes relating to, each such
item, as well as all patents and trademark registrations and applications.
(d) Section 2.11(d) of the Company Disclosure Schedule sets forth each item
of Debtors' Intellectual Property (other than commercially available software
generally available to the public at a license fee of less than $10,000) used
by any Debtor in the operation of its business that is owned by a party other
than the party using it. The Debtors have delivered or otherwise made
available to the Buyer true and complete copies of all licenses, sublicenses
or other agreements (each as amended to date) pursuant to which any Debtor
uses such Debtors' Intellectual Property, all of which are set forth in
Section 2.11(d) of the Company Disclosure Schedule.
(e) The Debtors have previously delivered or otherwise made available to the
Buyer true and complete copies of all internal reports, investigations,
analyses or other documents concerning the Debtors' Year 2000 compliance.
2.12 Real Property Leases. Section 2.12 of the Company Disclosure Schedule
lists all real property (other than tower sites) leased or subleased to the
Debtors, indicating, in each case, the term of the lease and any extension and
expansion options and the rent payable under such lease. The Debtors have made
available to the Buyer true and complete copies of all such leases and
subleases (each as amended to date), together with true and complete lists of
the tower sites omitted from Section 2.12 of the Company Disclosure Schedule.
With respect to each such lease and sublease:
(a) the lease or sublease is legal, valid, binding, enforceable and in
full force and effect, subject to the effect of the Chapter 11 Proceeding
and bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and except as the availability
of equitable remedies may be limited by general principles of equity;
(b) if assumed pursuant to the Amended Plan, the lease or sublease will
continue to be legal, valid, binding, enforceable and in full force and
effect immediately following the Closing with the same terms as in effect
immediately prior to the Closing, subject to the effect of bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and except as the availability of equitable
remedies may be limited by general principles of equity;
(c) none of the Debtors, nor, to the Parent's or the Company's knowledge,
any other party to the lease or sublease, is in material breach or default,
and no event (other than (i) the nonpayment of rent or other charges by the
Debtors with respect to periods prior to the Filing Date or (ii) the
commencement of the Chapter 11 Proceeding) has occurred which, with notice
or lapse of time, would constitute a material breach or default by the
Debtors or, to the Parent's or the Company's knowledge, by any such other
party, or permit termination, modification or acceleration thereunder;
(d) to the knowledge of the Debtors, there are no material disputes, oral
agreements or forbearance programs in effect as to the lease or sublease;
(e) none of the Debtors has assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or
subleasehold;
(f) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said
facilities; and
(g) other than in the Ordinary Course of Business, no construction,
alteration or other leasehold improvement work with respect to the lease or
sublease remains to be paid for or performed by the Debtors (except amounts
owing for periods prior to the Filing Date).
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2.13 Contracts.
(a) Section 2.13 of the Company Disclosure Schedule sets forth a true and
complete list of all written arrangements (including, without limitation,
written agreements) to which any Debtor is a party which, pursuant to the
rules and regulations of the SEC, would have to be attached as exhibits as
material contracts to an Annual Report on Form 10-K filed by the Parent or the
Company if such Annual Report were filed on the date of this Agreement.
(b) The Debtors have delivered or otherwise made available to the Buyer a
true and complete copy of each written arrangement (each as amended to date)
required to be listed in Section 2.13 of the Company Disclosure Schedule. With
respect to each written arrangement so listed: (i) as to a prepetition
agreement susceptible of assumption, upon the assumption thereof by the
Debtors pursuant to Section 365 of the Bankruptcy Code as specified in the
Amended Plan, the written arrangement will continue to be legal, valid,
binding, enforceable and in full force and effect immediately following the
Closing with the same terms as in effect immediately prior to the Closing,
subject to the effect of bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and except as
the availability of equitable remedies may be limited by general principles of
equity; and (ii) none of the Debtors nor, to the Parent's or the Company's
knowledge, any other party, is in material breach or default, and no event
(other than (x) the failure by the Debtor to pay an amount due thereunder with
respect to goods or services rendered prior to the Filing Date, (y) the
failure by the Debtor to render goods or services thereunto prior to the
Filing Date or (z) the commencement of the Chapter 11 Proceeding) has occurred
which with notice or lapse of time would constitute a material breach or
default by the Debtors or, to the Parent's or the Company's knowledge, by any
such other party, or permit termination, modification or acceleration, under
the written arrangement. None of the Debtors is a party to any oral contract,
agreement or other arrangement which, if reduced to written form, would be
required to be listed in Section 2.13 of the Company Disclosure Schedule under
the terms of this Section 2.13. None of the Debtors is restricted by any
arrangement from carrying on its business anywhere in the United States.
2.14 Licenses and Authorizations.
(a) The Debtors hold all licenses, permits, certificates, franchises,
ordinances, registrations, or other rights, applications and authorizations
filed with, granted or issued by, or entered by any Governmental Entity,
including, without limitation, the FCC or any state or local regulatory
authorities or any state or local public service commission or public utility
commission (each, a "State Authority") asserting jurisdiction over any Debtor
or its businesses or assets, that are required for the conduct of their
businesses as currently being conducted (each as amended to date)
(collectively, the "Debtor Authorizations"), other than such licenses,
permits, certificates, franchises, ordinances, registrations or other rights,
applications and authorizations the absence of which would not in the
aggregate materially impair the ability of either the Parent or the Company to
consummate the transactions contemplated hereby or of the Reorganized Debtors
to own and operate the properties, assets and businesses of the Debtors
following the Closing. Section 2.14(a) of the Company Disclosure Schedule
contains a true and complete list of such Debtor Authorizations.
(b) Section 2.14(b) of the Company Disclosure Schedule contains a true and
complete list of (i) each application of the Debtors pending before the FCC
(collectively, the "Debtor FCC Applications"); (ii) each FCC permit and FCC
license which is not a Debtor Authorization but in which any Debtor, directly
or indirectly, holds an interest, including as a stakeholder in the licensee
(collectively, the "Indirect Debtor Authorizations"); and (iii) all licenses,
certificates, consents, permits, approvals and authorizations for the benefit
of the Debtors pending before any State Authority (collectively, the "Debtor
State Applications"). The Debtor Authorizations, the Debtor FCC Applications,
the Indirect Debtor Authorizations and the Debtor State Applications
(collectively, the "Debtor Licenses and Authorizations") are the only federal,
state or local licenses, certificates, consents, permits, approvals and
authorizations that are required for the conduct of the business and
operations of the Debtors as presently conducted, other than such consents,
permits, approvals or authorizations the absence of which would not in the
aggregate materially impair the ability of either the Parent or the Company to
either consummate the transactions contemplated hereby or of the Reorganized
Debtors to own and operate the properties, assets and businesses of the
Debtors following the Closing.
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(c) The Debtor Authorizations and, to the Parent's and the Company's
knowledge, the Indirect Debtor Authorizations are in full force and effect
and, other than Security Interests in favor of the lenders under the DIP Loan
Agreement and the Pre-Petition Lenders, have not been pledged or otherwise
encumbered, assigned, suspended, modified in any material adverse respect,
canceled or revoked, and each Debtor has operated in compliance with all terms
thereof or any renewals thereof applicable to it, other than where the failure
to so comply would not in the aggregate have a Debtor Material Adverse Effect
or materially impair the ability of either the Parent or the Company to
consummate the transactions contemplated hereby or of the Reorganized Debtors
to own and operate the properties, assets and businesses of the Debtors
following the Closing. No event has occurred with respect to any of the Debtor
Authorizations which permits, or after notice or lapse of time or both would
permit, revocation or termination thereof or would result in any other
material impairment of the rights of the holder of any such Debtor
Authorizations. To the knowledge of the Parent or the Company, there is not
pending any application, petition, objection or other pleading with the FCC,
any State Authority or any similar body having jurisdiction or authority over
the operations of the Debtors which questions the validity of or contests any
Debtor Authorization or which could reasonably be expected, if accepted or
granted, to result in the revocation, cancellation, suspension or any
materially adverse modification of any Debtor Authorization.
(d) Except for approval by the Bankruptcy Court or by the FCC as
contemplated by Section 4.15 or as set forth in Section 2.14(d) of the Company
Disclosure Schedule, no permit, consent, approval, authorization,
qualification or registration of, or declaration to or filing with, any
Governmental Entity is required to be obtained or made by any Debtor in
connection with the transfer or deemed transfer of the Debtor Licenses and
Authorizations to the Buyer as a result of the consummation of the
transactions contemplated hereby, except where the failure to obtain or make
such permit, consent, approval, authorization, qualification, registration,
declaration or filing would not materially impair the ability of the Company
to consummate the transactions contemplated hereby or the Reorganized Debtors
to own and operate the properties, assets and businesses of the Debtors
following the Closing.
2.15 Litigation. Except as to claims arising prior to the Filing Date that
are within the jurisdiction of the Bankruptcy Court or are to be resolved in
the Chapter 11 Proceeding or by force of the discharge granted to the Debtors
in connection with the Chapter 11 proceeding, as of the date of this
Agreement: (a) there is no action, suit, proceeding or investigation to which
any Debtor is a party (either as a plaintiff or defendant) pending or, to the
Parent's or the Company's knowledge, threatened before any court, Governmental
Entity or arbitrator, and, to the Parent's or the Company's knowledge, there
is no basis for any such action, suit, proceeding or investigation; (b) none
of the Debtors nor, to the Parent's or the Company's knowledge, any officer,
director or employee of any Debtor has been permanently or temporarily
enjoined by any order, judgment or decree of any court or Governmental Entity
from engaging in or continuing to conduct the business of the Debtors; and (c)
no order, judgment or decree of any court or Governmental Entity has been
issued in any proceeding to which any Debtor is or was a party or, to the
Parent's or the Company's knowledge, in any other proceeding, that enjoins or
requires any Debtor to take action of any kind with respect to its businesses,
assets or properties. Except for the regulatory matters addressed in Section
2.14, none of the actions, suits, proceedings or investigations listed in
Section 2.15 of the Company Disclosure Schedule, individually or collectively,
if determined adversely to the interests of the Debtors, would have a Debtor
Material Adverse Effect.
2.16 Employees.
(a) Section 2.16(a) of the Company Disclosure Schedule sets forth a true and
complete list as of the most recent practicable date of all employment
contracts or agreements relating to employment to which any of the Debtors is
a party which are not terminable by the Debtors without penalty upon less than
30 or fewer days' notice.
(b) There are no collective bargaining agreements to which any of the
Debtors is a party. No Debtor has experienced any strikes, grievances, claims
of unfair labor practices or other collective bargaining disputes and, to the
Parent's or the Company's knowledge, no organizational effort is presently
being made or threatened by or on behalf of any labor union with respect to
its employees. To the knowledge of the Parent or the Company,
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there is no reasonable basis to believe that any Debtor will be subject to any
labor strike or other organized work force disturbance following the Closing.
2.17 Employee Benefits.
(a) Section 2.17(a) of the Company Disclosure Schedule contains a true and
complete list of all Employee Benefit Plans (as defined below in this Section
2.17(a)) maintained, or contributed to, by any Debtor or any ERISA Affiliate
(as defined below in this Section 2.17(a)) of any Debtor ("Company Employee
Benefit Plans"). For purposes of this Agreement, "Employee Benefit Plan" means
any "employee pension benefit plan" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), any
"employee welfare benefit plan" (as defined in Section 3(l) of ERISA), and any
other material written or oral plan, agreement or arrangement involving direct
or indirect employee compensation, including, without limitation, insurance
coverage, severance benefits, disability benefits, pension, retirement plans,
profit sharing, deferred compensation, bonuses, stock options, stock purchase,
phantom stock, stock appreciation or other forms of incentive compensation or
post-retirement compensation. For purposes of this Agreement, "ERISA
Affiliate" means any member of (i) a controlled group of corporations (as
defined in Section 414(b) of the Code); (ii) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code); or (iii) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code). True and complete copies of (i)
all Company Employee Benefit Plans that have been reduced to writing; (ii)
written summaries of all unwritten Company Employee Benefit Plans; (iii) all
trust agreements, insurance contracts and summary plan descriptions related to
the Company Employee Benefit Plans; (iv) the annual report filed on IRS Form
5500, 5500C or 5500R, if applicable, for the most recent plan year for each
Company Employee Benefit Plan; and (v) the most recent qualification letter
issued by the Internal Revenue Service with respect to each Company Employee
Benefit Plan that is intended to qualify under Section 401(a) of the Code,
have been made available to the Buyer. Each Company Employee Benefit Plan has
been administered in accordance with its terms in all material respects, and
each Debtor and, to the Parent's or the Company's knowledge, each ERISA
Affiliate of any Debtor has in all material respects met its obligations (if
any) with respect to each Company Employee Benefit Plan and has made all
required contributions (if any) thereto. The Debtors and all Company Employee
Benefit Plans are in compliance in all material respects with the currently
applicable provisions (if any) of ERISA, the Code and other applicable
federal, state and foreign laws and the regulations thereunder. Each Company
Employee Benefit Plan that is intended to qualify under Section 401(a) of the
Code is so qualified. Each Company Employee Benefit Plan that is required to
satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been reviewed
for compliance with, and has satisfied the requirements of, said Sections for
each plan year ending prior to the Closing.
(b) To the Parent's or the Company's knowledge, as of the date of this
Agreement, there are no inquiries or investigations by any Governmental
Entity, termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Company Employee Benefit Plans and
proceedings with respect to qualified domestic relations orders), suits or
proceedings against or involving any Company Employee Benefit Plan or
asserting any rights or claims to benefits under any Company Employee Benefit
Plan.
(c) Neither any Debtor nor, to the Parent's or the Company's knowledge, any
ERISA Affiliate of any Debtor has ever maintained a Company Employee Benefit
Plan subject to Section 412 of the Code, Part 3 of Subtitle B of Title I of
ERISA, or Title IV of ERISA. At no time has any Debtor or, to the Parent's or
the Company's knowledge, any ERISA Affiliate of any Debtor been obligated to
contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA) that is subject to Title IV of ERISA. No act or omission has occurred
and no condition exists with respect to any Company Employee Benefit Plan that
would subject any Debtor or, to the Company's knowledge, any ERISA Affiliate
of any Debtor to any material fine, penalty, Tax or liability of any kind
imposed under ERISA or the Code. No prohibited transaction (as defined in
Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to
any Company Employee Benefit Plan that is subject to ERISA or the Code. No
Company Employee Benefit Plan, plan documentation or agreement, summary plan
description or other written communication distributed generally to employees
by its terms prohibits any Debtor from amending or terminating any such
Company Employee Benefit Plan and any Company Employee
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Benefit Plan may be terminated without liability to any Debtor or the Buyer,
except for benefits accrued through the date of termination. Except as may be
required by Part 6 of Title I of ERISA or similar state laws regarding
continuation of benefits, no former employees participate in any employee
welfare benefit plans listed in Section 2.17(a) of the Company Disclosure
Schedule beyond the month of the termination of his employment. No Company
Employee Benefit Plan includes in its assets any securities issued by the
Debtors. No Company Employee Benefit Plan has been subject to tax under
Section 511 of the Code.
(d) Section 2.17(d) of the Company Disclosure Schedule lists each: (i)
agreement with any director, executive officer or other key employee of the
Debtors (A) the benefits of which are contingent, or the terms of which are
altered, upon the occurrence of a transaction involving the Debtors of the
nature of any of the transactions contemplated by this Agreement, (B)
providing any term of employment or compensation guarantee, or (C) providing
severance benefits or other benefits upon the consummation of any transaction
or after the termination of employment of such director, executive officer or
key employee; (ii) agreement, plan or arrangement under which any person may
receive a payment from any Debtor that may be subject to the tax imposed by
Section 4999 of the Code or may constitute a "parachute payment" under Section
280G of the Code; and (iii) agreement or plan binding any Debtor, including,
without limitation, any stock option plan, stock appreciation right plan,
restricted stock plan, stock purchase plan, severance benefit plan, or any
Company Employee Benefit Plan, any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by the occurrence
of any of the transactions contemplated by this Agreement or the value of any
of the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
2.18 Environmental Matters.
Except for Sections 2.5(a), 2.23 and 2.24, this Section 2.18 contains the
exclusive representations and warranties of the Parent and the Company
concerning environmental matters, including but not limited to Environmental
Laws and Materials of Environmental Concern (as both of those terms are
defined below in this Section 2.18). Each of the Parent and the Company
represents and warrants as follows:
(a) Each of the Debtors is in compliance with all applicable
Environmental Laws (as defined below in this Section 2.18(a)), other than
where the failure to be in compliance would not in the aggregate have a
Debtor Material Adverse Effect. There is no pending or, to the Parent's or
the Company's knowledge, threatened civil or criminal litigation, written
notice of violation, formal administrative proceeding, or written notice of
investigation or inquiry or written information request by any Governmental
Entity, relating to any Environmental Law involving any Debtors or their
respective assets and properties. For purposes of this Agreement,
"Environmental Law" means any foreign, federal, state or local law,
statute, permits, orders, rule or regulation or the common or decisional
law relating to the environment or occupational health and safety,
including, without limitation, any statute, regulation or order pertaining
to (i) treatment, storage, disposal, generation and transportation of
industrial, toxic or hazardous substances or solid or hazardous waste; (ii)
air, water and noise pollution; (iii) groundwater and soil contamination;
(iv) the release or threatened release into the environment of industrial,
toxic or hazardous substances, or solid or hazardous waste, including,
without limitation, emissions, discharges, injections, spills, escapes or
dumping of pollutants, contaminants or chemicals; (v) the protection of
wildlife, marine sanctuaries and wetlands, including, without limitation,
all endangered and threatened species; (vi) storage tanks, vessels and
containers; (vii) underground and other storage tanks or vessels,
abandoned, disposed or discarded barrels, containers and other closed
receptacles; (viii) health and safety of employees and other persons; and
(ix) manufacture, processing, use, distribution, treatment, storage,
disposal, transportation or handling of pollutants, contaminants, chemicals
or industrial, toxic or hazardous substances or oil or petroleum products
or solid or hazardous waste. For the purposes of this Agreement, the terms
"release" and "environment" shall have the meaning set forth in the United
States Comprehensive Environmental Compensation, Liability and Response Act
of 1980 ("CERCLA").
(b) There have been no releases of any Materials of Environmental Concern
(as defined below in this Section 2.18(b)) into the environment at any
parcel of real property or any facility formerly or currently
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owned, operated or controlled by any Debtor for which any Debtor may be
liable under any Environmental Law of the jurisdiction in which such
property or facility is located, other than such releases as would not in
the aggregate have a Debtor Material Adverse Effect. With respect to any
such releases of Materials of Environmental Concern, the Debtor has given
all required notices (if any) to Governmental Entities (copies of which
have been provided to the Buyer). There have been no releases of Materials
of Environmental Concern at parcels of real property or facilities other
than those owned, operated or controlled by the Debtors that could
reasonably be expected to have an impact on the real property or facilities
owned, operated or controlled by the Debtors, other than such impacts as
would not in the aggregate have a Debtor Material Adverse Effect. For
purposes of this Agreement, "Materials of Environmental Concern" means any
chemicals, pollutants or contaminants, hazardous substances (as such term
is defined under CERCLA or any Environmental Law), solid wastes and
hazardous wastes (as such terms are defined under the United States
Resources Conservation and Recovery Act or any Environmental Law), toxic
materials, oil or petroleum and petroleum products, or any other material
subject to regulation under any Environmental Law, except for normal office
and cleaning products.
(c) Set forth in Section 2.18 of the Company Disclosure Schedule is a
list of all environmental reports, investigations and audits which to the
knowledge of the Parent or the Company (whether conducted by or on behalf
of the Debtors or a third party, and whether done at the initiative of the
Debtors or directed by a Governmental Entity or other third party) were
issued during the past five years relating to premises formerly or
currently owned, operated or controlled by the Debtors. True and complete
copies of any such report, or the results of any such investigation or
audit, which to the knowledge of the Parent or the Company are in the
possession of the Parent or the Company (or can be obtained by the Company
through reasonable efforts), have been delivered or otherwise made
available to the Buyer.
(d) Neither the Parent nor the Company has any knowledge of any material
environmental liability of the solid and hazardous waste transporters and
treatment, storage and disposal facilities that have been utilized by
Debtors.
(e) The Debtors hold all Environmental Authorizations (as defined below
in this Section 2.18(e)) that are legally required for the conduct of their
businesses as currently conducted, other than where the failure to hold
such Environmental Authorizations would not in the aggregate have a Debtor
Material Adverse Effect, and such Environmental Authorizations (if any) are
listed in Section 2.18 of the Company Disclosure Schedule. For purposes of
this Agreement, the term "Environmental Authorization" means any license,
permit, certificate, or other authorization from a Governmental Entity
under any applicable Environmental Law. Each of the Debtors is and has been
in compliance with all such Environmental Authorizations, other than such
noncompliance as would not in the aggregate have a Debtor Material Adverse
Effect.
(f) None of the transactions contemplated by this Agreement or the
Amended Plan will require the Company or the Debtors to comply with an
Environmental Property Transfer Act (as defined below in this Section
2.18(f)). For purposes of this Agreement, the term "Environmental Property
Transfer Act" means any applicable law (including rules, regulations and
administrative orders thereunder) of any federal, state, local or foreign
government that requires any notification or disclosure of environmental
conditions in connection with the transfer, sale, lease or closure of any
property.
2.19 Legal Compliance. Each Debtor and the conduct and operation of its
respective business is and has been in compliance with each law (including
rules, regulations and administrative orders thereunder) of any federal,
state, local or foreign government, or any Governmental Entity, that (a)
affects or relates to this Agreement or the transactions contemplated hereby
or (b) is applicable to the Debtors or their respective businesses, other than
where the failure to be or to have been in compliance would not in the
aggregate have a Debtor Material Adverse Effect or materially impair the
ability of the Parent or the Company to consummate the transactions
contemplated hereby or the Reorganized Debtors to own and operate the
properties, assets and businesses of the Debtors following the Closing.
2.20 Subscriber Cancellations; Suppliers. The Debtors have previously
delivered or otherwise made available to the Buyer true and complete reports
of the number of paging units the Debtors had in service on a
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quarterly basis for its most recent fiscal year and the interim period covered
by the Company Financial Statements, and the number of subscriber
cancellations the Debtors had for each such period. To the knowledge of the
Parent or the Company, no material supplier of any Debtors has indicated
within the past year that it will stop, or decrease the rate of, supplying
materials, products or services to them.
2.21 Capital Expenditures. The Debtors have previously delivered to the
Buyer a true and complete list of all capital expenditures in an amount in
excess of $300,000 incurred by the Debtors during 1997, which list is attached
as Section 4.5(a) of the Company Disclosure Schedule.
2.22 Brokers' Fees. None of the Debtors has any liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
2.23 Certain Information. None of the information supplied by the Debtors
for inclusion or incorporation by reference in (i) the Prospectus and
Registration Statement (each as defined in Section 4.13) or (ii) any document
to be filed with the SEC, the FCC or any other Governmental Entity in
connection with the transactions contemplated hereby will, at the respective
times filed with the SEC, the FCC or other Governmental Entity and, in
addition, (A) in the case of the Prospectus, at the time it or any amendment
or supplement thereto is mailed to the Buyer's stockholders and at the time of
the Meeting (as defined in Section 4.12) and at the Closing and, (B) in the
case of the Registration Statement, at the time it becomes effective under the
Securities Act, contain any untrue statement of the Debtors of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. Notwithstanding the foregoing, no representation is
made by the Debtors with respect to statements made in any of the foregoing
documents based upon information supplied by the Buyer.
2.24 Disclosure. No representation or warranty by the Debtors contained in
this Agreement, and no statement contained in the Company Disclosure Schedule
or any other document, certificate or other instrument delivered to or to be
delivered by or on behalf of the Debtors pursuant to this Agreement, contains
or will as of the Closing Date contain any untrue statement of a material fact
or omits or will as of the Closing Date omit to state any material fact
necessary, in light of the circumstances under which it was or will be made,
in order to make the statements herein or therein not misleading.
ARTICLE III
Representations and Warranties of the Buyer
The Buyer represents and warrants to the Parent and the Company that the
statements contained in this Article III are true and complete, except as set
forth in the disclosure schedule of the Buyer delivered to the Company
simultaneously with the execution and delivery hereof (the "Buyer Disclosure
Schedule"). The Buyer Disclosure Schedule shall be arranged in sections and
paragraphs corresponding to the numbered and lettered sections and paragraphs
contained in this Article III, and the disclosures in any section or paragraph
of the Buyer Disclosure Schedule shall qualify other sections or paragraphs in
this Article III only to the extent that it is reasonably clear from a reading
of the disclosure that such disclosure is applicable to such other sections or
paragraphs. For purposes of this Agreement, a "Buyer Material Adverse Effect"
shall mean a material adverse effect on the businesses, assets (including
licenses, franchises and other intangible assets), financial condition,
operating income and prospects of the Buyer and its subsidiaries, taken as a
whole, excluding any effect generally applicable to the economy or the
industry in which the Buyer conducts its business.
3.1 Organization Qualification, Corporate Power and Authority.
(a) Each of the Buyer and the Merger Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Each of the Buyer and the Merger Subsidiary is duly qualified to
conduct business and is in good standing under the laws of each jurisdiction
(each such jurisdiction being set forth in Section 3.1(a) of the Buyer
Disclosure Schedule) in which the nature of its businesses or the
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ownership or leasing of its properties requires such qualification, other than
where the failure to be so qualified would not in the aggregate have a Buyer
Material Adverse Effect. Each of the Buyer and the Merger Subsidiary has all
requisite corporate power and authority to carry on the businesses in which it
is engaged and to own and use the properties owned and used by it. The Buyer
has furnished to the Company true and complete copies of the Buyer's and the
Merger Subsidiary's respective certificates of incorporation and by-laws, each
as amended and as in effect on the date hereof. Each of the Buyer and the
Merger Subsidiary has at all times complied with, and is not in default under
or in violation of, any provision of its certificate of incorporation or by-
laws, other than where the failure to so comply and such defaults and
violations would not in the aggregate have a Buyer Material Adverse Effect.
(b) Each of the Buyer and the Merger Subsidiary has all requisite power and
authority to execute and deliver this Agreement. The execution and delivery of
this Agreement by the Buyer and the Merger Subsidiary and, subject to the
approval of the Buyer Charter Amendment (as defined in Section 4.12) and the
Buyer Share Issuance (as defined below in this Section 3.1(b)) by the
stockholders of the Buyer, the performance of this Agreement and the
consummation of the transactions contemplated hereby by the Buyer and the
Merger Subsidiary have been duly and validly authorized by all necessary
corporate action on the part of the Buyer and the Merger Subsidiary. This
Agreement has been duly and validly executed and delivered by the Buyer and
the Merger Subsidiary and constitutes a valid and binding obligation of the
Buyer and the Merger Subsidiary, enforceable against the Buyer and the Merger
Subsidiary in accordance with its terms. For purposes of this Agreement,
"Buyer Share Issuance" means the issuance by the Buyer of shares of its
capital stock as contemplated by this Agreement and the Amended Plan,
including (i) the issuance of the Plan Shares as contemplated by the Merger
Agreement and the Amended Plan, (ii) the issuance of shares of Buyer Common
Stock and, if applicable, shares of Class B Common Stock, par value $0.01 per
share, of the Buyer ("Buyer Class B Common Stock") having the terms specified
in the Buyer Charter Amendment upon exercise of Rights issued pursuant to the
Rights Offering or issued to the Standby Purchasers (or their assignees or
persons in substitution therefor) pursuant to the Standby Purchase Commitments
in connection with the Rights Offering, and (iii) the issuance of the Buyers
Warrants issued by the Buyer (x) pursuant to the Rights Offering, (y) to the
Standby Purchasers in connection with the Rights Offering, and (z) pursuant to
the Buyer Distribution, and the issuance of shares of Buyer Common Stock upon
exercise of any of the foregoing Buyer Warrants.
3.2 Capitalization.
(a) The authorized capital stock of the Buyer consists of 75,000,000 shares
of Buyer Common Stock and 10,000,000 shares of preferred stock, $.01 par value
("Buyer Preferred Stock"), of which 100,000 shares have been designated as
Series B Junior Participating Preferred Stock and 250,000 shares have been
designated as Series C Convertible Preferred Stock. As of the date hereof, (i)
21,067,110 shares of Buyer Common Stock are issued and outstanding, (ii) no
shares of Buyer Common Stock are held in the treasury of the Buyer, (iii)
2,740,381 shares of Buyer Common Stock are issuable upon exercise of certain
outstanding options or are reserved for issuance pursuant to the Buyer's
existing stock option and purchase plans, and (iv) 5,343,305 shares of Buyer
Common Stock are reserved for issuance upon exercise of other convertible
securities of the Buyer. As of the date hereof, no shares of Series B Junior
Participating Preferred Stock and 250,000 shares of Series C Convertible
Preferred Stock are issued and outstanding, and no shares of Buyer Preferred
Stock are held in the treasury of the Buyer. Except for such options and such
other convertible securities and except for the rights to purchase shares of
Series B Junior Participating Preferred Stock of the Buyer (the "Preferred
Rights") issued pursuant to the Rights Agreement dated as of October 13, 1995
(the "Rights Agreement"), between the Buyer and The Bank of New York, as
Rights Agent, there are no options, warrants, rights, calls, convertible
instruments, agreements or commitments to which the Buyer or any Buyer
Subsidiary is a party or which are binding upon any of them (other than this
Agreement) providing for the issuance, disposition or acquisition of any of
its capital stock or stock appreciation, phantom stock or similar rights. All
the issued and outstanding shares of the Buyer's capital stock are duly
authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights.
(b) All the outstanding shares of capital stock of each of the Buyer
Subsidiaries are beneficially owned by the Buyer, directly or indirectly, free
and clear of any restrictions on transfer (other than restrictions under the
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Securities Act and state or foreign securities laws), claims, Security
Interests, options, warrants, rights, contracts, calls, commitments, equities
or demands, and all such shares are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights.
(c) There are no voting trusts, proxies or other agreements or
understandings to which the Buyer or any of the Buyer Subsidiaries is a party
with respect to the voting of the capital stock of the Buyer or any Buyer
Subsidiary. None of the Buyer or the Buyer Subsidiaries is required to redeem,
repurchase or otherwise acquire shares of capital stock or debt securities of
the Buyer or of any Buyer Subsidiary as a result of the transactions
contemplated by this Agreement.
(d) The authorized capital stock of the Merger Subsidiary consists of 1,000
shares of common stock, $.01 par value, all of which are issued and
outstanding and held beneficially and of record by the Buyer.
(e) The shares of Buyer Common Stock to be issued and distributed as
contemplated by Section 1.3(e) and Section 1.6 of this Agreement and the
shares of Buyer Common Stock, the shares of Buyer Class B Common Stock, if
applicable, and the Buyer Warrants to be issued and delivered pursuant to the
Rights Offering (as defined in Section 4.20(a)) or as contemplated by the
Standby Purchase Commitments, in each case when so issued and distributed or
delivered, as the case may be, and the shares of Buyer Common Stock issued
upon conversion of such shares of Buyer Class B Common Stock, if applicable,
when so converted in accordance with the Buyer Charter Amendment (as defined
in Section 4.12), and the shares of Buyer Common Stock issued upon exercise of
Buyer Warrants, when issued, paid for and delivered as provided in the Buyer
Warrant Agreement, will be duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights.
3.3 Noncontravention. Except for the applicable requirements of the
Securities Act and the Exchange Act, any applicable state and foreign
securities laws, the HSR Act, the Communications Act and the regulations of
the FCC, and state public utility, telecommunication or public service laws,
neither the execution and delivery of this Agreement by each of the Buyer and
the Merger Subsidiary nor the consummation of the transactions contemplated
hereby will (a) conflict with or violate any provision of the Buyer's or
Merger Subsidiary's respective certificate of incorporation or by-laws, (b)
require on the part of the Buyer and/or the Merger Subsidiary any filing with,
or any permit, authorization, consent or approval of, any Governmental Entity,
other than where the failure to make or obtain such filings, permits,
authorizations, consents or approvals would not in the aggregate have a Buyer
Material Adverse Effect or materially adversely affect the ability of the
Buyer to operate the business of the Buyer following the Effective Time, (c)
conflict with, result in a breach of, constitute (with or without due notice
or lapse of time or both) a default under, result in the acceleration of,
create in any party any right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest or other
arrangement to which the Buyer or any Buyer Subsidiary is a party or by which
the Buyer or any Buyer Subsidiary is bound or to which any of their respective
assets are subject or any judgment, order, writ, injunction, decree, statute,
rule or regulation applicable to the Buyer or any Buyer Subsidiary or any of
their respective properties or assets, other than such conflicts, violations,
breaches, defaults, accelerations, terminations, modifications, cancellations
or notices, consents or waivers as would not in the aggregate have a Buyer
Material Adverse Effect, or (d) result in the imposition of any Security
Interest upon any assets of the Buyer or any Buyer Subsidiary.
3.4 Business Entities.
(a) Section 3.4(a) of the Buyer Disclosure Schedule sets forth a true and
complete list of each corporation, partnership, limited liability company or
other form of business association in which the Buyer, directly or indirectly,
owns any equity interest or any security convertible into or exchangeable for
an equity interest (each a "Buyer Business Entity") which is material to the
Buyer.
(b) The Buyer Business Entities listed in Section 3.4(b) of the Buyer
Disclosure Schedule are the only Buyer Business Entities which have conducted
any operations, trade or businesses of the Buyer since January
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30, 1997, hold any Buyer Authorizations (as defined in Section 3.14(a)) or own
any assets necessary for the conduct of the businesses of the Buyer as
currently conducted.
(c) The Buyer owns all the outstanding equity interests in each Buyer
Business Entity. For purposes of this Agreement, "Buyer Subsidiary" means any
Buyer Business Entity in which the Buyer, directly or indirectly, owns a
majority of the equity interests.
(d) No Buyer Business Entity is in default under or in violation of any
provision of its organizational documents. To the knowledge of the Buyer, all
the issued and outstanding equity interests of each Buyer Business Entity are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. All equity interests of each Buyer Business Entity are held
of record or owned beneficially by the Buyer free and clear of any
restrictions on transfer (other than restrictions under the Securities Act and
state or foreign securities laws), claims, Security Interests, options,
warrants, rights, contracts, calls, commitments, equities and demands.
(e) There are no voting trusts, proxies or other agreements or
understandings with respect to the voting of any equity interests of any Buyer
Business Entity to which the Buyer or any Buyer Subsidiary is a party or by
which it is bound, or, to the Buyer's knowledge, any other such trusts,
proxies, agreements or understandings.
3.5 Reports and Financial Statements.
(a) The Buyer has previously furnished to the Debtors true and complete
copies, each as amended or supplemented to date, of (i) the Buyer's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, as filed by
the Buyer with the SEC, and (ii) all other reports, statements, exhibits and
other documents filed by the Buyer with the SEC under Section 13 or 15 of the
Exchange Act (which are all the reports, statements, exhibits and other
documents required to be so filed) since December 31, 1997 (such materials,
together with any amendments or supplements thereto, collectively being
referred to herein as the "Buyer Reports"). As of their respective dates, the
Buyer Reports complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to such Buyer Reports and the Buyer Reports did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The audited
financial statements and unaudited interim financial statements of the Buyer
included in the Buyer Reports (i) comply as to form in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby (except as may be indicated therein or in the notes thereto,
and, in the case of interim financial statements, as permitted by Form 10-Q
under the Exchange Act), (iii) fairly present the consolidated financial
condition, results of operations and cash flows of the Buyer as of the
respective dates thereof and for the periods referred to therein, and (iv) are
consistent with the books and records of the Buyer.
(b) The accounts receivable of the Buyer and its subsidiaries reflected on
the consolidated balance sheet of the Buyer as of June 30, 1998 (the "Buyer
Balance Sheet Date"), filed by the Buyer as part of its Quarterly Report on
Form 10-Q for the quarter that ended on such date (the "Most Recent Buyer
Balance Sheet"), and those arising since the date of the Most Recent Buyer
Balance Sheet, are valid receivables subject to no set-offs or counterclaims,
net of a reserve for bad debts, which reserve is reflected on the Most Recent
Buyer Balance Sheet. The inventories of the Buyer and its subsidiaries
reflected on the Most Recent Buyer Balance Sheet are of a quality and quantity
useable and/or saleable in the Ordinary Course of Business, except as written
down to net realizable value on the Most Recent Buyer Balance Sheet. All
inventory shown on the Most Recent Buyer Balance Sheet has been priced at the
lower of cost or net realizable value.
3.6 Absence of Certain Changes. Since the Buyer Balance Sheet Date, (a)
there has not been any Buyer Material Adverse Effect, nor has there occurred
any event or development that would have a Buyer Material Adverse Effect and
(b) the Buyer has not taken any action that would be prohibited by subsection
(b) of Section 4.5 below if taken from and after the date of this Agreement.
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3.7 Undisclosed Liabilities. Neither the Buyer nor any Buyer Subsidiary has
any liability (whether known or unknown, whether absolute or contingent,
whether liquidated or unliquidated, whether due or to become due), except for
(a) liabilities separately shown or expressly reserved on the Most Recent
Buyer Balance Sheet, (b) liabilities that have arisen since the Buyer Balance
Sheet Date in the Ordinary Course of Business of the Buyer or any Subsidiary
and that are similar in nature and amount to the liabilities that arose during
the comparable period of time in the immediately preceding fiscal period; and
(c) liabilities incurred in the Ordinary Course of Business of the Buyer that
are not required by GAAP to be reflected on the Most Recent Buyer Balance
Sheet and that are not in the aggregate material.
3.8 Tax Matters.
(a) Each of the Buyer and the Buyer Subsidiaries has filed all Tax Returns
that it was required to file, and all such Tax Returns were true and complete
in all material respects. Neither the Buyer nor any Buyer Subsidiary is or has
even been a member of a group of corporations which has filed (or been
required to file) consolidated, combined or unitary Tax Returns, other than a
group of which the Buyer and the Buyer Subsidiaries are or were members.
Except as described in Section 3.8(a) of the Buyer Disclosure Schedule, (i)
each group of corporations with which the Buyer has filed (or was required to
file) consolidated, combined, unitary or similar Tax Returns (a "Buyer
Affiliated Group") has filed all Tax Returns that it was required to file with
respect to any period in which the Buyer was a member of such Buyer Affiliated
Group (a "Buyer Affiliated Period") and (ii) all such Tax Returns were true
and complete in all material respects. Each of the Buyer and the Buyer
Subsidiaries has paid on a timely basis all Taxes (as defined below) that were
due and payable and, to the Buyer's knowledge, each member of a Buyer
Affiliated Group has paid all Taxes that were due and payable with respect to
all Buyer Affiliated Periods. The unpaid Taxes of the Buyer for tax periods
through the Most Recent Buyer Balance Sheet do not exceed the accruals and
reserves (other than accruals and reserves established to reflect timing
differences between book and tax income) for Taxes reflected on the Most
Recent Buyer Balance Sheet. All Taxes that the Buyer or any Buyer Subsidiary
is or was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental Entity.
(b) The Buyer has delivered or otherwise made available to the Company true
and complete copies of all federal income Tax Returns of the Buyer and the
Buyer Subsidiaries, together with all related examination reports and
statements of deficiencies, for all periods commencing after December 31, 1993
and, to the extent in the possession of the Buyer, true and complete copies of
the portion of the federal income Tax Returns of any member of a Buyer
Affiliated Group, together with all related examination reports and statements
of deficiency, relating to the activities of the Buyer or any Buyer Subsidiary
for all Buyer Affiliated Periods commencing after December 31, 1993. The
federal income Tax Returns of each of the Buyer, any Buyer Subsidiary and,
each member of a Buyer Affiliated Group have been audited by the Internal
Revenue Service or are closed by the applicable statute of limitations for all
taxable years through the taxable year specified in Section 3.8(b) of the
Buyer Disclosure Schedule. The Buyer has delivered or otherwise made available
to the Company true and complete copies of all other Tax Returns of the Buyer
and each Buyer Subsidiary, together with all related examination reports and
statements of deficiency, for all periods commencing after December 31, 1993
and, to the extent in the possession of the Buyer, true and complete copies of
the portion of all other Tax Returns, of any member of a Buyer Affiliated
Group, together with all related examination reports and statements of
deficiency, relating to the activities of the Buyer or any Buyer Subsidiary
for all Affiliated Periods commencing after December 31, 1993. No examination
or audit of any Tax Return of the Buyer, any Buyer Subsidiary or, to the
Buyer's knowledge, any member of a Buyer Affiliated Group with respect to an
Affiliated Period by any Governmental Entity is currently in progress or, to
the knowledge of the Buyer, threatened or contemplated. Neither the Buyer, any
Buyer Subsidiary nor, to the Buyer's knowledge, any member of a Buyer
Affiliated Group has been informed by any jurisdiction that the jurisdiction
believes that the Buyer or any Buyer Subsidiary or any member of a Buyer
Affiliated Group was required to file any Tax Return that was not filed on a
timely basis. Neither the Buyer, any Buyer Subsidiary nor, to the Buyer's
Knowledge, any member of a Buyer Affiliated Group has waived any statute of
limitations with respect to Taxes or agreed to an extension of time with
respect to a Tax assessment or deficiency.
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(c) Neither the Buyer nor any Buyer Subsidiary (i) is a "consenting
corporation" within the meaning of Section 341(f) of the Code and none of the
assets of the Buyer or any Buyer Subsidiary is subject to an election under
Section 341(f) of the Code; (ii) has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code; (iii)
has made any payments, is obligated to make any payments, or is a party to any
agreement that could obligate it to make any payments that may be treated as
an "excess parachute payment" under Section 280G of the Code; (iv) has any
actual or potential liability for any Taxes of any person (other than the
Buyer or any Buyer Subsidiary) under Treasury Regulation Section 1.1502-6 (or
any similar provision of federal, state, local, or foreign law), or as a
transferee or successor, by contract, or otherwise; or (v) is or has been
required to make a basis reduction pursuant to Treasury Regulation Section
1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(d) None of the assets of the Buyer or any Buyer Subsidiary: (i) is property
that is required to be treated as being owned by any other person pursuant to
the provisions of former Section 168(f)(8) of the Code; (ii) is "tax-exempt
use property" within the meaning of Section 168(h) of the Code; or (iii)
directly or indirectly secures any debt the interest on which is tax exempt
under Section 103(a) of the Code.
(e) Neither the Buyer nor any Buyer Subsidiary has undergone a change in its
method of accounting resulting in an adjustment to its taxable income pursuant
to Section 481(h) of the Code.
(f) No state or federal "net operating loss" of the Buyer or any Buyer
Subsidiary determined as of the Closing Date is subject to limitation on its
use pursuant to Section 382 of the Code or comparable provisions of state law
as a result of any "ownership change" within the meaning of Section 382(g) of
the Code occurring prior to the Closing Date.
(g) Section 3.8(g) of the Buyer Disclosure Schedule sets forth in reasonable
detail the following information with respect to the Buyer and each Buyer
Subsidiary as of the most recent practicable date: (i) the basis of the Buyer
and each Buyer Subsidiary in their respective assets; (ii) the basis of the
stockholder(s) in its stock (or the amount of any "excess loss account");
(iii) the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax, or excess charitable
contribution allocable; and (iv) the amount of any deferred gain or loss
allocable arising out of any "deferred intercompany transaction."
3.9 Tangible Assets. The Buyer and the Buyer Subsidiaries own or lease all
tangible assets necessary for the conduct of their respective businesses as
presently conducted. Each such tangible asset is free from material defects,
has been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear) and is
suitable for the purposes for which it is presently used, other than where the
failures or defects would not in the aggregate have a Buyer Material Adverse
Effect.
3.10 Owned Real Property. The Buyer has previously made available to the
Company a true and complete listing of all material real property that has
been owned by the Buyer or any Buyer Subsidiary at any time on or after
January 30, 1997. With respect to each parcel of real property which is
currently owned by the Buyer or any Buyer Subsidiary, the identified owner has
good record and marketable title to such parcel, free and clear of any
Security Interest, easement, covenant or other restriction, except for
Security Interests, easements, covenants and other restrictions which do not
materially impair the use, occupancy or value of such parcel as presently used
in the Buyer's or Buyer Subsidiaries' businesses.
3.11 Intellectual Property.
(a) The Buyer owns, licenses or otherwise has the legally enforceable right
to use all patents, trademarks, trade names, service marks, copyrights, and
any applications for such patents, trademarks, trade names, service marks and
copyrights, schematics, technology, know-how, computer software programs or
applications and tangible or intangible proprietary information or material
used in the operation of the business of the Buyer or any Buyer Subsidiary or
necessary for the operation of the business of the Buyer or any Buyer
Subsidiary as
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presently conducted by the Buyer or any Buyer Subsidiary (collectively "Buyer
Intellectual Property"). Each such item of Buyer Intellectual Property owned
or available for use by the Buyer or a Buyer Subsidiary immediately prior to
Closing will be owned or available for use by the Buyer or the Buyer
Subsidiary on substantially similar terms and conditions immediately following
the Closing. No other person or entity has any rights to any of the Buyer
Intellectual Property, and no other person or entity is infringing, violating
or misappropriating any of, the Buyer Intellectual Property used in the
business of the Buyer, other than such infringements, violations or
misappropriations as would not in the aggregate have a Buyer Material Adverse
Effect.
(b) The business, operations and activities of the Buyer and each Buyer
Subsidiary as presently conducted or as conducted at any time within the two
years prior to the date of this Agreement have not materially infringed or
violated, or constituted a material misappropriation of, and do not now
materially infringe or violate, or constitute a material misappropriation of,
any intellectual property rights of any other person or entity. Since January
30, 1997, neither the Buyer nor any Buyer Subsidiary has received any written,
or to its knowledge, verbal, complaint, claim or notice alleging any such
infringement, violation or misappropriation which has not been disposed of
through a settlement agreement described in Section 3.11(b) of the Buyer
Disclosure Schedule.
3.12 Real Property Leases. Section 3.12 of the Buyer Disclosure Schedule
lists all real property (other than tower sites) leased or subleased to the
Buyer or any Buyer Subsidiary, indicating, in each case, the term of the lease
and the rent payable under such lease. The Buyer has made available to the
Company true and complete copies of all such leases and subleases (each as
amended to date). With respect to each such lease and sublease:
(a) the lease or sublease is legal, valid, binding, enforceable and in
full force and effect, subject to the effect of bankruptcy, insolvency,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally and except as the availability of equitable remedies may
be limited by general principles of equity;
(b) neither the Buyer nor any Buyer Subsidiary nor, to the Buyer's
knowledge, any other party to the lease or sublease, is in material breach
or default, and no event has occurred which, with notice or lapse of time,
would constitute a material breach or default by the Buyer or any Buyer
Subsidiary or, to the Buyer's knowledge, by any such other party, or permit
termination, modification or acceleration thereunder;
(c) to the knowledge of the Buyer, there are no material disputes, oral
agreements or forbearance programs in effect as to the lease or sublease;
(d) neither the Buyer nor any Buyer Subsidiary has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the
leasehold or subleasehold;
(e) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said
facilities; and
(f) other than in the Ordinary Course of Business, no construction,
alteration or other leasehold improvement work with respect to the lease or
sublease remains to be paid for or performed by the Buyer or any Buyer
Subsidiary.
3.13 Contracts. The Buyer has delivered or otherwise made available to the
Company a true and complete copy of each written arrangement (each as amended
to date) filed as an exhibit to any Buyer Report. With respect to each written
arrangement (i) each written agreement will continue to be legal, valid,
binding, enforceable and in full force and effect immediately following the
Closing with the same terms as in effect immediately prior to the Closing,
subject to the effect of bankruptcy, insolvency, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and except as
the availability of equitable remedies may be limited by general principles of
equity; and (ii) neither the Buyer nor any Buyer Subsidiary nor, to the
Buyer's knowledge, any other party, is in material breach or default, and no
event has occurred which with notice or lapse of time would constitute a
material breach or default by the Buyer or any Buyer Subsidiary or, to the
Buyer's knowledge, by any such other party, or permit termination,
modification or acceleration, under the written arrangement. Neither the Buyer
nor any Buyer Subsidiary is a party to any oral contract, agreement or other
arrangement
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which, if reduced to written form, would be required to be filed as an exhibit
as a material contract to an Annual Report on Form 10-K filed by the Buyer.
Neither the Buyer nor any Buyer Subsidiary is restricted by any arrangement
from carrying on its business anywhere in the United States.
3.14 Licenses and Authorizations
(a) The Buyer and the Buyer Subsidiaries hold all licenses, permits,
certificates, franchises, ordinances, registrations, or other rights,
applications and authorizations filed with, granted or issued by, or entered
by any Governmental Entity, including, without limitation, the FCC or any
State Authority asserting jurisdiction over the Buyer or any Buyer Subsidiary
or its business or assets, that are required for the conduct of their
businesses as currently being conducted (each as amended to date) (the "Buyer
Authorizations"), other than such licenses, permits, certificates, franchises,
ordinances, registrations or other rights, applications and authorizations the
absence of which would not in the aggregate materially impair the ability of
the Buyer to consummate the transactions contemplated hereby or of the Buyer
to own and operate the properties, assets and businesses of the Buyer
following the Closing. The Buyer has heretofore delivered to the Company a
true and complete list of such Buyer Authorizations.
(b) The Buyer has previously made available to the Company a true and
complete list of (i) each application of the Buyer and/or any Buyer Subsidiary
pending before the FCC (collectively, the "Buyer FCC Applications"); (ii) each
FCC permit and FCC license which is not a Buyer Authorization but in which the
Buyer or any Buyer Subsidiary, directly or indirectly, holds an interest,
including as a stakeholder in the licensee (collectively, the "Indirect Buyer
Authorizations"); and (iii) all licenses, certificates, consents, permits,
approvals and authorizations for the benefit of the Buyer and the Buyer
Subsidiaries, as applicable, pending before any State Authority (collectively,
the "Buyer State Applications"). The Buyer Authorizations, the Buyer FCC
Applications, the Indirect Buyer Authorizations and the Buyer State
Applications (collectively, the "Buyer Licenses and Authorizations") are the
only federal, state or local licenses, certificates, consents, permits,
approvals and authorizations that are required for the conduct of the business
and operations of the Buyer and the Buyer Subsidiaries as presently conducted,
other than such consents, permits, approvals or authorizations the absence of
which would not in the aggregate materially impair the ability of the Buyer
and the Merger Subsidiary to either consummate the transactions contemplated
hereby or of the Buyer and the Buyer Subsidiaries to own and operate the
properties, assets and businesses of the Buyer and the Buyer Subsidiaries
following the Closing.
(c) The Buyer Authorizations and, to the Buyer's knowledge, the Indirect
Buyer Authorizations are in full force and effect and have not been pledged or
otherwise encumbered, assigned, suspended, modified in any material adverse
respect, canceled or revoked, and the Buyer and the Buyer Subsidiaries have
each operated in compliance with all terms thereof or any renewals thereof
applicable to them, other than where the failure to so comply would not in the
aggregate have a Buyer Material Adverse Effect or materially impair the
ability of the Buyer to consummate the transactions contemplated hereby or of
the Buyer to own and operate the properties, assets and businesses of the
Buyer following the Closing. No event has occurred with respect to any of the
Buyer Authorizations which permits, or after notice or lapse of time or both
would permit, revocation or termination thereof or would result in any other
material impairment of the rights of the holder of any such Buyer
Authorizations. To the knowledge of the Buyer, there is not pending any
application, petition, objection or other pleading with the FCC, any State
Authority or any similar body having jurisdiction or authority over the
operations of the Buyer and the Buyer Subsidiaries which questions the
validity of or contests any Buyer Authorization or which could reasonably be
expected, if accepted or granted, to result in the revocation, cancellation,
suspension or any materially adverse modification of any Buyer Authorization.
(d) Except for approval by the Bankruptcy Court or by the FCC as
contemplated by Section 4.15, or as set forth in Section 3.14(d) of the Buyer
Disclosure Schedule, no permit, consent, approval, authorization,
qualification or registration of, or declaration to or filing with, any
Governmental Entity is required to be obtained or made by the Buyer or any
Buyer Subsidiary in connection with the transfer or deemed transfer of the
Buyer Licenses and Authorizations as a result of the consummation of the
transactions contemplated hereby, except where the failure to obtain or make
such permit, consent, approval, authorization, qualification, registration,
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declaration or filing would not materially impair the ability of the Buyer to
consummate the transactions contemplated hereby or the Buyer to own and
operate the properties, assets and businesses of the Buyer following the
Closing.
3.15 Litigation. Except as described in the Buyer Reports, as of the date of
this Agreement: (a) there is no action, suit, proceeding or investigation to
which the Buyer or any Buyer Subsidiary is a party (either as a plaintiff or
defendant) pending or, to the Buyer's knowledge, threatened before any court,
Governmental Entity or arbitrator, and, to the Buyer's knowledge, there is no
basis for any such action, suit, proceeding or investigation; (b) neither the
Buyer nor any Buyer Subsidiary nor, to the Buyer's knowledge, any officer,
director or employee of the Buyer or any Buyer Subsidiary has been permanently
or temporarily enjoined by any order, judgment or decree of any court or
Governmental Entity from engaging in or continuing to conduct the business of
the Buyer or any Buyer Subsidiary; and (c) no order, judgment or decree of any
court or Governmental Entity has been issued in any proceeding to which the
Buyer or any Buyer Subsidiary is or was a party or, to the Buyer's knowledge,
in any other proceeding, that enjoins or requires the Buyer or any Buyer
Subsidiary to take action of any kind with respect to its business, assets or
properties. None of the actions, suits, proceedings or investigations listed
in Section 3.15 of the Buyer Disclosure Schedule, individually or
collectively, if determined adversely to the interests of the Buyer or any
Buyer Subsidiary, would have a Buyer Material Adverse Effect.
3.16 Employees.
(a) There are no collective bargaining agreements to which Buyer or any
Buyer Subsidiary is a party. Neither the Buyer nor any Buyer Subsidiary has
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes and, to the Buyer's knowledge, no
organizational effort is presently being made or threatened by or on behalf of
any labor union with respect to its employees. To the knowledge of the Buyer
or any Buyer Subsidiary there is no reasonable basis to believe that the Buyer
or any Buyer Subsidiary will be subject to any labor strike or other organized
work force disturbance following the Closing.
3.17 Employee Benefits.
(a) Section 3.17(a) of the Buyer Disclosure Schedule contains a true and
complete list of all Employee Benefit Plans maintained, or contributed to, by
the Buyer or any Buyer Subsidiary or any ERISA Affiliate of the Buyer or any
Buyer Subsidiary (the "Buyer Employee Benefit Plan"). True and complete copies
of (i) all Buyer Employee Benefit Plans that have been reduced to writing;
(ii) written summaries of all unwritten Buyer Employee Benefit Plans; (iii)
all trust agreements, insurance contracts and summary plan descriptions
related to the Buyer Employee Benefit Plans; (iv) the annual report filed on
IRS Form 5500, 5500C or 5500R, if applicable, for the most recent plan year
for each Buyer Employee Benefit Plan; and (v) the most recent qualification
letter issued by the Internal Revenue Service with respect to each Buyer
Employee Benefit Plan that is intended to qualify under Section 401(a) of the
Code, have been made available to the Company. Each Buyer Employee Benefit
Plan has been administered in accordance with its terms in all material
respects, and the Buyer and each Buyer Subsidiary and, to the Buyer's
knowledge, each ERISA Affiliate of the Buyer or any Buyer Subsidiary has in
all material respects met its obligations (if any) with respect to each Buyer
Employee Benefit Plan and has made all required contributions (if any)
thereto. The Buyer, all Buyer Subsidiaries and all Buyer Employee Benefit
Plans are in compliance in all material respects with the currently applicable
provisions (if any) of ERISA, the Code and other applicable federal, state and
foreign laws and the regulations thereunder. Each Buyer Employee Benefit Plan
that is intended to qualify under Section 401(a) of the Code is so qualified.
Each Buyer Employee Benefit Plan that is required to satisfy Section 401(k)(3)
or Section 401(m)(2) of the Code has been reviewed for compliance with, and
has satisfied the requirements of, said Sections for each plan year ending
prior to the Closing.
(b) To the Buyer's knowledge, as of the date of this Agreement, there are no
inquiries or investigations by any Governmental Entity, termination
proceedings or other claims (except claims for benefits payable in the normal
operation of the Buyer Employee Benefit Plans and proceedings with respect to
qualified domestic
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relations orders), suits or proceedings against or involving any Buyer
Employee Benefit Plan or asserting any rights or claims to benefits under any
Buyer Employee Benefit Plan.
(c) Neither the Buyer or any Buyer Subsidiary nor, to the Buyer's knowledge,
any ERISA Affiliate of the Buyer or any Buyer Subsidiary has ever maintained
an Buyer Employee Benefit Plan subject to Section 412 of the Code, Part 3 of
Subtitle B of Title I of ERISA, or Title IV of ERISA. At no time has the Buyer
or any Buyer Subsidiary or, to the Buyer's knowledge, any ERISA Affiliate of
the Buyer or any Buyer Subsidiary been obligated to contribute to any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) that is
subject to Title IV of ERISA. No act or omission has occurred and no condition
exists with respect to any Buyer Employee Benefit Plan that would subject the
Buyer, any Buyer Subsidiary or, to the Buyer's knowledge, any ERISA Affiliate
of the Buyer or any Buyer Subsidiary to any material fine, penalty, Tax or
liability of any kind imposed under ERISA or the Code. No prohibited
transaction (as defined in Section 406 of ERISA or Section 4975 of the Code)
has occurred with respect to any Buyer Employee Benefit Plan that is subject
to ERISA or the Code. No Buyer Employee Benefit Plan, plan documentation or
agreement, summary plan description or other written communication distributed
generally to employees by its terms prohibits the Buyer from amending or
terminating any such Buyer Employee Benefit Plan and any Buyer Employee
Benefit Plan may be terminated without liability to the Buyer or any Buyer
Subsidiary, except for benefits accrued through the date of termination.
Except as may be required by Part 6 of Title I of ERISA or similar state laws
regarding continuation of benefits, no former employees participate in any
employee welfare benefit plans listed in Section 3.17(a) of the Buyer
Disclosure Schedule beyond the month of the termination of his employment. No
Buyer Employee Benefit Plan includes in its assets any securities issued by
the Buyer. No Employee Benefit Plan has been subject to tax under Section 511
of the Code.
(d) Section 3.17(d) of the Buyer Disclosure Schedule lists each: (i)
agreement with any director, executive officer or other key employee of the
Buyer or any Buyer Subsidiary (A) the benefits of which are contingent, or the
terms of which are altered, upon the occurrence of a transaction involving the
Buyer or any Buyer Subsidiary of the nature of any of the transactions
contemplated by this Agreement; (B) providing any term of employment or
compensation guarantee or (C) providing severance benefits or other benefits
upon the consummation of any transaction or after the termination of
employment of such director, executive officer or key employee; (ii)
agreement, plan or arrangement under which any person may receive payments
from the Buyer or any Buyer Subsidiary that may be subject to the tax imposed
by Section 4999 of the Code or may constitute a "parachute payment" under
Section 280G of the Code; and (iii) agreement or plan binding the Buyer or any
Buyer Subsidiary, including, without limitation, any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan, severance
benefit plan, or any Employee Benefit Plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Agreement.
3.18 Environmental Matters.
Except for Sections 3.5(a), 3.26, and 3.27, this Section 3.18 contains the
exclusive representations and warranties of the Buyer concerning environmental
matters, including but not limited to Environmental Laws and Materials of
Environmental Concern. The Buyer represents and warrants as follows:
(a) Each of the Buyer and each Buyer Subsidiary is in compliance with all
applicable Environmental Laws, other than where the failure to be in
compliance would not in the aggregate have a Buyer Material Adverse Effect.
There is no pending or, to the knowledge of the Buyer or any Buyer
Subsidiary, threatened civil or criminal litigation, written notice of
violation, formal administrative proceeding, or written notice of
investigation or inquiry or written information request by any Governmental
Entity, relating to any Environmental Law involving the Buyer or any Buyer
Subsidiary or their respective assets and properties.
(b) There have been no releases of any Materials of Environmental Concern
into the environment at any parcel of real property or any facility
formerly or currently owned, operated or controlled by the Buyer or any
Buyer Subsidiary for which the Buyer or any Buyer Subsidiary may be liable
under any
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Environmental Law of the jurisdiction in which such property or facility is
located, other than such releases as would not in the aggregate have a
Buyer Material Adverse Effect. With respect to any such releases of
Materials of Environmental Concern, the Buyer or such Buyer Subsidiary has
given all required notices (if any) to Governmental Entities (copies of
which have been provided to the Company). There have been no releases of
Materials of Environmental Concern at parcels of real property or
facilities other than those owned, operated or controlled by the Buyer or
any Buyer Subsidiary that could reasonably be expected to have an impact on
the real property or facilities owned, operated or controlled by the Buyer
or any Buyer Subsidiary other than such impacts as would not in the
aggregate have a Debtor Material Adverse Effect.
(c) Set forth in Section 3.18 of the Buyer Disclosure Schedule is a list
of all environmental reports, investigations and audits which to the
knowledge of the Buyer (whether conducted by or on behalf of the Buyer or
any Buyer Subsidiary or a third party, and whether done at the initiative
of the Buyer or any Buyer Subsidiary or directed by a Governmental Entity
or other third party) were issued during the past five years relating to
premises formerly or currently owned, operated or controlled by the Buyer
or any Buyer Subsidiary. True and complete copies of any such report, or
the results of any such investigation or audit, which to the knowledge of
the Buyer are in the possession of Buyer or any Buyer Subsidiary (or can be
obtained by Buyer or any Buyer Subsidiary through reasonable efforts), have
been delivered or otherwise made available to the Company.
(d) Neither the Buyer nor any Buyer Subsidiary has any knowledge of any
material environmental liability of the solid and hazardous waste
transporters and treatment, storage and disposal facilities that have been
utilized by the Buyer or any Buyer Subsidiary.
(e) The Buyer and the Buyer Subsidiaries hold all Environmental
Authorizations that are legally required for the conduct of their
businesses as currently conducted, other than where the failure to hold
such Environmental Authorizations would not in the aggregate have a Buyer
Material Adverse Effect, and such Environmental Authorizations (if any) are
listed in Section 3.18 of the Buyer Disclosure Schedule. The Buyer and each
of the Buyer Subsidiaries is and has been in compliance with all such
Environmental Authorizations, other than such noncompliance as would not in
the aggregate have a Buyer Material Adverse Effect.
(f) None of the transactions contemplated by this Agreement or the
Amended Plan will require the Buyer or any Buyer Subsidiary to comply with
an Environmental Property Transfer Act.
3.19 Legal Compliance. Each of the Buyer and each Buyer Subsidiary and the
conduct and operation of its respective business, is and has been in
compliance with each law (including rules, regulations and administrative
orders thereunder) of any federal, state, local or foreign government, or any
Governmental Entity, that (a) affects or relates to this Agreement or the
transactions contemplated hereby or (b) is applicable to the Buyer or any
Buyer Subsidiary or their respective businesses, other than where the failure
to be or to have been in compliance would not in the aggregate have a Buyer
Material Adverse Effect or materially impair the ability of the Buyer to
consummate the transactions contemplated hereby or the Buyer to own and
operate the properties, assets and businesses of the Buyer following the
Closing.
3.20 Merger Subsidiary. The Merger Subsidiary was formed solely for the
purpose of effecting the transactions contemplated by this Agreement and,
except for such obligations or liabilities incurred in connection with its
incorporation or organization, and except for this Agreement and any other
agreements or arrangements contemplated by this Agreement, the Merger
Subsidiary has not and will not have incurred, directly or indirectly, any
obligations or liabilities or engaged in any business activities of any type
or kind whatsoever or entered into any agreements or arrangements with any
person.
3.21 Capital Expenditures; Suppliers. The Buyer has previously delivered to
the Company a true and complete accounting of all capital expenditures
incurred by it or the Buyer Subsidiaries during 1997 and their projected
capital expenditure budget for calendar years 1998 and 1999. To the knowledge
of the Buyer or any Buyer Subsidiary no material supplier of the Buyer or any
Buyer Subsidiary has indicated within the past year that it will stop, or
decrease the rate of, supplying materials, products or services to them.
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3.22 Brokers' Fees. Neither the Buyer nor any Buyer Subsidiary has any
liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement
except to Bear, Stearns & Co. Inc. ("Bear Stearns"), the financial advisor to
the Buyer.
3.23 Rights Agreement; Section 203. The Buyer has executed the amendment to
its Rights Agreement dated as of October 13, 1995 in the form attached hereto
as Exhibit D, and such amendment is in full force and effect.
(b) The Board of Directors of the Buyer has approved the Merger, this
Agreement and the Amended Plan together with the transactions contemplated
thereby (including without limitation the acquisition by the Standby
Purchasers of Buyer Warrants, Buyer Common Stock or Buyer Class B Common
Stock, if applicable, pursuant to this Agreement, the Amended Plan and the
Standby Purchase Commitments, or of Buyer Common Stock or Buyer Class B Common
Stock, if applicable, pursuant to the Buyer Warrants), including for purposes
of Section 203 of the DGCL.
3.24 Opinion of Financial Advisor. The Buyer has received an opinion of Bear
Stearns & Co. Inc., a copy of which is attached hereto as Exhibit E.
3.25 Required Vote of the Buyer's Stockholders. The affirmative vote of a
majority of the votes cast by holders of Buyer Stock is required to approve
the Buyer Share Issuance and the affirmative vote of a majority of the votes
entitled to be cast by holders of Buyer Stock is required to approve the Buyer
Charter Amendment. No other vote of the security holders of the Buyer or of
any Buyer Subsidiary is required by law, the respective organization documents
thereof or otherwise in order for the Buyer to consummate the Merger and the
other transactions contemplated hereby and by the Amended Plan.
3.26 Certain Information. None of the information supplied by the Buyer or
any Buyer Subsidiary for inclusion or incorporation by reference in (i) the
Prospectus (as defined in Section 4.13(a)) and Registration Statement (as
defined in Section 4.20(c)) or (ii) any document to be filed with the SEC, the
FCC or any other Governmental Entity in connection with the transactions
contemplated hereby will, at the respective times filed with the SEC, the FCC
or other Governmental Entity and, in addition, (A) in the case of the
Prospectus, at the time it or any amendment or supplement thereto is mailed to
the Buyer's stockholders and at the time of the Meeting (as defined in Section
4.12) and at the Closing and, (B) in the case of the Registration Statement,
at the time it becomes effective under the Securities Act, contain any untrue
statement of the Buyer or any Buyer Subsidiary of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, no representation is made by
the Buyer or any Buyer Subsidiary with respect to statements made in any of
the foregoing documents based upon information supplied by the Company.
3.27 Disclosure. No representation or warranty by the Buyer contained in
this Agreement, and no statement contained in the Buyer Disclosure Schedule or
any other document, certificate or other instrument delivered to or to be
delivered by or on behalf of the Buyer pursuant to this Agreement, contains or
will as of the Closing Date contain any untrue statement of a material fact or
omits or will as of the Closing Date omit to state any material fact
necessary, in light of the circumstances under which it was or will be made,
in order to make the statements herein or therein not misleading.
ARTICLE IV
Covenants
4.1 Best Efforts. Except, in the case of the Parent and the Company, to the
extent required by Bankruptcy-Related Requirements (as defined in Section
4.5), each Party shall use its best efforts to cause the transactions
contemplated by this Agreement and the Amended Plan to be consummated in
accordance with the terms hereof and thereof, and without limiting the
generality of the foregoing shall use its best efforts to obtain all necessary
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approvals, waivers, consents, permits, licenses, registrations and other
authorizations required in connection with this Agreement and the Amended Plan
and the transactions contemplated hereby and thereby and, in the case of the
Buyer, to assist the Parent and the Company in the preparation of a Disclosure
Statement related to the Amended Plan and, in the case of the Parent and the
Company, to assist the Buyer in the preparation of the Prospectus and
Registration Statement, including, without limitation, entry of the
Confirmation Order, and to make all filings with and to give all notices to
third parties which may be necessary or reasonably required of it in order to
consummate the transactions contemplated hereby and thereby, provided,
however, that actions taken by the Parent and the Company in compliance with
Section 4.7(b) and actions taken by the Buyer in accordance with Section
4.7(e) shall not be deemed a breach by the Parent or the Company, on the one
hand, or the Buyer, on the other hand, of this Section 4.1.
4.2 Approvals; Consents. Each Party shall obtain and maintain in full force
and effect all approvals, consents, permits, licenses and other authorizations
from all Governmental Entities reasonably necessary or required for the
operation of their respective businesses as presently conducted, as and when
such approvals, consents, permits, licenses or other authorizations are
necessary or required, except where the failure to do so would not have a
Debtor Material Adverse Effect or a Buyer Material Adverse Effect, as
applicable, or materially impair the ability of the Company or the Buyer to
consummate the transactions contemplated hereby or the Reorganized Debtors or
the Buyer to own and operate the properties, assets and businesses of the
Debtors following the Closing. Without limiting the generality of the
foregoing, each Party shall maintain its respective authorizations in full
force and effect, shall not take any action which could reasonably be expected
to have a material adverse effect on such authorizations or any licenses and
authorizations, shall diligently pursue all applications and shall, prior to
the expiration date of any material authorization, timely file for the renewal
of any such authorization. Neither Party shall make any material commitments
to any Governmental Entity relating to any material approval, consent, permit,
license or other authorization without the prior written consent of the other
Parties. The Parties shall consult with one another as to the approach to be
taken with any Governmental Entity with respect to obtaining any necessary
consent to the transactions contemplated hereby and by the Amended Plan, and
each of the Parties shall keep the other Parties reasonably informed as to the
status of any such communications with any Governmental Entity. Without
limiting the generality of the foregoing, the Buyer, the Parent and the
Company shall, and shall cause each of the Buyer Subsidiaries or each of the
other Debtors, as applicable, to make the necessary preliminary filings under
the HSR Act no later than ten days following the date of this Agreement and
shall seek early termination of all applicable waiting periods. The Buyer, the
Parent and the Company shall, and shall cause each of the Buyer Subsidiaries
or each of the other Debtors, as applicable, to use their reasonable best
efforts to resolve any competitive issues relating to or arising under the HSR
Act or any other federal or state antitrust or fair trade law raised by any
Governmental Entity. The Parties will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions
and proposals made or submitted by or on behalf of any Party in connection
with proceedings under or relating to the HSR Act or any other federal or
state antitrust or fair trade law. In the event of a challenge to the
transactions contemplated by this Agreement pursuant to the HSR Act, the
Buyer, the Parent and the Company shall, and shall cause each of the Buyer
Subsidiaries or each of the other Debtors, as applicable, to use their
reasonable best efforts to defeat such challenge, including by institution and
defense of litigation, or to settle such challenge on terms that permit the
consummation of the transactions contemplated by this Agreement; provided,
however, that nothing herein shall require the Buyer to divest or hold
separate any portion of its business or otherwise take any action, which
divestiture or holding separate or taking such action would be materially
adverse to the continued conduct of the Buyer's or the Debtor's businesses.
The Buyer shall pay all filing fees payable by any Party in connection with
the HSR Act.
4.3 Buyer Not To Control. Notwithstanding any provision of this Agreement
that may be construed to the contrary, pending the consummation of the
transactions contemplated hereby, the Buyer shall not obtain actual (de facto)
or legal (de jure) control over the Debtors. Specifically, and without
limitation, the responsibility for the operation of the Debtors shall, pending
the consummation of the transactions contemplated hereby, reside with the
Boards of Directors of the Debtors (subject to the jurisdiction of the
Bankruptcy Court), including, but
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not limited to, responsibility for the following matters: access to and the
use of the facilities of and equipment owned by the Debtors; control of the
daily operation of the Debtors; creation and implementation of policy
decisions; employment and supervision of employees; payment of financing
obligations and expenses incurred in the operation of the Debtors; receipt and
distribution of monies and profits derived from the operation of the Debtors;
and execution and approval of all contracts and applications prepared and
filed before regulatory agencies. Notwithstanding the foregoing, the Parties
shall consult and cooperate with one another, and consider in good faith the
views of one another with respect to the assumption or rejection by the
Debtors prior to Closing of any unexpired lease, license or other executory
contract.
4.4 Bankruptcy Covenants.
(a) Promptly after the execution of this Agreement, the Parent and the
Company shall, and shall cause each of the other Debtors to, file a motion
(the "Initial Merger Motion") for expedited determination of approval of the
Exclusivity Provisions (as defined in Section 4.7(a)), the Company Breakup Fee
and the Buyer Breakup Fee (as defined in Section 4.8(a)) and the Buyer
Reimbursement (as defined in Section 4.21) provided for in this Agreement in
form and substance acceptable to the Buyer. The Parent and the Company shall,
and shall cause each of the other Debtors to, use its best efforts to obtain
an order approving the Initial Merger Motion (the "Initial Merger Order")
within 15 days after the date of this Agreement, which order shall be in form
and substance acceptable to the Buyer, the Parent and the Company with only
such changes as shall be agreed to by all the Parties in writing.
(b) As soon as practicable following the execution of this Agreement (and in
no event later than August 20, 1998), the Parent and the Company shall, and
shall cause each of the other Debtors to, file with the Bankruptcy Court the
Amended Plan. As soon as practicable following the filing of the Amended Plan
(and in no event later than August 24, 1998), the Parent and the Company
shall, and shall cause each of the Debtors to, file with the Bankruptcy Court
a Disclosure Statement related thereto in form and substance reasonably
acceptable to the Buyer and the Company (the "Disclosure Statement").
Thereafter, without the prior written consent of the Buyer, the Parent and the
Company shall not, and shall cause each of the other Debtors not to, amend or
modify any material provision of the Amended Plan or the Disclosure Statement
or, except as provided in Section 4.7(b), withdraw the Amended Plan or file
any other plan of reorganization of the Debtors.
(c) The Parent and the Company shall, and shall cause each of the other
Debtors to, promptly provide the Buyer with drafts of all documents, motions,
orders, filings or pleadings that the Parent, the Company or any other Debtor
proposes to file with the Bankruptcy Court which relate to the consummation or
approval of the Amended Plan, this Agreement or any provision therein or
herein, and will provide the Buyer with reasonable opportunity to review such
filings to the extent reasonably practicable. The Parent and the Company
shall, and shall cause each of the other Debtors to, consult and cooperate
with the Buyer, and consider in good faith the views of the Buyer, as
contemplated by the Amended Plan, with respect to all such filings and the
acceptance or rejection prior to Closing of any unexpired lease, license or
other executory contract. The Parent and the Company shall, and shall cause
each of the other Debtors to, promptly (and, in any event, within 48 hours
after receipt of such pleadings by the Debtors) provide the Buyer with copies
of all pleadings (other than proofs of claim below $10,000 in amount) received
by or served by or upon any of the Debtors in connection with the Chapter 11
Proceeding after the date hereof, which either the Parent or the Company knows
have not otherwise been served on the Buyer.
4.5 Operation of Business. Except as otherwise contemplated by this
Agreement or the Amended Plan and, in the case of the Debtors, to the
Bankruptcy Code, the Bankruptcy Rules, the operation and information
requirements of the Office of United States Trustee, and any orders entered or
approvals or authorizations granted by the Bankruptcy Court in the Chapter 11
Proceeding during the period prior to the Closing (collectively, "Bankruptcy-
Related Requirements"), each of the Company, the Parent or the Company, on the
one hand, or the Buyer, on the other hand, shall, and shall cause each of the
other Debtors or each of the Buyer Subsidiaries, as applicable, to, conduct
its operations in the Ordinary Course of Business and in compliance with all
other applicable laws and regulations, and, to the extent consistent
therewith, use all reasonable efforts to preserve
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intact its current business organization, keep its physical assets in good
working condition, pay all Taxes (all post-petition Taxes in the case of the
Debtors) as they become due and payable, maintain insurance on its business
and assets (in amounts and types consistent with past practice), keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings
with it to the end that its goodwill and ongoing business shall not be
impaired in any material respect.
(a) Without limiting the generality of the foregoing, prior to the Closing,
and, except to the extent required by any Bankruptcy-Related Requirements, the
Parent and the Company shall not and shall not permit any other Debtor to,
without the prior written consent of the Buyer and except as otherwise
contemplated by this Agreement or the Amended Plan, or as otherwise provided
in Section 4.5 of the Company Disclosure Schedule:
(i) except for assets not in excess of $2,500,000 in aggregate fair
market value, sell, lease, mortgage, pledge, encumber or dispose
(collectively, "Dispose") of any of its assets, other than in the Ordinary
Course of Business;
(ii) except for borrowings under the existing DIP Loan Agreement in an
aggregate amount outstanding at any one time equal to the sum of (x)
amounts representing costs incurred or committed as of the date hereof in
connection with the Company's NPCS network construction as set forth in
Section 4.5(a) of the Company Disclosure Schedule ("NPCS Construction")
plus any additional costs for NPCS Construction approved by the Buyer
(which approval shall be given or withheld in writing within ten (10)
business days after the written request for such approval) and (y) (1) at
any time on or before December 31, 1998 up to a maximum of $20 million, and
(2) at any time between January 1, 1999 and June 30, 1999 up to a maximum
of $30 million, create, incur or assume any indebtedness for borrowed money
not currently outstanding (including obligations in respect of capital
leases); assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other person; or make any loans, advances or capital
contributions to, or investments in, any other person;
(iii) except for changes to Debtors' payroll program as previously
disclosed to the Buyer, enter into, adopt or amend any Company Employee
Benefit Plan or any employment or severance agreement or arrangement of the
type described in Section 2.17, or (except for normal adjustments in the
Ordinary Course of Business) increase in any material respect the
compensation or fringe benefits of, or modify the employment terms of its
directors, officers or employees generally or pay any benefit not required
by the terms in effect on the date hereof of any existing Company Employee
Benefit Plan;
(iv) change in any material respect its accounting methods, principles or
practices, except insofar as may be required by a generally applicable
change in GAAP;
(v) pay any pre-petition liability other than (x) liabilities in
connection with the assumption of pre-petition contracts and with respect
to wages, taxes, customer refunds and other related expenses that the
Debtors are authorized to pay by the Bankruptcy Court and (y) adequate
protection payments and the payment of the Net Cash Proceeds (as defined in
the DIP Loan Agreement) under the Debtor Tower Agreement to the Pre-
Petition Lenders, in each case as authorized by the Bankruptcy Court;
(vi) amend its certificate of incorporation, by-laws or other comparable
organizational documents;
(vii) sell, assign, transfer or license any material Debtor Licenses and
Authorizations or Debtors' Intellectual Property, other than in the
Ordinary Course of Business;
(viii) enter into, materially amend, terminate, take or omit to take any
action that would constitute a material violation of or default under, or
waive any material rights under, any of the Debtor Licenses and
Authorizations, or any contract or agreement which, if existing on the date
hereof, would be required to be set forth in Section 2.13 of the Company
Disclosure Schedule, other than in the Ordinary Course of Business;
provided, that (x) without such consent, the Company may enter into the
Master Lease (as defined in the Debtor Tower Agreement) and (y) with such
consent, which shall not be unreasonably withheld, terminate the Debtor
Tower Agreement and, in connection therewith, enter into a Replacement
Tower Agreement and a Comparable Tower Lease;
(ix) make or commit to make any capital expenditure not set forth in the
capital expense budget set forth as Section 4.5(a) to the Company
Disclosure Schedule;
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(x) (A) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, securities or other property) in respect
of, any of its outstanding capital stock (other than, with respect to a
Debtor other than the Company, to its corporate parent), (B) split, combine
or reclassify any of its outstanding capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of its outstanding capital stock, or (C) purchase,
redeem or otherwise acquire any shares of outstanding capital stock or any
rights, warrants or options to acquire any such shares;
(xi) issue, sell, grant or pledge any shares of its capital stock, any
other voting securities or any securities convertible into or exchangeable
for, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible or exchangeable securities, other than upon the
exercise of options, or upon the conversion or exchange of securities,
outstanding on the date of this Agreement;
(xii) settle or compromise any material Tax liability or any pending or
threatened suit or action other than consistent with the Company's practice
since the Filing Date or pursuant to the terms of the Amended Plan or make
any material Tax election;
(xiii) establish, or transfer any assets to, a trust for purposes of
funding any Debtor Employee Benefit Plan, including, without limitation, a
so-called "rabbi trust," except as required by applicable law;
(xiv) make any material amendment to the Debtor Tower Agreement or
terminate the Debtor Tower Agreement (whether by agreement with Pinnacle
Towers Inc. or otherwise); or
(xv) agree in writing or otherwise to take any of the foregoing actions.
(b) Without limiting the generality of the foregoing, prior to the Closing,
the Buyer shall not, and shall not permit any Buyer Subsidiary to, without the
prior written consent of the Company, and except as otherwise contemplated by
this Agreement or the Amended Plan, or as otherwise provided in Section 4.5 of
the Buyer Disclosure Schedule:
(i) Dispose of any of its assets or acquire or Dispose of any assets or
shares or other equity interests in or securities of any Business Entity,
other than in the Ordinary Course of Business, except for (A) the mortgage,
pledge or encumbering of such assets, shares, equity interests or
securities pursuant to agreements existing as of the date of this Agreement
or agreements entered into to provide funding, in whole or in part, for the
amounts payable by the Buyer under this Agreement or the Amended Plan or
(B) the acquisition of such assets, shares, equity interests or securities
of any other Person with an aggregate purchase price not exceeding
$25,000,000;
(ii) except for borrowings under the terms of its Second Amended and
Restated Credit Agreement (Tranche A and Tranche C Facilities), dated as of
June 29, 1998, by and among Arch Paging, Inc., The Bank of New York, Royal
Bank of Canada, Toronto Dominion (Texas), Inc. and the other parties
thereto, and its Second Amended and Restated Credit Agreement (Tranche B
Facility), dated as of June 29, 1998, by and among Arch Paging, Inc., The
Bank of New York, Royal Bank of Canada, Toronto Dominion (Texas), Inc. and
the other parties thereto, each as amended from time to time, or borrowings
to provide funding for the amounts payable by Buyer under this Agreement or
the Amended Plan, create, incur or assume any indebtedness for borrowed
money not currently outstanding (including obligations in respect of
capital leases); assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other person; or make any loans, advances or capital
contributions to, or investments in, any other person;
(iii) change in any material respect its accounting methods, principles
or practices, except insofar as may be required by a generally applicable
change in GAAP;
(iv) amend its certificate of incorporation, by-laws or other comparable
organizational documents;
(v) sell, assign, transfer or license any material Buyer Licenses and
Authorizations or Buyer Intellectual Property, other than in the Ordinary
Course of Business;
(vi) enter into, materially amend, terminate, take or omit to take any
action that would constitute a material violation of or default under, or
waive any material rights under, any of the Buyer Licenses and
Authorizations or any contract or agreement which, if existing on the date
hereof, would be required to be set forth in Section 3.13 of the Buyer
Disclosure Schedule, other than in the Ordinary Course of Business;
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(vii) make or commit to make any capital expenditure not set forth in the
capital expense budget attached as Section 4.5(b) to the Buyer Disclosure
Schedule;
(viii) except as required under agreements existing as of the date of
this Agreement, (A) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, securities or other property) in
respect of, any of its outstanding capital stock (other than, with respect
to any Buyer Subsidiary, to its corporate parent), (B) split, combine or
reclassify any of its outstanding capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its outstanding capital stock, or (C) purchase,
redeem or otherwise acquire any shares of outstanding capital stock or any
rights, warrants or options to acquire any such shares, except, in the case
of this clause (C), for the acquisition of shares from holders of options
in full or partial payment of the exercise price payable by such holder
upon exercise of options;
(ix) issue, sell, grant, pledge or, if outstanding as of the date hereof,
change the material terms of, any shares of its capital stock, any other
voting securities or any securities convertible into or exchangeable for,
or any rights, warrants or options to acquire, any such shares, voting
securities or convertible or exchangeable securities, other than pursuant
to the terms of any benefit plan as in effect on the date of this Agreement
in accordance with past practice or upon the exercise of options, or upon
the conversion or exchange of securities, outstanding on the date of this
Agreement;
(x) make any material Tax election or settle or compromise any material
Tax liability or any pending or threatened suit or action;
(xi) establish, or transfer any assets to, a trust for purposes of
funding any Buyer Employee Benefit Plan, including, without limitation, a
so-called "rabbi trust," except as required by applicable law; or
(xii) agree in writing or otherwise to take any of the foregoing actions.
4.6 Notice of Breaches. Each Party shall promptly deliver to the other
Parties written notice of any event or development that would (a) render any
statement, representation or warranty of such Party in this Agreement
(including its respective Disclosure Schedule) inaccurate or incomplete in any
respect, or (b) constitute or result in a breach by such Party of, or a
failure by such Party to comply with, any agreement or covenant in this
Agreement applicable to such Party. No such disclosure shall be deemed to
avoid or cure any such misrepresentation or breach.
4.7 Exclusivity.
(a) Except as contemplated by the Debtor Tower Agreement, from and after the
date hereof, the Parent and the Company shall not, and shall cause each other
Debtor and each of their respective directors, officers, employees, financial
advisors, representatives or agents not to, directly or indirectly, (i)
solicit, initiate, engage or participate in or encourage discussions or
negotiations with any person or entity (other than the Buyer) concerning any
merger, consolidation, sale of material assets, tender offer for,
recapitalization of or accumulation or acquisition of securities issued by any
Debtor, proxy solicitation or other business combination involving any Debtor
(collectively, "Company Acquisition Proposals") or (ii) provide any non-public
information concerning the business, properties or assets of any Debtor to any
person or entity (other than to the Buyer and to the Debtors' creditors in
accordance with existing confidentiality arrangements). The Parent and the
Company shall, and shall cause each of the other Debtors to, immediately cease
any and all existing activities, discussions or negotiations with any person
other than the Buyer with respect to any Company Acquisition Proposal. The
Parent and the Company shall immediately notify the Buyer of, and shall
disclose to the Buyer all details of, any inquiries, discussions or
negotiations of the nature described in the first sentence of this Section
4.7. The provisions of this Section 4.7 are referred to in this Agreement as
the "Exclusivity Provisions".
(b) Notwithstanding the provisions of subsection (a) above, prior to the
entry of the Confirmation Order, the Debtors may, to the extent required by
the Bankruptcy-Related Requirements, or to the extent that the Board of
Directors of the Company determines, in good faith after consultation with
outside legal counsel, that such Board's fiduciary duties under applicable law
require it to do so, participate in discussions or negotiations with,
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and, subject to the requirements of paragraph (c) below, furnish information
to any person, entity or group after such person, entity or group has
delivered to the Debtors, in writing, an unsolicited bona fide offer to effect
a Company Acquisition Proposal that the Board of Directors of the Company in
its good faith judgment determines, after consultation with its independent
financial advisors, would result in a transaction more favorable to the
stakeholders of the Debtors from a financial point of view than the
transactions contemplated hereby and for which financing, to the extent
required, is then committed (or which, in the good faith judgment of such
Board, is reasonably capable of being obtained) and which (in the good faith
judgment of such Board) is likely to be consummated (a "Company Superior
Proposal"). In the event the Debtors receive a Company Superior Proposal,
nothing contained in this Agreement (but subject to the terms hereof) will
prevent the Board of Directors of the Company from approving such Company
Superior Proposal or requesting authorization of such Company Superior
Proposal from the Bankruptcy Court, if such Board determines, in good faith,
after consultation with outside legal counsel, that such action is required by
its fiduciary duties under applicable law; in such case, the Board of
Directors of the Company may terminate this Agreement pursuant to Section
6.1(e) hereof; provided, however, that the Company shall not terminate this
Agreement until at least 48 hours after the Buyer's receipt of a copy of such
Company Superior Proposal.
(c) Notwithstanding anything to the contrary in this Section 4.7, the Parent
and the Company shall not, and shall cause each of the other Debtors not to,
provide any non-public information to a third party unless: (i) the Debtors
provide such non-public information pursuant to a non-disclosure agreement
with terms regarding the protection of confidential information at least as
restrictive as such terms in the Confidentiality Agreements between the Parent
and the Buyer dated March 26, 1998 and June 10, 1998 (the "Confidentiality
Agreement"); and (ii) such non-public information has previously been
delivered or made available to the Buyer.
(d) Except as contemplated by the Asset Purchase and Sale Agreement between
certain subsidiaries of Arch Communications Group, Inc., and OmniAmerica,
Inc., dated April 10, 1998, from and after the date hereof the Buyer shall
not, and shall cause each Buyer Subsidiary and each of their respective
directors, officers, employees, financial advisors, representatives or agents
not to, directly or indirectly, (i) solicit, initiate, engage or participate
in or encourage discussions or negotiations with any person or entity (other
than the Parent, the Company and, in connection with the transactions
contemplated by this Agreement, the Official Committee of Unsecured Creditors
of the Company) concerning any merger (other than mergers of the Buyer
Subsidiaries in connection with acquisitions of other businesses by the Buyer
(x) with a fair market value not in excess of $25,000,000 and (y) that would
not upon the closing thereof be in breach of the Buyer's obligations under
Section 4.5), consolidation, sale of material assets, tender offer for,
recapitalization of or accumulation or acquisition of securities issued by the
Buyer or any of the Buyer Subsidiaries, proxy solicitation or other business
combination (other than business combinations of the Buyer Subsidiaries in
connection with acquisitions of other businesses by the Buyer (x) with a fair
market value not in excess of $25,000,000 and (y) that would not upon the
closing thereof be in breach of the Buyer's obligations under Section 4.5),
involving the Buyer or any Buyer Subsidiary (collectively, "Buyer Acquisition
Proposals") or (ii) except as permitted by the foregoing clause (i), provide
any non-public information concerning the business, properties or assets of
the Buyer or any Buyer Subsidiary to any person or entity (other than the
Debtors or any of the Buyer's financing sources). The Buyer and the Buyer
Subsidiaries will immediately cease any and all existing activities,
discussions or negotiations with any person other than the Company with
respect to any Buyer Acquisition Proposal. The Buyer shall immediately notify
the Company of, and shall disclose to the Company all details of, any
inquiries, discussions or negotiations of the nature described in the first
sentence of this Section 4.7(d).
(e) Notwithstanding the provisions of subsection (d) above, prior to the
Meeting (as defined in Section 4.12), the Buyer may, to the extent that the
Board of Directors of the Buyer determines, in good faith, after consultation
with outside legal counsel, that such Board's fiduciary duties under
applicable law require it to do so, participate in discussions or negotiations
with, and, subject to the requirements of paragraph (f) below, furnish
information to any person, entity or group after such person, entity or group
has delivered to the Buyer, in writing, an unsolicited bona fide offer to
effect a Buyer Acquisition Proposal that the Board of Directors of the Buyer
in its good faith judgment determines, after consultation with its independent
financial advisors, would
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result in a transaction more favorable to the shareholders of the Buyer from a
financial point of view than the transactions contemplated hereby and for
which financing, to the extent required, is then committed (or which, in the
good faith judgment of such Board, is reasonably capable of being obtained)
and which (in the good faith judgment of such Board) is likely to be
consummated (a "Buyer Superior Proposal"). In the event the Buyer receives a
Buyer Superior Proposal, nothing contained in this Agreement (but subject to
the terms hereof) will prevent the Board of Directors of the Buyer from
recommending to the Buyer's shareholders such Buyer Superior Proposal if such
Board determines, in good faith, after consultation with outside legal
counsel, that such action is required by its fiduciary duties under applicable
law.
(f) Notwithstanding anything to the contrary in this Section 4.7, the Buyer
shall not provide any non-public information to a third party unless: (i) the
Buyer provides such non-public information pursuant to a non-disclosure
agreement with terms regarding the protection of confidential information at
least as restrictive as such terms in the Confidentiality Agreement; and (ii)
such non-public information has previously been delivered or made available to
the Company.
4.8 Breakup Fee Provisions. In the event that (i) the Buyer terminates this
Agreement pursuant to Section 6.1(b) or Section 6.1(i) or (ii) the Company or
the Buyer terminates this Agreement pursuant to Section 6.1(c) or 6.1(d) (in
either case as a result of the failure of the condition set forth in Section
5.1(h) to be satisfied due to (A) the failure of the creditors of the Debtors
entitled to vote on the Amended Plan (other than holders of Class 7, 8 or 9
Claims) to vote in favor of the Amended Plan, (B) the withdrawal of the
Amended Plan by the Debtors, the filing of any other plan of reorganization by
the Debtors, or the modification or amendment of any material provision of the
Amended Plan by the Debtors, in each case without the prior written consent of
the Buyer, or (C) the confirmation of any other plan of reorganization filed
by any other person other than the Debtors, (iii) except as set forth in
Section 4.8(a) of the Company Disclosure Schedule, the Debtors sell or
otherwise transfer (other than to the Buyer or the Buyer Subsidiaries) all or
any substantial portion of their assets as part of a sale approved pursuant to
Section 363 of the Bankruptcy Code, (iv) the Company has terminated this
Agreement pursuant to Section 6.1(e) (a termination under (i), (ii), (iii) or
(iv) being herein called a "Major Breakup Event"), or (v) the Buyer or the
Company terminates this Agreement pursuant to Section 6.1(j) (a "Minor Breakup
Event"; together with the Major Breakup Events, the "Breakup Events"), and at
the time of any such Breakup Event the Buyer is not in material breach of any
material covenant or obligation required to be performed by the Buyer
hereunder at or before such time, and is not in breach of its representations
and warranties contained in this Agreement (except where the matters in
respect of which such representations and warranties are in breach would not
in the aggregate have a Buyer Material Adverse Effect), then the Company shall
pay to the Buyer as promptly as practicable after demand therefor (but in no
event later than the third Business Day thereafter and, in the case of a Minor
Breakup Event, only if and when any Pinnacle Breakup Amount referred to below
is actually received by the Debtors) (x) in the case of a Major Breakup Event,
the amount of $25,000,000, and (y) in the case of a Minor Breakup Event, an
amount equal to one-half of any amount ("Pinnacle Breakup Amount") actually
received by the Debtors pursuant to Section 7.05 of the Debtor Tower Agreement
(or pursuant to a settlement with Pinnacle in lieu thereof) (in either case,
the "Buyer Breakup Fee"). The claims of the Buyer to the Buyer Breakup Fee
shall constitute a first priority administrative expense under 11 U.S.C. (S)
507(a)(1).
(b) In the event that (i) the Company terminates this Agreement pursuant to
Section 6.1(b) or (g), or (ii) the Buyer or the Company terminates this
Agreement after June 30, 1999 pursuant to Section 6.1(c) or (d) (in either
case as a result of the Closing not occurring due to the Buyer's failure to
obtain the financing necessary to effect the transactions contemplated hereby
and by the Amended Plan under circumstances when all the conditions set forth
in Section 5.1 (other than the condition set forth in Section 5.1(j)) and
Section 5.2 are satisfied, or would have been satisfied had such financing
been obtained) and at the time of such termination each of the Company and the
Parent is not in material breach of any material covenant or obligation
required to be performed by the Company or the Parent hereunder at or before
such time and is not in breach of its representations and warranties contained
in this Agreement (except where the matters in respect of which such
representations and warranties are in breach would not in the aggregate have a
Debtor Material Adverse Effect),
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then the Buyer shall pay to the Company as promptly as practicable after
demand therefor (but in no event later than the third Business Day thereafter)
the amount of $32,500,000 (the "Company Breakup Fee").
(c) This Section 4.8 shall be effective only from and after the date the
Initial Merger Order is signed by the Bankruptcy Court.
4.9 Nasdaq National Market Quotation. The Buyer shall use its best efforts
to have the shares of Buyer Common Stock (including all such shares issuable
upon conversion of the Buyer Class B Common Stock and upon exercise of the
Buyer Warrants) and Buyer Warrants to be issued as contemplated in the Amended
Plan and this Agreement approved for quotation on the Nasdaq National Market
prior to the Closing.
4.10 Delivery of Financial Statements. As promptly as possible following the
last day of each month after the date of this Agreement until the Closing
Date, and in any event within 35 days after the end of each such month, each
of the Buyer and the Company shall deliver to the other its unaudited
consolidated balance sheet and the related consolidated statements of
operations and cash flows for the one-month period then ended, all certified
by its chief financial officer to the effect that such interim financial
statements are prepared in accordance with GAAP (except as otherwise described
therein) on a consistent basis as with each Party's audited financial
statements and fairly present the consolidated financial condition and results
of operations of each Party as of the date thereof and for the period covered
thereby (collectively, the "Interim Monthly Financial Statements"). As
promptly as possible following the last day of each fiscal quarter, and in any
event within 45 days after the end of each such quarter, each of the Buyer and
the Company shall deliver to the other its unaudited consolidated balance
sheet and the related unaudited consolidated statements of operations and cash
flows for the year-to-date period then ended, prepared in accordance with GAAP
(except as otherwise described therein) applied on a consistent basis as with
the Audited Financial Statements, which comply as to form with the applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto (collectively, the "Unaudited Quarterly Financial
Statements"). The Company shall furnish the Buyer with all information
(including, without limitation, the Audited Financial Statements and the
Unaudited Quarterly Financial Statements, pro forma financial information and
projections included in the Disclosure Statement) and shall take such other
action including obtaining any necessary consents and comfort letters (in
customary form and scope) from its accountants, as the Buyer may reasonably
request in connection with any offering of securities of the Buyer used to
fund the amounts to be paid by the Buyer under the Amended Plan or the working
capital requirements of the Buyer following the Closing.
4.11 Full Access. Each of the Buyer, the Parent and the Company shall
permit representatives of the other to have full access (at all reasonable
times, and in a manner so as not to interfere with normal business operations)
to all premises, properties, financial and accounting records, contracts,
other records and documents, and personnel, of or pertaining to such Party.
Each of the Buyer, the Parent and the Company shall cause its officers and
management to cooperate fully with the representatives and agents of such
other Party and shall make themselves available to the extent reasonably
necessary to complete the due diligence process and the consummation of the
transactions contemplated hereby. The Parent and the Company shall, at the
request of the Buyer, introduce the Buyer to its principal suppliers and
employees to facilitate discussions between such persons and the Buyer in
regard to the conduct of the businesses of the Surviving Corporation following
the Closing.
4.12 Stockholders Approval; Meeting. The Buyer shall take all action
reasonably necessary in accordance with applicable law, the rules of the
Nasdaq National Market, this Agreement and the Buyer's Restated Certificate of
Incorporation, as amended, and By-laws, as amended, duly to convene a meeting
of its stockholders (the "Meeting") as promptly as practicable to consider and
vote upon (i) the Buyer Charter Amendment in the form attached as Exhibit F
hereto (the "Buyer Charter Amendment") and (ii) the Buyer Share Issuance. The
Buyer will (i) subject to Section 4.7(e), recommend in the Prospectus (as
defined in Section 4.13(a)) that its stockholders vote in favor of the Buyer
Charter Amendment and the Buyer Share Issuance (the "Buyer Recommendation")
and (ii) subject to Section 4.7(e), use its best efforts to cause to be
solicited proxies from stockholders of the Buyer to be voted at the Meeting in
favor of the Buyer Charter Amendment and the Buyer
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Share Issuance and to take all other actions necessary or advisable to secure
the vote or consent of stockholders required to approve the Buyer Charter
Amendment and the Buyer Share Issuance.
4.13 Prospectus, Disclosure Statement, Etc.
(a) The Buyer shall promptly after execution of this Agreement prepare and
file with the SEC under the Exchange Act, and shall use its best efforts to
have cleared by the SEC and shall thereafter promptly mail to its
stockholders, a proxy statement for the Meeting (the "Prospectus"). The
Prospectus shall be mailed to stockholders of the Buyer at least 20 business
days in advance of the date of the Meeting. The Company shall furnish the
Buyer with all information (including, without limitation, its Audited
Financial Statements and the Unaudited Quarterly Financial Statements, pro
forma financial information and projections included in the Disclosure
Statement) and shall take such other action (including obtaining any necessary
consents from the accountants) as the Buyer may reasonably request in
connection with the Prospectus. The Buyer shall consult with the Company and
its counsel in connection with, and shall permit the Company and its counsel
to participate in, the preparation of the Prospectus.
(b) The Buyer shall promptly notify the Company of the receipt of the
comments of the SEC and of any requests by the SEC for amendments or
supplements to the Prospectus or for additional information, and shall
promptly supply the Debtors with copies of all correspondence between it (or
its representatives) and the SEC (or its staff) with respect thereto, and
shall permit counsel for the Company to participate in any telephone
conferences or meetings with the staff of the SEC. If, at any time prior to
the Meeting, any event should occur relating to or affecting a Party or its
officers or directors, which event should be described in an amendment or
supplement to the Prospectus, such Party shall promptly inform the other Party
and shall cooperate in promptly preparing, filing and clearing with the SEC
and, if required by applicable securities law, mailing to the Buyer's
stockholders, as the case may be, such amendment or supplement.
(c) The Buyer shall furnish the Company with all information (including
historical and pro forma financial information and projections of the Buyer)
and shall take such other action as the Company may reasonably request in
connection with the Disclosure Statement. The Company shall consult with the
Buyer and its counsel in connection with, and shall permit the Buyer and its
counsel to participate in, the preparation and Bankruptcy Court approval
process of the Disclosure Statement and any amendments or supplements thereto.
4.14 Application of Pinnacle Proceeds. The Buyer, the Parent and the Company
agree that the net proceeds from the Closing (as defined in the Debtor Tower
Agreement) shall promptly be paid to the Pre-Petition Agent for the benefit of
the Pre-Petition Lenders.
4.15 FCC Filing. As soon as practicable following the date of this Agreement
and in no event later than the later to occur of the date fifteen days
following the execution hereof or the date ten days following the filing with
the Bankruptcy Court of the Amended Plan, the Parties shall jointly prepare
and file applications (the "FCC Applications") on the appropriate FCC forms in
accordance with all applicable FCC rules and regulations requesting (i) the
FCC's consent to the transfer of the control of the Debtor Authorizations to
the Buyer, (ii) to the extent that such consent is required, the FCC's consent
to the transfer of control of the Buyer Authorizations from the Buyer's
current stockholders to the Buyer's stockholders immediately following the
consummation of the transactions contemplated hereby in accordance with the
Amended Plan, (iii) the termination of the hearing in WT Docket No. 97-115, In
the Matter of MobileMedia Corporation, et al. (the "Hearing") without any
further findings adverse to the Debtors, or to the Debtor Authorizations or
otherwise materially restricting the Buyer's or the Reorganized Debtors'
ability to own or operate the properties, assets and businesses of the Debtors
following the Closing, and (iv) the grant to the Buyer of permanent license
authority to operate those stations listed on Attachment C of Public Notice DA
97-78 (January 13, 1997) (the "Attachment C Stations"), as to which Debtors
are currently operating under a grant of interim operating authority, or in
the alternative, a determination by the FCC that as to such stations, the
Buyer will enjoy protection from, and rights of incumbency as to, any future
Market Area Licensee authorized to operate on the frequencies licensed under
interim operating authority. The Parties shall cooperate in providing all
information and taking all steps necessary to expedite the
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preparation, filing and prosecution of the FCC Applications with the FCC. In
the event any person or entity petitions the FCC to deny any FCC Application,
or petitions for any further proceedings in the Hearing, or otherwise
challenges the grant of any FCC Application before the FCC, or in the event
the FCC approves the transfer of control of the Debtor Authorizations (and, if
necessary, the Buyer Authorizations), and any person requests reconsideration
or judicial review of such order, then the Parties shall take such reasonable
actions as are necessary to oppose such petition or challenge before the FCC
or defend such action and the order of the FCC before the judiciary diligently
and in good faith; provided, however, that nothing contained herein shall be
deemed to require the Buyer to intervene in the Hearing or otherwise to defend
the Debtors as to any allegations or proceedings relating to the allegations
before the FCC in the Hearing, except as reasonably required to support the
transfer of control of the Debtor Authorizations to the Buyer. The Company
shall provide the Buyer (whether or not the Buyer intervenes or otherwise
participates in the Hearing) with reasonable advance notice of, and a right to
participate in, any meetings or hearings relating to the FCC Applications or
the Hearing, and a right to review in advance any correspondence, agreements,
or pleadings which may be submitted by the Debtors to the FCC or any other
party to the Hearing with regard to the FCC Applications or any proceedings
relating to the Hearing. In each such case, each Party shall bear its own
costs and expenses of prosecuting such application to a favorable conclusion,
to the end that the transactions contemplated by this Agreement and the
Amended Plan may be consummated.
The Parent and the Company each covenants that it will continue to use
reasonable best efforts to complete the program, voluntarily undertaken by the
Debtors and monitored by its independent regulatory consultant, to inspect and
audit the Debtors' transmitter site facilities and license data, within the
time frames established by Debtors' independent regulatory consultant and
reported to the FCC, and will provide Buyer with periodic updates of the
progress of the program, including copies of status reports prepared by the
Debtors' independent regulatory consultant and furnished to the Company's
Board of Directors.
4.16 Indemnification; Director and Officers Insurance. (a) The Buyer agrees
that, to the extent set forth in the Amended Plan and only to such extent, all
rights to indemnification and exculpation from liabilities for acts or
omissions occurring prior to the Effective Time now existing in favor of the
current or former directors or officers of the Debtors as provided in their
respective charters or by-laws (or comparable organization documents) and any
indemnification agreements of the Debtors (including with Alvarez & Marsal,
Inc.) shall survive the Merger and shall continue in full force and effect in
accordance with their terms for a period of not less than three years from the
Effective Time and the obligations of the Debtors in connection therewith
shall be assumed by the Buyer. To the extent set forth in the Amended Plan and
only to such extent, the Buyer shall provide, or shall cause the Surviving
Corporation to provide, the Debtors' current directors and officers an
insurance and indemnification policy (including any fiduciary liability
policy) that provides coverage with respect to any claims made during the
three-year period following the Effective Time for events occurring prior to
the Effective Time.
(b) The provisions of this Section 4.16 are intended to be for the benefit
of, and shall be enforceable by, each person who is or has been a director or
officer of any of the Debtors (except for such Persons who are not entitled to
indemnification as provided for in the Amended Plan) and such director's or
officer's heirs and personal representatives and shall be binding on all
successors and assigns of the Buyer and the Surviving Corporation.
4.17 State Takeover Laws. If any "fair price", "business combination" or
"control share acquisition" statute or other similar statute or regulation
shall become applicable to the transactions contemplated hereby, the Buyer,
the Parent and the Company and their respective Boards of Directors shall use
all reasonable efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and shall otherwise
act to minimize the effects of any such statute or regulation on the
transactions contemplated hereby.
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4.18 Employees.
(a) Buyer's Benefits for Affected Employees. As promptly as practicable
following the Effective Time, the Buyer shall transfer to one or more employee
benefit plans maintained by the Buyer any employee of the Parent, the Company
or any of the Company's Subsidiaries who becomes an employee of the Buyer or
any of its Subsidiaries (collectively, the "Affected Employees"). Prior to
such transfer, the Buyer shall maintain, or shall cause the Company and its
Subsidiaries to maintain, compensation and employee benefits plans and
arrangements for the Affected Employees that are comparable to those provided
for under the compensation arrangements and Company Employee Benefit Plans as
in effect on the date hereof; provided, that for such period, the Buyer shall
not reduce the severance benefits payable to any terminated employee or
Affected Employee below the level currently provided to such terminated
employee or Affected Employee by the Company. Notwithstanding the foregoing,
the Buyer shall have the right, following the Effective Time, in the good
faith exercise of its managerial discretion, to terminate the employment of
any employee. Nothing in this Agreement shall be construed as granting to any
employee any rights of continuing employment.
(b) Honoring Accrued Vacation and 1998 Employee Incentive Plan. Without
limiting the generality of the foregoing subsection, and to the extent
permitted by law, the Buyer shall (i) honor all vacation, holiday, sickness
and personal days accrued by Affected Employees and, to the extent applicable,
former employees of the Parent, the Company and its Subsidiaries ("Former
Employees") as of the Effective Time and (ii) for purposes of the Company's
1998 Employee Incentive Plan, in the event the payments under the 1998
Employee Incentive Plan would be paid or payable after the Closing, (x) use
the evaluations of the executives covered by such plan prepared in good faith,
and to be provided by the Company to the Buyer at least five business days
prior to the Closing and (y) calculate the Company's 1998 EBITDA in a manner
consistent with the Company's current accounting practices, in connection with
the 1998 Employee Incentive Plan and without deduction for any restructuring
or other special or one-time charge relating to the transactions contemplated
by this Agreement.
(c) Participation in Benefit Plans. Employees and, to the extent applicable,
Former Employees shall be given credit, to the extent permitted by law, for
all service with the Parent, the Company and its Subsidiaries (or service
credited by the Company or such Subsidiaries) under all Buyer Employee Benefit
Plans currently maintained by the Buyer or any of its Subsidiaries in which
they are or become participants for purposes of eligibility, vesting, level of
participant contributions and benefit accruals (but subject to an offset, if
necessary, to avoid duplication of benefits) to the same extent as if rendered
to the Buyer or any of its Subsidiaries other than as otherwise provided in
clause (a) or (b) of this Section 4.18. The Buyer shall cause to be waived any
pre-existing condition limitation under its welfare plans that might otherwise
apply to an Affected Employee or, to the extent applicable, a Former Employee.
The Buyer agrees to recognize (or cause to be recognized) the dollar amount of
all expenses incurred by Affected Employees or, to the extent applicable,
Former Employees, during the calendar year in which the Effective Time occurs
for purposes of satisfying the calendar year deductions and co-payment
limitations for such year under the relevant benefit plans of the Buyer and
the Buyer Subsidiaries.
4.19 Rights Agreement. The Buyer shall not (i) amend the Rights Agreement or
(ii) take any action with respect to, or make any determination under, the
Rights Agreement (including a redemption of the Preferred Rights) with the
purpose of facilitating a Buyer Acquisition proposal.
4.20 Buyer Rights Offering; Registration Statement. (a) As specified in the
Amended Plan, the Buyer will issue (the "Rights Offering") to the holders of
certain Allowed Claims as specified in the Amended Plan the Rights to
purchase, for an aggregate consideration of $217 million, shares of Buyer
Common Stock, Buyer Class B Common Stock, if applicable, and Buyer Warrants.
The Rights Offering will be made substantially on the terms set forth in
Schedule III hereto.
(b) Concurrently with the execution of this Agreement, the Company and the
Buyer have entered into a Standby Purchase Commitment with each Standby
Purchaser and, prior to or at the Closing, the Buyer will execute and deliver
to each of the Standby Purchasers the Registration Rights Agreement.
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(c) The Buyer will file with the SEC a registration statement as required
under the Securities Act to effect the Rights Offering as contemplated hereby
(the "Registration Statement") as promptly as practicable (in any event within
15 days) after the date of this Agreement, and the Buyer will use its best
efforts to have the Registration Statement declared effective by the SEC as
promptly as practicable thereafter. The Buyer shall also take any action
required to be taken under state blue sky laws or other securities laws in
connection with the Rights Offering. The Parent and the Company shall furnish
the Buyer with all information (including, without limitation, the Audited
Financial Statements and the Unaudited Quarterly Financial Statements, pro
forma financial information and projections included in the Disclosure
Statement) and shall take such other action, including obtaining any necessary
consents and comfort letters (in customary form and scope) from its
accountants, as the Buyer may reasonably request in connection with the
Registration Statement. The Buyer shall consult with the Parent and the
Company and its counsel in connection with, and shall permit the Parent and
the Company and its counsel to participate in, the preparation of the
Registration Statement. The Buyer shall cause the Rights to be issued as
specified in the Amended Plan as soon as practicable after the date the
Registration Statement becomes effective but not before approval of Disclosure
Statement by the Bankruptcy Court.
(d) The Buyer shall promptly notify the Parent and the Company of the
receipt of the comments of the SEC and of any requests by the SEC for
amendment or supplements to the Registration Statement or for additional
information, and shall promptly supply the Parent and the Company with copies
of all correspondence between it (or its representatives) and the SEC (or its
staff) with respect thereto, and shall permit counsel for the Parent and the
Company to participate in any telephone conferences or meetings with the staff
of the SEC. If, at any time prior to the Effective Date, any event should
occur relating to or affecting a Party or its officers or directors, which
event should be described in an amendment or supplement to the Registration
Statement, such Party shall promptly inform the other Party and shall
cooperate in promptly preparing, filing and clearing with the SEC and, if
required by applicable securities law, distributing such amendment or
supplement.
4.21 Reimbursement of Buyer's Expenses. As soon as practicable after the
date of receipt of the Initial Merger Order (but in no event later than the
third Business Day thereafter), the Company shall pay to the Buyer, by wire
transfer to a bank account of the Buyer specified in a prior written notice
from the Buyer to the Company, $500,000 in next day funds in partial
reimbursement of the Buyer's expenses in connection with the negotiation and
execution of this Agreement (the "Buyer Reimbursement").
ARTICLE V
Conditions to Closing
5.1 Conditions to Obligations of Each Party. The respective obligation of
each Party to consummate the transactions to be performed by it in connection
with the Closing is subject to the satisfaction, or waiver by such Parties, of
the following conditions:
(a) each of the Buyer Charter Amendment and the Buyer Share Issuance
shall have been approved by the requisite vote of the holders of Buyer
Stock in accordance with the DGCL and the restated certificate of
incorporation, as amended, and by-laws, as amended, of the Buyer;
(b) no statute, rule, order, decree or regulation shall have been enacted
or promulgated by any foreign or domestic Governmental Entity which
prohibits the consummation of the transactions contemplated hereby and all
consents, orders and approvals from all Governmental Entities and other
persons or entities listed in Section 2.3 of the Company Disclosure
Schedule or Section 3.3 of the Buyer Disclosure Schedule shall have been
obtained and shall be in effect;
(c) there shall be no order or injunction of a foreign or United States
federal or state court or other governmental authority of competent
jurisdiction in effect precluding, restraining, enjoining or prohibiting
consummation of the transactions contemplated hereby;
(d) the expiration or early termination of any waiting period under the
HSR Act shall have occurred;
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(e) (1) the FCC shall have issued an order (the "FCC Grant") both (i)
consenting to the transfer of the Debtor Authorizations and, to the extent
requested by the Parties, to the transfer of the Buyer Authorizations
without any conditions that would have a Buyer FCC Material Adverse Effect
(as defined below in this Section 5.1(e)) or a Debtor FCC Material Adverse
Effect (as defined below in this Section 5.1(e)) and (ii) terminating the
Hearing without any findings or conclusions (x) that are materially adverse
to the Reorganized Debtors or the Debtor Authorizations or which would have
a material adverse effect on the use of the Debtor Authorizations by the
Reorganized Debtors following the Closing, or (y) which impose any material
monetary forfeiture on the Debtors or the Reorganized Debtors or retain
jurisdiction to impose any material monetary forfeitures in the future on
the Buyer or the Reorganized Debtors based on the activities of the Debtors
prior to the Closing, or (z) which would have a Buyer FCC Material Adverse
Effect or a Debtor FCC Material Adverse Effect; and (2) either (i) the FCC
Grant has become a Final Order (as defined below in this Section 5.1(e)) or
(ii)(a) any condition or conditions under the Bank Lending Documents to the
effect that the FCC Grant shall have become a Final Order (or any condition
or conditions therein having a substantially similar effect) shall have
been satisfied or, if not satisfied, the Bank Lenders shall have waived any
such condition or conditions (or any such condition or conditions having a
substantially similar effect) and (b) any condition or conditions under the
Other Lending Documents to the effect that the FCC Grant shall have become
a Final Order (or any condition or conditions therein having a
substantially similar effect) shall have been satisfied or, if not
satisfied, the Other Lenders shall have waived any such condition or
conditions (or any such condition or conditions having a substantially
similar effect); it being agreed that, for purposes of this Section 5.1(e)
and Section 5.1(h), (A) "Bank Lenders" shall mean, collectively, the
Existing Lenders (as defined in the Bank Commitment Letter) and the Credit
Parties (as so defined), as the same in each case shall exist at the
Closing, (B) "Bank Lending Documents" shall mean the Existing Credit
Agreements (as defined in the Bank Commitment Letter) as amended and
modified by the Amendments (as so defined), (C) "Bank Commitment Letter"
shall mean the Commitment Letter of even date herewith between Arch Paging,
Inc. and the Credit Parties, including the Term Sheet (as defined in such
Bank Commitment Letter), copies of which has been delivered to the Company
by the Buyer, as the same may be amended or modified, (D) "Other Lenders"
shall mean the Lenders (as defined in the Bridge Commitment Letter), as the
same shall exist at the Closing, or, if applicable, any other lenders which
lend funds to Arch Communications, Inc. (or the Buyer or any other Buyer
Subsidiary) pursuant to a Substitute Loan Agreement (as defined below), (E)
"Other Lending Documents" shall mean the Bridge Commitment Letter, Bridge
Loan Agreement (as defined in the Bridge Commitment Letter) or any other
loan agreement, indenture or similar agreement (the "Substitute Loan
Agreement") entered into by the Buyer or any Buyer Subsidiary in lieu
thereof for purposes of funding a material portion of the consideration
required by the Buyer for the transactions contemplated by this Agreement,
(F) "Bridge Commitment Letter" shall mean the Bridge Commitment Letter, the
Bridge Fee Letter and the Bridge Engagement Letter, each of even date
herewith, between the Buyer and Arch Communications, Inc., on the one hand,
and the Other Lenders, on the other hand, a copy of which has been
delivered by the Buyer to the Company, as the same may be amended or
modified, (G) "Buyer FCC Material Adverse Effect" shall mean a material
adverse effect on the financial condition and operating income of the Buyer
and its subsidiaries, taken as a whole, excluding any effect generally
applicable to the economy or the industry in which Buyer conducts its
business, and (H) "Debtor FCC Material Adverse Effect" shall mean a
material adverse effect on the financial condition and operating income of
the Debtors, taken as a whole, excluding any effect generally applicable to
the economy or the industry in which the Company conducts its business; and
it being further agreed that, for purposes of this Section 5.1(e), the FCC
Grant shall become a "Final Order" when no request for a stay is pending,
no stay is in effect and any deadline for filing such a request that may be
designated by statute or regulation is past; no petition for rehearing or
reconsideration or application for review is pending and the time for
filing any such petition or application is passed; the FCC does not have
the action or decision under reconsideration on its own motion and the time
for initiating any such reconsideration that may be designated by statute
or rule has passed; and no appeal is pending or in effect and any deadline
for filing any such appeal that may be designated by statute or rule has
passed;
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(f) the Registration Statement shall have been declared effective and no
stop order with respect thereto shall be in effect;
(g) the shares of Buyer Common Stock (including all such shares issuable
upon conversion of the Buyer Class B Common Stock and the Buyer Warrants)
to be issued as contemplated by the Amended Plan and this Agreement shall
have been approved for quotation on the Nasdaq National Market;
(h) (1) the Confirmation Order (which shall authorize and approve the
assumption by the Debtors of the Assumed Contracts), in a form reasonably
satisfactory to each of the Parties, shall have been entered by the
Bankruptcy Court; and (2) either (i) the Confirmation Order has become a
Final Order (as defined below in this Section 5.1(h)) or (ii) (a) any
condition or conditions under the Bank Lending Documents to the effect that
the Confirmation Order shall have become a Final Order (or any condition or
conditions therein having a substantially similar effect) shall have been
satisfied or, if not satisfied, the Bank Lenders shall have waived any such
condition or conditions (or any such condition or conditions having a
substantially similar effect), and (b) any condition or conditions under
the Other Lending Documents to the effect that the Confirmation Order shall
have become a Final Order (or any condition or conditions therein having a
substantially similar effect) shall have been satisfied or, if not
satisfied, the Other Lenders shall have waived any such condition or
conditions (or any such condition or conditions having a substantially
similar effect), it being agreed that, for purposes of this Section 5.1(h),
the Confirmation Order shall become a "Final Order" when it shall have been
in full force and effect for eleven days without any stay or material
modification or amendment thereof, and when the time to appeal or petition
for certiorari designated by statute or regulation has expired and no
appeal or petition for certiorari is pending or, if an appeal or petition
for certiorari has been timely filed or taken, the order or judgment of the
tribunal has been affirmed (or such appeal or petition has been dismissed
as moot) by the highest court (or other tribunal having appellate
jurisdiction over the order or judgment) to which the order was appealed or
the petition for certiorari has been denied, and the time to take any
further appeal or to seek further certiorari designated by statute or
regulation has expired;
(i) no action, suit or proceeding shall be pending or threatened by any
Governmental Entity challenging the validity of the actions taken by the
Buyer, the Debtors or any of their respective Subsidiaries in connection
with the confirmation of the Amended Plan;
(j) the Effective Date (as defined in the Amended Plan) shall have
occurred; and
(k) the Plan Shares to be issued and distributed as contemplated by
Section 1.3(e) and Section 1.6 shall, when so issued and distributed, be
(i) issued and distributed pursuant to the exemption from registration
under the Securities Act provided by Section 1145 of the Bankruptcy Code,
(ii) freely tradeable by holders thereof who are not then affiliates of the
Buyer or "underwriters" under the Securities Act or 1145(b)(1) of the
Bankruptcy Code and, (iii) except for certificates issuable to such
affiliates or underwriters, represented by certificates bearing no
restrictive legend.
5.2 Conditions to Obligations of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by the Buyer in connection with
the Closing is subject to the satisfaction, or waiver by the Buyer, of the
following conditions:
(a) the representations and warranties of the Parent and the Company
contained in this Agreement, which representations and warranties shall be
deemed for purposes of this Section 5.2(a) not to include any qualification
or limitation with respect to materiality (whether by reference to a
"Debtor Material Adverse Effect" or otherwise), shall be true and correct
as of the Effective Time, with the same effect as though such
representations and warranties were made as of the Effective Time, except
where the matters in respect of which such representations and warranties
are not true and correct, result from actions permitted by this Agreement
or would not in the aggregate have a Debtor Material Adverse Effect;
(b) the Parent and the Company shall each have performed or complied with
its material agreements and covenants required to be performed or complied
with under this Agreement as of or prior to the Closing in all material
respects;
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(c) there shall not have occurred between the Agreement Date and the
Closing Date a Debtor Material Adverse Effect;
(d) the Parent and the Company shall have delivered to the Buyer a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified in clauses
(a) through (c) of this Section 5.2 is satisfied in all respects;
(e) after the Registration Statement has been declared effective, the
Rights Offering shall have expired and the Buyer shall have received
aggregate proceeds therefrom (and/or from the closings contemplated by the
Standby Purchase Commitments) of $217.0 million; and
(f) the Debtors shall have on or prior to the Closing Date paid to the
Pre-Petition Agent for the benefit of the Pre-Petition Lenders at least
$165 million in net proceeds under the Debtor Tower Agreement or a
Replacement Tower Agreement (the "Company Tower Sale Proceeds").
5.3 Conditions to Obligations of the Company. The obligations of the Parent
and the Company to consummate the transactions to be performed by each of them
in connection with the Closing is subject to the satisfaction, or waiver by
the Parent and the Company, of the following conditions:
(a) the representations and warranties of the Buyer contained in this
Agreement, which representations and warranties shall be deemed for
purposes of this Section 5.3(a) not to include any qualification or
limitation with respect to materiality (whether by reference to a "Buyer
Material Adverse Effect" or otherwise), shall be true and correct as of the
Effective Time with the same effect as though such representations and
warranties were made as of the Effective Time, except where the matters in
respect of which such representations and warranties are not true and
correct result from actions permitted by this Agreement or would not in the
aggregate have a Buyer Material Adverse Effect;
(b) the Buyer shall have performed or complied with its material
agreements and covenants required to be performed or complied with under
this Agreement as of or prior to the Closing in all material respects;
(c) there shall not have occurred between the Agreement Date and the
Closing Date a Buyer Material Adverse Effect;
(d) the Preferred Rights shall not have become nonredeemable,
exercisable, distributed or triggered pursuant to the terms of the Rights
Agreement; and
(e) the Buyer shall have delivered to the Company a certificate (without
qualification as to knowledge or materiality or otherwise) to the effect
that each of the conditions specified in clauses (a) through (d) of this
Section 5.3 is satisfied in all respects.
ARTICLE VI
Termination
6.1 Termination of Agreement. The Parties may terminate this Agreement prior
to the Closing Date only as provided below:
(a) the Parties may terminate this Agreement by mutual written consent;
(b) either the Buyer or the Company may terminate this Agreement by
giving written notice to the other in the event the other is in breach (i)
of its representations and warranties contained in this Agreement, which
representations and warranties shall be deemed for purposes of this Section
6.1(b) not to include any qualification or limitation with respect to
materiality (whether by reference to a "Debtor Material Adverse Effect",
"Buyer Material Adverse Effect" or otherwise), except where the matters in
respect of which such representations and warranties are in breach would
not in the aggregate have a Debtor Material Adverse Effect or a Buyer
Material Adverse Effect, as the case may be, or (ii) of its material
covenants or agreements contained in this Agreement in any material
respect, and in either case such breach is not remedied within 20 business
days of delivery of such written notice thereof (which notice shall specify
in reasonable detail the nature of such breach);
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(c) (i) after March 31, 1999, the Buyer may terminate this Agreement by
written notice to the Company if the Confirmation Order has not been
entered by the Bankruptcy Court on or prior to such date (unless such
failure results primarily from a breach by the Buyer of any representation,
warranty or covenant contained in this Agreement) or (ii) after June 30,
1999, the Buyer may terminate this Agreement by giving written notice to
the Company if the Closing shall not have occurred on or before such date
(unless the failure results primarily from a breach by the Buyer of any
representation, warranty or covenant contained in this Agreement);
(d) (i) after March 31, 1999, the Company may terminate this Agreement by
written notice to the Buyer if the Confirmation Order has not been entered
by the Bankruptcy Court on or prior to such date (unless the failure
results primarily from a breach by the Company of any representation,
warranty or covenant contained in this Agreement) or (ii) after June 30,
1999, the Company may terminate this Agreement by giving written notice to
the Buyer if the Closing shall not have occurred on or before such date
(unless the failure results primarily from a breach by the Company of any
representation, warranty or covenant contained in this Agreement);
(e) the Company may terminate this Agreement pursuant to and in
accordance with the provisions of Section 4.7 by giving written notice to
the Buyer, provided that on or before such termination the Debtors shall
have paid to the Buyer the applicable Buyer Breakup Fee;
(f) the Buyer may terminate this Agreement by giving written notice to
the Company if the Initial Merger Order has not been entered by the
Bankruptcy Court on or prior to September 4, 1998;
(g) The Company may terminate this Agreement by giving written notice to
the Buyer if (i) the Buyer's Board of Directors does not issue the Buyer
Recommendation prior to the Meeting or withdraws or amends in a manner
adverse to the Company the Buyer Recommendation or otherwise materially
breaches the first sentence of Section 4.12 or of Section 4.13(a) or (ii)
at the Meeting the Buyer Charter Amendment or the Buyer Share Issuance is
not approved by the requisite vote of the holders of Buyer Common Stock;
(h) the Buyer may terminate this Agreement by giving written notice to
the Company if the Company or any other Debtor files either an amendment to
the Amended Plan or any other plan of reorganization in violation of
Section 4.4(b);
(i) the Buyer may terminate this Agreement by giving written notice to
the Company if (x) the Company takes any action (or omits to take any
action) that would constitute a material breach of any of its material
covenants or agreements contained in Section 4.1 or 4.5 but for the
language of such Sections that permits the Company to take actions (or omit
to take actions) required by a Bankruptcy-Related Requirement, and (y) such
action (or omission to take action) is not remedied within 20 business days
of delivery of written notice thereof (which notice shall specify in
reasonable detail the nature of such action (or omission to take action)
and the nature of the resulting breach (but for such language)); and
(j) either the Buyer or the Company may terminate this Agreement by
giving written notice to the other (i) if at the time of giving such notice
the Debtor Tower Agreement shall have been terminated in accordance with
its terms, unless, prior to or simultaneously with such termination, the
Company shall have entered into a definitive agreement (which agreement
(herein called a "Replacement Tower Agreement") shall be comparable in form
and substance to the Debtor Tower Agreement, and any lease (herein called a
"Comparable Tower Lease") entered into in connection therewith shall be
comparable in form and substance to the Master Lease (as defined in the
Debtor Tower Agreement), and a copy of which shall be delivered to Arch
promptly following execution thereof) with a bona fide third-party
purchaser providing for a sale to such third party of the assets or
substantially all the assets to be sold to Pinnacle Towers Inc. pursuant to
the Debtor Tower Agreement and which results in net proceeds to the Company
of not less than $165,000,000 (an "Acceptable Sale"), or (ii) on or after
December 31, 1998 if the Closing (as defined in the Debtor Tower Agreement)
or the closing of an Acceptable Sale shall not have occurred on or before
such date.
6.2 Effect of Termination. If any Party terminates this Agreement pursuant
to Section 6.1, all obligations of the Parties hereunder shall terminate
without any liability of any Party to any other Party, except for any
liability of any Party for willful or intentional breaches of this Agreement,
and except for the Company's
43
<PAGE>
obligation to pay the Buyer Breakup Fee, if applicable, and the Buyer's
obligation to pay the Company Breakup Fee, if applicable, each pursuant to
Section 4.8, which shall survive any such termination; provided that Article
VIII shall also survive any such termination. Any claims arising out of or in
connection with the Company's willful or intentional breach of any covenant or
agreement herein after entry of the Confirmation Order shall be treated as a
claim for an expense of administration under 11 U.S.C. (S) 503(b)(1) of each
of Debtor's bankruptcy estate.
44
<PAGE>
ARTICLE VII
Definitions
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
<TABLE>
<CAPTION>
DEFINED TERM SECTION
- ------------ -------
<S> <C>
Affected Employees....................................... 4.18(a)
Agreement................................................ Introduction
Agreement Date........................................... Introduction
Allowed Claims........................................... Preliminary Statement
Amended Plan............................................. Preliminary Statement
Attachment C Stations.................................... 4.15
Audited Company Financial Statements..................... 2.5(a)
Bankruptcy Code.......................................... 2.1(a)
Bankruptcy Court......................................... Preliminary Statement
Bankruptcy-Related Requirements.......................... 4.5
Bear Stearns............................................. 3.22
Breakup Events........................................... 4.8(a)
Business Entity.......................................... 2.4(a)
Buyer.................................................... Introduction
Buyer Acquisition Proposals.............................. 4.7(d)
Buyer Affiliated Group................................... 3.8(a)
Buyer Affiliated Period.................................. 3.8(a)
Buyer Authorizations..................................... 3.14(a)
Buyer Balance Sheet Date................................. 3.5(b)
Buyer Breakup Fee........................................ 4.8(a)
Buyer Business Entity.................................... 3.4(a)
Buyer Class B Common Stock............................... 3.1(b)
Buyer Common Stock....................................... Preliminary Statement
Buyer Charter Amendment.................................. 4.12
Buyer Disclosure Schedule................................ Article III
Buyer Distribution....................................... 1.7(a)
Buyer Employee Benefit Plan.............................. 3.17(a)
Buyer FCC Applications................................... 3.14(b)
Buyer FCC Material Adverse Effect........................ 5.1(e)
Buyer Intellectual Property.............................. 3.11(a)
Buyer Licenses and Authorizations........................ 3.14(b)
Buyer Material Adverse Effect............................ Article III
Buyer Preferred Stock.................................... 1.7(a)
Buyer Recommendation..................................... 4.12
Buyer Reimbursement...................................... 4.21
Buyer Reports............................................ 3.5(a)
Buyer Share Issuance..................................... 3.1(b)
Buyer State Applications................................. 3.14(b)
Buyer Stock.............................................. 1.7(a)
Buyer Subsidiary......................................... 3.4(c)
Buyer Superior Proposal.................................. 4.7(e)
Buyer Warrant Agreement.................................. Preliminary Statement
Buyer Warrants........................................... Preliminary Statement
CERCLA................................................... 2.18(a)
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM SECTION
- ------------ -------
<S> <C>
Certificate of Merger.................................... 1.1
Chapter 11 Proceeding.................................... Preliminary Statement
Closing.................................................. 1.2
Closing Date............................................. 1.2
Code..................................................... Preliminary Statement
Communications Act....................................... 2.3
Company.................................................. Introduction
Company Acquisition Proposals............................ 4.7(a)
Company Balance Sheet Date............................... 2.5(a)
Company Breakup Fee...................................... 4.8(b)
Company Disclosure Schedule.............................. Article II
Company Employee Benefit Plans........................... 2.17(a)
Company Financial Statements............................. 2.5(a)
Company Group............................................ 2.8(b)(i)
Company Stock............................................ 1.5(b)
Company Superior Proposal................................ 4.7(b)
Company Tower Sale Proceeds.............................. 5.2(f)
Confidentiality Agreement................................ 4.7(c)
Confirmation Order....................................... Preliminary Statement
Comparable Tower Lease................................... 6.1(j)
Debtor................................................... Preliminary Statement
Debtor Affiliated Group.................................. 2.8(b)
Debtor Affiliated Period................................. 2.8(b)
Debtor Authorizations.................................... 2.14(a)
Debtor Business Entity................................... 2.4(a)
Debtor FCC Applications.................................. 2.14(b)
Debtor FCC Material Adverse Effect....................... 5.1(e)
Debtor Licenses and Authorizations....................... 2.14(b)
Debtor Material Adverse Effect........................... Article II
Debtor State Applications................................ 2.14(b)
Debtor Tower Agreement................................... 2.10
Debtors.................................................. Preliminary Statement
Debtors' Intellectual Property........................... 2.11(a)
DGCL..................................................... 1.1
DIP Loan Agreement....................................... 1.11
Disclosure Statement..................................... 4.4(b)
Dispose.................................................. 4.5(a)(i)
Effective Time........................................... 1.1
Employee Benefit Plan.................................... 2.17(a)
Environmental Authorization.............................. 2.18(e)
Environmental Law........................................ 2.18(a)
Environmental Property Transfer Act...................... 2.18(f)
ERISA.................................................... 2.17(a)
ERISA Affiliate.......................................... 2.17(a)
Exchange Act............................................. 2.3
Exchange Agent........................................... 1.3
Exclusivity Provisions................................... 4.7(a)
FCC...................................................... 2.3
FCC Applications......................................... 4.15
Filing Date.............................................. 2.5(a)
Final Order.............................................. 5.1(e)
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM SECTION
- ------------ -------
<S> <C>
Former Employees.......................................... 4.18(b)
GAAP...................................................... 2.5(a)
Governmental Entity....................................... 2.3
Hearing................................................... 4.15
HSR Act................................................... 2.3
Indirect Buyer Authorizations............................. 3.14(b)
Indirect Debtor Authorizations............................ 2.14(b)
Initial Merger Motion..................................... 4.4(a)
Initial Merger Order...................................... 4.4(a)
Interim Monthly Financial Statements...................... 4.10
June 30 Unaudited Company Balance......................... 2.5(a)
Knowledge................................................. 8.15
Major Breakup Event....................................... 4.8(a)
Materials of Environmental Concern........................ 2.18(b)
Meeting................................................... 4.12
Merger.................................................... 1.1
Merger Subsidiary......................................... Introduction
Minor Breakup Event....................................... 4.8(a)
Most Recent Buyer Balance Sheet........................... 3.5(b)
MobileMedia............................................... Preliminary Statement
Most Recent Buyer Balance Sheet........................... 3.5(b)
Ordinary Course of Business............................... 2.3
Parties................................................... Introduction
Parent.................................................... Introduction
Pinnacle.................................................. 2.10
Pinnacle Breakup Amount................................... 4.8(a)
Plan Cash................................................. 1.3
Plan Shares............................................... 1.3
Preferred Rights.......................................... 3.2(a)
Prior Plan................................................ Preliminary Statement
Prospectus................................................ 4.13(a)
Registration Rights Agreement............................. Preliminary Statement
Registration Statement.................................... 4.20(c)
Replacement Tower Agreement............................... 6.7(j)
Rights Agreement.......................................... 3.2(a)
Rights Offering........................................... 4.20(a)
SEC....................................................... 2.5(a)
Securities Act............................................ 2.3
Security Interest......................................... 2.3
Standby Purchase Commitments.............................. Preliminary Statement
Standby Purchasers........................................ Preliminary Statement
State Authority........................................... 2.14(a)
Surviving Corporation..................................... 1.1
Tax Returns............................................... 2.8(a)
Taxes..................................................... 2.8(a)
Unaudited Quarterly Financial Statements.................. 4.10
</TABLE>
47
<PAGE>
ARTICLE VIII
General Provisions
8.1 Press Releases and Announcements. No Party shall issue any press release
or announcement relating to the subject matter of this Agreement without the
prior written approval of the other Parties; provided, however, that any Party
may make any public disclosure it determines in good faith, after consultation
with counsel, is required by law or regulation (in which case the disclosing
Party shall advise the other Parties and provide them with a copy of the
proposed disclosure prior to making the disclosure).
8.2 No Third Party Beneficiaries. Except as otherwise expressly provided
herein, this Agreement shall not confer any rights or remedies upon any person
other than the Parties and their respective successors and permitted assigns.
8.3 Entire Agreement. This Agreement and the exhibits and schedules attached
hereto, including the Amended Plan, and the Confidentiality Agreement
constitute the entire agreement among the Parties and supersede any prior
understandings, agreements or representations by or among the Parties, written
or oral, that may have related in any way to the subject matter of the
Agreement.
8.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior
written approval of the other Parties; provided, that the Buyer may assign its
rights under this Agreement to another wholly owned subsidiary of the Buyer by
notice to the Company; provided, further, that the Buyer shall remain liable
for all its obligations hereunder.
8.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.6 Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.7 Notices. All notices, requests, demands, claims and other communications
hereunder shall be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly delivered three business days
after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or two business days after it is sent via a reputable
international overnight courier service, in each case to the intended
recipient as set forth below:
If to the Company: Copy to:
Sidley & Austin
MobileMedia Communications, Inc. 875 Third Avenue
Fort Lee Executive Park New York, NY 10022
One Executive Drive, Suite 500 Attn: James D. Johnson
Fort Lee, NJ 07024
Attn: Chairman--Restructuring
Copy to:
If to the Parent: Sidley & Austin
875 Third Avenue
MobileMedia Corporation New York, NY 10022
Fort Lee Executive Park Attn: James D. Johnson
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman--Restructuring
48
<PAGE>
If to the Buyer: Copy to:
Hale and Dorr LLP
Arch Communications Group, Inc. 60 State Street
1800 West Park Drive, Suite 250 Boston, MA 02109
Westborough, MA 01581 Attn: Jay E. Bothwick
Attn: Chairman and Chief Executive
Officer
Any Party may give any notice, request, demand, claim or other communication
hereunder by personal delivery or telecopy, but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the Party for whom it is intended.
Any Party may change the address to which notices, requests, demands, claims
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State
of Delaware.
8.9 Amendments and Waivers. The Parties may mutually amend any provision of
this Agreement at any time by a written instrument signed by all of the
Parties. No waiver by any Party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence.
8.10 Severability. If any court of competent jurisdiction determines that
any material provision of this Agreement is invalid or unenforceable, then,
only to the extent the Parties agree, such provision shall be severable and
null and void, and, in such event, such determination shall in no way limit or
affect the enforceability or operative effect of any or all other portions of
this Agreement.
8.11 Expenses. Except as otherwise set forth in this Agreement, each of the
Parties shall bear its or their own costs and expenses (including fees and
expenses of their respective legal, accounting and financial advisors)
incurred in connection with this Agreement and the transactions contemplated
hereby.
8.12 Specific Performance. Each of the Parties acknowledges and agrees that
one or more of the other Parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court having jurisdiction over the Parties and the
matter, in addition to any other remedy to which it may be entitled, at law or
in equity.
8.13 Construction. The language used in this Agreement shall be deemed to be
the language chosen by the Parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against any Party. Any
reference to any federal, state, local or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise.
8.14 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
8.15 Knowledge. For purposes of this Agreement, the term "knowledge" of the
Company and the Buyer shall mean the actual knowledge, after due inquiry, of
the senior executive officers of the Buyer and each of its Subsidiaries and
the Parent, the Company and each other Debtor, respectively.
8.16 Survival of Representations. None of the representations and warranties
made by the Parties herein or the documents or certificates contemplated
hereby, nor the covenants set forth in Article IV, shall survive the Closing.
49
<PAGE>
8.17 Bankruptcy Process. Nothing contained in this Agreement shall be deemed
to limit in any manner the ability of any Debtor to take any position before
or make any motion to the Bankruptcy Court in connection with the Chapter 11
Proceeding; provided, however, that no Debtor shall take any such position or
make any such motion in support of any action or inaction by such Debtor that
would constitute a breach of any covenant of the Company contained in this
Agreement.
50
<PAGE>
IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT AND PLAN OF
MERGER AS OF THE DATE FIRST ABOVE WRITTEN.
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
________________________________
Name: J. Roy Pottle
Title:Executive Vice President and
Chief Financial Officer
FARM TEAM CORP.
By: /s/ J. Roy Pottle
_________________________________
Name: J. Roy Pottle
Title:Executive Vice President and
Chief Financial Officer
SUBJECT TO ENTRY OF THE PROVISION
ORDER AS TO THE PROVISIONS HEREOF
COVERED THEREBY AND TO THE RECEIPT
OF THE CONFIRMATION ORDER FROM THE
BANKRUPTCY COURT WITH RESPECT TO
THE AMENDED PLAN AS DESCRIBED
HEREIN:
MOBILEMEDIA CORPORATION
By: /s/ Joseph A. Bondi
_________________________________
Name: Joseph A. Bondi
Title:Chairman - Restructuring
MOBILEMEDIA COMMUNICATIONS, INC.
By: /s/ Joseph A. Bondi
_________________________________
Name: Joseph A. Bondi
Title:Chairman - Restructuring
51
<PAGE>
EXHIBIT 2.2
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This First Amendment, dated as of September 3, 1998 (this "First
Amendment"), to the Agreement and Plan of Merger, dated as of August 18, 1998
(the "Merger Agreement"), by and among Arch Communications Group, Inc. (the
"Buyer"), Farm Team Corp. (the "Merger Subsidiary"), MobileMedia Corporation
(the "Parent") and MobileMedia Communications, Inc. (the "Company"). Terms used
herein with initial capital letters that are not otherwise defined shall have
the meanings ascribed to such terms in the Merger Agreement.
PRELIMINARY STATEMENT
A. The Buyer, the Merger Subsidiary, the Parent and the Company have
entered into the Merger Agreement.
B. The Buyer, the Merger Subsidiary, the Parent and the Company desire to
amend the Merger Agreement as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:
1. Recital C. Recital C of the Merger Agreement is hereby amended to
----------
delete the reference to "Debtor's First Amended Joint Plan of Reorganization"
and replace such reference with a reference to "Debtor's Second Amended Joint
Plan of Reorganization."
2. Recital E. Recital E of the Merger Agreement is hereby amended to
---------
read in its entirety as follows:
E. In connection with the Merger (as defined in Section 1.1) and as part
of the Amended Plan, the Buyer intends to conduct the Rights Offering (as
defined in Section 4.20), in which it will issue to holders of certain
Allowed Claims transferable Rights to purchase (i) if a Rights Offering
Adjustment (as defined in Schedule II attached hereto) shall not have
occurred, units consisting of (a) shares of Common Stock, $0.01 par value
per share, of the Buyer ("Buyer Common Stock") or shares of Buyer Class B
Common Stock, if applicable, and (b) warrants to purchase shares of Buyer
Common Stock ("Buyer Warrants"), such Buyer Warrants to be issued pursuant
to a warrant agreement in the form attached hereto as Exhibit B (the "Buyer
---------
Warrant Agreement"), or (ii) if a Rights Offering Adjustment shall have
occurred, shares of Buyer Common Stock or shares of Buyer Class B Common
Stock, if applicable. Contemporaneously with the execution and delivery of
this Agreement, certain holders of Allowed Claims
<PAGE>
(the "Standby Purchasers") are making certain commitments in connection
with the Rights Offering (as the same may be amended from time to time, the
"Standby Purchase Commitments"), copies of which are attached as Exhibits
G, H, I, J, K and L hereto. In partial consideration for the Standby
Purchase Commitments, the Buyer will issue to the Standby Purchasers (x) if
a Rights Offering Adjustment shall not have occurred, Buyer Warrants or (y)
if a Rights Offering Adjustment shall have occurred, warrants to purchase
shares of Buyer Common Stock ("Buyer Participation Warrants"), such Buyer
Participation Warrants to be issued pursuant to a warrant agreement in the
form attached hereto as Exhibit B-1 (the "Buyer Participation Warrant
Agreement"), as provided in the Standby Purchase Commitments. In addition,
in connection with the Standby Purchase Commitments, the Buyer and the
Standby Purchasers will enter into a registration rights agreement in the
form attached hereto as Exhibit C (as the same may be amended from time to
---------
time, the "Registration Rights Agreement").
3. Recital F. Recital F of the Merger Agreement is hereby amended to
---------
read in its entirety as follows:
F. If a Rights Offering Adjustment shall not have occurred, immediately
following the Merger, the Buyer will issue Buyer Warrants to the
stockholders of the Buyer that were holders of record immediately prior to
such Merger. The Buyer will conduct the Stockholder Rights Offering (as
defined in Section 4.22), in which it will issue to holders of Buyer Stock
(as defined in Section 1.7) as of a record date to be determined by the
Board of Directors of the Buyer (the "Buyer Record Date"), such holders
being referred to herein as the "Stockholder Rights Holders", non-
transferable rights ("Stockholder Rights") (except that, at the Buyer's
election, the Stockholder Rights will transfer with the underlying shares
in respect of which the Stockholder Rights are distributed) to acquire
shares of Buyer Common Stock if a Rights Offering Adjustment shall have
occurred. In connection therewith, if a Rights Offering Adjustment shall
have occurred, immediately following the Merger, the Buyer will issue to
the stockholders of the Buyer one Buyer Participation Warrant for each
Stockholder Right issued to such Stockholder Rights Holder that was not
exercised.
4. Section 1.2. Section 1.2 of the Merger Agreement is here amended to
-----------
add the following at the end thereof:
Notwithstanding anything contained herein to the contrary, in no event will
the Closing be earlier than twelve business days after the Buyer delivers
to the Standby Purchasers the written notice required pursuant to Section
4(c)(i) of the Standby Purchase Commitments.
5. Section 1.3. Section 1.3 of the Merger Agreement is hereby amended to
-----------
read in its entirety as follows:
-2-
<PAGE>
1.3 Actions at the Closing. At the Closing, (a) the Parent and the
----------------------
Company shall deliver to the Buyer and the Merger Subsidiary the various
certificates, instruments and documents referred to in Section 5.2, (b) the
Buyer and the Merger Subsidiary shall deliver to the Company the various
certificates, instruments and documents referred to in Section 5.3, (c) the
Buyer shall file with the Secretary of State of the State of Delaware the
Buyer Charter Amendment (as defined in Section 4.12), (d) the Company and
the Merger Subsidiary shall immediately thereafter file with the Secretary
of State of the State of Delaware the Certificate of Merger, (e)(i) the
Buyer shall deliver (A) to the Pre-Petition Agent, for the benefit of the
Pre-Petition Lenders, immediately available funds equal to the excess of
(x) $649,000,000 over (y) the Company Tower Sale Proceeds (as defined in
Section 5.2(f)), (B) to the Company immediately available funds when and as
required in amounts sufficient to pay allowed administrative and priority
claims and expenses of the Debtors, whether allowed prior to or after the
Effective Time, as set forth in the Amended Plan (collectively, the "Plan
Cash") and (C) to a bank trust company or other entity reasonably
satisfactory to the Company and the Buyer appointed by the Buyer to act as
the exchange agent (the "Exchange Agent") pursuant to Section 1.6(a),
certificates representing an aggregate number of shares of Buyer Common
Stock determined in accordance with the pricing mechanism set forth in
Schedule II attached hereto (the "Plan Shares") to be distributed as
contemplated by Section 1.6(b), (ii) the Buyer shall issue the Buyer Common
--------------
Stock (and Buyer Class B Common Stock, if applicable) and, if a Rights
Offering Adjustment shall not have occurred, (A) Buyer Warrants purchased
through the exercise of Rights and (B) Buyer Warrants purchased by or
otherwise issued to the Standby Purchasers in connection with the Standby
Purchase Commitments, and (iii) if a Rights Offering Adjustment shall have
occurred, the Buyer shall issue the Buyer Common Stock purchased through
the exercise of the Stockholder Rights and, to the extent such Stockholder
Rights are not exercised, the Buyer shall issue the Buyer Participation
Warrants.
6. Section 1.7. Section 1.7 of the Merger Agreement is hereby amended to
-----------
read in its entirety as follows:
1.7 Distribution to Holders of Buyer Common Stock.
---------------------------------------------
(a) If a Rights Offering Adjustment shall not have occurred, the Buyer
shall, as soon as practicable after receipt of the Confirmation Order,
declare and make, subject to and effective immediately after the occurrence
of the Effective Time, a distribution of Buyer Warrants on the shares of
Buyer Common Stock and the Buyer's Series C Convertible Preferred Stock,
$.01 par value per share (the "Buyer Preferred Stock" and, together with
the Buyer Common Stock, the "Buyer Stock"), outstanding immediately prior
to the Effective Time . The Buyer Warrants to be distributed pursuant to
this Section 1.7(a) will entitle the holders thereof to purchase, in the
aggregate, a number of shares of Buyer Common
-3-
<PAGE>
Stock equal to 7.00% of the aggregate number of shares of issued and
outstanding Buyer Common Stock and, if applicable, Buyer Class B Common
Stock on the date the Initial Buyer Market Price is determined in
accordance with Schedule II attached hereto, computed on a Fully Diluted
Basis after giving effect to the Amended Plan as if the Effective Date had
occurred on such date and assuming 21,067,110 shares of Buyer Common Stock
were issued and outstanding immediately prior thereto.
(b) The Buyer shall conduct the Stockholder Rights Offering in accordance
with Section 4.22, and, if a Rights Offering Adjustment shall have
occurred, the Buyer shall, as soon as practicable after the occurrence of
the Effective Time, declare and make a distribution to each Stockholder
Rights Holder of one Buyer Participation Warrant for each Stockholder Right
of such Stockholder Rights Holder that shall not have been exercised.
(c) Notwithstanding the foregoing, no fractional Buyer Warrants or Buyer
Participation Warrants, as the case may be, shall be issued in the
distribution of Buyer Warrants or Buyer Participation Warrants to be made
pursuant to this Section 1.7 (the "Buyer Distribution"); in lieu thereof,
fractional Buyer Warrants or Buyer Participation Warrants, as the case may
be, that would otherwise be issued in the Buyer Distribution will be
rounded up to the nearest whole number of Buyer Warrants or Buyer
Participation Warrants, as the case may be.
7. Section 3.1(b). Section 3.1(b) of the Merger Agreement is hereby
--------------
amended to read in its entirety as follows:
(b) Each of the Buyer and the Merger Subsidiary has all requisite power
and authority to execute and deliver this Agreement. The execution and
delivery of this Agreement by the Buyer and the Merger Subsidiary and,
subject to the approval of the Buyer Charter Amendment (as defined in
Section 4.12) and the Buyer Share Issuance (as defined below in this
Section 3.1(b)) by the stockholders of the Buyer, the performance of this
Agreement and the consummation of the transactions contemplated hereby by
the Buyer and the Merger Subsidiary have been duly and validly authorized
by all necessary corporate action on the part of the Buyer and the Merger
Subsidiary. This Agreement has been duly and validly executed and delivered
by the Buyer and the Merger Subsidiary and constitutes a valid and binding
obligation of the Buyer and the Merger Subsidiary, enforceable against the
Buyer and the Merger Subsidiary in accordance with its terms. For purposes
of this Agreement, "Buyer Share Issuance" means the issuance by the Buyer
of shares of its capital stock as contemplated by this Agreement and the
Amended Plan, including (i) the issuance of the Plan Shares as contemplated
by the Merger Agreement and the Amended Plan, (ii) the issuance of shares
of Buyer Common Stock and, if applicable, shares of Class B Common Stock,
par value $0.01 per share, of the Buyer ("Buyer Class B Common Stock")
having the terms specified in the Buyer
-4-
<PAGE>
Charter Amendment upon exercise of Rights issued pursuant to the Rights
Offering or issued to the Standby Purchasers (or their assignees or persons
in substitution therefor) pursuant to the Standby Purchase Commitments in
connection with the Rights Offering and, if a Rights Offering Adjustment
shall have occurred, the issuance of shares of Buyer Common Stock upon
exercise of Stockholder Rights issued pursuant to the Stockholder Rights
Offering, and (iii) (A) if a Rights Offering Adjustment shall not have
occurred, the issuance of the Buyer Warrants by the Buyer (x) pursuant to
the Rights Offering, (y) to the Standby Purchasers in connection with the
Rights Offering, and (z) pursuant to the Buyer Distribution, and the
issuance of shares of Buyer Common Stock upon exercise of any of the
foregoing Buyer Warrants, or (B) if a Rights Offering Adjustment shall have
occurred, the issuance of the Buyer Participation Warrants by the Buyer (x)
to the Standby Purchasers in connection with the Rights Offering and (y)
pursuant to the Buyer Distribution, and the issuance of shares of Buyer
Common Stock upon exercise of any of the foregoing Buyer Participation
Warrants.
8. Section 3.2(e). Section 3.2(e) of the Merger Agreement is hereby
--------------
amended to read in its entirety as follows:
(e) (i) The Plan Shares to be issued and distributed as contemplated by
Sections 1.3(e) and 1.6 of this Agreement, (ii) the shares of Buyer Common
Stock to be issued and distributed pursuant to the Stockholder Rights
Offering, (iii) the shares of Buyer Common Stock and the shares of Buyer
Class B Common Stock, if applicable, to be issued and delivered pursuant to
the Rights Offering (as defined in Section 4.20(a)) or as contemplated by
the Standby Purchase Commitments, (iv) the shares of Buyer Common Stock to
be issued and delivered upon conversion of shares of Buyer Class B Common
Stock, if applicable, when so converted in accordance with the Buyer
Charter Amendment (as defined in Section 4.12), (v) either (A), if a Rights
Offering Adjustment shall not have occurred, the Buyer Warrants to be
issued and distributed pursuant to the Rights Offering or as otherwise
contemplated by the Standby Purchase Commitments or (B) if a Rights
Offering Adjustment shall have occurred, the Buyer Participation Warrants
to be issued and delivered as contemplated by the Standby Purchase
Commitments, in either case when so issued and distributed or delivered, as
the case may be, and (vi) either (A), if a Rights Offering Adjustment shall
not have occurred, the shares of Buyer Common Stock to be issued and
delivered upon exercise of Buyer Warrants, when issued, paid for and
delivered as provided in the Buyer Warrant Agreement or (B) if a Rights
Offering Adjustment shall have occurred, the shares of Buyer Common Stock
to be issued and delivered upon exercise of Buyer Participation Warrants,
when issued, paid for and delivered as provided in the Buyer Participation
Warrant Agreement, will all be duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights.
-5-
<PAGE>
9. Section 3.23. Section 3.23 of the Merger Agreement is hereby amended
------------
to read in its entirety as follows:
3.23 Rights Agreement; Section 203.
-----------------------------
(a) The Buyer has executed amendments dated as of August 18, 1998 and
September 3, 1998 to its Rights Agreement dated as of October 13, 1995 in
the forms attached hereto as Exhibit D, and Exhibit D-1, respectively.
--------- -----------
(b) The Board of Directors of the Buyer has approved this Agreement, the
Merger and the Amended Plan together with the transactions contemplated
hereby and thereby (including without limitation the acquisition by the
Standby Purchasers of Buyer Warrants or Buyer Participation Warrants, as
the case may be, and Buyer Common Stock or Buyer Class B Common Stock, if
applicable, pursuant to this Agreement, the Amended Plan and the Standby
Purchase Commitments, or of Buyer Common Stock pursuant to the Buyer
Warrants or Buyer Participation Warrants, as the case may be), including
for purposes of Section 203 of the DGCL.
10. Section 4.9. Section 4.9 of the Merger Agreement is hereby amended to
-----------
read in its entirety as follows:
4.9 Nasdaq National Market Quotation. The Buyer shall use its best
--------------------------------
efforts to have the shares of Buyer Common Stock (including all such shares
issuable upon conversion of the Buyer Class B Common Stock and upon
exercise of the Buyer Warrants or Buyer Participation Warrants, as the case
may be) and Buyer Warrants or Buyer Participation Warrants, as the case may
be, to be issued as contemplated by the Amended Plan and this Agreement
approved for quotation on the Nasdaq National Market prior to the Closing.
11. Section 4.13. Section 4.13 of the Merger Agreement is hereby amended
------------
to read in its entirety as follows:
4.13 Proxy Statement, Disclosure Statement, Etc.
------------------------------------------
(a) The Buyer shall promptly after execution of this Agreement prepare and
file with the SEC under the Exchange Act, and shall use its best efforts to
have declared effective by the SEC as soon as practicable thereafter and
shall thereafter promptly mail to its stockholders, a proxy
statement/prospectus for the Meeting and to effect the Stockholder Rights
Offering (the "Proxy Statement"). The Buyer shall also take any action
required to be taken under state blue sky laws or other securities laws in
connection with the Stockholder Rights Offering. The Proxy Statement shall
be mailed to stockholders of the Buyer at least 20 business days in advance
of the date of the Meeting. The Company shall furnish the Buyer with all
information (including, without
-6-
<PAGE>
limitation, its Audited Financial Statements and the Unaudited Quarterly
Financial Statements, pro forma financial information and projections
included in the Disclosure Statement) and shall take such other action
(including obtaining any necessary consents from the accountants) as the
Buyer may reasonably request in connection with the Proxy Statement. The
Buyer shall consult with the Company and its counsel in connection with,
and shall permit the Company and its counsel to participate in, the
preparation of the Proxy Statement and any amendments or supplements
thereto.
(b) The Buyer shall promptly notify the Company of the receipt of the
comments of the SEC and of any requests by the SEC for amendments or
supplements to the Proxy Statement or for additional information, and shall
promptly supply the Debtors with copies of all correspondence between it
(or its representatives) and the SEC (or its staff) with respect thereto,
and shall permit counsel for the Company to participate in any telephone
conferences or meetings with the staff of the SEC. If, at any time prior
to the Meeting, any event should occur relating to or affecting a Party or
its officers or directors, which event should be described in an amendment
or supplement to the Proxy Statement, such Party shall promptly inform the
other Party and shall cooperate in promptly preparing, filing and clearing
with the SEC and, if required by applicable securities law, mailing to the
Buyer's stockholders, as the case may be, such amendment or supplement.
(c) The Buyer shall furnish the Company with all information (including
historical and pro forma financial information and projections of the
Buyer) and shall take such other action as the Company may reasonably
request in connection with the Disclosure Statement. The Company shall
consult with the Buyer and its counsel in connection with, and shall permit
the Buyer and its counsel to participate in, the preparation and Bankruptcy
Court approval process of the Disclosure Statement and any amendments or
supplements thereto.
12. Section 4.19. Section 4.19 of the Merger Agreement is hereby amended
------------
to read in its entirety as follows:
4.19 Rights Agreement. The Buyer shall not (i) amend the Rights Agreement
----------------
other than as contemplated by Section 3.23 or (ii) take any action with
respect to, or make any determination under, the Rights Agreement
(including a redemption of the Preferred Rights) with the purpose of
facilitating a Buyer Acquisition Proposal.
13. Section 4.20(a). Section 4.20(a) of the Merger Agreement is hereby
---------------
amended to read in its entirety as follows:
-7-
<PAGE>
4.20 Buyer Rights Offering Registration Statement. (a) As specified in
--------------------------------------------
the Amended Plan, the Buyer will issue (the "Rights Offering") to the
holders of certain Allowed Claims as specified in the Amended Plan Rights
to purchase, for an aggregate consideration of $217 million, shares of
Buyer Common Stock, Buyer Class B Common Stock, if applicable, and, if a
Rights Offering Adjustment shall not have occurred, Buyer Warrants. The
Rights Offering will be made substantially on the terms set forth in
Schedule III hereto.
14. New Section 4.22. The Merger Agreement is hereby amended to add the
----------------
following immediately following Section 4.21 thereof:
4.22 Stockholder Rights Offering. If a Rights Offering Adjustment shall
---------------------------
have occurred, the Buyer will offer (the "Stockholder Rights Offering") to
the Stockholder Rights Holders Stockholder Rights to purchase for cash
shares of Buyer Common Stock. The Stockholder Rights Offering will be made
substantially on the terms set forth in Schedule IV hereto.
15. Section 5.1(f). Section 5.1(f) of the Merger Agreement is hereby
--------------
amended to read in its entirety as follows:
(f) each of the Registration Statement and the Proxy Statement shall have
been declared effective and no stop order with respect to either of the
Registration Statement or the Proxy Statement shall be in effect;
16. Section 5.1(g). Section 5.1(g) of the Merger Agreement is hereby
--------------
amended to read in its entirety as follows:
(g) the shares of Buyer Common Stock (including all such shares issuable
upon conversion of the Buyer Class B Common Stock and the Buyer Warrants or
Buyer Participation Warrants, as the case may be) to be issued as
contemplated by the Amended Plan and this Agreement shall have been
approved for quotation on the Nasdaq National Market.
17. Section 5.2(e). Section 5.2(e) of the Merger Agreement is hereby
--------------
amended to read in its entirety as follows:
(e) after each of the Registration Statement and the Proxy Statement has
been declared effective, each of the Rights Offering and the Stockholder
Rights Offering shall have expired and the Buyer shall have received
aggregate proceeds therefrom (and/or from the closings contemplated by the
Standby Purchase Commitments) of at least $217.0 million; and
18. Section 6.1(f). Section 6.1(f) of the Merger Agreement is hereby
---------------
amended to add the following at the end thereof:
-8-
<PAGE>
provided, however, that such termination shall not be effective unless
-------- -------
such notice is delivered on or before October 4, 1998;
19. Amended Exhibit A. Exhibit A to the Merger Agreement is hereby
------------------
amended to read in its entirety as Exhibit A hereto.
---------
20. Amended Exhibit B. Exhibit B to the Merger Agreement is hereby
-----------------
amended to read in its entirety as Exhibit B hereto.
---------
21. New Exhibit B-1. Exhibit B-1 hereto is hereby added as Exhibit B-1 to
--------------- -----------
the Merger Agreement.
22. New Exhibit D-1. Exhibit D-1 hereto is hereby added as Exhibit D-1 to
---------------
the Merger Agreement.
23. Amended Exhibit F. Exhibit F to the Merger Agreement is hereby
-----------------
amended to read in its entirety as Exhibit F hereto.
---------
24. Amended Schedule II. Schedule II to the Merger Agreement is hereby
-------------------
amended to read in its entirety as Schedule II hereto.
-----------
25. Amended Schedule III. Schedule III to the Merger Agreement is hereby
--------------------
amended to read in it entirety as Schedule III hereto.
------------
26. New Schedule IV. Schedule IV hereto is hereby added as Schedule IV to
--------------- -----------
the Merger Agreement.
27. Continuation of Merger Agreement. Except as specifically amended
--------------------------------
hereby, the Merger Agreement shall continue in full force and effect and is
hereby ratified and confirmed in all respects.
28. Governing Law. This Amendment shall be governed by and construed in
-------------
accordance with the internal laws (and not the law of conflicts) of the State of
Delaware.
29. Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-9-
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date
first above written.
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
----------------------------------------
Name: J. Roy Pottle
----------------------------------
Title: Executive Vice President and
----------------------------------
Chief Financial Officer
----------------------------------
FARM TEAM CORP.
By: /s/ J. Roy Pottle
----------------------------------------
Name: J. Roy Pottle
----------------------------------
Title: Executive Vice President and
----------------------------------
Chief Financial Officer
----------------------------------
SUBJECT TO THE RECEIPT OF THE
CONFIRMATION ORDER FROM THE
BANKRUPTCY COURT WITH RESPECT
TO THE AMENDED PLAN:
MOBILEMEDIA CORPORATION
By: /s/ Joseph A. Bondi
----------------------------------
Name: Joseph A. Bondi
-----------------------------
Title: Chairman - Restructuring
----------------------------
MOBILEMEDIA COMMUNICATIONS, INC.
By: /s/ Joseph A. Bondi
----------------------------------
Name: Joseph A. Bondi
-----------------------------
Title: Chairman - Restructuring
--------------------------
-10-
<PAGE>
CONSENT
-------
Each of the undersigned hereby acknowledges that this Amendment
(including the amendments to the exhibits to the Merger Agreement effected
thereby) is in form and substance reasonably satisfactory to it.
Northwestern Mutual Series Fund, Inc.
for the High Yield Bond Portfolio
By: /s/ Timothy S. Collins
-----------------------------
Name: Timothy S. Collins
Its: Vice President
The Northwestern Mutual Life
Insurance Company
for its Group Annuity Separate Account
By: Northwestern Investment
Management Company
By: /s/ Steven P. Swanson
------------------------------
Name: Steven P. Swanson
Its: Managing Director
The Northwestern Mutual Life
Insurance Company
By: /s/ Steven P. Swanson
------------------------------
Name: Steven P. Swanson
Its: Authorized Representative
-11-
<PAGE>
W.R. Huff Asset Management Co., L.L.C.,
as agent for its separate accounts and
affiliates
By: /s/ Bryan E. Bloom
-------------------------------
Name: Bryan E. Bloom, Esq.
Its: Attorney-in-Fact
Whippoorwill Associates, Inc., as
general partner of and/or as agent for
each account, fund or entity listed in
its Standby Purchase Commitment
By: /s/ David Strumwasser
-------------------------------
Name: David Strumwasser
Its: Managing Director
Credit Suisse First Boston Corporation
By: /s/ Alex Lagetko
-------------------------------
Name: Alex Lagetko
Its: Director
September 3, 1998
-12-
<PAGE>
EXHIBIT 3.5
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ARCH COMMUNICATIONS GROUP, INC.
Arch Communications Group, Inc. (hereinafter called the "Corporation"),
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify as follows:
At a duly convened meeting of the Board of Directors of the Corporation, a
resolution was duly adopted pursuant to Section 242 of the General Corporation
Law of the State of Delaware setting forth amendments to the Restated
Certificate of Incorporation of the Corporation, as amended by a Certificate of
Designation dated October 13, 1995 stating the designation and number of shares,
and fixing the relative rights, preferences and limitations, of the
Corporation's Series B Junior Participating Preferred Stock (the "Series B
Certificate of Designation") and a Certificate of Designation dated June 29,
1998 stating the designation and number of shares, and fixing the relative
rights, preferences and limitations, of the Corporation's Series C Convertible
Preferred Stock (as so amended, the "Restated Certificate of Incorporation"),
and declaring such amendments to be advisable. The stockholders of the
Corporation duly approved said proposed amendments in accordance with Section
242 of the General Corporation Law of the State of Delaware at a duly convened
meeting of stockholders. The resolutions setting forth the amendments are as
follows:
<PAGE>
RESOLVED: That Article FOURTH of the Restated Certificate of Incorporation
of the Corporation, as previously amended, be and hereby is
further amended by deleting paragraph (a) of said Article FOURTH
and inserting in lieu thereof the following:
(a) The aggregate number of shares of all classes of stock which
the Corporation shall have authority to issue is 375,000,000
shares, consisting of (i) 300,000,000 shares of Common Stock,
$.01 par value per share ("Common Stock"), (ii) 65,000,000 shares
of Class B Common Stock, $.01 par value per share ("Class B
Common Stock"), and (iii) 10,000,000 shares of preferred stock,
$.01 par value per share ("Preferred Stock"), of which 300,000
shares have been designated as Series B Junior Participating
Preferred Stock, $.01 par value per share, 250,000 shares have
been designated as Series C Convertible Preferred Stock, $.01 par
value per share, and 9,450,000 shares remain available for future
designation and issuance in accordance with the General
Corporation Law of the State of Delaware.
FURTHER
RESOLVED: That Article FOURTH of the Restated Certificate of Incorporation
be and hereby is amended by deleting subparagraph (b)(i) of said
Article FOURTH and inserting in lieu thereof the following:
(i) Common Stock and Class B Common Stock.
(A) Subject to the provisions of any series of Preferred
Stock which may at the time be outstanding, the holders of Common
Stock and Class B Common Stock shall be entitled to receive, when
and as declared from time to time by the Board of Directors out
of any funds legally available for the purpose, such dividends as
may be declared from time to time by the Board of Directors. When
and as dividends are declared thereon, whether payable in cash,
property or securities of the Corporation, each holder of Common
Stock or Class B Common Stock will be entitled to participate in
such dividends ratably on a per share basis. In the event of any
liquidation, dissolution or winding up of the
-2-
<PAGE>
Corporation, whether voluntary or involuntary, or upon the
distribution of its assets, after the payment in full or the
setting apart for payment of such preferential amounts, if any,
to which the holders of Preferred Stock at the time outstanding
shall be entitled, the remaining assets of the Corporation
available for payment and distribution to stockholders shall,
subject to any participating or similar rights of any series of
Preferred Stock at the time outstanding, be distributed ratably
among the holders of Common Stock and Class B Common Stock at the
time outstanding on a per share basis. Shares of Common Stock
shall have no preference, conversion, exchange, preemptive or
other similar rights. Shares of Class B Common Stock shall have
no preference, exchange, preemptive right or other similar
rights, shall be identical in all respects to shares of Common
Stock except as set forth in subparagraphs (B), (C) and (D)
below, and shall have no conversion rights except as set forth in
subparagraphs (C) and (D) below.
(B) Except as otherwise required by the General Corporation
Law of the State of Delaware or this Certificate of
Incorporation, on all matters to be voted on by the Corporation's
stockholders, the Common Stock will be entitled to one vote per
share. Except as otherwise required by the General Corporation
Law of the State of Delaware or this Certificate of
Incorporation, the Class B Common Stock shall not be entitled to
vote with respect to the election of directors and shall be
entitled to 1/100th vote per share on all other matters to be
voted on by the Corporation's stockholders. Except as otherwise
required by the General Corporation Law of the State of Delaware
or this Certificate of Incorporation, the Common Stock, the Class
B Common Stock and the Preferred Stock shall vote as a single
class with respect to all matters as to which such shares are
entitled to vote.
(C) Upon any transfer of shares of Class B Common Stock to
a person or entity other than (i) any person or entity who
received Class B Common Stock
-3-
<PAGE>
pursuant to Section 4.3(C) of the Debtor's First Amended Joint
Plan of Reorganization dated August 18, 1998 as filed by
MobileMedia Corporation, MobileMedia Communications, Inc. and
MobileMedia Communications, Inc.'s direct and indirect
subsidiaries with the United States Bankruptcy Court for the
District of Delaware, Case No. 97-174 (PJW), including the Rights
Offering as defined therein (the "Initial Distributees"), (ii)
any other person or entity who, when taken together with any of
the Initial Distributees, would constitute a "person" or "group"
as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, or (iii) any
"affiliate" (as such term is defined in Rule 405 promulgated
under the Securities Act of 1933, as amended) of any of them
(collectively, the "Class B Holders"), such transferred shares
shall automatically convert into an identical number of shares of
Common Stock without any action on the part of any person or
entity (except as follows). The Class B Holder transferring such
shares shall surrender to the Corporation at its principal office
the share certificate or certificates evidencing all such shares
of Class B Common Stock being transferred together with a
certificate (a "Transfer Certificate") (i) stating the number of
shares of Class B Common Stock being transferred to such
transferee and (ii) stating that, to the knowledge of such Class
B Holder, after due inquiry, such transferee is not a Class B
Holder. Promptly after the delivery of such share certificate or
certificates, together with such Transfer Certificate, the
Corporation shall (i) cause to be issued in the name of the
transferee identified in the Transfer Certificate and delivered
to such Class B Holder, or to such person as directed by his or
its written order, a share certificate or certificates for the
number of shares of Common Stock equal to the number of shares of
Class B Common Stock being transferred to such transferee and
(ii) cause to be issued in the name of such Class B Holder and
delivered to such Class B Holder a share certificate or
certificates evidencing the number of shares, if any, of Class B
Common Stock evidenced by the share certificate or certificate(s)
surrendered to the
-4-
<PAGE>
Corporation not being so transferred. Upon such transfer, all
rights with respect to the Class B Common Stock so converted will
terminate, except only the rights of the holders thereof, upon
surrender of their share certificate or certificates therefor, to
receive certificates registered in the name of its transferee for
the number of shares of Common Stock into which such Class B
Common Stock has been converted, and payment of any declared but
unpaid dividends thereon.
(D) Any Class B Holder may, at any time and from time to
time by surrendering to the Corporation at its principal office a
share certificate or certificates for shares of Class B Common
Stock together with a certificate (a "Conversion Certificate")
stating that such Class B Holder has transferred shares of Common
Stock (in an amount set forth in such Conversion Certificate) to
a transferee that, to the knowledge of such Class B Holder, after
due inquiry, is not a Class B Holder, request that the
Corporation exchange shares of Common Stock, on a one-for-one
basis, for a number of shares of Class B Common Stock not greater
than the number of shares of Common Stock set forth in such
Conversion Certificate. The Corporation shall, upon receipt of
such certificate or certificates and the Conversion Certificate
in a form the Corporation deems appropriate, issue an equal
number of shares of Common Stock in exchange for such number of
shares of Class B Common Stock set forth in any Conversion
Certificate.
(E) All certificates evidencing shares of Class B Common
Stock which are surrendered for transfer and conversion in
accordance with the provisions of subparagraph (C) above, or as
accepted for conversion in accordance with the provisions of
subparagraph (D) above, shall, from and after the presentation
thereof together with any other documentation required hereunder,
be deemed to have been retired and cancelled and the shares of
Class B Common Stock represented thereby converted into Common
Stock for all purposes. The Corporation may thereafter take such
appropriate action (without the need for
-5-
<PAGE>
stockholder action) as may be necessary to reduce the authorized
Class B Common Stock accordingly.
FURTHER
RESOLVED: That Article FOURTH of the Restated Certificate of Incorporation
be and hereby is amended by deleting subparagraph (b)(ii) of said
Article FOURTH.
FURTHER
RESOLVED: That the Series B Certificate of Designations be and hereby is
amended by deleting Section 1 thereof and inserting in lieu
thereof the following:
Section 1. Designation and Amount. The shares of such series
----------------------
shall be designated as "Series B Junior Participating Preferred
Stock" (the "Series B Preferred Stock") and the number of shares
constituting the Series B Preferred Stock shall be 300,000. Such
number of shares may be increased or decreased by resolution of
the Board of Directors; provided that no decrease shall reduce
--------
the number of shares of Series B Preferred Stock to a number less
than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into
Series B Preferred Stock.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its Chairman
and Chief Executive Officer and attested by its Secretary this day of
, 1998.
ARCH COMMUNICATIONS GROUP, INC.
By:_______________________________
-6-
<PAGE>
EXHIBIT 3.6
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
ARCH COMMUNICATIONS GROUP, INC.
Arch Communications Group, Inc. (hereinafter called the "Corporation"),
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify as follows:
By written action of the Board of Directors of the Corporation, dated _____
_______, 1998, the Board of Directors duly adopted resolutions pursuant to
Sections 141(f) and 242 of the General Corporation Law of the State of Delaware
setting forth an amendment to the Restated Certificate of Incorporation of the
Corporation, as amended by a Certificate of Designation dated October 13, 1995
stating the designation and number of shares, and fixing the relative rights,
preferences and limitations, of the Corporation's Series B Junior Participating
Preferred Stock (the "Series B Certificate of Designation") and a Certificate of
Designation dated June 29, 1998 stating the designation and number of shares,
and fixing the relative rights, preferences and limitations, of the
Corporation's Series C Convertible Preferred Stock (as so amended, the "Restored
Certificate of Incorporation), and declaring such amendment to be advisable. The
stockholders of the Corporation duly approved said proposed amendment in
accordance with Section 242 of the General Corporation Law of the State of
Delaware at a duly convened meeting of stockholders.
The resolution setting forth the amendment is as follows:
RESOLVED: That the following paragraph be inserted prior to the first
- --------
paragraph of Article FOURTH of the Restated Certificate of
Incorporation:
"That upon the filing date of the Certificate of Amendment
of the Restated Certificate of Incorporation of the Corporation
(the "Effective Date"), a [one-for __] reverse split of the
Corporation's Common Stock (as defined below) shall become
effective, such that each __ shares of Common Stock outstanding
and held of record by each
<PAGE>
stockholder of the Corporation (including treasury shares)
immediately prior to the Effective Date shall represent one share
of Common Stock from and after the Effective Date."
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its Chairman
and Chief Executive Officer and attested by its Secretary this ___ day of
________________, 1998.
ARCH COMMUNICATIONS GROUP, INC.
By: ________________________________
C. Edward Baker, Jr.
Chairman of the Board
and Chief Executive Officer
-2-
<PAGE>
EXHIBIT 10.6
W.R. HUFF ASSET MANAGEMENT CO., L.L.C.
67 Park Place, Ninth Floor
Morristown, New Jersey 07960
August 18, 1998
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Commitment to Purchase Stock and Warrants
-----------------------------------------
Gentlemen:
Arch Communications Group, Inc., a Delaware corporation ("Arch"), and
MobileMedia Communications, Inc., a Delaware corporation ("MobileMedia"), intend
to engage in a business combination transaction (the "Combination") as part of a
reorganization (the "Reorganization") of MobileMedia, MobileMedia Corporation,
the sole stockholder of MobileMedia ("Parent"), and all of MobileMedia's
subsidiaries (collectively, the "Debtors") pursuant to chapter 11 of title 11,
United States Code, 11 U.S.C. (S)(S) 101 et seq. (the "Bankruptcy Code"). It is
our understanding that in connection with the Reorganization, among other
things: (a) pursuant to the Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), among Arch, a wholly owned subsidiary of Arch
("Merger Sub"), Parent and MobileMedia, MobileMedia will merge with and into
Merger Sub, with Merger Sub continuing as the surviving corporation and a wholly
owned subsidiary of Arch; (b) pursuant to the Merger Agreement, Arch will make
available for distribution pursuant to a plan of reorganization of the Debtors
in the form attached as Exhibit A to the Merger Agreement, with such amendments
and modifications thereto as are made in a manner consistent with clause (e) of
Section 5 hereto (such plan of reorganization being referred to herein as the
"Plan"), (i) cash, (ii) shares of its Common Stock, par value $.01 per share
("Existing Arch Common Stock"), and (iii) warrants entitling the holders thereof
to purchase shares of Existing Arch Common Stock ("Arch Warrants"), with such
Arch Warrants to be issued pursuant to, and to
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
have the terms set forth in, a warrant agreement in the form attached as Exhibit
B to the Merger Agreement (the "Arch Warrant Agreement"); (c) holders of
unsecured non-priority claims against the Debtors ("Unsecured Claims"), to the
extent such Unsecured Claims are Allowed (as defined in the Plan), will receive
pursuant to the Plan (i) shares of Existing Arch Common Stock and (ii) rights to
purchase ("Rights") for cash units consisting of (A) shares of Existing Arch
Common Stock and (B) Arch Warrants; (d) holders of claims arising under or
relating to the Credit Agreement, dated December 4, 1995, as amended, among
MobileMedia and the other parties thereto ("Secured Claims"), to the extent such
Secured Claims are Allowed, will receive pursuant to the Plan cash in an amount
equal to 100% of such claims; (e) all of the outstanding equity interests in
MobileMedia and Parent will be canceled without consideration and Parent will be
dissolved; and (f) the commitments under the DIP Loan Agreement will terminate
and all amounts owed under or in respect of the DIP Loan Agreement will be paid
in full in cash.
Terms used herein with initial capital letters that are not otherwise
defined shall have the meanings ascribed to such terms in the Merger Agreement.
1. The Commitment. In connection with the foregoing, W.R. Huff Asset
--------------
Management Co., L.L.C. (the "Standby Purchaser") hereby advises you of its
commitment (the "Commitment"), subject to the conditions set forth herein:
(a) to exercise any Rights distributed to it in respect of its
Allowed Unsecured Claims in accordance with the Plan and not thereafter
sold or transferred as permitted by Section 3 below to purchase units
consisting of shares of Existing Arch Common Stock and Arch Warrants
underlying such Rights, to the extent that the aggregate purchase price
payable upon such exercise, as determined in accordance with Schedule II to
the Merger Agreement (the "Subscription Price"), does not exceed the Rights
Exercise Commitment Amount of the Standby Purchaser as set forth in Annex I
-------
hereto;
(b) if (i) the Standby Purchaser sells or otherwise transfers any or
all of (A) the Rights distributed to it in accordance with the Plan or (B)
Unsecured Claims held by it as of the date hereof in respect of which
Rights are to be distributed, in each case as permitted by Section 3 below,
and (ii) the Rights sold or transferred by the Standby Purchaser or the
Rights distributed in respect of Unsecured Claims held by it as of the date
hereof that are hereafter sold or transferred by the Standby Purchaser are
not exercised prior to the expiration thereof (at which time such Rights
will be void and will no longer be exercisable), to purchase for cash
(based upon the Subscription Price payable upon exercise of such Rights)
identical units consisting of shares of Existing Arch Common Stock and Arch
Warrants underlying such unexercised
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
Rights, to the extent that the aggregate purchase price therefor, together
with the aggregate Subscription Price payable upon exercise of Rights
exercised as contemplated by clause (a) above, does not exceed the Rights
Exercise Commitment Amount of the Standby Purchaser as set forth in Annex I
-------
hereto; and
(c) if any Rights distributed in accordance with the Plan (other than
(i) Rights distributed to the Standby Purchaser or the other holders of
Unsecured Claims listed on Annex I hereto (the "Other Standby Purchasers")
-------
and retained by them (which Rights are referred to in Section 1(a) above
and Section 1(a) of each of the Other Standby Purchase Commitments (as
defined in Section 13(a) below)) or (ii) subject to Section 3(b) below,
Rights distributed in respect of Unsecured Claims held by the Standby
Purchaser or the Other Standby Purchasers as of the date hereof that are
hereafter sold or transferred by them (which Rights are referred to in
Sections 1(b) and 3 hereof and Section 1(b) and 3 of each of the Other
Standby Purchase Commitments)) remain unexercised upon the expiration
thereof (at which time such Rights will be void and will no longer be
exercisable), to purchase for cash (based on the Subscription Price payable
upon exercise of such Rights) pro rata in accordance with and up to the
Unexercised Rights Commitment Amount of the Standby Purchaser as set forth
in Annex I hereto identical units consisting of shares of Existing Arch
-------
Common Stock and Arch Warrants underlying such unexercised Rights.
2 Arch Class B Common Stock. Notwithstanding anything to the contrary
-------------------------
herein contained, if the purchases by the Standby Purchaser contemplated by
Section 1 above would cause the Standby Purchaser, the Other Standby Purchasers,
and any other persons or entities who, when taken together with any one or more
of the Standby Purchaser and the Other Standby Purchasers, would constitute a
"person" or "group" as used in Section 13(d) or Section 14(d) of the Exchange
Act or Rule 13d-3 or Rule 13d-5 promulgated thereunder, or any "affiliate" as
defined in Rule 405 promulgated under the Securities Act of any of them
(collectively, the "Standby Class B Holders"), in the aggregate, to beneficially
own on the effective date of the Plan (the "Effective Date") shares representing
more than 49.0% of the capital stock of Arch generally entitled to vote in the
election of directors or more than 49.0% of the total voting power of the
capital stock of Arch, Arch will substitute shares of Class B Common Stock, par
value $.01 per share, of Arch ("Arch Class B Common Stock"), with such Arch
Class B Common Stock having the terms set forth in the form of Certificate of
Amendment to Certificate of Incorporation of Arch attached as Exhibit F to the
Merger Agreement (the "Arch Charter Amendment"), for shares of Existing Arch
Common Stock included in the units so purchased on a one-for-one basis such that
on the Effective Date the Standby Class B
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
Holders, in the aggregate, will beneficially own shares representing not more
than 49.0% of the capital stock of Arch generally entitled to vote in the
election of directors and not more than 49.0% of the total voting power of the
capital stock of Arch, all as provided in the Plan. For purposes of this letter
agreement, "beneficial ownership" shall be determined as provided in Rule 13d-3
and Rule 13d-5 promulgated under the Exchange Act, except that a person or
entity shall be deemed to have "beneficial ownership" of all securities that
such person or entity has the right to acquire, whether such right is
exercisable immediately or only after the passage of time.
(b) For purposes of calculating the percentages referred to in
Section 2(a) above, it will be assumed that no additional Unsecured Claims are
allowed after the Effective Date and all of the shares of Existing Arch Common
Stock in the Creditor Stock Pool (as defined in the Plan) are distributed in
accordance with the Plan to the holders of Allowed Unsecured Claims as of the
Effective Date.
(c) Substitution of shares of Class B Common Stock as contemplated by
Section 2(a) above will be effectuated as follows:
(i) first, to the extent that the Standby Purchaser or any Other
Standby Purchaser beneficially owns shares of Existing Arch Common
Stock as of the Effective Date, other than those acquired as
contemplated by the Plan, the Merger Agreement, this letter agreement
and the Other Standby Purchase Commitments ("Non-Plan Arch Shares"),
among the Standby Purchaser and such Other Standby Purchaser pro rata
based on ownership of Non-Plan Arch Shares up to an amount equal to
the aggregate number of Non-Plan Arch Shares beneficially owned by
them as of the Effective Date; and
(ii) second, if necessary, among the Standby Purchaser and the
Other Standby Purchasers in accordance with the percentages set forth
in Column D of Annex I hereto.
-------
(d) The Standby Purchaser hereby disclaims beneficial ownership of
any securities of Arch owned by the Other Standby Purchasers.
3. Certain Transfer Restrictions. (a) Subject to Section 12 below, the
-----------------------------
Standby Purchaser may (i) sell or otherwise transfer any or all of (A) the
Rights distributed to it in accordance with the Plan or (B) Unsecured Claims in
respect of which Rights are to be distributed or (ii) purchase or otherwise
acquire (A) Rights distributed to others in accordance with the Plan or (B)
Unsecured Claims in respect of which Rights are to be distributed; provided,
--------
however, that, with respect to clause (i) of this sentence, (X)
- -------
contemporaneously with the consummation of any such sale
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
or other transfer of Rights or Unsecured Claims, the Standby Purchaser will
notify Arch and MobileMedia of the occurrence thereof and (Y) the Standby
Purchaser will not consummate any such sale or other transfer unless the
transferee or transferees of such Rights or Unsecured Claims shall have entered
into a written agreement (a "Tracking Agreement") (I) to notify the Standby
Purchaser, Arch and MobileMedia of any subsequent transfer by it of such Rights
or Unsecured Claims or any Rights distributed to it in respect of such Unsecured
Claims and (II) not to sell or otherwise transfer such Rights or Unsecured
Claims or Rights distributed to it in respect of such Unsecured Claims, unless
its transferee or transferees shall agree in writing to be bound in the same
manner provided in this clause (Y) with respect to any subsequent transfer by
it.
(b) Notwithstanding the provisions of clause (y) of the proviso in Section
3(a) above, the Standby Purchaser may elect to sell or otherwise transfer (i)
any or all of the Rights distributed to it in accordance with the Plan or (ii)
Unsecured Claims in respect of which Rights are to be so distributed, in either
case without entering into a Tracking Agreement with its transferee or
transferees (any Rights so transferred and any Rights distributed in respect of
Allowed Claims so transferred, together with any Rights so transferred and any
Rights distributed in respect of Allowed Claims so transferred by the Other
Standby Purchasers pursuant to Section 3(b) of the Other Standby Purchase
Commitments, being referred to herein collectively as "Untracked Rights"). Any
Rights that remain unexercised upon expiration thereof will be deemed to be
"Section 3(b) Rights" up to, but not exceeding, the amount of Untracked Rights.
The Section 3(b) Rights shall be exercised as follows prior to the application
of Section 1(c) above and Section 1(c) of the Other Standby Purchase
Commitments: (A) the Standby Purchaser and the Other Standby Purchasers will
first be given the opportunity to purchase for cash (based on the Subscription
Price payable upon exercise of such Rights) units consisting of shares of Arch
Common Stock and Arch Warrants underlying a number of unexercised Rights up to
the amount of Section 3(b) Rights in accordance with the percentages set forth
in Column D of Annex I hereto and (B) to the extent such units are not so
-------
purchased, the Standby Purchaser and any Other Standby Purchasers that are
responsible for the existence of the Section 3(b) Rights will be required to
purchase such units pro rata based on the number of Section 3(b) Rights
resulting from their respective transfers. Nothing in this Section 3(b) will in
any way reduce the commitment of the Standby Purchaser specified in Section 1(c)
above or the Unexercised Rights Commitment Amount as set forth in Annex I
-------
hereto.
4. The Closing. (a) Notwithstanding anything to the contrary herein
-----------
contained or the terms of the Rights or the Plan, subject to the conditions set
forth herein, on the Effective Date the Standby Purchaser, in satisfaction of
the Commitment, will deliver at the Closing (i) the aggregate Subscription Price
payable
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
upon exercise of any Rights exercised by it and (ii) the purchase price payable
in consideration of any shares of Existing Arch Common Stock or, if applicable,
Arch Class B Common Stock and Arch Warrants to be otherwise purchased by it
pursuant to the Commitment; provided, however, that, if requested by the Standby
-------- ------
Purchaser in writing at least two business days prior to the Effective Date, any
cash to be distributed to the Standby Purchaser in respect of Allowed Secured
Claims pursuant to the Plan will, prior to the distribution thereof pursuant to
the Plan and in accordance with the instruction included in such written
request, be first applied, on behalf of the Standby Purchaser, to the payment of
such amounts payable on the Effective Date as provided in this Section 4(a).
(b) Upon payment of the amounts payable as provided in Section 4(a),
on the Effective Date at the Closing Arch will deliver to the Standby Purchaser
(or its designees) certificates representing the shares of Existing Arch Common
Stock, shares of Arch Class B Common Stock, if applicable, and the Arch
Warrants, in each case, (i) issuable upon exercise of any Rights exercised by
the Standby Purchaser or (ii) otherwise purchased by the Standby Purchaser
pursuant to the Commitment.
(c) Arch will deliver to the Standby Purchaser at least five business
days prior to the Effective Date a written notice which shall (i) specify the
amounts payable at the Closing by it in satisfaction of the Commitment, (ii)
specify the date on which the Effective Date is to occur and the last date on
which the notice referred to in Section 4(d) may to be delivered, and (iii)
indicate the matters required to be addressed in such notice.
(d) At least two business days prior to the Effective Date, the
Standby Purchaser will deliver to Arch and MobileMedia a written notice which
shall set forth the number of shares of Existing Arch Common Stock beneficially
owned by it as of such date. During the period from the date of such notice
through the Effective Date, neither the Standby Purchaser nor any affiliate
thereof shall acquire beneficial ownership of, or any rights to acquire, any
additional shares of Existing Arch Common Stock or any Unsecured Claim.
5. Certain Conditions. The Commitment is subject to the conditions that:
------------------
(a) (i) the Confirmation Order (as defined in the Plan), in a form
reasonably satisfactory to the Standby Purchaser, shall have been entered
by the Bankruptcy Court (as defined in the Plan) and (ii) such Confirmation
Order shall have become a Final Order (as defined in Section 5.1(h) of the
Merger Agreement); provided, however, that (A) the Standby Purchaser may
-------- -------
not assert the condition contained in clause (ii) above if each of the
Other Standby Purchasers that is not affiliated with the Standby Purchaser
(each, an
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 7
"Unaffiliated Standby Purchaser"), acting in good faith, shall have waived
the condition contained in Section 5(a) of the Other Standby Purchase
Commitments to which such Unaffiliated Standby Purchaser is a party and (B)
the Standby Purchaser may not assert the condition contained in either
clause (i) or clause (ii) above if the sole reason for the failure of such
condition to be satisfied is the failure or the threatened failure of the
Standby Purchaser or any of its affiliates to fulfill the Commitment;
(b) the satisfaction or, with the written consent of the Standby
Purchaser, waiver of all conditions precedent to the obligations of each of
the parties to the Merger Agreement contained in the Merger Agreement and
all conditions precedent to the effectiveness of the Plan contained in the
Plan; provided, however, that (i) the conditions contained in Section
-------- -------
5.1(e) and (h), Section 5.2(a), (b), (c), (d) and (e) and Section 5.3(a),
(b), (c) and (e) of the Merger Agreement (collectively, the "Unilateral
Conditions") may be waived without the written consent of the Standby
Purchaser and (ii) the Standby Purchaser may not assert the condition
contained in this clause (b) if the sole reason for the failure of such
condition to be satisfied is the failure or the threatened failure of the
Standby Purchaser or any of its affiliates to fulfill the Commitment;
(c) there shall be effective under the Securities Act, a registration
statement (the "Shelf Registration Statement") covering the resale by the
Standby Purchaser of (i) all shares of Existing Arch Common Stock, all
shares of Arch Class B Common Stock, if applicable, and all Arch Warrants
received by the Standby Purchaser as a result of the transactions
contemplated by the Plan (including those received upon the exercise of
Rights and pursuant to this letter agreement) and (ii) all shares of
Existing Arch Common Stock issuable upon conversion of any such shares of
the Arch Class B Common Stock or exercise of any such Arch Warrants (the
securities referred to in the foregoing clauses (i) and (ii) are referred
to herein as the "Registrable Securities");
(d) Arch shall have executed and delivered to the Standby Purchaser a
registration rights agreement in the form attached as Exhibit C to the
Merger Agreement (the "Registration Rights Agreement") granting the Standby
Purchaser certain demand and piggyback registration rights with respect to
the Registrable Securities;
(e) any and all amendments or modifications to the Merger Agreement
or any exhibit or schedule thereto (including without limitation the Plan,
the Arch Charter Amendment, the Arch Warrant Agreement and the Registration
Rights Agreement) on or after the date hereof and any consents or
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 8
waivers delivered on or after the date hereof by Arch or MobileMedia to the
other under the Merger Agreement (other than (i) subject to Section 15(a)
below, consents under Section 4.5 of the Merger Agreement or (ii) waivers
of Unilateral Conditions) shall have been in form and substance reasonably
satisfactory to the Standby Purchaser;
(f) the representations and warranties of Arch contained in this
letter agreement shall be true and correct, in all material respects
(except for the representations and warranties set forth at clauses (a)(v)
and (a)(vi) of Section 9 below, which shall be true and correct in all
respects, and except for the representations and warranties set forth at
clauses (a)(vii) and (a)(viii) of Section 9 below, which shall be
disregarded for purposes of this clause (f) insofar as they relate to
financial projections), on the Effective Date, with the same effect as
though such representations and warranties were made on the Effective Date,
and Arch shall have performed or complied with, in all material respects,
its covenants required to be performed or complied with under this letter
agreement on or prior to the Effective Date (and Arch shall have delivered
to the Standby Purchaser a certificate to the effect that each of the
conditions specified in this clause (f) is satisfied in all respects);
(g) the representations and warranties of MobileMedia contained in
this letter agreement shall be true and correct, in all material respects
(except for the representations and warranties set forth at clauses (b)(v)
and (b)(vi) of Section 9 below, which shall be true and correct in all
respects, and except for the representations and warranties set forth at
clauses (b)(vii) and (b)(viii) of Section 9 below, which shall be
disregarded for purposes of this clause (f) insofar as they relate to
financial projections), on the Effective Date, with the same effect as
though such representations and warranties were made on the Effective Date,
and MobileMedia shall have performed or complied with, in all material
respects, its covenants required to be performed or complied with, under
this letter agreement on or prior to the Effective Date (and MobileMedia
shall have delivered to the Standby Purchaser a certificate to the effect
that each of the conditions specified in this clause (g) is satisfied in
all respects);
(h) simultaneously with the transactions contemplated by Section 4
above, Arch shall have performed its obligation under clause (e) of Section
1.3 of the Merger Agreement and any debt financing (other than secured bank
financing) obtained by Arch to enable it to do so shall have terms no less
favorable to Arch than those set forth in the Bridge Commitment Letter;
provided, however, that the Standby Purchaser may not assert the condition
-------- -------
contained in this clause (h) if the sole reason for the failure of such
condition
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 9
to be satisfied is the failure or threatened failure of the Standby
Purchaser or any of its affiliates to fulfill the Commitment;
(i) simultaneously with the transactions contemplated by Section 4
above, each of the Other Standby Purchasers shall have fulfilled its
commitment under the Other Standby Purchase Commitment to which it is a
party, and, if applicable, any other person having a commitment
contemplated by Section 13(a) hereof shall have fulfilled such commitment;
(j) (i) the shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement shall be so issued and distributed pursuant to an exemption from
registration under the Securities Act provided by Section 1145 of the
Bankruptcy Code, and (ii)(A) the issuance of the Rights, (B) the issuance
of the shares of Existing Arch Common Stock, the shares of Arch Class B
Common Stock, if applicable, and the Arch Warrants upon exercise of the
Rights, (C) the issuance to the Standby Purchaser of the shares of Existing
Arch Common Stock, the shares of Arch Class B Common Stock, if applicable,
and the Arch Warrants as contemplated by Section 1 and Section 3 above and
the Arch Warrants as contemplated by Section 7 below, and (D) the issuance
of Existing Arch Common Stock upon exercise of the Arch Warrants or
conversion of Arch Class B Common Stock, if applicable, shall be covered
by the Registration Statement, the Registration Statement shall have been
declared effective and no stop order with respect thereto shall be in
effect;
(k) (i) the FCC Grant shall have been issued by the FCC and (ii) such
FCC Grant shall have become a Final Order (as defined in Section 5.1(e) of
the Merger Agreement); provided, however, that (A) the Standby Purchaser
-------- -------
may not assert the condition contained in clause (ii) above if each of the
Unaffiliated Standby Purchasers, acting in good faith, shall have waived
the condition contained in Section 5(k) of the Other Standby Purchase
Commitment to which such Unaffiliated Standby Purchaser is a party or (B)
the Standby Purchaser may not assert the condition contained in either
clause (i) or clause (ii) above if the sole reason for the failure of such
condition to be satisfied is an appeal, a motion for reconsideration or
similar action taken by any present or former officer of any Debtor
considered or determined by the FCC to be an alleged or actual wrongdoer
for purposes of the FCC Proceeding;
(l) any applicable waiting period under the HSR Act shall have
expired or been terminated early; and
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 10
(m) Arch shall have filed with the SEC no later than Friday, August
21, 1998 a preliminary Proxy Statement which shall not include any
information that a reasonable investor would consider important in
determining whether to make an investment decision regarding a purchase of
Existing Arch Common Stock and would view its disclosure as significantly
altering the total mix of information otherwise contained therein, which
information is not included in the Draft Proxy Statement; provided,
--------
however, that the Standby Purchaser may not assert the condition in this
-------
clause (m) unless (i) the information with respect to which the Standby
Purchaser seeks to assert such condition relates to information other than
the descriptions of the Merger, the Plan and the other exhibits thereto
contained in the preliminary Proxy Statement and (ii) such condition is
asserted by the Standby Purchaser not later than two business days after
Arch delivers to the Standby Purchaser a copy of the preliminary Proxy
Statement as filed with the SEC indicating the changes therein from the
Draft Proxy Statement (which copy Arch will deliver as promptly as
practicable following filing the same with the SEC).
The Standby Purchaser hereby acknowledges and agrees that (i) the entities with
an asterisk next to their names on Annex I hereto (the "Affiliated Standby
-------
Purchasers") shall be deemed to be affiliated with each other for purposes of
clauses (a) and (k) above and clause (iii) of Section 6 below, and (ii) the
Affiliated Standby Purchasers will act jointly with respect to any decision to
waive the condition contained in any such clause and the corresponding clause
contained in the Other Standby Purchase Commitments to which such Affiliated
Standby Purchasers are parties (with the vote of the Affiliated Standby
Purchasers holding at least 85% of the aggregate amount of Unsecured Claims held
by such Affiliated Standby Purchasers to control with respect to the taking of
any such action).
6. Additional Condition. The Commitment is subject to the further
--------------------
condition that there shall not have occurred between the Buyer Balance Sheet
Date and the Confirmation Date, and, if the Effective Date does not occur within
90 days following the Confirmation Date, between the Buyer Balance Sheet Date
and the Effective Date (i) any event or events (other than events which affect
generally the economy or the industry in which Arch and MobileMedia conduct
their respective businesses) which has had or would have a material adverse
effect on the business, assets (including licenses, franchise and other
intangible assets), financial condition, operating income or prospects
(determined in each case, where applicable, in accordance with generally
accepted accounting principles and in a manner consistent with the past
practices of Arch and MobileMedia) of Arch, MobileMedia and their respective
subsidiaries, taken as a whole (collectively, the "Combined Company") (a
"Combined Company Material Adverse Effect"), (ii) any event or events involving
a regulatory or statutory change and affecting generally the industry in which
Arch
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 11
and MobileMedia conduct their respective businesses which would materially
and adversely affect the ability of the Combined Company to operate its
business, or (iii) any event or events affecting generally the industry in which
Arch and MobileMedia conduct their respective business which would materially
and adversely affect the ability of the Combined Company to operate its
business; provided, however, that the Standby Purchaser may not assert the
-------- -------
condition contained in this clause (iii) if each of the Unaffiliated Standby
Purchasers, acting in good faith, shall have waived the condition in Section
6(iii) of the Other Standby Purchase Commitment to which such Unaffiliated
Standby Purchaser is a party.
7. Consideration for the Commitment. In consideration for the
--------------------------------
Commitment, on the Effective Date at the Closing the Standby Purchaser will
receive its pro rata share of Arch Warrants entitling the holders thereof to
purchase, in the aggregate, a number of shares of Existing Arch Common Stock
equal to 2.50% of the issued and outstanding shares of Existing Arch Common
Stock and, if applicable, Arch Class B Common Stock, computed on a Fully Diluted
Basis (as defined in the Plan) on the date the "Buyer Market Price" is
determined in accordance with Schedule II to the Merger Agreement giving effect
to the Plan as if the Effective Date had occurred on such date and assuming
21,067,110 shares of Existing Arch Common Stock are issued and outstanding
immediately prior thereto. Such Arch Warrants will be delivered to the Standby
Purchaser and the Other Standby Purchasers, in accordance with the percentages
specified in Column D of Annex I hereto.
-----
8. Satisfaction of the Commitment. The Standby Purchaser may, in its
------------------------------
sole discretion, satisfy the Commitment directly and/or indirectly through one
or more of its affiliates, separate accounts within its control or investment
funds under its or its affiliates' management.
9. Representations and Warranties. (a) Arch hereby represents and
------------------------------
warrants to the Standby Purchaser that:
(i) Arch is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to execute, deliver and
perform its obligations hereunder and to consummate the transactions
contemplated hereby;
(ii) Subject to the approval of the Buyer Charter Amendment and
the Buyer Share Issuance by the Stockholders of Arch, the execution,
delivery and performance of this letter agreement by Arch and the
consummation by Arch of the transactions contemplated hereby
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 12
have been duly and validly authorized by all necessary corporate action on
the part of Arch;
(iii) This letter agreement constitutes the legal, valid and
binding obligation of Arch, enforceable against Arch in accordance with its
terms;
(iv) Except as described in Section 3.3 of the Buyer Disclosure
Schedule and except for the applicable requirements of the Securities Act,
the Exchange Act and any applicable state and foreign securities laws, the
HSR Act, the Communications Act and the regulations of the FCC, state
public utility, telecommunications or public service laws and the
Bankruptcy Code, the Confirmation Order and the Amended Plan (collectively,
the "Applicable Requirements"), the execution, delivery and performance of
this letter agreement by Arch and the consummation by Arch of the
transactions contemplated hereby in accordance with the terms hereof do not
and will not conflict with, violate or constitute a breach of any material
contract, agreement or instrument by which Arch is bound or any judgment,
order, decree, law, statute, rule, regulation or other judicial or
governmental restriction to which Arch is subject;
(v) Except as described in the Buyer Disclosure Schedule, the
representations and warranties of Arch contained in the Merger Agreement
(other than those contained in Sections 3.6, 3.7, 3.26 and 3.27 thereof),
which representations and warranties shall be deemed for purposes of this
clause (v) not to include any qualification or limitation with respect to
materiality (whether by reference to "Buyer Material Adverse Effect" or
otherwise), are true and correct, except where the matters in respect of
which such representations and warranties are not true and correct would
not have a Buyer Material Adverse Effect;
(vi) True, complete and correct copies of the following
documents are attached hereto as indicated:
Document Exhibit
--------------------------------- -------
Hereto
-------
Merger Agreement (including all A
exhibits and schedules thereto)
Buyer Disclosure Schedule B
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 13
Document Exhibit
--------------------------------- -------
Hereto
------
Other Standby Purchase C
Commitments
Certificate of Incorporation of Arch, as D
amended through the date hereof
By-laws of Arch, as amended through E
the date hereof
Rights Agreement, dated as of F
October 13, 1995, between Arch and
the Bank of New York, as Rights
Agent, as amended through the date
hereof (the "Rights Agreement")
Draft of the Proxy Statement dated G
August 18, 1998 (the "Draft Proxy
Statement")
Existing Registration Rights H
Agreements (as defined in Section
9(a)(xi) below),
Bridge Commitment Letter I
(vii) As of the date hereof, the Draft Proxy Statement contains
no untrue statement of a material fact or omits to state any material fact
necessary, in light of the circumstances under which it was made, in order
to make the statements therein not misleading; provided, however, Arch
makes no representation with respect to either (A) information supplied by
MobileMedia for inclusion therein or (B) the descriptions of the Merger
Agreement, the Plan and the other exhibits to the Merger Agreement, and of
this letter agreement and the Other Standby Purchase Commitments, contained
therein;
(viii) No representation or warranty of Arch contained in this
letter agreement, and no statement relating to Arch contained in the Merger
Agreement, the Buyer Disclosure Schedule or any other document, certificate
or other instrument delivered or to be delivered by or on behalf of Arch
pursuant to this letter agreement (including the
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 14
definitive Proxy Statement and the Registration Statement as declared
effective by the SEC), contains or will as of the Effective Date contain
any untrue statement of a material fact or omits or will as of the
Effective Date omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading;
(ix) Between the Buyer Balance Sheet Date and the date hereof,
there has not occurred with respect to Arch (A) any event or events (other
than events which affect generally the economy or the industry in which
Arch and MobileMedia conduct their respective businesses) which has had or
would have a Combined Company Material Adverse Effect or (B) any event or
events involving a regulatory or statutory change and affecting generally
the industry in which Arch and MobileMedia conduct their respective
business which would materially and adversely affect the ability of the
Combined Company to operate its business;
(x) The shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement and the shares of Existing Arch Common Stock, the shares of Arch
Class B Common Stock, if applicable, and the Arch Warrants to be issued and
delivered as contemplated by Section 1 and Section 3 above, and the Arch
Warrants to be issued as contemplated by Section 7 above, in each case when
so issued and distributed or delivered, as the case may be, and the shares
of Existing Arch Common Stock issued upon conversion of such shares of Arch
Class B Common Stock, if applicable, when so converted in accordance with
the Arch Charter Amendment, and the shares of Existing Arch Common Stock
issued upon exercise of such Arch Warrants, when issued, paid for and
delivered as provided in the Arch Warrant Agreement, will be duly
authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights; and
(xi) Schedule 9(a)(xi) hereto sets forth a true, complete and
-----------------
correct list of all agreements that are in effect as of the date hereof
pursuant to which the Company has granted any registration rights to any
person or entity (the "Existing Registration Rights Agreements"), and,
except as specified in Schedule 9(a)(xi) hereto, none of the Existing
-----------------
Registration Rights Agreements is inconsistent with the rights to be
granted to the Standby Purchaser pursuant to the Registration Rights
Agreement.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 15
(b) MobileMedia hereby represents and warrants to the Standby
Purchaser that:
(i) MobileMedia is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and,
subject to the entry of the Confirmation Order, has all requisite corporate
power and authority to execute, deliver and perform its obligations
hereunder and to consummate the transactions contemplated hereby;
(ii) Subject to the entry of the Confirmation Order, the
execution, delivery and performance of this letter agreement by MobileMedia
and the consummation by MobileMedia of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on
the part of MobileMedia;
(iii) Subject to the entry of the Confirmation Order and the
effectiveness of the Plan, this letter agreement constitutes the legal,
valid and binding obligation of MobileMedia, enforceable against
MobileMedia in accordance with its terms;
(iv) Subject to entry of the Confirmation Order, and except as
described in Section 2.3 of the Company Disclosure Schedule and except for
the Applicable Requirements, the execution, delivery and performance of
this letter agreement by MobileMedia and the consummation by MobileMedia of
the transactions contemplated hereby in accordance with the terms hereof do
not and will not conflict with, violate, or constitute a breach of any
material contract, agreement or instrument by which MobileMedia is bound or
any judgment, order, decree, law, statute, rule, regulation or other
judicial or governmental restriction to which MobileMedia is subject;
(v) Except as described in the Company Disclosure Schedule,
the representations and warranties of MobileMedia contained in the Merger
Agreement (other than those contained in Sections 2.6, 2.7, 2.23 and 2.24
thereof), which representations and warranties shall be deemed for purposes
of this clause (v) not to include any qualification or limitation with
respect to materiality (whether by reference to "Company Material Adverse
Effect" or otherwise), are true and correct, except where the matters in
respect of which such representations and warranties are not true and
correct would not have a Company Material Adverse Effect;
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 16
(vi) True, complete and correct copies of the following documents
are attached hereto as indicated:
Document Exhibit
--------------------------------- --------
Hereto
-------
Merger Agreement (including all A
exhibits and schedules thereto)
Other Standby Purchase C
Commitments
Company Disclosure Schedule J
Agreement, dated the date hereof (the K
"Debtor/Committee Agreement"),
between MobileMedia, on behalf of
itself and the other Debtors, and the
Committee (as defined in the Plan)
(vii) As of the date hereof, the information included in the Draft
Proxy Statement that was provided for inclusion therein by MobileMedia
contains no untrue statement of a material of a material fact or omits to
state any material fact necessary,in light of the circumstances under which
it was made, in order to make the statements therein not misleading;
(viii) No representation or warranty of MobileMedia contained in this
letter agreement, and no statement relating to MobileMedia contained in the
Merger Agreement, the Company Disclosure Schedule or any other document,
certificate, or other instrument delivered or to be delivered by or on
behalf of MobileMedia pursuant to this letter agreement, contains or will
as of the Effective Date contain any untrue statement of a material fact or
omits or will as of the Effective Date omit to state any material fact
necessary, in light of the circumstances under which it was or will be
made, in order to make the statements herein or therein not misleading; and
(ix) Between the Company Balance Sheet Date and the date hereof,
there has not occurred with respect to MobileMedia (A) any event or events
(other than events which affect generally the economy or the industry in
which Arch and MobileMedia conduct their respective
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 17
businesses) which has had or would have a Combined Company Material Adverse
Effect or (B) any event or events involving a regulatory or statutory
change and affecting generally the industry in which Arch and MobileMedia
conduct their respective businesses which would materially and adversely
affect the ability of the Combined Company to operate its business.
(c) The Standby Purchaser hereby represents and warrants to each of
Arch and MobileMedia that:
(i) The Standby Purchaser is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite limited liability company power and
authority to execute, deliver and perform its obligations hereunder and to
consummate the transactions contemplated hereby;
(ii) The execution, delivery and performance of this letter
agreement by the Standby Purchaser and the consummation by the Standby
Purchaser of the transactions contemplated hereby have been duly and
validly authorized by all necessary limited liability company action on the
part of the Standby Purchaser;
(iii) This letter agreement constitutes the legal, valid and
binding obligation of the Standby Purchaser, enforceable against the
Standby Purchaser in accordance with its terms;
(iv) Except for the Applicable Requirements, the execution,
delivery and performance of this letter agreement by the Standby Purchaser
and the consummation by the Standby Purchaser of the transactions
contemplated hereby in accordance with the terms hereof do not and will not
conflict with, violate or constitute a breach of any material contract,
agreement, or instrument by which the Standby Purchaser is bound or any
judgment, order, decree, law, statute, rule, regulation or other judicial
or governmental restriction to which the Standby Purchaser is subject,
except where such conflicts, violations or breaches, individually or in the
aggregate, would not have a material adverse effect on the ability of the
Standby Purchaser to consummate the transactions contemplated hereby;
(v) No representation or warranty of the Standby Purchaser
contained in this letter agreement, and no statement contained in any other
document, certificate or other instrument delivered or to be
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 18
delivered by or on behalf of the Standby Purchaser pursuant to this letter
agreement, contains or will as of the Effective Date contain any untrue
statement of a material fact or omits or will as of the Effective Date omit
to state any material fact necessary, in light of the circumstances under
which it was or will be made, in order to make the statements herein or
therein not misleading; and
(vi) As of the date hereof, the Standby Purchaser holds directly,
or indirectly through its affiliates, separate accounts within its control
or investment funds under its or its affiliates' management, the aggregate
stated principal amount 93/8% Notes and 10 1/2% Notes (as such terms are
defined in the Plan) indicated under the Standby Purchaser's name and
address on Annex I hereto.
-------
(d) None of the representations and warranties made herein or in any
certificate to be delivered as contemplated hereby will survive the Closing.
10. Certain Covenants. (a) Each of Arch and MobileMedia (i) acknowledges
-----------------
that the Debtors have agreed to provide to the Committee copies of any and all
notices, documents or information to be provided by or made available by the
Debtors to Arch pursuant to the Merger Agreement or provided by or made
available by Arch to the Debtors pursuant to the Merger Agreement, promptly
after the receipt or provision thereof by or to the Debtors, as applicable, and
that the Committee, pursuant to the undertaking attached as Annex II hereto, has
--------
agreed to distribute copies of the same to the Standby Purchaser and to take
certain other actions and (ii) agrees that the Committee may do so.
(b) Without limiting the generality of the foregoing clause (a) of
this Section 10, Arch will, before filing the Registration Statement with the
SEC, furnish to the Standby Purchaser and its counsel copies of the Registration
Statement (including all exhibits thereto) proposed to be filed, will provide
the Standby Purchaser and its counsel a reasonable opportunity to review and
comment on such Registration Statement and will not file such Registration
Statement if the Standby Purchaser shall reasonably object thereto within three
calendar days after the receipt thereof.
(c) Arch will deliver to the Standby Purchaser copies of the
definitive Proxy Statement in the form filed with the SEC and mailed to
Stockholders of Arch and the Registration Statement in the form declared
effective by the SEC.
(d) Without limiting the generality of the foregoing clause (a) of
this Section 10, Arch will, before filing the Shelf Registration Statement or
any pre-effective amendment thereto, furnish to the Standby Purchaser and its
counsel copies
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 19
of the Shelf Registration Statement or such pre-effective amendment thereto, as
applicable, proposed to be filed, will provide Standby Purchaser and its counsel
with a reasonable opportunity to review and comment on the Shelf Registration
Statement or such pre-effective amendment thereto, as applicable, and will not
file the Shelf Registration Statement or such pre-effective amendment thereto,
as applicable, to which the Standby Purchaser or its counsel shall reasonably
object within three business days after the receipt thereof. The Standby
Purchaser will furnish to Arch such information regarding the Standby Purchaser
and its plan and method of distribution of the Registrable Securities as Arch
may reasonably request in writing in connection with the preparation of the
Shelf Registration Statement.
(e) Each of Arch, MobileMedia and the Standby Purchaser will use its
reasonable best efforts to obtain all approvals, waivers, consents and other
authorizations required by the Applicable Requirements, including without
limitation the applicable requirement of the HSR Act, necessary in connection
with the performance of this letter agreement by the Standby Purchaser and the
consummation by the Standby Purchaser of the transactions contemplated hereby.
(f) Arch will, as requested by the Standby Purchaser, either pay
directly to the appropriate Governmental Entity, or reimburse the Standby
Purchaser for, on behalf of the Standby Purchaser, any fees required to be paid
by the Standby Purchaser in connection with its compliance with the applicable
requirements of the HSR Act. In addition, following the Effective Date, Arch
will reimburse, promptly upon written request (accompanied by appropriate
supporting documentation), costs and expenses (including without limitation
reasonable fees and expenses of legal counsel, including a reasonable allocation
with respect to the cost of any internal counsel) not to exceed $100,000,
incurred by the Standby Purchaser in connection with this letter agreement and
the transactions contemplated hereby.
11. Certain Prohibited Transactions. The Standby Purchaser hereby
-------------------------------
covenants that, from and after the date hereof, so long as its commitment
hereunder remains in effect, it will not sell, or enter into any agreement
relating to the sale (including without limitation any short sale, equity swap
or other hedge position) of, any shares of Arch capital stock or, except as
otherwise expressly contemplated by this Section 11, engage in any other
disposition of such shares that might negatively affect the market price of such
shares; provided, however, that the foregoing provision will not apply to any
-------- -------
agreement entered into prior to the date hereof (if not entered into in
contemplation of the transactions contemplated by the Plan, the Merger Agreement
or this letter agreement) or any transaction effected pursuant to the terms
thereof. Notwithstanding the immediately preceding sentence, but subject to
Section 3 above and Section 12 below, the Standby Purchaser may at any time, as
it may determine in its sole and absolute discretion, sell or otherwise
transfer, or
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 20
acquire, or enter into any agreement relating to the sale, transfer or
acquisition of, Rights or Unsecured Claims. The Standby Purchaser acknowledges
that it has received copies of the Rights Agreement and the amendment thereto
attached as Exhibit D to the Merger Agreement (the "Rights Plan Amendment").
Arch hereby covenants that it will not, without the prior written consent of the
Standby Purchaser, further amend the Rights Agreement in any manner that would
eliminate or reduce the ownership thresholds applicable to the Standby Purchaser
thereunder; provided, however, that this sentence shall cease to be of any
-------- -------
further force or effect at such time after the Effective Date as the Standby
Purchaser ceases to beneficially own in the aggregate at least 10.0% of the
outstanding shares of Existing Arch Common Stock.
12. Voting Agreement. The Standby Purchaser hereby covenants that (a) so
----------------
long as the Bankruptcy Court approves the Disclosure Statement not later than
December 31, 1998 and the Confirmation Order is entered not later than March 31,
1999, (i) it will vote, or cause to be voted, for the acceptance of the Plan all
Unsecured Claims held by it on the date fixed for determining holders of
Unsecured Claims entitled to vote for acceptance or rejection of the Plan (the
"Record Date"), (ii) it will not withdraw or otherwise revoke, or cause to be
withdrawn or otherwise revoked, such vote for the acceptance of the Plan, and
(iii) it will not grant, or cause to be granted, to any other person or entity
any proxy to vote with respect to any such Unsecured Claims (other than a proxy
to vote for the acceptance of the Plan) and (b) except with respect to accounts
which cease to be within the Standby Purchaser's control and investment funds
which cease to be under its management, it will not, on or prior to the Record
Date, sell or otherwise transfer any Unsecured Claims held by it unless the
transferee shall have agreed in writing in the form attached as Annex III hereto
---------
(i) to vote for the acceptance of the Plan with respect to such Unsecured Claims
and (ii) not to sell or otherwise transfer such Unsecured Claims unless its
transferee shall agree to be bound in the same manner provided in this clause
(b) with respect to such Unsecured Claims.
13. Other Standby Purchase Commitments. (a) Each of Arch and MobileMedia
----------------------------------
covenants that it will not agree to any amendment or modification to any of the
letter agreements, dated the date hereof, among Arch, MobileMedia and any of the
Other Standby Purchasers (the "Other Standby Purchase Commitments"), without the
prior written consent of the Standby Purchaser. Notwithstanding the immediately
preceding sentence, Arch and MobileMedia may, without the prior written consent
of the Standby Purchaser, agree to an amendment or modification to any of the
Other Standby Purchase Commitments to the extent that (i) such amendment or
modification has the sole effect of reducing or eliminating the financial
commitment thereunder and (ii) simultaneously therewith, a qualified
institutional buyer (as such term is defined in Rule 144A promulgated under the
Securities Act) reasonably acceptable to the Standby Purchaser makes a
commitment in a
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 21
corresponding amount on terms identical in all material respects to those set
forth in such Other Standby Purchase Commitment.
(b) The Standby Purchaser will have no liability for the commitment of
any Other Standby Purchaser under any Other Standby Purchase Commitments or the
commitment of any other person contemplated by Section 13(a) above.
14. Certain Notices; Certain Information. (a) Each of Arch and
------------------------------------
MobileMedia hereby covenants that it will promptly deliver to the Standby
Purchaser, and the Standby Purchaser hereby covenants that it will promptly
deliver to Arch and MobileMedia, written notice of any matter, event or
development that would (i) render any representation or warranty made by it
herein inaccurate or incomplete in any respect or (ii) constitute or result in a
breach by it of, or a failure by it to comply with, any covenant herein
applicable to it.
(b) Each of Arch and MobileMedia will furnish the Standby Purchaser
with such information regarding itself as the Standby Purchaser may reasonably
request.
15. Certain Consent Rights. (a) Notwithstanding anything to the contrary
----------------------
herein contained, except as expressly contemplated by the Merger Agreement or
the Plan, Arch hereby covenants that it will not take, or agree in writing to
take, any action contemplated by Section 4.5(b)(ii), (iii), (iv), (viii) or (ix)
of the Merger Agreement without the prior written consent of the Standby
Purchaser.
(b) Arch hereby covenants that, without the prior written consent of
the Standby Purchaser, it will not, prior to the Effective Date, enter into any
agreement with respect to its securities, or amend any existing agreement with
respect to its securities (including without limitation the Existing
Registration Rights Agreements) in any manner inconsistent with the rights to be
granted to the Standby Purchaser pursuant to the Registration Rights Agreement.
16. Board Representation. Arch hereby covenants that: (a) on or prior to
--------------------
the Effective Date, Arch will cause a vacancy to be created on its Board of
Directors (by increasing the number of members of such Board or otherwise) and
effective no later than the Effective Date will cause one person designated by
the Standby Purchaser (the "Designee"), which person shall be reasonably
acceptable to the Board of Directors of Arch and shall not be a director or
employee of any entity that competes with Arch in the paging industry (excluding
for this purpose the Personal Communications Services business), to be elected
or appointed to such Board with an initial term expiring at Arch's Annual
Meeting of Stockholders to be held in the year 1999; (b) so long as the Standby
Purchaser beneficially owns (as a result of its
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 22
discretionary control of accounts, management discretion over investment funds
or otherwise, directly or through its affiliates) capital stock of Arch
representing at least (x) with respect to Arch's Annual Meeting of Stockholders
to be held in the year 2002 and meetings of Arch's stockholders held prior
thereto, 5.0% and (y) with respect to meetings of Arch's stockholders held
thereafter 10.0%, of the outstanding voting power, Arch will (i) nominate and
recommend the Designee (or another person designated by the Standby Purchaser as
the Designee's successor) for election at any meeting of Arch's stockholders at
which the term of the Designee or any successor thereto would otherwise expire
and (ii) fill any vacancy on Arch's Board of Directors created by the death,
resignation or removal of the Designee or any successor thereto with another
person designated by the Standby Purchaser as the Designee's successor; and (c)
so long as the Designee or any successor thereto remains on Arch's Board of
Directors, Arch will permit one additional person designated by the Standby
Purchaser (the "Observer") to attend all meetings of such Board as an observer
and to receive copies of all documents and other materials made available to the
members of such Board. The Standby Purchaser hereby acknowledges that the
Designee and the Observer will be required to execute and deliver to Arch
confidentiality agreements in the form executed by the existing members of
Arch's Board of Directors. The commitment of the Standby Purchaser hereunder is
subject to the additional condition that Arch shall have performed its covenant
set forth in clause (a) of the first sentence of this Section 16.
17. Removal of Legends. In the event that, following the transactions
------------------
contemplated by the Merger Agreement, the Plan and this letter agreement, any
certificates evidencing securities ("Certificates") of Arch held by the Standby
Purchaser bear a restrictive legend then:
(a) if the Standby Purchaser delivers to Arch (i) a certificate, in a
form reasonably satisfactory to Arch, certifying that securities evidenced
by such Certificate have been transferred pursuant to a registration
statement that is effective under the Securities Act or (ii) a certificate,
in a form reasonably satisfactory to Arch, certifying that securities
evidenced by such Certificate have been transferred without registration in
accordance with the requirements of Rule 144 under the Securities Act, Arch
will, or will instruct its transfer agent to, issue upon surrender of such
Certificate one or more new Certificates evidencing the securities so
transferred evidenced by the Certificate so surrendered, which new
Certificate or Certificates will not bear any such legend; and
(b) if the Standby Purchaser delivers to Arch an opinion of counsel to
the Standby Purchaser (which may be internal counsel to the Standby
Purchaser) that, in the opinion of such counsel, such legend is not, or is
no
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 23
longer, required to ensure compliance with the Securities Act, Arch
will, or will instruct its transfer agent to, issue upon surrender of such
Certificate one or more new Certificates evidencing the securities
evidenced by the Certificate so surrendered, which new Certificate or
Certificates will not bear any such legend.
* * * * *
If you are in agreement with the foregoing, please execute the enclosed
copy of this letter agreement as indicated and return it to the undersigned.
This letter agreement will become effective upon (i) the delivery to us of
executed counterparts of this letter agreement by each of you and (ii) the
execution and delivery of each of the Other Standby Purchase Commitments by each
of the parties thereto. Once effective, this letter agreement will terminate on
(i) the date on which the Debtor Tower Agreement is terminated, unless prior to
or simultaneously with such termination, MobileMedia shall have entered into a
definitive agreement (which shall be comparable in form and substance to the
Debtor Tower Agreement and a copy of which shall be delivered to the Standby
Purchaser promptly following the execution thereof) with a bona fide third-party
purchaser providing for a sale to such third party of the assets or
substantially all of the assets to be sold to Pinnacle pursuant to the Debtor
Tower Agreement resulting in net proceeds to MobileMedia of not less than $165.0
million (an "Acceptable Sale"), (ii) December 31, 1998, unless the Closing (as
defined in the Debtor Tower Agreement) or the closing of an Acceptable Sale
shall have occurred on or before such date, (iii) March 31, 1999, unless the
Confirmation Order shall have been entered by the Bankruptcy Court on or before
such date, (iv) June 30, 1999, unless the effectiveness of the Plan occurs on or
before such date, or (v) if not theretofore terminated pursuant to one of the
foregoing clauses, the date on which the Merger Agreement is terminated in
accordance with the terms thereof.
All notices and other communications hereunder must be in writing. Any
notice or other communication hereunder will be deemed duly delivered three
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or two business days after it is sent via a
reputable international overnight courier service, in each case to the intended
recipient at the address therefor set forth on the signature page hereto. Any
party hereto may give any notice or other communication hereunder by personal
delivery or telecopy, but no such notice or other communication will be deemed
to have been duly given unless and until it actually is received by the party
for whom it is intended. Any party may change the address to which notices and
other communications hereunder are to be delivered by giving the other parties
notice in the manner herein set forth.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 24
This letter agreement represents the final agreement among the parties
hereto with respect to the subject matter hereof and may not be contradicted by
evidence of prior or contemporaneous agreements of the parties. There are no
unwritten oral agreements between the parties relating to the subject matter
hereof. This letter agreement may not be amended or modified except by a
written instrument signed by each of the Standby Purchaser, Arch and
MobileMedia.
This letter agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to its principles of conflicts
of law.
This letter agreement may be executed in counterparts which, taken
together, shall constitute one and the same instrument.
Very truly yours,
W.R. HUFF ASSET MANAGEMENT CO., L.L.C.
By: /s/ Bryan E. Bloom
-----------------------------------
Name: Bryan E. Bloom, Esq.
Its: Attorney-in-Fact
Address: 67 Park Place, 9th Floor
Morristown, New Jersey 07960
Attn: Cathy Markey, Esq.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 25
ACCEPTED AND AGREED TO:
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
---------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
Subject to entry of the Confirmation Order:
MOBILEMEDIA COMMUNICATIONS, INC.
By: /s/ Joseph A. Bondi
---------------------------------
Name: Joseph A. Bondi
Its: Chairman - Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman - Restructuring
With copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, New York 10022
Attn: James D. Johnson
<PAGE>
ANNEX I
-------
<TABLE>
<CAPTION>
COMMITMENT AMOUNTS
------------------
(dollars in millions)
Column A Column B Column C Column D
----------- ------------------- ----------- -----------
Rights Unexercised
Exercise Rights Total
Commitment Commitment Commitment Commitment
Name and Address of Standby Amount (1) Amount (2) Amount Percentage
- --------------------------- ----------- ----------- ----------- -------------
Purchasers
- ---------- - -
<S> <C> <C> <C> <C>
W.R. Huff Asset Management Co., L.L.C., $ 39.27 $ 35.80 $ 75.07 34.60%
as agent for its affiliates and
discretionary accounts
67 Park Place, 9th Floor
Morristown, New Jersey 07960
Stated Principal Amount of 9 3/8% Notes:
$ 57,847,000
- -----------------
Stated Principal Amount of 10 1/2% Notes:
$ 27,970,000
- ----------------
The Northwestern Mutual Life Insurance $ 10.95 $ 9.97 $ 20.92 9.64%
Company/*/
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8% Notes:
$ 19,776,000
- -------------
Stated Principal Amount of 10 1/2% Notes:
$ 3,350,000
- --------------
The Northwestern Mutual Life Insurance $ 2.65 $ 2.42 $ 5.07 2.34%
Company for its Group Annuity Separate
Account/*/
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8% Notes:
$ -0-
- --------------
Stated Principal Amount of 10 1/2% Notes
$ 7,000,000
- --------------
</TABLE>
_____________________
/*/ The Northwestern Mutual Life Insurance Company, The Northwestern Mutual
Life Insurance Company for its Group Annuity Separate Account and Northwestern
Mutual Series Fund, Inc. for the High Yield Bond Portfolio are affiliated
entities for purposes of clauses (a) and (k) of Section 5 and clause (iii) of
Section 6.
<PAGE>
<TABLE>
<CAPTION>
COMMITMENT AMOUNTS
------------------
(dollars in millions)
Column A Column B Column C Column D
----------- ------------------- ----------- -----------
Rights Unexercised
Exercise Rights Total
Commitment Commitment Commitment Commitment
Name and Address of Standby Amount (1) Amount (2) Amount Percentage
- --------------------------- ----------- ----------- ----------- -------------
Purchases
- --------- - -
<S> <C> <C> <C> <C>
Northwestern Mutual Series Fund, Inc. for $ .75 $ .69 $ 1.44 0.66%
the High Yield Bond Portfolio/*/
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8% Notes:
$ -0-
- ----------------
Stated Principal Amount of 10 1/2% Notes:
$ 2,000,000
- ------------------ $ 29.48 $ 26.88 $ 56.36 25.97%
Credit Suisse First Boston Corporation
11 Madison Avenue, 4th Floor
New York, New York 10010
Stated Principal Amount of 9 3/8% Notes:
$ 32,453,000
- ---------------
Stated Principal Amount of 10 1/2% Notes:
$ 35,930,000
- --------------
Whippoorwill Associates, Inc., as general $ 30.42 $ 27.72 $ 58.14 26.79%
partner and/or agent for the parties set
forth on Schedule A hereto in the
percentages noted thereon
11 Martine Avenue
White Plains, New York 10606
Stated Principal Amount of 9 3/8% Notes:
$ 37,855,000
- ---------------
Stated Principal Amount of 10 1/2% Notes:
$ 31,410,000
- --------------
Total: $113.52 $103.48 $217.00 100.00%
------- ------- -------
</TABLE>
(1) The "Rights Exercise Commitment Amount", for each Standby Purchaser, shall
mean an amount equal to the product of (i) the Rights Subscription Price
(as defined in Schedule II to the Merger Agreement) and (ii) the number of
Rights issuable in respect of an amount of Allowed Unsecured Claims derived
from the principal amount of 9 3/8% Notes and the 101/2% Notes indicated
under the Standby Purchaser's name on this Annex I held by such Standby
Purchaser on the date hereof. The dollar amounts set forth under Column A
are estimates provided for illustrative purposes only, based on the
assumptions that (x) there is a total of $475 million of Allowed Unsecured
Claims, (y) there is no Rights Reserve (as defined in the Plan), and (z)
the aggregate amount of Subordinated Noteholder Claims (as defined in the
Plan) is $441,819,762.
<PAGE>
(2) The "Unexercised Rights Commitment Amount", for each Standby Purchaser,
shall mean an amount equal to (i) the Total Commitment Amount indicated in
Column C for such Standby Purchaser less (ii) the Rights Exercise
Commitment Amount for such Standby Purchaser. The dollar amounts set forth
under Column B are estimates provided for illustrative purposes only, based
on the estimates set forth in Column A.
<PAGE>
ANNEX II
--------
UNDERTAKING
-----------
The Committee hereby undertakes to distribute to the Standby Purchaser
(until instructed by the Standby Purchaser to do otherwise) copies of any and
all notices, documents or information to be provided by or made available by the
Debtors to Arch pursuant to the Merger Agreement or provided by or made
available by Arch to the Debtors pursuant to the Merger Agreement that are
received by the Committee pursuant to the Debtor/Committee Agreement as soon as
practicable with its receipt thereof. The Committee hereby further undertakes
to consult with the Standby Purchaser (until instructed by the Standby Purchaser
to do otherwise) prior to delivering any written consent or exercising any other
right of the Committee (other than the distribution of notices, documents or
information to the Standby Purchaser or the Other Standby Purchasers) pursuant
to the Debtor/Committee Agreement or the Plan. The Committee will not enter
into any amendment to the Debtor/Committee Agreement without the prior written
consent of the Standby Purchaser.
THE OFFICIAL COMMITTEE
OF UNSECURED CREDITORS
By: /s/ Bryan E. Bloom
---------------------------------
Its: Chairman
<PAGE>
ANNEX III
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VOTING AGREEMENT
----------------
The undersigned transferee of indebtedness of MobileMedia Corporation or one of
its direct or indirect subsidiaries (collectively, "MobileMedia") described in
Schedule A attached hereto (the "Claim"), hereby acknowledges and agrees as
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follows:
1. MobileMedia is a debtor-in-possession under Chapter 11 of the
Bankruptcy Code and has proposed a First Amended Joint Plan of
Reorganization dated August __, 1998 (the "Amended Plan").
2. By acquiring the Claim the undersigned may also acquire rights to vote
on the adoption of the Amended Plan.
3. As a condition of the transfer of the Claim, the undersigned hereby
agrees to exercise all voting rights it may have as holder of the
Claim in favor of the Amended Plan unless the Amended Plan shall have
been withdrawn.
4 The undersigned agrees that it shall not subsequently transfer the
Claim or any portion thereof unless and until it obtains from its
transferee a Voting Agreement identical to the form hereof.
IN WITNESS HEREOF, the undersigned transferee has executed this Voting
Agreement this _____ day of __________, 199_.
[TRANSFEREE]
By:____________________________
Title:
Accepted By:
_________________________
[Transferor]
<PAGE>
SCHEDULE A
TO
VOTING AGREEMENT
----------------
[Describe Claim.]
<PAGE>
SCHEDULE 9(a)(xi)
-----------------
Existing Registration Rights Agreement
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(1) Registration Rights Agreement, dated as of June 24, 1998, by and among Arch
Communications Group, Inc., Sandler Capital Partner, IV, L.P., Sandler
Capital Partners IV FTE, L.P. Harvey Sandler, John Kornreich, Michael J.
Morocco, Andrew Sandler, South Fork Partners, The Georgica International
Fund Limited, Aspen Partners and Consolidated Press International Limited,
as amended
(2) Registration Rights Agreement, dated as of June 29, 1998, Arch
Communications Group, Inc. Adelphia Communications Corporation and Lisa-
Gaye Shearing
Inconsistencies:
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The provisions of the Registration Rights Agreement listed at (2) above are
inconsistent in certain respects with the provisions of the Registration Rights
Agreement.
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
for its Group Annuity Separate Account
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
August 18, 1998
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Commitment to Purchase Stock and Warrants
-----------------------------------------
Gentlemen:
Arch Communications Group, Inc., a Delaware corporation ("Arch"), and
MobileMedia Communications, Inc., a Delaware corporation ("MobileMedia"), intend
to engage in a business combination transaction (the "Combination") as part of a
reorganization (the "Reorganization") of MobileMedia, MobileMedia Corporation,
the sole stockholder of MobileMedia ("Parent"), and all of MobileMedia's
subsidiaries (collectively, the "Debtors") pursuant to chapter 11 of title 11,
United States Code, 11 U.S.C. (S)(S) 101 et seq. (the "Bankruptcy Code"). It is
our understanding that in connection with the Reorganization, among other
things: (a) pursuant to the Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), among Arch, a wholly owned subsidiary of Arch
("Merger Sub"), Parent and MobileMedia, MobileMedia will merge with and into
Merger Sub, with Merger Sub continuing as the surviving corporation and a wholly
owned subsidiary of Arch; (b) pursuant to the Merger Agreement, Arch will make
available for distribution pursuant to a plan of reorganization of the Debtors
in the form attached as Exhibit A to the Merger Agreement, with such amendments
and modifications thereto as are made in a manner consistent with clause (e) of
Section 5 hereto (such plan of reorganization being referred to herein as the
"Plan"), (i) cash, (ii) shares of its Common Stock, par value $.01 per share
("Existing Arch Common Stock"), and (iii) warrants entitling the holders thereof
to purchase shares of Existing Arch Common Stock ("Arch Warrants"), with such
Arch Warrants to be issued pursuant to, and to
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
have the terms set forth in, a warrant agreement in the form attached as Exhibit
B to the Merger Agreement (the "Arch Warrant Agreement"); (c) holders of
unsecured non-priority claims against the Debtors ("Unsecured Claims"), to the
extent such Unsecured Claims are Allowed (as defined in the Plan), will receive
pursuant to the Plan (i) shares of Existing Arch Common Stock and (ii) rights to
purchase ("Rights") for cash units consisting of (A) shares of Existing Arch
Common Stock and (B) Arch Warrants; (d) holders of claims arising under or
relating to the Credit Agreement, dated December 4, 1995, as amended, among
MobileMedia and the other parties thereto ("Secured Claims"), to the extent such
Secured Claims are Allowed, will receive pursuant to the Plan cash in an amount
equal to 100% of such claims; (e) all of the outstanding equity interests in
MobileMedia and Parent will be canceled without consideration and Parent will be
dissolved; and (f) the commitments under the DIP Loan Agreement will terminate
and all amounts owed under or in respect of the DIP Loan Agreement will be paid
in full in cash.
Terms used herein with initial capital letters that are not otherwise
defined shall have the meanings ascribed to such terms in the Merger Agreement.
1. The Commitment. In connection with the foregoing, The Northwestern
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Mutual Life Insurance Company for its Group Annuity Separate Account (the
"Standby Purchaser") hereby advises you of its commitment (the "Commitment"),
subject to the conditions set forth herein:
(a) to exercise any Rights distributed to it in respect of its Allowed
Unsecured Claims in accordance with the Plan and not thereafter sold or
transferred as permitted by Section 3 below to purchase units consisting of
shares of Existing Arch Common Stock and Arch Warrants underlying such
Rights, to the extent that the aggregate purchase price payable upon such
exercise, as determined in accordance with Schedule II to the Merger
Agreement (the "Subscription Price"), does not exceed the Rights Exercise
Commitment Amount of the Standby Purchaser as set forth in Annex I hereto;
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(b) if (i) the Standby Purchaser sells or otherwise transfers any or
all of (A) the Rights distributed to it in accordance with the Plan or (B)
Unsecured Claims held by it as of the date hereof in respect of which
Rights are to be distributed, in each case as permitted by Section 3 below,
and (ii) the Rights sold or transferred by the Standby Purchaser or the
Rights distributed in respect of Unsecured Claims held by it as of the date
hereof that are hereafter sold or transferred by the Standby Purchaser are
not exercised prior to the
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
expiration thereof (at which time such Rights will be void and will no
longer be exercisable), to purchase for cash (based upon the Subscription
Price payable upon exercise of such Rights) identical units consisting of
shares of Existing Arch Common Stock and Arch Warrants underlying such
unexercised Rights, to the extent that the aggregate purchase price
therefor, together with the aggregate Subscription Price payable upon
exercise of Rights exercised as contemplated by clause (a) above, does not
exceed the Rights Exercise Commitment Amount of the Standby Purchaser as
set forth in Annex I hereto; and
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(c) if any Rights distributed in accordance with the Plan (other than
(i) Rights distributed to the Standby Purchaser or the other holders of
Unsecured Claims listed on Annex I hereto (the "Other Standby Purchasers")
-------
and retained by them (which Rights are referred to in Section 1(a) above
and Section 1(a) of each of the Other Standby Purchase Commitments (as
defined in Section 13(a) below)) or (ii) subject to Section 3(b) below,
Rights distributed in respect of Unsecured Claims held by the Standby
Purchaser or the Other Standby Purchasers as of the date hereof that are
hereafter sold or transferred by them (which Rights are referred to in
Sections 1(b) and 3 hereof and Sections 1(b) and 3 of each of the Other
Standby Purchase Commitments)) remain unexercised upon the expiration
thereof (at which time such Rights will be void and will no longer be
exercisable), to purchase for cash (based on the Subscription Price payable
upon exercise of such Rights) pro rata in accordance with and up to the
Unexercised Rights Commitment Amount of the Standby Purchaser as set forth
in Annex I hereto identical units consisting of shares of Existing Arch
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Common Stock and Arch Warrants underlying such unexercised Rights.
2. Arch Class B Common Stock. (a) Notwithstanding anything to the
-------------------------
contrary herein contained, if the purchases by the Standby Purchaser
contemplated by Section 1 above would cause the Standby Purchaser, the Other
Standby Purchasers, and any other persons or entities who, when taken together
with any one or more of the Standby Purchaser and the Other Standby Purchasers,
would constitute a "person" or "group" as used in Section 13(d) or Section 14(d)
of the Exchange Act or Rule 13d-3 or Rule 13d-5 promulgated thereunder, or any
"affiliate" as defined in Rule 405 promulgated under the Securities Act of any
of them (collectively, the "Standby Class B Holders"), in the aggregate, to
beneficially own on the effective date of the Plan (the "Effective Date") shares
representing more than 49.0% of the capital stock of Arch generally entitled to
vote in the election of directors
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
or more than 49.0% of the total voting power of the capital stock of Arch, Arch
will substitute shares of Class B Common Stock, par value $.01 per share, of
Arch ("Arch Class B Common Stock"), with such Arch Class B Common Stock having
the terms set forth in the form of Certificate of Amendment to Certificate of
Incorporation of Arch attached as Exhibit F to the Merger Agreement (the "Arch
Charter Amendment"), for shares of Existing Arch Common Stock included in the
units so purchased on a one-for-one basis such that on the Effective Date the
Standby Class B Holders, in the aggregate, will beneficially own shares
representing not more than 49.0% of the capital stock of Arch generally entitled
to vote in the election of directors and not more than 49.0% of the total voting
power of the capital stock of Arch, all as provided in the Plan. For purposes of
this letter agreement, "beneficial ownership" shall be determined as provided in
Rule 13d-3 and Rule 13d-5 promulgated under the Exchange Act, except that a
person or entity shall be deemed to have "beneficial ownership" of all
securities that such person or entity has the right to acquire, whether such
right is exercisable immediately or only after the passage of time.
(b) For purposes of calculating the percentages referred to in Section
2(a) above, it will be assumed that no additional Unsecured Claims are allowed
after the Effective Date and all of the shares of Existing Arch Common Stock in
the Creditor Stock Pool (as defined in the Plan) are distributed in accordance
with the Plan to the holders of Allowed Unsecured Claims as of the Effective
Date.
(c) Substitution of shares of Class B Common Stock as contemplated by
Section 2(a) above will be effectuated as follows:
(i) first, to the extent that the Standby Purchaser or any Other
Standby Purchaser beneficially owns shares of Existing Arch Common
Stock as of the Effective Date, other than those acquired as
contemplated by the Plan, the Merger Agreement, this letter agreement
and the Other Standby Purchase Commitments ("Non-Plan Arch Shares"),
among the Standby Purchaser and such Other Standby Purchaser pro rata
based on ownership of Non-Plan Arch Shares up to an amount equal to
the aggregate number of Non-Plan Arch Shares beneficially owned by
them as of the Effective Date; and
(ii) second, if necessary, among the Standby Purchaser and the
Other Standby Purchasers in accordance with the percentages set forth
in Column D of Annex I hereto.
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<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
(d) The Standby Purchaser hereby disclaims beneficial ownership of any
securities of Arch owned by the Other Standby Purchasers.
3. Certain Transfer Restrictions. (a) Subject to Section 12 below, the
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Standby Purchaser may (i) sell or otherwise transfer any or all of (A) the
Rights distributed to it in accordance with the Plan or (B) Unsecured Claims in
respect of which Rights are to be distributed or (ii) purchase or otherwise
acquire (A) Rights distributed to others in accordance with the Plan or (B)
Unsecured Claims in respect of which Rights are to be distributed; provided,
--------
however, that, with respect to clause (i) of this sentence, (X)
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contemporaneously with the consummation of any such sale or other transfer of
Rights or Unsecured Claims, the Standby Purchaser will notify Arch and
MobileMedia of the occurrence thereof and (Y) the Standby Purchaser will not
consummate any such sale or other transfer unless the transferee or transferees
of such Rights or Unsecured Claims shall have entered into a written agreement
(a "Tracking Agreement") (I) to notify the Standby Purchaser, Arch and
MobileMedia of any subsequent transfer by it of such Rights or Unsecured Claims
or any Rights distributed to it in respect of such Unsecured Claims and (II) not
to sell or otherwise transfer such Rights or Unsecured Claims or Rights
distributed to it in respect of such Unsecured Claims, unless its transferee or
transferees shall agree in writing to be bound in the same manner provided in
this clause (Y) with respect to any subsequent transfer by it.
(b) Notwithstanding the provisions of clause (Y) of the proviso in Section
3(a) above, the Standby Purchaser may elect to sell or otherwise transfer (i)
any or all of the Rights distributed to it in accordance with the Plan or (ii)
Unsecured Claims in respect of which Rights are to be so distributed, in either
case without entering into a Tracking Agreement with its transferee or
transferees (any Rights so transferred and any Rights distributed in respect of
Allowed Claims so transferred, together with any Rights so transferred and any
Rights distributed in respect of Allowed Claims so transferred by the Other
Standby Purchasers pursuant to Section 3(b) of the Other Standby Purchase
Commitments, being referred to herein collectively as "Untracked Rights"). Any
Rights that remain unexercised upon expiration thereof will be deemed to be
"Section 3(b) Rights" up to, but not exceeding, the amount of Untracked Rights.
The Section 3(b) Rights shall be exercised as follows prior to the application
of Section 1(c) above and Section 1(c) of the Other Standby Purchase
Commitments: (A) the Standby Purchaser and the Other Standby Purchasers will
first be given the opportunity to purchase for cash (based on the Subscription
Price payable upon exercise of such Rights) units consisting of shares of Arch
Common Stock and Arch Warrants underlying a number of unexercised Rights up to
the amount of Section
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
3(b) Rights in accordance with the percentages set forth in Column D of Annex I
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hereto and (B) to the extent such units are not so purchased, the Standby
Purchaser and any Other Standby Purchasers that are responsible for the
existence of the Section 3(b) Rights will be required to purchase such units pro
rata based on the number of Section 3(b) Rights resulting from their respective
transfers. Nothing in this Section 3(b) will in any way reduce the commitment of
the Standby Purchaser specified in Section 1(c) above or the Unexercised Rights
Commitment Amount as set forth in Annex I hereto.
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4. The Closing. (a) Notwithstanding anything to the contrary herein
-----------
contained or the terms of the Rights or the Plan, subject to the conditions set
forth herein, on the Effective Date the Standby Purchaser, in satisfaction of
the Commitment, will deliver at the Closing (i) the aggregate Subscription Price
payable upon exercise of any Rights exercised by it and (ii) the purchase price
payable in consideration of any shares of Existing Arch Common Stock or, if
applicable, Arch Class B Common Stock and Arch Warrants to be otherwise
purchased by it pursuant to the Commitment; provided, however, that, if
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requested by the Standby Purchaser in writing at least two business days prior
to the Effective Date, any cash to be distributed to the Standby Purchaser in
respect of Allowed Secured Claims pursuant to the Plan will, prior to the
distribution thereof pursuant to the Plan and in accordance with the instruction
included in such written request, be first applied, on behalf of the Standby
Purchaser, to the payment of such amounts payable on the Effective Date as
provided in this Section 4(a).
(b) Upon payment of the amounts payable as provided in Section 4(a),
on the Effective Date at the Closing Arch will deliver to the Standby Purchaser
(or its designees) certificates representing the shares of Existing Arch Common
Stock, shares of Arch Class B Common Stock, if applicable, and the Arch
Warrants, in each case, (i) issuable upon exercise of any Rights exercised by
the Standby Purchaser or (ii) otherwise purchased by the Standby Purchaser
pursuant to the Commitment.
(c) Arch will deliver to the Standby Purchaser at least five business
days prior to the Effective Date a written notice which shall (i) specify the
amounts payable at the Closing by it in satisfaction of the Commitment, (ii)
specify the date on which the Effective Date is to occur and the last date on
which the notice referred to in Section 4(d) may to be delivered, and (iii)
indicate the matters required to be addressed in such notice.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 7
(d) At least two business days prior to the Effective Date, the
Standby Purchaser will deliver to Arch and MobileMedia a written notice which
shall set forth the number of shares of Existing Arch Common Stock beneficially
owned by it as of such date. During the period from the date of such notice
through the Effective Date, neither the Standby Purchaser nor any affiliate
thereof shall acquire beneficial ownership of, or any rights to acquire, any
additional shares of Existing Arch Common Stock or any Unsecured Claim.
5. Certain Conditions. The Commitment is subject to the conditions that:
------------------
(a) (i) the Confirmation Order (as defined in the Plan), in a form
reasonably satisfactory to the Standby Purchaser, shall have been entered
by the Bankruptcy Court (as defined in the Plan) and (ii) such Confirmation
Order shall have become a Final Order (as defined in Section 5.1(h) of the
Merger Agreement); provided, however, that (A) the Standby Purchaser may
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not assert the condition contained in clause (ii) above if each of the
Other Standby Purchasers that is not affiliated with the Standby Purchaser
(each, an "Unaffiliated Standby Purchaser"), acting in good faith, shall
have waived the condition contained in Section 5(a) of the Other Standby
Purchase Commitments to which such Unaffiliated Standby Purchaser is a
party and (B) the Standby Purchaser may not assert the condition contained
in either clause (i) or clause (ii) above if the sole reason for the
failure of such condition to be satisfied is the failure or the threatened
failure of the Standby Purchaser or any of its affiliates to fulfill the
Commitment;
(b) the satisfaction or, with the written consent of the Standby
Purchaser, waiver of all conditions precedent to the obligations of each of
the parties to the Merger Agreement contained in the Merger Agreement and
all conditions precedent to the effectiveness of the Plan contained in the
Plan; provided, however, that (i) the conditions contained in Section
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5.1(e) and (h), Section 5.2(a), (b), (c), (d) and (e) and Section 5.3(a),
(b), (c) and (e) of the Merger Agreement (collectively, the "Unilateral
Conditions") may be waived without the written consent of the Standby
Purchaser and (ii) the Standby Purchaser may not assert the condition
contained in this clause (b) if the sole reason for the failure of such
condition to be satisfied is the failure or the threatened failure of the
Standby Purchaser or any of its affiliates to fulfill the Commitment;
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 8
(c) there shall be effective under the Securities Act, a registration
statement (the "Shelf Registration Statement") covering the resale by the
Standby Purchaser of (i) all shares of Existing Arch Common Stock, all
shares of Arch Class B Common Stock, if applicable, and all Arch Warrants
received by the Standby Purchaser as a result of the transactions
contemplated by the Plan (including those received upon the exercise of
Rights and pursuant to this letter agreement) and (ii) all shares of
Existing Arch Common Stock issuable upon conversion of any such shares of
the Arch Class B Common Stock or exercise of any such Arch Warrants (the
securities referred to in the foregoing clauses (i) and (ii) are referred
to herein as the "Registrable Securities");
(d) Arch shall have executed and delivered to the Standby Purchaser a
registration rights agreement in the form attached as Exhibit C to the
Merger Agreement (the "Registration Rights Agreement") granting the Standby
Purchaser certain demand and piggyback registration rights with respect to
the Registrable Securities;
(e) any and all amendments or modifications to the Merger Agreement or
any exhibit or schedule thereto (including without limitation the Plan, the
Arch Charter Amendment, the Arch Warrant Agreement and the Registration
Rights Agreement) on or after the date hereof and any consents or waivers
delivered on or after the date hereof by Arch or MobileMedia to the other
under the Merger Agreement (other than (i) subject to Section 15(a) below,
consents under Section 4.5 of the Merger Agreement or (ii) waivers of
Unilateral Conditions) shall have been in form and substance reasonably
satisfactory to the Standby Purchaser;
(f) the representations and warranties of Arch contained in this
letter agreement shall be true and correct, in all material respects
(except for the representations and warranties set forth at clauses (a)(v)
and (a)(vi) of Section 9 below, which shall be true and correct in all
respects, and except for the representations and warranties set forth at
clauses (a)(vii) and (a)(viii) of Section 9 below, which shall be
disregarded for purposes of this clause (f) insofar as they relate to
financial projections), on the Effective Date, with the same effect as
though such representations and warranties were made on the Effective Date,
and Arch shall have performed or complied with, in all material respects,
its covenants required to be performed or complied with under this letter
agreement on or prior to the Effective Date (and Arch shall
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 9
have delivered to the Standby Purchaser a certificate to the effect that
each of the conditions specified in this clause (f) is satisfied in all
respects);
(g) the representations and warranties of MobileMedia contained in
this letter agreement shall be true and correct, in all material respects
(except for the representations and warranties set forth at clauses (b)(v)
and (b)(vi) of Section 9 below, which shall be true and correct in all
respects, and except for the representations and warranties set forth at
clauses (b)(vii) and (b)(viii) of Section 9 below, which shall be
disregarded for purposes of this clause (f) insofar as they relate to
financial projections), on the Effective Date, with the same effect as
though such representations and warranties were made on the Effective Date,
and MobileMedia shall have performed or complied with, in all material
respects, its covenants required to be performed or complied with, under
this letter agreement on or prior to the Effective Date (and MobileMedia
shall have delivered to the Standby Purchaser a certificate to the effect
that each of the conditions specified in this clause (g) is satisfied in
all respects);
(h) simultaneously with the transactions contemplated by Section 4
above, Arch shall have performed its obligation under clause (e) of Section
1.3 of the Merger Agreement and any debt financing (other than secured bank
financing) obtained by Arch to enable it to do so shall have terms no less
favorable to Arch than those set forth in the Bridge Commitment Letter (the
"Bridge Commitment Letter"); provided, however, that the Standby Purchaser
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may not assert the condition contained in this clause (h) if the sole
reason for the failure of such condition to be satisfied is the failure or
threatened failure of the Standby Purchaser or any of its affiliates to
fulfill the Commitment;
(i) simultaneously with the transactions contemplated by Section 4
above, each of the Other Standby Purchasers shall have fulfilled its
commitment under the Other Standby Purchase Commitment to which it is a
party, and, if applicable, any other person having a commitment
contemplated by Section 13(a) hereof shall have fulfilled such commitment;
(j) (i) the shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement shall be so issued and distributed pursuant to an exemption from
registration under the Securities Act provided by Section 1145 of the
Bankruptcy Code, and (ii) (A) the issuance of the Rights, (B) the issuance
of the shares of Existing Arch Common Stock, the shares of Arch Class B
Common Stock, if applicable, and the Arch Warrants upon exercise of the
Rights, (C) the issuance to the Standby Purchaser of the shares of Existing
Arch Common Stock, the shares of Arch Class B Common
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 10
Stock, if applicable, and the Arch Warrants as contemplated by Section 1
and Section 3 above and the Arch Warrants as contemplated by Section 7
below, and (D) the issuance of Existing Arch Common Stock upon exercise of
the Arch Warrants or conversion of Arch Class B Common Stock, if
applicable, shall be covered by the Registration Statement, the
Registration Statement shall have been declared effective and no stop order
with respect thereto shall be in effect;
(k) the FCC Grant shall have been issued by the FCC and (ii) such FCC
Grant shall have become a Final Order (as defined in Section 5.1(e) of the
Merger Agreement); provided, however, that (A) the Standby Purchaser may
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not assert the condition contained in clause (ii) above if each of the
Unaffiliated Standby Purchasers, acting in good faith, shall have waived
the condition contained in Section 5(k) of the Other Standby Purchase
Commitment to which such Unaffiliated Standby Purchaser is a party or (B)
the Standby Purchaser may not assert the condition contained in either
clause (i) or clause (ii) above if the sole reason for the failure of such
condition to be satisfied is an appeal, a motion for reconsideration or
similar action taken by any present or former officer of any Debtor
considered or determined by the FCC to be an alleged or actual wrongdoer
for purposes of the FCC Proceeding;
(l) any applicable waiting period under the HSR Act shall have expired
or been terminated early; and
(m) Arch shall have filed with the SEC no later than Friday, August
21, 1998 a preliminary Proxy Statement which shall not include any
information that a reasonable investor would consider important in
determining whether to make an investment decision regarding a purchase of
Existing Arch Common Stock and would view its disclosure as significantly
altering the total mix of information otherwise contained therein, which
information is not included in the Draft Proxy Statement; provided,
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however, that the Standby Purchaser may not assert the condition in this
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clause (m) unless (i) the information with respect to which the Standby
Purchaser seeks to assert such condition relates to information other than
the descriptions of the Merger, the Plan and the other exhibits thereto
contained in the preliminary Proxy Statement and (ii) such condition is
asserted by the Standby Purchaser not later than two business days after
Arch delivers to the Standby Purchaser a
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 11
copy of the preliminary Proxy Statement as filed with the SEC indicating
the changes therein from the Draft Proxy Statement (which copy Arch will
deliver as promptly as practicable following filing the same with the SEC).
The Standby Purchaser hereby acknowledges and agrees that (i) the entities with
an asterisk next to their names on Annex I hereto (the "Affiliated Standby
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Purchasers") shall be deemed to be affiliated with each other for purposes of
clauses (a) and (k) above and clause (iii) of Section 6 below; and (ii) the
Affiliated Standby Purchasers will act jointly with respect to any decision to
waive the condition contained in any such clause and the corresponding clause
contained in the Other Standby Purchase Commitments to which such Affiliated
Standby Purchasers are parties (with the vote of the Affiliated Standby
Purchasers holding at least 85% of the aggregate amount of Unsecured Claims held
by such Affiliated Standby Purchasers to control with respect to the taking of
any such action).
6. Additional Condition. The Commitment is subject to the further
--------------------
condition that there shall not have occurred between the Buyer Balance Sheet
Date and the Confirmation Date, and, if the Effective Date does not occur within
90 days following the Confirmation Date, between the Buyer Balance Sheet Date
and the Effective Date (i) any event or events (other than events which affect
generally the economy or the industry in which Arch and MobileMedia conduct
their respective businesses) which has had or would have a material adverse
effect on the business, assets (including licenses, franchise and other
intangible assets), financial condition, operating income or prospects
(determined in each case, where applicable, in accordance with generally
accepted accounting principles and in a manner consistent with the past
practices of Arch and MobileMedia) of Arch, MobileMedia and their respective
subsidiaries, taken as a whole (collectively, the "Combined Company") (a
"Combined Company Material Adverse Effect"), (ii) any event or events involving
a regulatory or statutory change and affecting generally the industry in which
Arch and MobileMedia conduct their respective businesses which would materially
and adversely affect the ability of the Combined Company to operate its
business, or (iii) any event or events affecting generally the industry in which
Arch and MobileMedia conduct their respective business which would materially
and adversely affect the ability of the Combined Company to operate its
business; provided, however, that the Standby Purchaser may not assert the
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condition contained in this clause (iii) if each of the Unaffiliated Standby
Purchasers, acting in good faith, shall have waived the condition in Section
6(iii) of the Other Standby Purchase Commitment to which such Unaffiliated
Standby Purchaser is a party.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 12
7. Consideration for the Commitment. In consideration for the
--------------------------------
Commitment, on the Effective Date at the Closing the Standby Purchaser will
receive its pro rata share of Arch Warrants entitling the holders thereof to
purchase, in the aggregate, a number of shares of Existing Arch Common Stock
equal to 2.50% of the issued and outstanding shares of Existing Arch Common
Stock and, if applicable, Arch Class B Common Stock, computed on a Fully Diluted
Basis (as defined in the Plan) on the date the "Buyer Market Price" is
determined in accordance with Schedule II to the Merger Agreement giving effect
to the Plan as if the Effective Date had occurred on such date and assuming
21,067,110 shares of Existing Arch Common Stock are issued and outstanding
immediately prior thereto. Such Arch Warrants will be delivered to the Standby
Purchaser and the Other Standby Purchasers, in accordance with the percentages
specified in Column D of Annex I hereto.
-----
8. Satisfaction of the Commitment. The Standby Purchaser may, in its
------------------------------
sole discretion, satisfy the Commitment directly and/or indirectly through one
or more of its affiliates, separate accounts within its control or investment
funds under its or its affiliates' management.
9. Representations and Warranties. (a) Arch hereby represents and
------------------------------
warrants to the Standby Purchaser that:
(i) Arch is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to execute, deliver and
perform its obligations hereunder and to consummate the transactions
contemplated hereby;
(ii) Subject to the approval of the Buyer Charter Amendment and
the Buyer Share Issuance by the Stockholders of Arch, the execution,
delivery and performance of this letter agreement by Arch and the
consummation by Arch of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the
part of Arch;
(iii) This letter agreement constitutes the legal, valid and
binding obligation of Arch, enforceable against Arch in accordance
with its terms;
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 13
(iv) Subject to entry of the Certification Order, and except as
described in Section 3.3 of the Buyer Disclosure Schedule and except
for the applicable requirements of the Securities Act, the Exchange
Act and any applicable state and foreign securities laws, the HSR Act,
the Communications Act and the regulations of the FCC, state public
utility, telecommunications or public service laws and the Bankruptcy
Code, the Confirmation Order and the Amended Plan (collectively, the
"Applicable Requirements"), the execution, delivery and performance of
this letter agreement by Arch and the consummation by Arch of the
transactions contemplated hereby in accordance with the terms hereof
do not and will not conflict with, violate or constitute a breach of
any material contract, agreement or instrument by which Arch is bound
or any judgment, order, decree, law, statute, rule, regulation or
other judicial or governmental restriction to which Arch is subject;
(v) Except as described in the Buyer Disclosure Schedule, the
representations and warranties of Arch contained in the Merger
Agreement (other than those contained in Sections 3.6, 3.7, 3.26 and
3.27 thereof), which representations and warranties shall be deemed
for purposes of this clause (v) not to include any qualification or
limitation with respect to materiality (whether by reference to "Buyer
Material Adverse Effect" or otherwise), are true and correct, except
where the matters in respect of which such representations and
warranties are not true and correct would not have a Buyer Material
Adverse Effect;
(vi) True, complete and correct copies of the following documents
are attached hereto as indicated:
Document Exhibit
-------------------------------
Hereto
-------
Merger Agreement (including all A
exhibits and schedules thereto)
Buyer Disclosure Schedule B
Other Standby Purchase C
Commitments
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 14
Document Exhibit
-------------------------------
Hereto
-------
Certificate of Incorporation of Arch, D
as amended through the date hereof
By-laws of Arch, as amended through E
the date hereof
Rights Agreement, dated as of F
October 13, 1995, between Arch and
the Bank of New York, as Rights
Agent, as amended through the date
hereof (the "Rights Agreement")
Draft of the Proxy Statement dated G
August 18, 1998 (the "Draft Proxy
Statement")
Existing Registration Rights H
Agreements (as defined in Section
9(a)(xi) below),
Bridge Commitment Letter I
(vii) As of the date hereof, the Draft Proxy Statement contains
no untrue statement of a material fact or omits to state any material
fact necessary, in light of the circumstances under which it was made,
in order to make the statements therein not misleading; provided,
--------
however, Arch makes no representation with respect to either (A)
-------
information supplied by MobileMedia for inclusion therein or (B) the
descriptions of the Merger Agreement, the Plan and the other exhibits
to the Merger Agreement, and of this letter agreement and the Other
Standby Purchase Commitments, contained therein;
(viii) No representation or warranty of Arch contained in this
letter agreement, and no statement relating to Arch contained in the
Merger Agreement, the Buyer Disclosure Schedule or any other document,
certificate or other instrument delivered or to be delivered by or on
behalf of Arch pursuant to this letter agreement (including the
definitive Proxy Statement and the Registration Statement as declared
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 15
effective by the SEC), contains or will as of the Effective Date contain
any untrue statement of a material fact or omits or will as of the
Effective Date omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading;
(ix) Between the Buyer Balance Sheet Date and the date hereof,
there has not occurred with respect to Arch (A) any event or events (other
than events which affect generally the economy or the industry in which
Arch and MobileMedia conduct their respective businesses) which has had or
would have a Combined Company Material Adverse Effect or (B) any event or
events involving a regulatory or statutory change and affecting generally
the industry in which Arch and MobileMedia conduct their respective
business which would materially and adversely affect the ability of the
Combined Company to operate its business;
(x) The shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement and the shares of Existing Arch Common Stock, the shares of Arch
Class B Common Stock, if applicable, and the Arch Warrants to be issued and
delivered as contemplated by Section 1 and Section 3 above, and the Arch
Warrants to be issued as contemplated by Section 7 above, in each case when
so issued and distributed or delivered, as the case may be, and the shares
of Existing Arch Common Stock issued upon conversion of such shares of Arch
Class B Common Stock, if applicable, when so converted in accordance with
the Arch Charter Amendment, and the shares of Existing Arch Common Stock
issued upon exercise of such Arch Warrants, when issued, paid for and
delivered as provided in the Arch Warrant Agreement, will be duly
authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights; and
(xi) Schedule 9(a)(xi) hereto sets forth a true, complete and
-----------------
correct list of all agreements that are in effect as of the date hereof
pursuant to which the Company has granted any registration rights to any
person or entity (the "Existing Registration Rights Agreements"), and,
except as specified in Schedule 9(a)(xi) hereto, none of the Existing
-----------------
Registration Rights Agreements is inconsistent with the rights to be
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 16
granted to the Standby Purchaser pursuant to the Registration Rights
Agreement.
(b) MobileMedia hereby represents and warrants to the Standby
Purchaser that:
(i) MobileMedia is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and, subject to the entry of the Confirmation Order, has all requisite
corporate power and authority to execute, deliver and perform its
obligations hereunder and to consummate the transactions contemplated
hereby;
(ii) Subject to the entry of the Confirmation Order, the
execution, delivery and performance of this letter agreement by
MobileMedia and the consummation by MobileMedia of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of MobileMedia;
(iii) Subject to the entry of the Confirmation Order and the
effectiveness of the Plan, this letter agreement constitutes the
legal, valid and binding obligation of MobileMedia, enforceable
against MobileMedia in accordance with its terms;
(iv) Subject to entry of the Confirmation Order, and except as
described in Section 2.3 of the Company Disclosure Schedule and except
for the Applicable Requirements, the execution, delivery and
performance of this letter agreement by MobileMedia and the
consummation by MobileMedia of the transactions contemplated hereby in
accordance with the terms hereof do not and will not conflict with,
violate, or constitute a breach of any material contract, agreement or
instrument by which MobileMedia is bound or any judgment, order,
decree, law, statute, rule, regulation or other judicial or
governmental restriction to which MobileMedia is subject;
(v) Except as described in the Company Disclosure Schedule, the
representations and warranties of MobileMedia contained in the Merger
Agreement (other than those contained in Sections 2.6, 2.7, 2.23 and
2.24 thereof), which representations and warranties shall be deemed
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 17
for purposes of this clause (v) not to include any qualification or
limitation with respect to materiality (whether by reference to
"Company Material Adverse Effect" or otherwise), are true and correct,
except where the matters in respect of which such representations and
warranties are not true and correct would not have a Company Material
Adverse Effect;
(vi) True, complete and correct copies of the following
documents are attached hereto as indicated:
Document Exhibit
--------------------------------
Hereto
------
Merger Agreement (including all A
exhibits and schedules thereto)
Other Standby Purchase C
Commitments
Company Disclosure Schedule J
Agreement, dated the date hereof (the K
"Debtor/Committee Agreement"),
between MobileMedia, on behalf of
itself and the other Debtors, and the
Committee (as defined in the Plan)
(vii) As of the date hereof, the information included in
the Draft Proxy Statement that was provided for inclusion therein by
MobileMedia contains no untrue statement of a material fact or omits
to state any material fact necessary, in light of the circumstances
under which it was made, in order to make the statements therein not
misleading;
(viii) No representation or warranty of MobileMedia contained
in this letter agreement, and no statement relating to MobileMedia
contained in the Merger Agreement, the Company Disclosure Schedule or
any other document, certificate, or other instrument delivered or to
be delivered by or on behalf of MobileMedia pursuant to this letter
agreement, contains or will as of the Effective Date contain any
untrue
<PAGE>
Arch Communications Group Inc.
MobileMedia Communications, Inc.
Page 18
statement of a material fact or omits or will as of the Effective Date
omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading; and
(ix) Between the Company Balance Sheet Date and the date hereof,
there has not occurred with respect to MobileMedia (A) any event or
events (other than events which affect generally the economy or the
industry in which Arch and MobileMedia conduct their respective
businesses) which has had or would have a Combined Company Material
Adverse Effect or (B) any event or events involving a regulatory or
statutory change and affecting generally the industry in which Arch
and MobileMedia conduct their respective businesses which would
materially and adversely affect the ability of the Combined Company to
operate its business.
(c) The Standby Purchaser hereby represents and warrants to each of
Arch and MobileMedia that:
(i) The Standby Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has all requisite corporate power and authority to
execute, deliver and perform its obligations hereunder and to
consummate the transactions contemplated hereby;
(ii) The execution, delivery and performance of this letter
agreement by the Standby Purchaser and the consummation by the Standby
Purchaser of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of
the Standby Purchaser;
(iii) This letter agreement constitutes the legal, valid and
binding obligation of the Standby Purchaser, enforceable against the
Standby Purchaser in accordance with its terms;
(iv) Except for the Applicable Requirements, the execution,
delivery and performance of this letter agreement by the Standby
Purchaser and the consummation by the Standby Purchaser of the
transactions contemplated hereby in accordance with the terms hereof
<PAGE>
Arch Communications Group Inc.
MobileMedia Communications, Inc.
Page 19
do not and will not conflict with, violate or constitute a breach of
any material contract, agreement, or instrument by which the Standby
Purchaser is bound or any judgment, order, decree, law, statute, rule,
regulation or other judicial or governmental restriction to which the
Standby Purchaser is subject, except where such conflicts, violations
or breaches, individually or in the aggregate, would not have a
material adverse effect on the ability of the Standby Purchaser to
consummate the transactions contemplated hereby;
(v) No representation or warranty of the Standby Purchaser
contained in this letter agreement, and no statement contained in any
other document, certificate or other instrument delivered or to be
delivered by or on behalf of the Standby Purchaser pursuant to this
letter agreement, contains or will as of the Effective Date contain
any untrue statement of a material fact or omits or will as of the
Effective Date omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading; and
(vi) As of the date hereof, the Standby Purchaser holds the
aggregate stated principal amount of 9 3/8% Notes and 10 1/2% Notes
(as such terms are defined in the Plan) indicated under the Standby
Purchaser's name and address on Annex I hereto.
-------
(d) None of the representations and warranties made herein or in any
certificate to be delivered as contemplated hereby will survive the Closing.
10. Certain Covenants. (a) Each of Arch and MobileMedia (i) acknowledges
-----------------
that the Debtors have agreed to provide to the Committee copies of any and all
notices, documents or information to be provided by or made available by the
Debtors to Arch pursuant to the Merger Agreement or provided by or made
available by Arch to the Debtors pursuant to the Merger Agreement, promptly
after the receipt or provision thereof by or to the Debtors, as applicable, and
that the Committee, pursuant to the undertaking attached as Annex II hereto, has
--------
agreed to distribute copies of the same to the Standby Purchaser and to take
certain other actions and (ii) agrees that the Committee may do so.
(b) Without limiting the generality of the foregoing clause (a) of
this Section 10, Arch will, before filing the Registration Statement with the
SEC, furnish to
<PAGE>
Arch Communications Group Inc.
MobileMedia Communications, Inc.
Page 20
the Standby Purchaser and its counsel copies of the Registration Statement
(including all exhibits thereto) proposed to be filed, will provide the Standby
Purchaser and its counsel a reasonable opportunity to review and comment on such
Registration Statement and will not file such Registration Statement if the
Standby Purchaser shall reasonably object thereto within three calendar days
after the receipt thereof.
(c) Arch will deliver to the Standby Purchaser copies of the
definitive Proxy Statement in the form filed with the SEC and mailed to
Stockholders of Arch and the Registration Statement in the form declared
effective by the SEC.
(d) Without limiting the generality of the foregoing clause (a) of
this Section 10, Arch will, before filing the Shelf Registration Statement or
any pre-effective amendment thereto, furnish to the Standby Purchaser and its
counsel copies of the Shelf Registration Statement or such pre-effective
amendment thereto, as applicable, proposed to be filed, will provide Standby
Purchaser and its counsel with a reasonable opportunity to review and comment on
the Shelf Registration Statement or such pre-effective amendment thereto, as
applicable, and will not file the Shelf Registration Statement or such pre-
effective amendment thereto, as applicable, to which the Standby Purchaser or
its counsel shall reasonably object within three business days after the receipt
thereof. The Standby Purchaser will furnish to Arch such information regarding
the Standby Purchaser and its plan and method of distribution of the Registrable
Securities as Arch may reasonably request in writing in connection with the
preparation of the Shelf Registration Statement.
(e) Each of Arch, MobileMedia and the Standby Purchaser will use its
reasonable best efforts to obtain all approvals, waivers, consents and other
authorizations required by the Applicable Requirements, including without
limitation the applicable requirement of the HSR Act, necessary in connection
with the performance of this letter agreement by the Standby Purchaser and the
consummation by the Standby Purchaser of the transactions contemplated hereby.
(f) Arch will, as requested by the Standby Purchaser, either pay
directly to the appropriate Governmental Entity, on behalf of the Standby
Purchaser, or reimburse the Standby Purchaser for, any fees required to be paid
by the Standby Purchaser in connection with its compliance with the applicable
requirements of the HSR Act. In addition, following the Effective Date, Arch
will reimburse, promptly upon written request (accompanied by appropriate
supporting documentation), costs and expenses (including without limitation
reasonable fees and expenses of legal counsel, including a reasonable allocation
with respect to the cost of any internal
<PAGE>
Arch Communications Group Inc.
MobileMedia Communications, Inc.
Page 21
counsel), incurred by the Standby Purchaser in connection with this letter
agreement and the transactions contemplated hereby; provided, however, the
-------- -------
reimbursable costs and expenses of the Affiliated Standby Purchasers shall not
exceed $100,000 in the aggregate.
11. Certain Prohibited Transactions. The Standby Purchaser hereby
-------------------------------
covenants that, from and after the date hereof, so long as its commitment
hereunder remains in effect, it will not sell, or enter into any agreement
relating to the sale (including without limitation any short sale, equity swap
or other hedge position) of, any shares of Arch capital stock or, except as
otherwise expressly contemplated by this Section 11, engage in any other
disposition of such shares that might negatively affect the market price of such
shares; provided, however, that the foregoing provision will not apply to any
-------- -------
agreement entered into prior to the date hereof (if not entered into in
contemplation of the transactions contemplated by the Plan, the Merger Agreement
or this letter agreement) or any transaction effected pursuant to the terms
thereof. Notwithstanding the immediately preceding sentence, but subject to
Section 3 above and Section 12 below, the Standby Purchaser may at any time, as
it may determine in its sole and absolute discretion, sell or otherwise
transfer, or acquire, or enter into any agreement relating to the sale, transfer
or acquisition of, Rights or Unsecured Claims. The Standby Purchaser
acknowledges that it has received copies of the Rights Agreement and the
amendment thereto attached as Exhibit D to the Merger Agreement (the "Rights
Plan Amendment"). Arch hereby covenants that it will not, without the prior
written consent of the Standby Purchaser, further amend the Rights Agreement in
any manner that would eliminate or reduce the ownership thresholds applicable to
the Standby Purchaser thereunder; provided, however, that this sentence shall
-------- -------
cease to be of any further force or effect at such time after the Effective Date
as the Standby Purchaser ceases to beneficially own in the aggregate at least
10.0% of the outstanding shares of Existing Arch Common Stock.
12. Voting Agreement. The Standby Purchaser hereby covenants that (a) so
----------------
long as the Bankruptcy Court approves the Disclosure Statement not later than
December 31, 1998 and the Confirmation Order is entered not later than March 31,
1999, (i) it will vote, or cause to be voted, for the acceptance of the Plan all
Unsecured Claims held by it on the date fixed for determining holders of
Unsecured Claims entitled to vote for acceptance or rejection of the Plan (the
"Record Date"), (ii) it will not withdraw or otherwise revoke, or cause to be
withdrawn or otherwise revoked, such vote for the acceptance of the Plan, and
(iii) it will not grant, or cause to be granted, to any other person or entity
any proxy to vote with respect to any such Unsecured Claims (other than a proxy
to vote for the acceptance of the Plan)
<PAGE>
Arch Communications Group Inc.
MobileMedia Communications, Inc.
Page 22
and (b) except with respect to accounts which cease to be within the Standby
Purchaser's control and investment funds which cease to be under its management,
it will not, on or prior to the Record Date, sell or otherwise transfer any
Unsecured Claims held by it unless the transferee shall have agreed in writing
in the form attached as Annex III hereto (i) to vote for the acceptance of the
---------
Plan with respect to such Unsecured Claims and (ii) not to sell or otherwise
transfer such Unsecured Claims unless its transferee shall agree to be bound in
the same manner provided in this clause (b) with respect to such Unsecured
Claims.
13. Other Standby Purchase Commitments. (a) Each of Arch and MobileMedia
----------------------------------
covenants that it will not agree to any amendment or modification to any of the
letter agreements, dated the date hereof, among Arch, MobileMedia and any of the
Other Standby Purchasers (the "Other Standby Purchase Commitments"), without the
prior written consent of the Standby Purchaser. Notwithstanding the immediately
preceding sentence, Arch and MobileMedia may, without the prior written consent
of the Standby Purchaser, agree to an amendment or modification to any of the
Other Standby Purchase Commitments to the extent that (i) such amendment or
modification has the sole effect of reducing or eliminating the financial
commitment thereunder and (ii) simultaneously therewith, a qualified
institutional buyer (as such term is defined in Rule 144A promulgated under the
Securities Act) reasonably acceptable to the Standby Purchaser makes a
commitment in a corresponding amount on terms identical in all material respects
to those set forth in such Other Standby Purchase Commitment.
(b) The Standby Purchaser will have no liability for the commitment of
any Other Standby Purchaser under any Other Standby Purchase Commitments or the
commitment of any other person contemplated by Section 13(a) above.
14. Certain Notices; Certain Information. (a) Each of Arch and
------------------------------------
MobileMedia hereby covenants that it will promptly deliver to the Standby
Purchaser, and the Standby Purchaser hereby covenants that it will promptly
deliver to Arch and MobileMedia, written notice of any matter, event or
development that would (i) render any representation or warranty made by it
herein inaccurate or incomplete in any respect or (ii) constitute or result in a
breach by it of, or a failure by it to comply with, any covenant herein
applicable to it.
(b) Each of Arch and MobileMedia will furnish the Standby Purchaser
with such information regarding itself as the Standby Purchaser may reasonably
request.
<PAGE>
Arch Communications Group Inc.
MobileMedia Communications, Inc.
Page 23
15. Certain Consent Rights. (a) Notwithstanding anything to the contrary
----------------------
herein contained, except as expressly contemplated by the Merger Agreement or
the Plan, Arch hereby covenants that it will not take, or agree in writing to
take, any action contemplated by Section 4.5(b)(ii), (iii), (iv), (viii) or (ix)
of the Merger Agreement without the prior written consent of the Standby
Purchaser.
(b) Arch hereby covenants that, without the prior written consent of
the Standby Purchaser, it will not, prior to the Effective Date, enter into any
agreement with respect to its securities, or amend any existing agreement with
respect to its securities (including without limitation the Existing
Registration Rights Agreements) in any manner inconsistent with the rights to be
granted to the Standby Purchaser pursuant to the Registration Rights Agreement.
16. Removal of Legends. In the event that, following the
------------------
transactions contemplated by the Merger Agreement, the Plan and this letter
agreement, any certificates evidencing securities ("Certificates") of Arch held
by the Standby Purchaser bear a restrictive legend then:
(a) if the Standby Purchaser delivers to Arch (i) a certificate, in a
form reasonably satisfactory to Arch, certifying that securities evidenced
by such Certificate have been transferred pursuant to a registration
statement that is effective under the Securities Act or (ii) a certificate,
in a form reasonably satisfactory to Arch, certifying that securities
evidenced by such Certificate have been transferred without registration in
accordance with the requirements of Rule 144 under the Securities Act, Arch
will, or will instruct its transfer agent to, issue upon surrender of such
Certificate one or more new Certificates evidencing the securities so
transferred evidenced by the Certificate so surrendered, which new
Certificate or Certificates will not bear any such legend; and
(b) if the Standby Purchaser delivers to Arch an opinion of counsel to
the Standby Purchaser (which may be internal counsel to the Standby
Purchaser) that, in the opinion of such counsel, such legend is not, or is
no longer, required to ensure compliance with the Securities Act, Arch
will, or will instruct its transfer agent to, issue upon surrender of such
Certificate one or more new Certificates evidencing the securities
evidenced by the Certificate so surrendered, which new Certificate or
Certificates will not bear any such legend.
<PAGE>
Arch Communications Group Inc.
MobileMedia Communications, Inc.
Page 24
* * * * *
If you are in agreement with the foregoing, please execute the enclosed
copy of this letter agreement as indicated and return it to the undersigned.
This letter agreement will become effective upon (i) the delivery to us of
executed counterparts of this letter agreement by each of you and (ii) the
execution and delivery of each of the Other Standby Purchase Commitments by each
of the parties thereto. Once effective, this letter agreement will terminate on
(i) the date on which the Debtor Tower Agreement is terminated, unless prior to
or simultaneously with such termination, MobileMedia shall have entered into a
definitive agreement which shall be comparable in form and substance to the
Debtor Tower Agreement and a copy of which shall be delivered to the Standby
Purchaser promptly following execution thereof, with a bona fide third-party
purchaser providing for a sale to such third party of the assets or
substantially all of the assets to be sold to Pinnacle pursuant to the Debtor
Tower Agreement resulting in net proceeds to MobileMedia of not less than $165.0
million (an "Acceptable Sale"), (ii) December 31, 1998, unless the Closing (as
defined in the Debtor Tower Agreement) or the closing of an Acceptable Sale
shall have occurred on or before such date, (iii) March 31, 1999, unless the
Confirmation Order shall have been entered by the Bankruptcy Court on or before
such date, (iv) June 30, 1999, unless the effectiveness of the Plan occurs on or
before such date, or (v) if not theretofore terminated pursuant to one of the
foregoing clauses, the date on which the Merger Agreement is terminated in
accordance with the terms thereof.
All notices and other communications hereunder must be in writing. Any
notice or other communication hereunder will be deemed duly delivered three
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or two business days after it is sent via a
reputable international overnight courier service, in each case to the intended
recipient at the address therefor set forth on the signature page hereto. Any
party hereto may give any notice or other communication hereunder by personal
delivery or telecopy, but no such notice or other communication will be deemed
to have been duly given unless and until it actually is received by the party
for whom it is intended. Any party may change the address to which notices and
other communications hereunder are to be delivered by giving the other parties
notice in the manner herein set forth.
This letter agreement represents the final agreement among the parties
hereto with respect to the subject matter hereof and may not be contradicted by
evidence of
<PAGE>
Arch Communications Group Inc.
MobileMedia Communications, Inc.
Page 25
prior or contemporaneous agreements of the parties. There are no
unwritten oral agreements between the parties relating to the subject matter
hereof. This letter agreement may not be amended or modified except by a
written instrument signed by each of the Standby Purchaser, Arch and
MobileMedia.
This letter agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to its principles of conflicts
of law.
<PAGE>
Arch Communications Group Inc.
MobileMedia Communications, Inc.
Page 26
This letter agreement may be executed in counterparts which, taken
together, shall constitute one and the same instrument.
Very truly yours,
NORTHWESTERN MUTUAL SERIES FUND, INC.
FOR THE HIGH YIELD BOND PORTFOLIO
By: /s/ Timothy S. Collins
--------------------------------------
Name: Timothy S. Collins
Its: Vice President
Address: c/o The Northwestern Mutual Life
Insurance Company
720 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Securities Department
ACCEPTED AND AGREED TO:
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
---------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
<PAGE>
Arch Communications Group Inc.
MobileMedia Communications, Inc.
Page 27
Subject to entry of the Confirmation Order:
MOBILEMEDIA COMMUNICATIONS, INC.
By: /s/ Joseph A. Bondi
------------------------------------
Name: Joseph A. Bondi
Its: Chairman - Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman - Restructuring
With copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, New York 10022
Attn: James D. Johnson
<PAGE>
ANNEX I
-------
<TABLE>
<CAPTION>
COMMITMENT AMOUNTS
(dollars in millions)
Column A Column B Column C Column D
----------- ------------ -------- -----------
Rights Unexercised Total
Exercise Rights Commitme
Commitment Commitment nt Commitment
Name and Address of Standby Amount (1) Amount (2) Amount Percentage
- --------------------------- ----------- ------------ -------- -----------
Purchasers
- ---------- - -
<S> <C> <C> <C> <C>
W.R. Huff Asset Management Co., L.L.C., $ 39.27 $ 35.80 $ 75.07 34.60%
as agent for its affiliates and
discretionary accounts
67 Park Place, 9th Floor
Morristown, New Jersey 07960
Stated Principal Amount of 9 3/8%
Notes: $ 57,847,000
--------------------
Stated Principal Amount of 10 1/2%
Notes: $ 27,970,000
--------------------
The Northwestern Mutual Life Insurance $ 10.95 $ 9.97 $ 20.92 9.64%
Company/*/
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8%
Notes:
$ 19,776,000
--------------------
Stated Principal Amount of 10 1/2%
Notes:
$ 3,350,000
--------------------
The Northwestern Mutual Life Insurance $ 2.65 $ 2.42 $ 5.07 2.34%
Company for its Group Annuity
Separate Account*
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8%
Notes:
$ -0-
--------------------
Stated Principal Amount of 10 1/2%
Notes
$ 7,000,000
--------------------
</TABLE>
____________________
* The Northwestern Mutual Life Insurance Company, The Northwestern Mutual Life
Insurance Company for its Group Annuity Seperate Account and Nortwestern Mutual
Series Fund, Inc. for the High Yield Bond Portfolio are affiliated entities for
purposes of clauses (a) and (k) of Section 5 and clause (iii) of Section 6.
<PAGE>
<TABLE>
<CAPTION>
COMMITMENT AMOUNTS
(dollars in millions)
Column A Column B Column C Column D
----------- ------------ -------- -----------
Rights Unexercised Total
Exercise Rights Commitme
Commitment Commitment nt Commitment
Name and Address of Standby Amount (1) Amount (2) Amount Percentage
- -------------------------- ----------- ------------ -------- -----------
Purchasers
- ---------- - -
<S> <C> <C> <C> <C>
Northwestern Mutual Series Fund, $ .75 $ .69 $ 1.44 0.66%
Inc. for the High Yield Bond Portfolio*
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8%
Notes:
$ -0-
-------------------
Stated Principal Amount of 10 1/2%
Notes:
$ 2,000,000
--------------------
Credit Suisse First Boston Corporation $ 29.48 $ 26.88 $ 56.36 25.97%
11 Madison Avenue, 4th Floor
New York, New York 10010
Stated Principal Amount of 9 3/8%
Notes: $ 32,453,000
--------------------
Stated Principal Amount of 10 1/2%
Notes: $ 35,930,000
--------------------
Whippoorwill Associates, Inc., as general $ 30.42 $ 27.72 $ 58.14 26.79%
partner and/or agent for the parties set
forth on Schedule A hereto in the
percentages noted thereon
11 Martine Avenue
White Plains, New York 10606
Stated Principal Amount of 9 3/8%
Notes: $ 37,855,000
--------------------
Stated Principal Amount of 10 1/2%
Notes: $ 31,410,000
--------------------
Total: $113.52 $103.48 $217.00 100.00%
------- ------- -------
</TABLE>
_________________
(1) The "Rights Exercise Commitment Amount", for each Standby Purchaser, shall
mean an amount equal to the product of (i) the Rights Subscription Price (as
defined in Schedule II to the Merger Agreement) and (ii) the number of
Rights issuable in respect of an amount of Allowed Unsecured Claims derived
from the principal amount of 9 3/8% Notes and the 10 1/2% Notes indicated
under the Standby Purchaser's name on this Annex I held by such Standby
Purchaser on the date hereof. The dollar amounts set forth under Column A
are estimates provided for illustrative purposes only, based on the
assumptions that (x) there is a total of $475 million of Allowed Unsecured
Claims, (y) there is no Rights Reserve (as defined in the Plan) and (z) the
aggregate amount of Subordinated Noteholder Claims (as defined in the Plan)
is $441,819,762.
<PAGE>
(2) The "Unexercised Rights Commitment Amount", for each Standby Purchaser,
shall mean an amount equal to (i) the Total Commitment Amount indicated in
Column C for such Standby Purchaser less (ii) the Rights Exercise Commitment
Amount for such Standby Purchaser. The dollar amounts set forth under
Column B are estimates provided for illustrative purposes only, based on the
estimates set forth in Column A.
ANNEX II
--------
UNDERTAKING
-----------
The Committee hereby undertakes to distribute to the Standby Purchaser
(until instructed by the Standby Purchaser to do otherwise) copies of any and
all notices, documents or information to be provided by or made available by the
Debtors to Arch pursuant to the Merger Agreement or provided by or made
available by Arch to the Debtors pursuant to the Merger Agreement that are
received by the Committee pursuant to the Debtor/Committee Agreement as soon as
practicable with its receipt thereof. The Committee hereby further undertakes
to consult with the Standby Purchaser (until instructed by the Standby Purchaser
to do otherwise) prior to delivering any written consent or exercising any other
right of the Committee (other than the distribution of notices, documents or
information to the Standby Purchaser or the Other Standby Purchasers) pursuant
to the Debtor/Committee Agreement or the Plan. The Committee will not enter
into any amendment to the Debtor/Committee Agreement without the prior written
consent of the Standby Purchaser.
THE OFFICIAL COMMITTEE
OF UNSECURED CREDITORS
By: /s/ Bryan E. Bloom
------------------------------------
Its: Chairman
<PAGE>
ANNEX III
---------
VOTING AGREEMENT
----------------
The undersigned transferee of indebtedness of MobileMedia Corporation or
one of its direct or indirect subsidiaries (collectively, "MobileMedia")
described in Schedule A attached hereto (the "Claim"), hereby acknowledges and
----------
agrees as follows:
1. MobileMedia is a debtor-in-possession under Chapter 11 of the Bankruptcy
Code and has proposed a First Amended Joint Plan of Reorganization dated
August __, 1998 (the "Amended Plan").
2. By acquiring the Claim the undersigned may also acquire rights to vote
on the adoption of the Amended Plan.
3. As a condition of the transfer of the Claim, the undersigned hereby
agrees to exercise all voting rights it may have as holder of the Claim
in favor of the Amended Plan unless the Amended Plan shall have been
withdrawn.
4. The undersigned agrees that it shall not subsequently transfer the Claim
or any portion thereof unless and until it obtains from its transferee a
Voting Agreement identical to the form hereof.
IN WITNESS HEREOF, the undersigned transferee has executed this Voting
Agreement this _____ day of __________, 199_.
[TRANSFEREE]
By:____________________________
Title:
Accepted By:
_________________________
[Transferor]
<PAGE>
SCHEDULE A
TO
VOTING AGREEMENT
----------------
[Describe Claim.]
<PAGE>
SCHEDULE 9(a)(xi)
-----------------
Existing Registration Rights Agreement
- --------------------------------------
(1) Registration Rights Agreement, dated as of June 24, 1998, by and among Arch
Communications Group, Inc., Sandler Capital Partner, IV, L.P., Sandler
Capital Partners IV FTE, L.P. Harvey Sandler, John Kornreich, Michael J.
Marocco, Andrew Sandler, South Fork Partners, The Georgica International
Fund Limited, Aspen Partners and Consolidated Press International Limited,
as amended
(2) Registration Rights Agreement, dated as of June 29, 1998, Arch
Communications Group, Inc. Adelphia Communications Corporation and Lisa-
Gaye Shearing
Inconsistencies:
- ---------------
The provisions of the Registration Rights Agreement listed at (2) above are
inconsistent in certain respects with the provisions of the Registration Rights
Agreement.
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
for its Group Annuity Separate Account
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
August 18, 1998
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Commitment to Purchase Stock and Warrants
-----------------------------------------
Gentlemen:
Arch Communications Group, Inc., a Delaware corporation ("Arch"), and
MobileMedia Communications, Inc., a Delaware corporation ("MobileMedia"), intend
to engage in a business combination transaction (the "Combination") as part of a
reorganization (the "Reorganization") of MobileMedia, MobileMedia Corporation,
the sole stockholder of MobileMedia ("Parent"), and all of MobileMedia's
subsidiaries (collectively, the "Debtors") pursuant to chapter 11 of title 11,
United States Code, 11 U.S.C. (S)(S) 101 et seq. (the "Bankruptcy Code"). It is
our understanding that in connection with the Reorganization, among other
things: (a) pursuant to the Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), among Arch, a wholly owned subsidiary of Arch
("Merger Sub"), Parent and MobileMedia, MobileMedia will merge with and into
Merger Sub, with Merger Sub continuing as the surviving corporation and a wholly
owned subsidiary of Arch; (b) pursuant to the Merger Agreement, Arch will make
available for distribution pursuant to a plan of reorganization of the Debtors
in the form attached as Exhibit A to the Merger Agreement, with such amendments
and modifications thereto as are made in a manner consistent with clause (e) of
Section 5 hereto (such plan of reorganization being referred to herein as the
"Plan"), (i) cash, (ii) shares of its Common Stock, par value $.01 per share
("Existing Arch Common Stock"), and (iii) warrants entitling the holders thereof
to purchase shares of Existing Arch Common Stock ("Arch Warrants"), with such
Arch Warrants to be issued pursuant to, and to
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
have the terms set forth in, a warrant agreement in the form attached as Exhibit
B to the Merger Agreement (the "Arch Warrant Agreement"); (c) holders of
unsecured non-priority claims against the Debtors ("Unsecured Claims"), to the
extent such Unsecured Claims are Allowed (as defined in the Plan), will receive
pursuant to the Plan (i) shares of Existing Arch Common Stock and (ii) rights to
purchase ("Rights") for cash units consisting of (A) shares of Existing Arch
Common Stock and (B) Arch Warrants; (d) holders of claims arising under or
relating to the Credit Agreement, dated December 4, 1995, as amended, among
MobileMedia and the other parties thereto ("Secured Claims"), to the extent such
Secured Claims are Allowed, will receive pursuant to the Plan cash in an amount
equal to 100% of such claims; (e) all of the outstanding equity interests in
MobileMedia and Parent will be canceled without consideration and Parent will be
dissolved; and (f) the commitments under the DIP Loan Agreement will terminate
and all amounts owed under or in respect of the DIP Loan Agreement will be paid
in full in cash.
Terms used herein with initial capital letters that are not otherwise
defined shall have the meanings ascribed to such terms in the Merger Agreement.
1. The Commitment. In connection with the foregoing, The Northwestern
--------------
Mutual Life Insurance Company for its Group Annuity Separate Account (the
"Standby Purchaser") hereby advises you of its commitment (the "Commitment"),
subject to the conditions set forth herein:
(a) to exercise any Rights distributed to it in respect of its Allowed
Unsecured Claims in accordance with the Plan and not thereafter sold or
transferred as permitted by Section 3 below to purchase units consisting of
shares of Existing Arch Common Stock and Arch Warrants underlying such
Rights, to the extent that the aggregate purchase price payable upon such
exercise, as determined in accordance with Schedule II to the Merger
Agreement (the "Subscription Price"), does not exceed the Rights Exercise
Commitment Amount of the Standby Purchaser as set forth in Annex I hereto;
-------
(b) if (i) the Standby Purchaser sells or otherwise transfers any or
all of (A) the Rights distributed to it in accordance with the Plan or (B)
Unsecured Claims held by it as of the date hereof in respect of which
Rights are to be distributed, in each case as permitted by Section 3 below,
and (ii) the Rights sold or transferred by the Standby Purchaser or the
Rights distributed in respect of Unsecured Claims held by it as of the date
hereof that are hereafter sold or transferred by the Standby Purchaser are
not exercised prior to the expiration thereof (at which time such Rights
will be void and will no longer be exercisable), to purchase for cash
(based upon the Subscription Price payable upon exercise of such Rights)
identical units consisting of shares of Existing Arch Common Stock and Arch
Warrants underlying such unexercised
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
Rights, to the extent that the aggregate purchase price therefor, together
with the aggregate Subscription Price payable upon exercise of Rights
exercised as contemplated by clause (a) above, does not exceed the Rights
Exercise Commitment Amount of the Standby Purchaser as set forth in Annex I
-------
hereto; and
(c) if any Rights distributed in accordance with the Plan (other than
(i) Rights distributed to the Standby Purchaser or the other holders of
Unsecured Claims listed on Annex I hereto (the "Other Standby Purchasers")
-------
and retained by them (which Rights are referred to in Section 1(a) above
and Section 1(a) of each of the Other Standby Purchase Commitments (as
defined in Section 13(a) below)) or (ii) subject to Section 3(b) below,
Rights distributed in respect of Unsecured Claims held by the Standby
Purchaser or the Other Standby Purchasers as of the date hereof that are
hereafter sold or transferred by them (which Rights are referred to in
Sections 1(b) and 3 hereof and Sections 1(b) and 3 of each of the Other
Standby Purchase Commitments)) remain unexercised upon the expiration
thereof (at which time such Rights will be void and will no longer be
exercisable), to purchase for cash (based on the Subscription Price payable
upon exercise of such Rights) pro rata in accordance with and up to the
Unexercised Rights Commitment Amount of the Standby Purchaser as set forth
in Annex I hereto identical units consisting of shares of Existing Arch
-------
Common Stock and Arch Warrants underlying such unexercised Rights.
2. Arch Class B Common Stock. (a) Notwithstanding anything to the
-------------------------
contrary herein contained, if the purchases by the Standby Purchaser
contemplated by Section 1 above would cause the Standby Purchaser, the Other
Standby Purchasers, and any other persons or entities who, when taken together
with any one or more of the Standby Purchaser and the Other Standby Purchasers,
would constitute a "person" or "group" as used in Section 13(d) or Section 14(d)
of the Exchange Act or Rule 13d-3 or Rule 13d-5 promulgated thereunder, or any
"affiliate" as defined in Rule 405 promulgated under the Securities Act of any
of them (collectively, the "Standby Class B Holders"), in the aggregate, to
beneficially own on the effective date of the Plan (the "Effective Date") shares
representing more than 49.0% of the capital stock of Arch generally entitled to
vote in the election of directors or more than 49.0% of the total voting power
of the capital stock of Arch, Arch will substitute shares of Class B Common
Stock, par value $.01 per share, of Arch ("Arch Class B Common Stock"), with
such Arch Class B Common Stock having the terms set forth in the form of
Certificate of Amendment to Certificate of Incorporation of Arch attached as
Exhibit F to the Merger Agreement (the "Arch Charter Amendment"), for shares of
Existing Arch Common Stock included in the units so purchased on a one-for-one
basis such that on the Effective Date the Standby Class B Holders, in the
aggregate, will beneficially own shares representing not more than
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
49.0% of the capital stock of Arch generally entitled to vote in the election of
directors and not more than 49.0% of the total voting power of the capital stock
of Arch, all as provided in the Plan. For purposes of this letter agreement,
"beneficial ownership" shall be determined as provided in Rule 13d-3 and Rule
13d-5 promulgated under the Exchange Act, except that a person or entity shall
be deemed to have "beneficial ownership" of all securities that such person or
entity has the right to acquire, whether such right is exercisable immediately
or only after the passage of time.
(b) For purposes of calculating the percentages referred to in Section
2(a) above, it will be assumed that no additional Unsecured Claims are allowed
after the Effective Date and all of the shares of Existing Arch Common Stock in
the Creditor Stock Pool (as defined in the Plan) are distributed in accordance
with the Plan to the holders of Allowed Unsecured Claims as of the Effective
Date.
(c) Substitution of shares of Class B Common Stock as contemplated by
Section 2(a) above will be effectuated as follows:
(i) first, to the extent that the Standby Purchaser or any Other
Standby Purchaser beneficially owns shares of Existing Arch Common
Stock as of the Effective Date, other than those acquired as
contemplated by the Plan, the Merger Agreement, this letter agreement
and the Other Standby Purchase Commitments ("Non-Plan Arch Shares"),
among the Standby Purchaser and such Other Standby Purchaser pro rata
based on ownership of Non-Plan Arch Shares up to an amount equal to
the aggregate number of Non-Plan Arch Shares beneficially owned by
them as of the Effective Date; and
(ii) second, if necessary, among the Standby Purchaser and the
Other Standby Purchasers in accordance with the percentages set forth
in Column D of Annex I hereto.
-------
(d) The Standby Purchaser hereby disclaims beneficial ownership of any
securities of Arch owned by the Other Standby Purchasers.
3. Certain Transfer Restrictions. (a) Subject to Section 12 below, the
-----------------------------
Standby Purchaser may (i) sell or otherwise transfer any or all of (A) the
Rights distributed to it in accordance with the Plan or (B) Unsecured Claims in
respect of which Rights are to be distributed or (ii) purchase or otherwise
acquire (A) Rights distributed to others in accordance with the Plan or (B)
Unsecured Claims in respect of which Rights are to be distributed; provided,
--------
however, that, with respect to clause (i) of this sentence, (X)
- -------
contemporaneously with the consummation of any such sale or other transfer of
Rights or Unsecured Claims, the Standby Purchaser will notify Arch and
MobileMedia of the occurrence thereof and (Y) the Standby Purchaser will
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
not consummate any such sale or other transfer unless the transferee or
transferees of such Rights or Unsecured Claims shall have entered into a written
agreement (a "Tracking Agreement") (I) to notify the Standby Purchaser, Arch and
MobileMedia of any subsequent transfer by it of such Rights or Unsecured Claims
or any Rights distributed to it in respect of such Unsecured Claims and (II) not
to sell or otherwise transfer such Rights or Unsecured Claims or Rights
distributed to it in respect of such Unsecured Claims, unless its transferee or
transferees shall agree in writing to be bound in the same manner provided in
this clause (Y) with respect to any subsequent transfer by it.
(b) Notwithstanding the provisions of clause (Y) of the proviso in Section
3(a) above, the Standby Purchaser may elect to sell or otherwise transfer (i)
any or all of the Rights distributed to it in accordance with the Plan or (ii)
Unsecured Claims in respect of which Rights are to be so distributed, in either
case without entering into a Tracking Agreement with its transferee or
transferees (any Rights so transferred and any Rights distributed in respect of
Allowed Claims so transferred, together with any Rights so transferred and any
Rights distributed in respect of Allowed Claims so transferred by the Other
Standby Purchasers pursuant to Section 3(b) of the Other Standby Purchase
Commitments, being referred to herein collectively as "Untracked Rights"). Any
Rights that remain unexercised upon expiration thereof will be deemed to be
"Section 3(b) Rights" up to, but not exceeding, the amount of Untracked Rights.
The Section 3(b) Rights shall be exercised as follows prior to the application
of Section 1(c) above and Section 1(c) of the Other Standby Purchase
Commitments: (A) the Standby Purchaser and the Other Standby Purchasers will
first be given the opportunity to purchase for cash (based on the Subscription
Price payable upon exercise of such Rights) units consisting of shares of Arch
Common Stock and Arch Warrants underlying a number of unexercised Rights up to
the amount of Section 3(b) Rights in accordance with the percentages set forth
in Column D of Annex I hereto and (B) to the extent such units are not so
-------
purchased, the Standby Purchaser and any Other Standby Purchasers that are
responsible for the existence of the Section 3(b) Rights will be required to
purchase such units pro rata based on the number of Section 3(b) Rights
resulting from their respective transfers. Nothing in this Section 3(b) will in
any way reduce the commitment of the Standby Purchaser specified in Section 1(c)
above or the Unexercised Rights Commitment Amount as set forth in Annex I
-------
hereto.
4. The Closing. (a) Notwithstanding anything to the contrary herein
-----------
contained or the terms of the Rights or the Plan, subject to the conditions set
forth herein, on the Effective Date the Standby Purchaser, in satisfaction of
the Commitment, will deliver at the Closing (i) the aggregate Subscription Price
payable upon exercise of any Rights exercised by it and (ii) the purchase price
payable in consideration of any shares of Existing Arch Common Stock or, if
applicable, Arch Class B Common Stock and Arch Warrants to be otherwise
purchased by it pursuant
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
to the Commitment; provided, however, that, if requested by the Standby
-------- -------
Purchaser in writing at least two business days prior to the Effective Date, any
cash to be distributed to the Standby Purchaser in respect of Allowed Secured
Claims pursuant to the Plan will, prior to the distribution thereof pursuant to
the Plan and in accordance with the instruction included in such written
request, be first applied, on behalf of the Standby Purchaser, to the payment of
such amounts payable on the Effective Date as provided in this Section 4(a).
(b) Upon payment of the amounts payable as provided in Section 4(a),
on the Effective Date at the Closing Arch will deliver to the Standby Purchaser
(or its designees) certificates representing the shares of Existing Arch Common
Stock, shares of Arch Class B Common Stock, if applicable, and the Arch
Warrants, in each case, (i) issuable upon exercise of any Rights exercised by
the Standby Purchaser or (ii) otherwise purchased by the Standby Purchaser
pursuant to the Commitment.
(c) Arch will deliver to the Standby Purchaser at least five business
days prior to the Effective Date a written notice which shall (i) specify the
amounts payable at the Closing by it in satisfaction of the Commitment, (ii)
specify the date on which the Effective Date is to occur and the last date on
which the notice referred to in Section 4(d) may to be delivered, and (iii)
indicate the matters required to be addressed in such notice.
(d) At least two business days prior to the Effective Date, the
Standby Purchaser will deliver to Arch and MobileMedia a written notice which
shall set forth the number of shares of Existing Arch Common Stock beneficially
owned by it as of such date. During the period from the date of such notice
through the Effective Date, neither the Standby Purchaser nor any affiliate
thereof shall acquire beneficial ownership of, or any rights to acquire, any
additional shares of Existing Arch Common Stock or any Unsecured Claim.
5. Certain Conditions. The Commitment is subject to the conditions that:
------------------
(a) (i) the Confirmation Order (as defined in the Plan), in a form
reasonably satisfactory to the Standby Purchaser, shall have been entered
by the Bankruptcy Court (as defined in the Plan) and (ii) such Confirmation
Order shall have become a Final Order (as defined in Section 5.1(h) of the
Merger Agreement); provided, however, that (A) the Standby Purchaser may
-------- -------
not assert the condition contained in clause (ii) above if each of the
Other Standby Purchasers that is not affiliated with the Standby Purchaser
(each, an "Unaffiliated Standby Purchaser"), acting in good faith, shall
have waived the condition contained in Section 5(a) of the Other Standby
Purchase Commitments to which such Unaffiliated Standby Purchaser is a
party and (B) the Standby Purchaser may not assert the condition contained
in either
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 7
clause (i) or clause (ii) above if the sole reason for the failure of such
condition to be satisfied is the failure or the threatened failure of the
Standby Purchaser or any of its affiliates to fulfill the Commitment;
(b) the satisfaction or, with the written consent of the Standby
Purchaser, waiver of all conditions precedent to the obligations of each of
the parties to the Merger Agreement contained in the Merger Agreement and
all conditions precedent to the effectiveness of the Plan contained in the
Plan; provided, however, that (i) the conditions contained in Section
-------- -------
5.1(e) and (h), Section 5.2(a), (b), (c), (d) and (e) and Section 5.3(a),
(b), (c) and (e) of the Merger Agreement (collectively, the "Unilateral
Conditions") may be waived without the written consent of the Standby
Purchaser and (ii) the Standby Purchaser may not assert the condition
contained in this clause (b) if the sole reason for the failure of such
condition to be satisfied is the failure or the threatened failure of the
Standby Purchaser or any of its affiliates to fulfill the Commitment;
(c) there shall be effective under the Securities Act, a registration
statement (the "Shelf Registration Statement") covering the resale by the
Standby Purchaser of (i) all shares of Existing Arch Common Stock, all
shares of Arch Class B Common Stock, if applicable, and all Arch Warrants
received by the Standby Purchaser as a result of the transactions
contemplated by the Plan (including those received upon the exercise of
Rights and pursuant to this letter agreement) and (ii) all shares of
Existing Arch Common Stock issuable upon conversion of any such shares of
the Arch Class B Common Stock or exercise of any such Arch Warrants (the
securities referred to in the foregoing clauses (i) and (ii) are referred
to herein as the "Registrable Securities");
(d) Arch shall have executed and delivered to the Standby Purchaser a
registration rights agreement in the form attached as Exhibit C to the
Merger Agreement (the "Registration Rights Agreement") granting the Standby
Purchaser certain demand and piggyback registration rights with respect to
the Registrable Securities;
(e) any and all amendments or modifications to the Merger Agreement or
any exhibit or schedule thereto (including without limitation the Plan, the
Arch Charter Amendment, the Arch Warrant Agreement and the Registration
Rights Agreement) on or after the date hereof and any consents or waivers
delivered on or after the date hereof by Arch or MobileMedia to the other
under the Merger Agreement (other than (i) subject to Section 15(a) below,
consents under Section 4.5 of the Merger Agreement or (ii) waivers of
Unilateral Conditions) shall have been in form and substance reasonably
satisfactory to the Standby Purchaser;
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 8
(f) the representations and warranties of Arch contained in this
letter agreement shall be true and correct, in all material respects
(except for the representations and warranties set forth at clauses (a)(v)
and (a)(vi) of Section 9 below, which shall be true and correct in all
respects, and except for the representations and warranties set forth at
clauses (a)(vii) and (a)(viii) of Section 9 below, which shall be
disregarded for purposes of this clause (f) insofar as they relate to
financial projections), on the Effective Date, with the same effect as
though such representations and warranties were made on the Effective Date,
and Arch shall have performed or complied with, in all material respects,
its covenants required to be performed or complied with under this letter
agreement on or prior to the Effective Date (and Arch shall have delivered
to the Standby Purchaser a certificate to the effect that each of the
conditions specified in this clause (f) is satisfied in all respects);
(g) the representations and warranties of MobileMedia contained in
this letter agreement shall be true and correct, in all material respects
(except for the representations and warranties set forth at clauses (b)(v)
and (b)(vi) of Section 9 below, which shall be true and correct in all
respects, and except for the representations and warranties set forth at
clauses (b)(vii) and (b)(viii) of Section 9 below, which shall be
disregarded for purposes of this clause (f) insofar as they relate to
financial projections), on the Effective Date, with the same effect as
though such representations and warranties were made on the Effective Date,
and MobileMedia shall have performed or complied with, in all material
respects, its covenants required to be performed or complied with, under
this letter agreement on or prior to the Effective Date (and MobileMedia
shall have delivered to the Standby Purchaser a certificate to the effect
that each of the conditions specified in this clause (g) is satisfied in
all respects);
(h) simultaneously with the transactions contemplated by Section 4
above, Arch shall have performed its obligation under clause (e) of Section
1.3 of the Merger Agreement and any debt financing (other than secured bank
financing) obtained by Arch to enable it to do so shall have terms no less
favorable to Arch than those set forth in the Bridge Commitment Letter (the
"Bridge Commitment Letter"); provided, however, that the Standby Purchaser
-------- -------
may not assert the condition contained in this clause (h) if the sole
reason for the failure of such condition to be satisfied is the failure or
threatened failure of the Standby Purchaser or any of its affiliates to
fulfill the Commitment;
(i) simultaneously with the transactions contemplated by Section 4
above, each of the Other Standby Purchasers shall have fulfilled its
commitment under the Other Standby Purchase Commitment to which it is a
party, and, if applicable, any other person having a commitment
contemplated by Section 13(a) hereof shall have fulfilled such commitment;
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 9
(j) (i) the shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement shall be so issued and distributed pursuant to an exemption from
registration under the Securities Act provided by Section 1145 of the
Bankruptcy Code, and (ii) (A) the issuance of the Rights, (B) the issuance
of the shares of Existing Arch Common Stock, the shares of Arch Class B
Common Stock, if applicable, and the Arch Warrants upon exercise of the
Rights, (C) the issuance to the Standby Purchaser of the shares of Existing
Arch Common Stock, the shares of Arch Class B Common Stock, if applicable,
and the Arch Warrants as contemplated by Section 1 and Section 3 above and
the Arch Warrants as contemplated by Section 7 below, and (D) the issuance
of Existing Arch Common Stock upon exercise of the Arch Warrants or
conversion of Arch Class B Common Stock, if applicable, shall be covered
by the Registration Statement, the Registration Statement shall have been
declared effective and no stop order with respect thereto shall be in
effect;
(k) the FCC Grant shall have been issued by the FCC and (ii) such FCC
Grant shall have become a Final Order (as defined in Section 5.1(e) of the
Merger Agreement); provided, however, that (A) the Standby Purchaser may
-------- -------
not assert the condition contained in clause (ii) above if each of the
Unaffiliated Standby Purchasers, acting in good faith, shall have waived
the condition contained in Section 5(k) of the Other Standby Purchase
Commitment to which such Unaffiliated Standby Purchaser is a party or (B)
the Standby Purchaser may not assert the condition contained in either
clause (i) or clause (ii) above if the sole reason for the failure of such
condition to be satisfied is an appeal, a motion for reconsideration or
similar action taken by any present or former officer of any Debtor
considered or determined by the FCC to be an alleged or actual wrongdoer
for purposes of the FCC Proceeding;
(l) any applicable waiting period under the HSR Act shall have expired
or been terminated early; and
(m) Arch shall have filed with the SEC no later than Friday, August
21, 1998 a preliminary Proxy Statement which shall not include any
information that a reasonable investor would consider important in
determining whether to make an investment decision regarding a purchase of
Existing Arch Common Stock and would view its disclosure as significantly
altering the total mix of information otherwise contained therein, which
information is not included in the Draft Proxy Statement; provided,
--------
however, that the Standby Purchaser may not assert the condition in this
-------
clause (m) unless (i) the information with respect to which the Standby
Purchaser seeks to assert such condition relates to information other than
the descriptions of the
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 10
Merger, the Plan and the other exhibits thereto contained in the
preliminary Proxy Statement and (ii) such condition is asserted by the
Standby Purchaser not later than two business days after Arch delivers to
the Standby Purchaser a copy of the preliminary Proxy Statement as filed
with the SEC indicating the changes therein from the Draft Proxy Statement
(which copy Arch will deliver as promptly as practicable following filing
the same with the SEC).
The Standby Purchaser hereby acknowledges and agrees that (i) the entities with
an asterisk next to their names on Annex I hereto (the "Affiliated Standby
-------
Purchasers") shall be deemed to be affiliated with each other for purposes of
clauses (a) and (k) above and clause (iii) of Section 6 below; and (ii) the
Affiliated Standby Purchasers will act jointly with respect to any decision to
waive the condition contained in any such clause and the corresponding clause
contained in the Other Standby Purchase Commitments to which such Affiliated
Standby Purchasers are parties (with the vote of the Affiliated Standby
Purchasers holding at least 85% of the aggregate amount of Unsecured Claims held
by such Affiliated Standby Purchasers to control with respect to the taking of
any such action).
6. Additional Condition. The Commitment is subject to the further
--------------------
condition that there shall not have occurred between the Buyer Balance Sheet
Date and the Confirmation Date, and, if the Effective Date does not occur within
90 days following the Confirmation Date, between the Buyer Balance Sheet Date
and the Effective Date (i) any event or events (other than events which affect
generally the economy or the industry in which Arch and MobileMedia conduct
their respective businesses) which has had or would have a material adverse
effect on the business, assets (including licenses, franchise and other
intangible assets), financial condition, operating income or prospects
(determined in each case, where applicable, in accordance with generally
accepted accounting principles and in a manner consistent with the past
practices of Arch and MobileMedia) of Arch, MobileMedia and their respective
subsidiaries, taken as a whole (collectively, the "Combined Company") (a
"Combined Company Material Adverse Effect"), (ii) any event or events involving
a regulatory or statutory change and affecting generally the industry in which
Arch and MobileMedia conduct their respective businesses which would materially
and adversely affect the ability of the Combined Company to operate its
business, or (iii) any event or events affecting generally the industry in which
Arch and MobileMedia conduct their respective business which would materially
and adversely affect the ability of the Combined Company to operate its
business; provided, however, that the Standby Purchaser may not assert the
-------- -------
condition contained in this clause (iii) if each of the Unaffiliated Standby
Purchasers, acting in good faith, shall have waived the condition in Section
6(iii) of the Other Standby Purchase Commitment to which such Unaffiliated
Standby Purchaser is a party.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 11
7. Consideration for the Commitment. In consideration for the
--------------------------------
Commitment, on the Effective Date at the Closing the Standby Purchaser will
receive its pro rata share of Arch Warrants entitling the holders thereof to
purchase, in the aggregate, a number of shares of Existing Arch Common Stock
equal to 2.50% of the issued and outstanding shares of Existing Arch Common
Stock and, if applicable, Arch Class B Common Stock, computed on a Fully Diluted
Basis (as defined in the Plan) on the date the "Buyer Market Price" is
determined in accordance with Schedule II to the Merger Agreement giving effect
to the Plan as if the Effective Date had occurred on such date and assuming
21,067,110 shares of Existing Arch Common Stock are issued and outstanding
immediately prior thereto. Such Arch Warrants will be delivered to the Standby
Purchaser and the Other Standby Purchasers, in accordance with the percentages
specified in Column D of Annex I hereto.
-----
8. Satisfaction of the Commitment. The Standby Purchaser may, in its
------------------------------
sole discretion, satisfy the Commitment directly and/or indirectly through one
or more of its affiliates, separate accounts within its control or investment
funds under its or its affiliates' management.
9. Representations and Warranties. (a) Arch hereby represents and
------------------------------
warrants to the Standby Purchaser that:
(i) Arch is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to execute, deliver and
perform its obligations hereunder and to consummate the transactions
contemplated hereby;
(ii) Subject to the approval of the Buyer Charter Amendment
and the Buyer Share Issuance by the Stockholders of Arch, the
execution, delivery and performance of this letter agreement by Arch
and the consummation by Arch of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate
action on the part of Arch;
(iii) This letter agreement constitutes the legal, valid and
binding obligation of Arch, enforceable against Arch in accordance
with its terms;
(iv) Except as described in Section 3.3 of the Buyer
Disclosure Schedule and except for the applicable requirements of the
Securities Act, the Exchange Act and any applicable state and foreign
securities laws, the HSR Act, the Communications Act and the
regulations of the
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 12
FCC, state public utility, telecommunications or public service laws and
the Bankruptcy Code, t he Confirmation Order and the Amended Plan
(collectively, the "Applicable Requirements"), the execution, delivery and
performance of this letter agreement by Arch and the consummation by Arch
of the transactions contemplated hereby in accordance with the terms hereof
do not and will not conflict with, violate or constitute a breach of any
material contract, agreement or instrument by which Arch is bound or any
judgment, order, decree, law, statute, rule, regulation or other judicial
or governmental restriction to which Arch is subject;
(v) Except as described in the Buyer Disclosure Schedule, the
representations and warranties of Arch contained in the Merger Agreement
(other than those contained in Sections 3.6, 3.7, 3.26 and 3.27 thereof),
which representations and warranties shall be deemed for purposes of this
clause (v) not to include any qualification or limitation with respect to
materiality (whether by reference to "Buyer Material Adverse Effect" or
otherwise), are true and correct, except where the matters in respect of
which such representations and warranties are not true and correct would
not have a Buyer Material Adverse Effect;
(vi) True, complete and correct copies of the following
documents are attached hereto as indicated:
Document Exhibit
--------------------------------- -------
Hereto
------
Merger Agreement (including all A
exhibits and schedules thereto)
Buyer Disclosure Schedule B
Other Standby Purchase C
Commitments
Certificate of Incorporation of Arch, D
as amended through the date hereof
By-laws of Arch, as amended through E
the date hereof
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 13
Document Exhibit
--------------------------------- -------
Hereto
------
Rights Agreement, dated as of F
October 13, 1995, between Arch and
the Bank of New York, as Rights
Agent, as amended through the date
hereof (the "Rights Agreement")
Draft of the Proxy Statement dated G
August 18, 1998 (the "Draft Proxy
Statement")
Existing Registration Rights H
Agreements (as defined in Section
9(a)(xi) below),
Bridge Commitment Letter I
(vii) As of the date hereof, the Draft Proxy Statement contains no
untrue statement of a material fact or omits to state any material fact
necessary, in light of the circumstances under which it was made, in order
to make the statements therein not misleading; provided, however, Arch
makes no representation with respect to either (A) information supplied by
MobileMedia for inclusion therein or (B) the descriptions of the Merger
Agreement, the Plan and the other exhibits to the Merger Agreement, and of
this letter agreement and the Other Standby Purchase Commitments, contained
therein;
(viii) No representation or warranty of Arch contained in this
letter agreement, and no statement relating to Arch contained in the Merger
Agreement, the Buyer Disclosure Schedule or any other document, certificate
or other instrument delivered or to be delivered by or on behalf of Arch
pursuant to this letter agreement (including the definitive Proxy Statement
and the Registration Statement as declared effective by the SEC), contains
or will as of the Effective Date contain any untrue statement of a material
fact or omits or will as of the Effective Date omit to state any material
fact necessary, in light of the circumstances under which it was or will be
made, in order to make the statements herein or therein not misleading;
(ix) Between the Buyer Balance Sheet Date and the date hereof,
there has not occurred with respect to Arch (A) any event or events
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 14
(other than events which affect generally the economy or the industry in
which Arch and MobileMedia conduct their respective businesses) which has
had or would have a Combined Company Material Adverse Effect or (B) any
event or events involving a regulatory or statutory change and affecting
generally the industry in which Arch and MobileMedia conduct their
respective business which would materially and adversely affect the ability
of the Combined Company to operate its business;
(x) The shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement and the shares of Existing Arch Common Stock, the shares of Arch
Class B Common Stock, if applicable, and the Arch Warrants to be issued and
delivered as contemplated by Section 1 and Section 3 above, and the Arch
Warrants to be issued as contemplated by Section 7 above, in each case when
so issued and distributed or delivered, as the case may be, and the shares
of Existing Arch Common Stock issued upon conversion of such shares of Arch
Class B Common Stock, if applicable, when so converted in accordance with
the Arch Charter Amendment, and the shares of Existing Arch Common Stock
issued upon exercise of such Arch Warrants, when issued, paid for and
delivered as provided in the Arch Warrant Agreement, will be duly
authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights; and
(xi) Schedule 9(a)(xi) hereto sets forth a true, complete and
-----------------
correct list of all agreements that are in effect as of the date hereof
pursuant to which the Company has granted any registration rights to any
person or entity (the "Existing Registration Rights Agreements"), and,
except as specified in Schedule 9(a) (xi) hereto, none of the Existing
------------------
Registration Rights Agreements is inconsistent with the rights to be
granted to the Standby Purchaser pursuant to the Registration Rights
Agreement.
(b) MobileMedia hereby represents and warrants to the Standby Purchaser
that:
(i) MobileMedia is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and, subject to
the entry of the Confirmation Order, has all requisite corporate power and
authority to execute, deliver and perform its obligations hereunder and to
consummate the transactions contemplated hereby;
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 15
(ii) Subject to the entry of the Confirmation Order, the execution,
delivery and performance of this letter agreement by MobileMedia and the
consummation by MobileMedia of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on the
part of MobileMedia;
(iii) Subject to the entry of the Confirmation Order and the
effectiveness of the Plan, this letter agreement constitutes the legal,
valid and binding obligation of MobileMedia, enforceable against
MobileMedia in accordance with its terms;
(iv) Subject to entry of the Confirmation Order, and except as
described in Section 2.3 of the Company Disclosure Schedule and except for
the Applicable Requirements, the execution, delivery and performance of
this letter agreement by MobileMedia and the consummation by MobileMedia of
the transactions contemplated hereby in accordance with the terms hereof do
not and will not conflict with, violate, or constitute a breach of any
material contract, agreement or instrument by which MobileMedia is bound or
any judgment, order, decree, law, statute, rule, regulation or other
judicial or governmental restriction to which MobileMedia is subject;
(v) Except as described in the Company Disclosure Schedule, the
representations and warranties of MobileMedia contained in the Merger
Agreement (other than those contained in Sections 2.6, 2.7, 2.23 and 2.24
thereof), which representations and warranties shall be deemed for purposes
of this clause (v) not to include any qualification or limitation with
respect to materiality (whether by reference to "Company Material Adverse
Effect" or otherwise), are true and correct, except where the matters in
respect of which such representations and warranties are not true and
correct would not have a Company Material Adverse Effect;
(vi) True, complete and correct copies of the following documents
are attached hereto as indicated:
Document Exhibit
--------------------------------- -------
Hereto
------
Merger Agreement (including all A
exhibits and schedules thereto)
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 16
Document Exhibit
--------------------------------- -------
Hereto
------
Other Standby Purchase C
Commitments
Company Disclosure Schedule J
Agreement, dated the date hereof (the K
"Debtor/Committee Agreement"),
between MobileMedia, on behalf of
itself and the other Debtors, and the
Committee (as defined in the Plan)
(vii) As of the date hereof, the information included in the Draft
Proxy Statement that was provided for inclusion therein by MobileMedia
contains no untrue statement of a material fact or omits to state any
material fact necessary, in light of the circumstances under which it was
made, in order to make the statements therein not misleading;
(viii) No representation or warranty of MobileMedia contained in
this letter agreement, and no statement relating to MobileMedia contained in
the Merger Agreement, the Company Disclosure Schedule or any other document,
certificate, or other instrument delivered or to be delivered by or on behalf
of MobileMedia pursuant to this letter agreement, contains or will as of the
Effective Date contain any untrue statement of a material fact or omits or
will as of the Effective Date omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to
make the statements herein or therein not misleading; and
(ix) Between the Company Balance Sheet Date and the date hereof,
there has not occurred with respect to MobileMedia (A) any event or events
(other than events which affect generally the economy or the industry in
which Arch and MobileMedia conduct their respective businesses) which has had
or would have a Combined Company Material Adverse Effect or (B) any event or
events involving a regulatory or statutory change and affecting generally the
industry in which Arch and MobileMedia conduct their respective businesses
which would materially and adversely affect the ability of the Combined
Company to operate its business.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 17
(c) The Standby Purchaser hereby represents and warrants to each of Arch
and MobileMedia that:
(i) The Standby Purchaser is a corporation duly organized,
validly existing under the laws of the State of Wisconsin and has all
requisite corporate power and authority to execute, deliver and perform its
obligations hereunder and to consummate the transactions contemplated
hereby;
(ii) The execution, delivery and performance of this letter
agreement by the Standby Purchaser and the consummation by the Standby
Purchaser of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of the
Standby Purchaser;
(iii) This letter agreement constitutes the legal, valid and
binding obligation of the Standby Purchaser, enforceable against the
Standby Purchaser in accordance with its terms;
(iv) Except for the Applicable Requirements, the execution,
delivery and performance of this letter agreement by the Standby Purchaser
and the consummation by the Standby Purchaser of the transactions
contemplated hereby in accordance with the terms hereof do not and will not
conflict with, violate or constitute a breach of any material contract,
agreement, or instrument by which the Standby Purchaser is bound or any
judgment, order, decree, law, statute, rule, regulation or other judicial
or governmental restriction to which the Standby Purchaser is subject,
except where such conflicts, violations or breaches, individually or in the
aggregate, would not have a material adverse effect on the ability of the
Standby Purchaser to consummate the transactions contemplated hereby;
(v) No representation or warranty of the Standby Purchaser
contained in this letter agreement, and no statement contained in any other
document, certificate or other instrument delivered or to be delivered by
or on behalf of the Standby Purchaser pursuant to this letter agreement,
contains or will as of the Effective Date contain any untrue statement of a
material fact or omits or will as of the Effective Date omit to state any
material fact necessary, in light of the circumstances under which it was
or will be made, in order to make the statements herein or therein not
misleading; and
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 18
(vi) As of the date hereof, the Standby Purchaser holds the
aggregate stated principal amount of 93/8 % Notes and 10 1/2% Notes
(as such terms are defined in the Plan) indicated under the Standby
Purchaser's name and address on Annex I hereto.
-------
(d) None of the representations and warranties made herein or in any
certificate to be delivered as contemplated hereby will survive the Closing.
10. Certain Covenants. (a) Each of Arch and MobileMedia (i) acknowledges
-----------------
that the Debtors have agreed to provide to the Committee copies of any and all
notices, documents or information to be provided by or made available by the
Debtors to Arch pursuant to the Merger Agreement or provided by or made
available by Arch to the Debtors pursuant to the Merger Agreement, promptly
after the receipt or provision thereof by or to the Debtors, as applicable, and
that the Committee, pursuant to the undertaking attached as Annex II hereto, has
--------
agreed to distribute copies of the same to the Standby Purchaser and to take
certain other actions and (ii) agrees that the Committee may do so.
(b) Without limiting the generality of the foregoing clause (a) of
this Section 10, Arch will, before filing the Registration Statement with the
SEC, furnish to the Standby Purchaser and its counsel copies of the Registration
Statement (including all exhibits thereto) proposed to be filed, will provide
the Standby Purchaser and its counsel a reasonable opportunity to review and
comment on such Registration Statement and will not file such Registration
Statement if the Standby Purchaser shall reasonably object thereto within three
calendar days after the receipt thereof.
(c) Arch will deliver to the Standby Purchaser copies of the
definitive Proxy Statement in the form filed with the SEC and mailed to
Stockholders of Arch and the Registration Statement in the form declared
effective by the SEC.
(d) Without limiting the generality of the foregoing clause (a) of
this Section 10, Arch will, before filing the Shelf Registration Statement or
any pre-effective amendment thereto, furnish to the Standby Purchaser and its
counsel copies of the Shelf Registration Statement or such pre-effective
amendment thereto, as applicable, proposed to be filed, will provide Standby
Purchaser and its counsel with a reasonable opportunity to review and comment on
the Shelf Registration Statement or such pre-effective amendment thereto, as
applicable, and will not file the Shelf Registration Statement or such pre-
effective amendment thereto, as applicable, to which the Standby Purchaser or
its counsel shall reasonably object within three business days after the receipt
thereof. The Standby Purchaser will furnish to Arch such information regarding
the Standby Purchaser and its plan and method of distribution of the Registrable
Securities as Arch may reasonably request in writing in connection with the
preparation of the Shelf Registration Statement.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 19
(e) Each of Arch, MobileMedia and the Standby Purchaser will use its
reasonable best efforts to obtain all approvals, waivers, consents and other
authorizations required by the Applicable Requirements, including without
limitation the applicable requirement of the HSR Act, necessary in connection
with the performance of this letter agreement by the Standby Purchaser and the
consummation by the Standby Purchaser of the transactions contemplated hereby.
(f) Arch will, as requested by the Standby Purchaser, either pay
directly to the appropriate Governmental Entity, on behalf of the Standby
Purchaser, or reimburse the Standby Purchaser for, any fees required to be paid
by the Standby Purchaser in connection with its compliance with the applicable
requirements of the HSR Act. In addition, following the Effective Date, Arch
will reimburse, promptly upon written request (accompanied by appropriate
supporting documentation), costs and expenses (including without limitation
reasonable fees and expenses of legal counsel, including a reasonable allocation
with respect to the cost of any internal counsel) incurred by the Standby
Purchaser in connection with this letter agreement and the transactions
contemplated hereby; provided, however, the reimbursable costs and expenses of
-------- -------
the Affiliated Standby Purchasers shall not exceed $100,000 in the aggregate.
11. Certain Prohibited Transactions. The Standby Purchaser hereby
-------------------------------
covenants that, from and after the date hereof, so long as its commitment
hereunder remains in effect, it will not sell, or enter into any agreement
relating to the sale (including without limitation any short sale, equity swap
or other hedge position) of, any shares of Arch capital stock or, except as
otherwise expressly contemplated by this Section 11, engage in any other
disposition of such shares that might negatively affect the market price of such
shares; provided, however, that the foregoing provision will not apply to any
-------- -------
agreement entered into prior to the date hereof (if not entered into in
contemplation of the transactions contemplated by the Plan, the Merger Agreement
or this letter agreement) or any transaction effected pursuant to the terms
thereof. Notwithstanding the immediately preceding sentence, but subject to
Section 3 above and Section 12 below, the Standby Purchaser may at any time, as
it may determine in its sole and absolute discretion, sell or otherwise
transfer, or acquire, or enter into any agreement relating to the sale, transfer
or acquisition of, Rights or Unsecured Claims. The Standby Purchaser
acknowledges that it has received copies of the Rights Agreement and the
amendment thereto attached as Exhibit D to the Merger Agreement (the "Rights
Plan Amendment"). Arch hereby covenants that it will not, without the prior
written consent of the Standby Purchaser, further amend the Rights Agreement in
any manner that would eliminate or reduce the ownership thresholds applicable to
the Standby Purchaser thereunder; provided, however, that this sentence shall
-------- -------
cease to be of any further force or effect at such time after the Effective Date
as the Standby Purchaser ceases to beneficially own in the aggregate at least
10.0% of the outstanding shares of Existing Arch Common Stock.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 20
12. Voting Agreement. The Standby Purchaser hereby covenants that (a) so
----------------
long as the Bankruptcy Court approves the Disclosure Statement not later than
December 31, 1998 and the Confirmation Order is entered not later than March 31,
1999, (i) it will vote, or cause to be voted, for the acceptance of the Plan all
Unsecured Claims held by it on the date fixed for determining holders of
Unsecured Claims entitled to vote for acceptance or rejection of the Plan (the
"Record Date"), (ii) it will not withdraw or otherwise revoke, or cause to be
withdrawn or otherwise revoked, such vote for the acceptance of the Plan, and
(iii) it will not grant, or cause to be granted, to any other person or entity
any proxy to vote with respect to any such Unsecured Claims (other than a proxy
to vote for the acceptance of the Plan) and (b) except with respect to accounts
which cease to be within the Standby Purchaser's control and investment funds
which cease to be under its management, it will not, on or prior to the Record
Date, sell or otherwise transfer any Unsecured Claims held by it unless the
transferee shall have agreed in writing in the form attached as Annex III hereto
---------
(i) to vote for the acceptance of the Plan with respect to such Unsecured Claims
and (ii) not to sell or otherwise transfer such Unsecured Claims unless its
transferee shall agree to be bound in the same manner provided in this clause
(b) with respect to such Unsecured Claims.
13. Other Standby Purchase Commitments. (a) Each of Arch and MobileMedia
----------------------------------
covenants that it will not agree to any amendment or modification to any of the
letter agreements, dated the date hereof, among Arch, MobileMedia and any of the
Other Standby Purchasers (the "Other Standby Purchase Commitments"), without the
prior written consent of the Standby Purchaser. Notwithstanding the immediately
preceding sentence, Arch and MobileMedia may, without the prior written consent
of the Standby Purchaser, agree to an amendment or modification to any of the
Other Standby Purchase Commitments to the extent that (i) such amendment or
modification has the sole effect of reducing or eliminating the financial
commitment thereunder and (ii) simultaneously therewith, a qualified
institutional buyer (as such term is defined in Rule 144A promulgated under the
Securities Act) reasonably acceptable to the Standby Purchaser makes a
commitment in a corresponding amount on terms identical in all material respects
to those set forth in such Other Standby Purchase Commitment.
(b) The Standby Purchaser will have no liability for the commitment of
any Other Standby Purchaser under any Other Standby Purchase Commitments or the
commitment of any other person contemplated by Section 13(a) above.
14. Certain Notices; Certain Information. (a) Each of Arch and
------------------------------------
MobileMedia hereby covenants that it will promptly deliver to the Standby
Purchaser, and the Standby Purchaser hereby covenants that it will promptly
deliver to Arch and MobileMedia, written notice of any matter, event or
development that would (i) render any representation or warranty made by it
herein inaccurate or
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 21
incomplete in any respect or (ii) constitute or result in a breach by it of, or
a failure by it to comply with, any covenant herein applicable to it.
(b) Each of Arch and MobileMedia will furnish the Standby Purchaser
with such information regarding itself as the Standby Purchaser may reasonably
request.
15. Certain Consent Rights. (a) Notwithstanding anything to the contrary
----------------------
herein contained, except as expressly contemplated by the Merger Agreement or
the Plan, Arch hereby covenants that it will not take, or agree in writing to
take, any action contemplated by Section 4.5(b)(ii), (iii), (iv), (viii) or (ix)
of the Merger Agreement without the prior written consent of the Standby
Purchaser.
(b) Arch hereby covenants that, without the prior written consent of
the Standby Purchaser, it will not, prior to the Effective Date, enter into any
agreement with respect to its securities, or amend any existing agreement with
respect to its securities (including without limitation the Existing
Registration Rights Agreements) in any manner inconsistent with the rights to be
granted to the Standby Purchaser pursuant to the Registration Rights Agreement.
16. Removal of Legends. In the event that, following the transactions
------------------
contemplated by the Merger Agreement, the Plan and this letter agreement, any
certificates evidencing securities ("Certificates") of Arch held by the Standby
Purchaser bear a restrictive legend then:
(a) if the Standby Purchaser delivers to Arch (i) a certificate, in a form
reasonably satisfactory to Arch, certifying that securities evidenced by such
Certificate have been transferred pursuant to a registration statement that is
effective under the Securities Act or (ii) a certificate, in a form reasonably
satisfactory to Arch, certifying that securities evidenced by such Certificate
have been transferred without registration in accordance with the requirements
of Rule 144 under the Securities Act, Arch will, or will instruct its transfer
agent to, issue upon surrender of such Certificate one or more new Certificates
evidencing the securities so transferred evidenced by the Certificate so
surrendered, which new Certificate or Certificates will not bear any such
legend; and
(b) if the Standby Purchaser delivers to Arch an opinion of counsel to
the Standby Purchaser (which may be internal counsel to the Standby Purchaser)
that, in the opinion of such counsel, such legend is not, or is no longer,
required to ensure compliance with the Securities Act, Arch will, or will
instruct its transfer agent to, issue upon surrender of such Certificate one or
more new Certificates evidencing the securities evidenced by the Certificate so
surrendered, which new Certificate or Certificates will not bear any such
legend.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 22
* * * * *
If you are in agreement with the foregoing, please execute the enclosed
copy of this letter agreement as indicated and return it to the undersigned.
This letter agreement will become effective upon (i) the delivery to us of
executed counterparts of this letter agreement by each of you and (ii) the
execution and delivery of each of the Other Standby Purchase Commitments by each
of the parties thereto. Once effective, this letter agreement will terminate on
(i) the date on which the Debtor Tower Agreement is terminated, unless prior to
or simultaneously with such termination, MobileMedia shall have entered into a
definitive agreement (which shall be comparable in form and substance to the
Debtor Tower Agreement and a copy of which shall be delivered to the Standby
Purchaser promptly following the execution thereof) with a bona fide third-party
purchaser providing for a sale to such third party of the assets or
substantially all of the assets to be sold to Pinnacle pursuant to the Debtor
Tower Agreement resulting in net proceeds to MobileMedia of not less than $165.0
million (an "Acceptable Sale"), (ii) December 31, 1998, unless the Closing (as
defined in the Debtor Tower Agreement) or the closing of an Acceptable Sale
shall have occurred on or before such date, (iii) March 31, 1999, unless the
Confirmation Order shall have been entered by the Bankruptcy Court on or before
such date, (iv) June 30, 1999, unless the effectiveness of the Plan occurs on or
before such date, or (v) if not theretofore terminated pursuant to one of the
foregoing clauses, the date on which the Merger Agreement is terminated in
accordance with the terms thereof.
All notices and other communications hereunder must be in writing. Any
notice or other communication hereunder will be deemed duly delivered three
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or two business days after it is sent via a
reputable international overnight courier service, in each case to the intended
recipient at the address therefor set forth on the signature page hereto. Any
party hereto may give any notice or other communication hereunder by personal
delivery or telecopy, but no such notice or other communication will be deemed
to have been duly given unless and until it actually is received by the party
for whom it is intended. Any party may change the address to which notices and
other communications hereunder are to be delivered by giving the other parties
notice in the manner herein set forth.
This letter agreement represents the final agreement among the parties
hereto with respect to the subject matter hereof and may not be contradicted by
evidence of prior or contemporaneous agreements of the parties. There are no
unwritten oral agreements between the parties relating to the subject matter
hereof. This letter agreement may not be amended or modified except by a
written instrument signed by each of the Standby Purchaser, Arch and
MobileMedia.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 23
This letter agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to its principles of conflicts
of law.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 24
This letter agreement may be executed in counterparts which, taken
together, shall constitute one and the same instrument.
Very truly yours,
NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
FOR ITS GROUP ANNUITY SEPARATE ACCOUNT
By: Northwestern Investment Mangement
Company
By: /s/ Steven P. Swanson
--------------------------------------
Name: Steven P. Swanson
Its: Managing Director
Address: 720 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Securities Department
ACCEPTED AND AGREED TO:
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
------------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 25
Subject to entry of the Confirmation Order:
MOBILEMEDIA COMMUNICATION, INC.
By: /s/ Joseph A. Bondi
-----------------------------------
Name: Joseph A. Bondi
Its: Chairman - Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman - Restructuring
With copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, New York 10022
Attn: James D. Johnson
<PAGE>
ANNEX I
-------
<TABLE>
<CAPTION>
COMMITMENT AMOUNTS
------------------
(dollars in millions)
Column A Column B Column C Column D
----------- ------------ -------- -----------
Rights Unexercised
Exercise Rights Total
Commitment Commitment Commitment Commitment
Amount (1) Amount (2) Amount Percentage
----------- ----------- -------- -----------
Name and Address of Standby Purchasers
- --------------------------------------
<S> <C> <C> <C> <C>
W.R. Huff Asset Management Co., L.L.C., $ 39.27 $ 35.80 $ 75.07 34.60%
as agent for its affiliates and
discretionary accounts
67 Park Place, 9th Floor
Morristown, New Jersey 07960
Stated Principal Amount of 9 3/8% Notes:
$ 57,847,000
---------------
Stated Principal Amount of 10 1/2%
Notes: $ 27,970,000
---------------
The Northwestern Mutual Life Insurance $ 10.95 $ 9.97 $ 20.92 9.64%
Company/*/
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8% Notes:
$ 19,776,000
- -------------
Stated Principal Amount of 10 1/2%
Notes:
$ 3,350,000
- --------------
The Northwestern Mutual Life Insurance $ 2.65 $ 2.42 $ 5.07 2.34%
Company for its Group Annuity
Separate Account/*/
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8% Notes:
$ -0-
- --------------
Stated Principal Amount of 10 1/2% Notes
$ 7,000,000
- --------------
</TABLE>
_____________________________________
/*/ The Northwestern Mutual Life Insurance Company, The Northwestern Mutual
Life Insurance Company for its Group Annuity Separate Account and Northwestern
Mutual Series Fund, Inc. for the High Yield Bond Portfolio are affiliated
entities for purposes of clauses (a) and (k) of Section 5 and clause (iii) of
Section 6.
<PAGE>
<TABLE>
<CAPTION>
COMMITMENT AMOUNTS
--------------------
(dollars in millions)
Column A Column B Column C Column D
----------- ------------ -------- -----------
Rights Unexercised
Exercise Rights Total
Commitment Commitment Commitment Commitment
Amount (1) Amount (2) Amount Percentage
----------- ----------- -------- -----------
Name and Address of Standby Purchasers
- --------------------------------------
<S> <C> <C> <C> <C>
Northwestern Mutual Series Fund, Inc. for $ .75 $ .69 $ 1.44 0.66%
the High Yield Bond Portfolio*
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8% Notes:
$ -0-
- ---------------
Stated Principal Amount of 10 1/2%
Notes:
$ 2,000,000
- ---------------
Credit Suisse First Boston Corporation $ 29.48 $ 26.88 $ 56.36 25.97%
11 Madison Avenue, 4th Floor
New York, New York 10010
Stated Principal Amount of 9 3/8% Notes:
$ 32,453,000
- ---------------
Stated Principal Amount of 10 1/2%
Notes: $ 35,930,000
--------------
Whippoorwill Associates, Inc., as general $ 30.42 $ 27.72 $ 58.14 26.79%
partner and/or agent for the parties set
forth on Schedule A hereto in the
percentages noted thereon
11 Martine Avenue
White Plains, New York 10606
Stated Principal Amount of 9 3/8% Notes:
$ 37,855,000
--------------
Stated Principal Amount of 10 1/2%
Notes: $ 31,410,000
--------------
Total: $113.52 $103.48 $217.00 100.00%
------- ------ ------
</TABLE>
(1) The "Rights Exercise Commitment Amount", for each Standby Purchaser, shall
mean an amount equal to the product of (i) the Rights Subscription Price (as
defined in Schedule II to the Merger Agreement) and (ii) the number of
Rights issuable in respect of an amount of Allowed Unsecured Claims derived
from the principal amount of 9 3/8% Notes and the 10 1/2% Notes indicated
under the Standby Purchaser's name on this Annex I held by such Standby
Purchaser on the date hereof. The dollar amounts set forth under Column A
are estimates provided for illustrative purposes only, based on the
assumptions that (x) there is a total of $475 million of Allowed Unsecured
Claims, (y) there is no Rights Reserve (as defined in the Plan) and (z) the
aggregate amount of Subordinated Noteholder Claims (as defined in the Plan)
is $441,819,762.
<PAGE>
(2) The "Unexercised Rights Commitment Amount", for each Standby Purchaser,
shall mean an amount equal to (i) the Total Commitment Amount indicated in
Column C for such Standby Purchaser less (ii) the Rights Exercise Commitment
Amount for such Standby Purchaser. The dollar amounts set forth under
Column B are estimates provided for illustrative purposes only, based on the
estimates set forth in Column A.
<PAGE>
ANNEX II
--------
UNDERTAKING
-----------
The Committee hereby undertakes to distribute to the Standby Purchaser
(until instructed by the Standby Purchaser to do otherwise) copies of any and
all notices, documents or information to be provided by or made available by the
Debtors to Arch pursuant to the Merger Agreement or provided by or made
available by Arch to the Debtors pursuant to the Merger Agreement that are
received by the Committee pursuant to the Debtor/Committee Agreement as soon as
practicable with its receipt thereof. The Committee hereby further undertakes
to consult with the Standby Purchaser (until instructed by the Standby Purchaser
to do otherwise) prior to delivering any written consent or exercising any other
right of the Committee (other than the distribution of notices, documents or
information to the Standby Purchaser or the Other Standby Purchasers) pursuant
to the Debtor/Committee Agreement or the Plan. The Committee will not enter
into any amendment to the Debtor/Committee Agreement without the prior written
consent of the Standby Purchaser.
THE OFFICIAL COMMITTEE
OF UNSECURED CREDITORS
By: /s/ Bryan E. Bloom
--------------------------------
Its: Chairman
<PAGE>
ANNEX III
---------
VOTING AGREEMENT
----------------
The undersigned transferee of indebtedness of MobileMedia Corporation or
one of its direct or indirect subsidiaries (collectively, "MobileMedia")
described in Schedule A attached hereto (the "Claim"), hereby acknowledges and
----------
agrees as follows:
1. MobileMedia is a debtor-in-possession under Chapter 11 of the
Bankruptcy Code and has proposed a First Amended Joint Plan of
Reorganization dated August __, 1998 (the "Amended Plan").
2. By acquiring the Claim the undersigned may also acquire rights to vote
on the adoption of the Amended Plan.
3. As a condition of the transfer of the Claim, the undersigned hereby
agrees to exercise all voting rights it may have as holder of the
Claim in favor of the Amended Plan unless the Amended Plan shall have
been withdrawn.
4. The undersigned agrees that it shall not subsequently transfer the
Claim or any portion thereof unless and until it obtains from its
transferee a Voting Agreement identical to the form hereof.
IN WITNESS HEREOF, the undersigned transferee has executed this Voting
Agreement this _____ day of __________, 199_.
[TRANSFEREE]
By:__________________________
Title:
Accepted By:
_________________________
[Transferor]
<PAGE>
SCHEDULE A
TO
VOTING AGREEMENT
----------------
[Describe Claim.]
<PAGE>
SCHEDULE 9(a) (xi)
------------------
Existing Registration Rights Agreement
- --------------------------------------
(1) Registration Rights Agreement, dated as of June 24, 1998, by and among Arch
Communications Group, Inc., Sandler Capital Partner, IV, L.P., Sandler
Capital Partners IV FTE, L.P. Harvey Sandler, John Kornreich, Michael J.
Marocco, Andrew Sandler, South Fork Partners, The Georgica International
Fund Limited, Aspen Partners and Consolidated Press International Limited,
as amended
(2) Registration Rights Agreement, dated as of June 29, 1998, Arch
Communications Group, Inc. Adelphia Communications Corporation and Lisa-
Gaye Shearing
Inconsistencies:
- ---------------
The provisions of the Registration Rights Agreement listed at (2) above are
inconsistent in certain respects with the provisions of the Registration Rights
Agreement.
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
for the High Yield Bond Portfolio
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
August 18, 1998
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Commitment to Purchase Stock and Warrants
-----------------------------------------
Gentlemen:
Arch Communications Group, Inc., a Delaware corporation ("Arch"), and
MobileMedia Communications, Inc., a Delaware corporation ("MobileMedia"), intend
to engage in a business combination transaction (the "Combination") as part of a
reorganization (the "Reorganization") of MobileMedia, MobileMedia Corporation,
the sole stockholder of MobileMedia ("Parent"), and all of MobileMedia's
subsidiaries (collectively, the "Debtors") pursuant to chapter 11 of title 11,
United States Code, 11 U.S.C. (S)(S) 101 et seq. (the "Bankruptcy Code"). It is
our understanding that in connection with the Reorganization, among other
things: (a) pursuant to the Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), among Arch, a wholly owned subsidiary of Arch
("Merger Sub"), Parent and MobileMedia, MobileMedia will merge with and into
Merger Sub, with Merger Sub continuing as the surviving corporation and a wholly
owned subsidiary of Arch; (b) pursuant to the Merger Agreement, Arch will make
available for distribution pursuant to a plan of reorganization of the Debtors
in the form attached as Exhibit A to the Merger Agreement, with such amendments
and modifications thereto as are made in a manner consistent with clause (e) of
Section 5 hereto (such plan of reorganization being referred to herein as the
"Plan"), (i) cash, (ii) shares of its Common Stock, par value $.01 per share
("Existing Arch Common Stock"), and (iii) warrants entitling the holders thereof
to purchase shares of Existing Arch Common Stock ("Arch Warrants"), with such
Arch Warrants to be issued pursuant to, and to have the terms set forth in, a
warrant agreement in the form attached as Exhibit B to the Merger Agreement (the
"Arch Warrant Agreement");
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
(c) holders of unsecured non-priority claims against the Debtors ("Unsecured
Claims"), to the extent such Unsecured Claims are Allowed (as defined in the
Plan), will receive pursuant to the Plan (i) shares of Existing Arch Common
Stock and (ii) rights to purchase ("Rights") for cash units consisting of (A)
shares of Existing Arch Common Stock and (B) Arch Warrants; (d) holders of
claims arising under or relating to the Credit Agreement, dated December 4,
1995, as amended, among MobileMedia and the other parties thereto ("Secured
Claims"), to the extent such Secured Claims are Allowed, will receive pursuant
to the Plan cash in an amount equal to 100% of such claims; (e) all of the
outstanding equity interests in MobileMedia and Parent will be canceled without
consideration and Parent will be dissolved; and (f) the commitments under the
DIP Loan Agreement will terminate and all amounts owed under or in respect of
the DIP Loan Agreement will be paid in full in cash.
Terms used herein with initial capital letters that are not otherwise
defined shall have the meanings ascribed to such terms in the Merger Agreement.
1. The Commitment. In connection with the foregoing, Northwestern Mutual
--------------
Series Fund, Inc. for the High Yield Bond Portfolio (the "Standby Purchaser")
hereby advises you of its commitment (the "Commitment"), subject to the
conditions set forth herein:
(a) to exercise any Rights distributed to it in respect of its Allowed
Unsecured Claims in accordance with the Plan and not thereafter sold or
transferred as permitted by Section 3 below to purchase units consisting of
shares of Existing Arch Common Stock and Arch Warrants underlying such
Rights, to the extent that the aggregate purchase price payable upon such
exercise, as determined in accordance with Schedule II to the Merger
Agreement (the "Subscription Price"), does not exceed the Rights Exercise
Commitment Amount of the Standby Purchaser as set forth in Annex I hereto;
-------
(b) if (i) the Standby Purchaser sells or otherwise transfers any or
all of (A) the Rights distributed to it in accordance with the Plan or (B)
Unsecured Claims held by it as of the date hereof in respect of which
Rights are to be distributed, in each case as permitted by Section 3 below,
and (ii) the Rights sold or transferred by the Standby Purchaser or the
Rights distributed in respect of Unsecured Claims held by it as of the date
hereof that are hereafter sold or transferred by the Standby Purchaser are
not exercised prior to the expiration thereof (at which time such Rights
will be void and will no longer be exercisable), to purchase for cash
(based upon the Subscription Price payable upon exercise of such Rights)
identical units consisting of shares of Existing Arch Common Stock and Arch
Warrants underlying such unexercised Rights, to the extent that the
aggregate purchase price therefor, together with the aggregate Subscription
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
Price payable upon exercise of Rights exercised as contemplated by clause
(a) above, does not exceed the Rights Exercise Commitment Amount of the
Standby Purchaser as set forth in Annex I hereto; and
-------
(c) if any Rights distributed in accordance with the Plan (other than
(i) Rights distributed to the Standby Purchaser or the other holders of
Unsecured Claims listed on Annex I hereto (the "Other Standby Purchasers")
-------
and retained by them (which Rights are referred to in Section 1(a) above
and Section 1(a) of each of the Other Standby Purchase Commitments (as
defined in Section 13(a) below)) or (ii) subject to Section 3(b) below,
Rights distributed in respect of Unsecured Claims held by the Standby
Purchaser or the Other Standby Purchasers as of the date hereof that are
hereafter sold or transferred by them (which Rights are referred to in
Sections 1(b) and 3 hereof and Sections 1(b) and 3 of each of the Other
Standby Purchase Commitments)) remain unexercised upon the expiration
thereof (at which time such Rights will be void and will no longer be
exercisable), to purchase for cash (based on the Subscription Price payable
upon exercise of such Rights) pro rata in accordance with and up to the
Unexercised Rights Commitment Amount of the Standby Purchaser as set forth
in Annex I hereto identical units consisting of shares of Existing Arch
-------
Common Stock and Arch Warrants underlying such unexercised Rights.
2. Arch Class B Common Stock. (a) Notwithstanding anything to the
-------------------------
contrary herein contained, if the purchases by the Standby Purchaser
contemplated by Section 1 above would cause the Standby Purchaser, the Other
Standby Purchasers, and any other persons or entities who, when taken together
with any one or more of the Standby Purchaser and the Other Standby Purchasers,
would constitute a "person" or "group" as used in Section 13(d) or Section 14(d)
of the Exchange Act or Rule 13d-3 or Rule 13d-5 promulgated thereunder, or any
"affiliate" as defined in Rule 405 promulgated under the Securities Act of any
of them (collectively, the "Standby Class B Holders"), in the aggregate, to
beneficially own on the effective date of the Plan (the "Effective Date") shares
representing more than 49.0% of the capital stock of Arch generally entitled to
vote in the election of directors or more than 49.0% of the total voting power
of the capital stock of Arch, Arch will substitute shares of Class B Common
Stock, par value $.01 per share, of Arch ("Arch Class B Common Stock"), with
such Arch Class B Common Stock having the terms set forth in the form of
Certificate of Amendment to Certificate of Incorporation of Arch attached as
Exhibit F to the Merger Agreement (the "Arch Charter Amendment"), for shares of
Existing Arch Common Stock included in the units so purchased on a one-for-one
basis such that on the Effective Date the Standby Class B Holders, in the
aggregate, will beneficially own shares representing not more than 49.0% of the
capital stock of Arch generally entitled to vote in the election of directors
and not more than 49.0% of the total
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
voting power of the capital stock of Arch, all as provided in the Plan. For
purposes of this letter agreement, "beneficial ownership" shall be determined as
provided in Rule 13d-3 and Rule 13d-5 promulgated under the Exchange Act, except
that a person or entity shall be deemed to have "beneficial ownership" of all
securities that such person or entity has the right to acquire, whether such
right is exercisable immediately or only after the passage of time.
(b) For purposes of calculating the percentages referred to in
Section 2(a) above, it will be assumed that no additional Unsecured Claims are
allowed after the Effective Date and all of the shares of Existing Arch Common
Stock in the Creditor Stock Pool (as defined in the Plan) are distributed in
accordance with the Plan to the holders of Allowed Unsecured Claims as of the
Effective Date.
(c) Substitution of shares of Class B Common Stock as contemplated by
Section 2(a) above will be effectuated as follows:
(i) first, to the extent that the Standby Purchaser or any
Other Standby Purchaser beneficially owns shares of Existing Arch
Common Stock as of the Effective Date, other than those acquired as
contemplated by the Plan, the Merger Agreement, this letter agreement
and the Other Standby Purchase Commitments ("Non-Plan Arch Shares"),
among the Standby Purchaser and such Other Standby Purchaser pro rata
based on ownership of Non-Plan Arch Shares up to an amount equal to
the aggregate number of Non-Plan Arch Shares beneficially owned by
them as of the Effective Date; and
(ii) second, if necessary, among the Standby Purchaser and the
Other Standby Purchasers in accordance with the percentages set forth
in Column D of Annex I hereto.
-------
(d) The Standby Purchaser hereby disclaims beneficial ownership of
any securities of Arch owned by the Other Standby Purchasers.
3. Certain Transfer Restrictions. (a) Subject to Section 12 below, the
-----------------------------
Standby Purchaser may (i) sell or otherwise transfer any or all of (A) the
Rights distributed to it in accordance with the Plan or (B) Unsecured Claims in
respect of which Rights are to be distributed or (ii) purchase or otherwise
acquire (A) Rights distributed to others in accordance with the Plan or (B)
Unsecured Claims in respect of which Rights are to be distributed; provided,
--------
however, that, with respect to clause (i) of this sentence, (X)
- -------
contemporaneously with the consummation of any such sale or other transfer of
Rights or Unsecured Claims, the Standby
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
Purchaser will notify Arch and MobileMedia of the occurrence thereof and (Y) the
Standby Purchaser will not consummate any such sale or other transfer unless the
transferee or transferees of such Rights or Unsecured Claims shall have entered
into a written agreement (a "Tracking Agreement") (I) to notify the Standby
Purchaser, Arch and MobileMedia of any subsequent transfer by it of such Rights
or Unsecured Claims or any Rights distributed to it in respect of such Unsecured
Claims and (II) not to sell or otherwise transfer such Rights or Unsecured
Claims or Rights distributed to it in respect of such Unsecured Claims, unless
its transferee or transferees shall agree in writing to be bound in the same
manner provided in this clause (Y) with respect to any subsequent transfer by
it.
(b) Notwithstanding the provisions of clause (Y) of the proviso in Section
3(a) above, the Standby Purchaser may elect to sell or otherwise transfer (i)
any or all of the Rights distributed to it in accordance with the Plan or (ii)
Unsecured Claims in respect of which Rights are to be so distributed, in either
case without entering into a Tracking Agreement with its transferee or
transferees (any Rights so transferred and any Rights distributed in respect of
Allowed Claims so transferred, together with any Rights so transferred and any
Rights distributed in respect of Allowed Claims so transferred by the Other
Standby Purchasers pursuant to Section 3(b) of the Other Standby Purchase
Commitments, being referred to herein collectively as "Untracked Rights"). Any
Rights that remain unexercised upon expiration thereof will be deemed to be
"Section 3(b) Rights" up to, but not exceeding, the amount of Untracked Rights.
The Section 3(b) Rights shall be exercised as follows prior to the application
of Section 1(c) above and Section 1(c) of the Other Standby Purchase
Commitments: (A) the Standby Purchaser and the Other Standby Purchasers will
first be given the opportunity to purchase for cash (based on the Subscription
Price payable upon exercise of such Rights) units consisting of shares of Arch
Common Stock and Arch Warrants underlying a number of unexercised Rights up to
the amount of Section 3(b) Rights in accordance with the percentages set forth
in Column D of Annex I hereto and (B) to the extent such units are not so
-------
purchased, the Standby Purchaser and any Other Standby Purchasers that are
responsible for the existence of the Section 3(b) Rights will be required to
purchase such units pro rata based on the number of Section 3(b) Rights
resulting from their respective transfers. Nothing in this Section 3(b) will in
any way reduce the commitment of the Standby Purchaser specified in Section 1(c)
above or the Unexercised Rights Commitment Amount as set forth in Annex I
-------
hereto.
4. The Closing. (a) Notwithstanding anything to the contrary herein
-----------
contained or the terms of the Rights or the Plan, subject to the conditions set
forth herein, on the Effective Date the Standby Purchaser, in satisfaction of
the Commitment, will deliver at the Closing (i) the aggregate Subscription Price
payable upon exercise of any Rights exercised by it and (ii) the purchase price
payable in consideration of any shares of Existing Arch Common Stock or, if
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
applicable, Arch Class B Common Stock and Arch Warrants to be otherwise
purchased by it pursuant to the Commitment; provided, however, that, if
-------- -------
requested by the Standby Purchaser in writing at least two business days prior
to the Effective Date, any cash to be distributed to the Standby Purchaser in
respect of Allowed Secured Claims pursuant to the Plan will, prior to the
distribution thereof pursuant to the Plan and in accordance with the instruction
included in such written request, be first applied, on behalf of the Standby
Purchaser, to the payment of such amounts payable on the Effective Date as
provided in this Section 4(a).
(b) Upon payment of the amounts payable as provided in Section 4(a),
on the Effective Date at the Closing Arch will deliver to the Standby Purchaser
(or its designees) certificates representing the shares of Existing Arch Common
Stock, shares of Arch Class B Common Stock, if applicable, and the Arch
Warrants, in each case, (i) issuable upon exercise of any Rights exercised by
the Standby Purchaser or (ii) otherwise purchased by the Standby Purchaser
pursuant to the Commitment.
(c) Arch will deliver to the Standby Purchaser at least five business
days prior to the Effective Date a written notice which shall (i) specify the
amounts payable at the Closing by it in satisfaction of the Commitment, (ii)
specify the date on which the Effective Date is to occur and the last date on
which the notice referred to in Section 4(d) may to be delivered, and (iii)
indicate the matters required to be addressed in such notice.
(d) At least two business days prior to the Effective Date, the
Standby Purchaser will deliver to Arch and MobileMedia a written notice which
shall set forth the number of shares of Existing Arch Common Stock beneficially
owned by it as of such date. During the period from the date of such notice
through the Effective Date, neither the Standby Purchaser nor any affiliate
thereof shall acquire beneficial ownership of, or any rights to acquire, any
additional shares of Existing Arch Common Stock or any Unsecured Claim.
5. Certain Conditions. The Commitment is subject to the conditions that:
------------------
(a) (i) the Confirmation Order (as defined in the Plan), in a form
reasonably satisfactory to the Standby Purchaser, shall have been entered
by the Bankruptcy Court (as defined in the Plan) and (ii) such Confirmation
Order shall have become a Final Order (as defined in Section 5.1(h) of the
Merger Agreement); provided, however, that (A) the Standby Purchaser may
-------- -------
not assert the condition contained in clause (ii) above if each of the
Other Standby Purchasers that is not affiliated with the Standby Purchaser
(each, an "Unaffiliated Standby Purchaser"), acting in good faith, shall
have waived the condition contained in Section 5(a) of the Other Standby
Purchase Commitments to which such
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 7
Unaffiliated Standby Purchaser is a party and (B) the Standby Purchaser may
not assert the condition contained in either clause (i) or clause (ii)
above if the sole reason for the failure of such condition to be satisfied
is the failure or the threatened failure of the Standby Purchaser or any of
its affiliates to fulfill the Commitment;
(b) the satisfaction or, with the written consent of the Standby
Purchaser, waiver of all conditions precedent to the obligations of each of
the parties to the Merger Agreement contained in the Merger Agreement and
all conditions precedent to the effectiveness of the Plan contained in the
Plan; provided, however, that (i) the conditions contained in Section
-------- -------
5.1(e) and (h), Section 5.2(a), (b), (c), (d) and (e) and Section 5.3(a),
(b), (c) and (e) of the Merger Agreement (collectively, the "Unilateral
Conditions") may be waived without the written consent of the Standby
Purchaser and (ii) the Standby Purchaser may not assert the condition
contained in this clause (b) if the sole reason for the failure of such
condition to be satisfied is the failure or the threatened failure of the
Standby Purchaser or any of its affiliates to fulfill the Commitment;
(c) there shall be effective under the Securities Act, a registration
statement (the "Shelf Registration Statement") covering the resale by the
Standby Purchaser of (i) all shares of Existing Arch Common Stock, all
shares of Arch Class B Common Stock, if applicable, and all Arch Warrants
received by the Standby Purchaser as a result of the transactions
contemplated by the Plan (including those received upon the exercise of
Rights and pursuant to this letter agreement) and (ii) all shares of
Existing Arch Common Stock issuable upon conversion of any such shares of
the Arch Class B Common Stock or exercise of any such Arch Warrants (the
securities referred to in the foregoing clauses (i) and (ii) are referred
to herein as the "Registrable Securities");
(d) Arch shall have executed and delivered to the Standby Purchaser a
registration rights agreement in the form attached as Exhibit C to the
Merger Agreement (the "Registration Rights Agreement") granting the Standby
Purchaser certain demand and piggyback registration rights with respect to
the Registrable Securities;
(e) any and all amendments or modifications to the Merger Agreement or
any exhibit or schedule thereto (including without limitation the Plan, the
Arch Charter Amendment, the Arch Warrant Agreement and the Registration
Rights Agreement) on or after the date hereof and any consents or waivers
delivered on or after the date hereof by Arch or MobileMedia to the other
under the Merger Agreement (other than (i) subject to Section 15(a) below,
consents under Section 4.5 of the Merger Agreement or (ii) waivers
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 8
of Unilateral Conditions) shall have been in form and substance reasonably
satisfactory to the Standby Purchaser;
(f) the representations and warranties of Arch contained in this
letter agreement shall be true and correct, in all material respects
(except for the representations and warranties set forth at clauses (a)(v)
and (a)(vi) of Section 9 below, which shall be true and correct in all
respects, and except for the representations and warranties set forth at
clauses (a)(vii) and (a)(viii) of Section 9 below, which shall be
disregarded for purposes of this clause (f) insofar as they relate to
financial projections), on the Effective Date, with the same effect as
though such representations and warranties were made on the Effective Date,
and Arch shall have performed or complied with, in all material respects,
its covenants required to be performed or complied with under this letter
agreement on or prior to the Effective Date (and Arch shall have delivered
to the Standby Purchaser a certificate to the effect that each of the
conditions specified in this clause (f) is satisfied in all respects);
(g) the representations and warranties of MobileMedia contained in
this letter agreement shall be true and correct, in all material respects
(except for the representations and warranties set forth at clauses (b)(v)
and (b)(vi) of Section 9 below, which shall be true and correct in all
respects, and except for the representations and warranties set forth at
clauses (b)(vii) and (b)(viii) of Section 9 below, which shall be
disregarded for purposes of this clause (f) insofar as they relate to
financial projections), on the Effective Date, with the same effect as
though such representations and warranties were made on the Effective Date,
and MobileMedia shall have performed or complied with, in all material
respects, its covenants required to be performed or complied with, under
this letter agreement on or prior to the Effective Date (and MobileMedia
shall have delivered to the Standby Purchaser a certificate to the effect
that each of the conditions specified in this clause (g) is satisfied in
all respects);
(h) simultaneously with the transactions contemplated by Section 4
above, Arch shall have performed its obligation under clause (e) of Section
1.3 of the Merger Agreement and any debt financing (other than secured bank
financing) obtained by Arch to enable it to do so shall have terms no less
favorable to Arch than those set forth in the Bridge Commitment Letter;
provided, however, that the Standby Purchaser may not assert the condition
-------- -------
contained in this clause (h) if the sole reason for the failure of such
condition to be satisfied is the failure or threatened failure of the
Standby Purchaser or any of its affiliates to fulfill the Commitment;
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 9
(i) simultaneously with the transactions contemplated by Section 4
above, each of the Other Standby Purchasers shall have fulfilled its
commitment under the Other Standby Purchase Commitment to which it is a
party, and, if applicable, any other person having a commitment
contemplated by Section 13(a) hereof shall have fulfilled such commitment;
(j) (i) the shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement shall be so issued and distributed pursuant to an exemption from
registration under the Securities Act provided by Section 1145 of the
Bankruptcy Code, and (ii)(A) the issuance of the Rights, (B) the issuance
of the shares of Existing Arch Common Stock, the shares of Arch Class B
Common Stock, if applicable, and the Arch Warrants upon exercise of the
Rights, (C) the issuance to the Standby Purchaser of the shares of Existing
Arch Common Stock, the shares of Arch Class B Common Stock, if applicable,
and the Arch Warrants as contemplated by Section 1 and Section 3 above and
the Arch Warrants as contemplated by Section 7 below, and (D) the issuance
of Existing Arch Common Stock upon exercise of the Arch Warrants or
conversion of Arch Class B Common Stock, if applicable, shall be covered
by the Registration Statement, the Registration Statement shall have been
declared effective and no stop order with respect thereto shall be in
effect;
(k) (i) the FCC Grant shall have been issued by the FCC and (ii) such
FCC Grant shall have become a Final Order (as defined in Section 5.1(e) of
the Merger Agreement); provided, however, that (A) the Standby Purchaser
-------- -------
may not assert the condition contained in clause (ii) above if each of the
Unaffiliated Standby Purchasers, acting in good faith, shall have waived
the condition contained in Section 5(k) of the Other Standby Purchase
Commitment to which such Unaffiliated Standby Purchaser is a party or (B)
the Standby Purchaser may not assert the condition contained in either
clause (i) or clause (ii) above if the sole reason for the failure of such
condition to be satisfied is an appeal, a motion for reconsideration or
similar action taken by any present or former officer of any Debtor
considered or determined by the FCC to be an alleged or actual wrongdoer
for purposes of the FCC Proceeding;
(l) any applicable waiting period under the HSR Act shall have
expired or been terminated early; and
(m) Arch shall have filed with the SEC no later than Friday, August
21, 1998 a preliminary Proxy Statement which shall not include any
information that a reasonable investor would consider important in
determining whether to make an investment
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 10
decision regarding a purchase of Existing Arch Common Stock and would view
its disclosure as significantly altering the total mix of information
otherwise contained therein, which information is not included in the Draft
Proxy Statement; provided, however, that the Standby Purchaser may not
-------- -------
assert the condition in this clause (m) unless (i) the information with
respect to which the Standby Purchaser seeks to assert such condition
relates to information other than the descriptions of the Merger, the Plan
and the other exhibits thereto contained in the preliminary Proxy Statement
and (ii) such condition is asserted by the Standby Purchaser not later than
two business days after Arch delivers to the Standby Purchaser a copy of
the preliminary Proxy Statement as filed with the SEC indicating the
changes therein from the Draft Proxy Statement (which copy Arch will
deliver as promptly as practicable following filing the same with the SEC).
The Standby Purchaser hereby acknowledges and agrees that (i) the entities with
an asterisk next to their names on Annex I hereto (the "Affiliated Standby
-------
Purchasers") shall be deemed to be affiliated with each other for purposes of
clauses (a) and (k) above and clause (iii) of Section 6 below, and (ii) the
Affiliated Standby Purchasers will act jointly with respect to any decision to
waive the condition contained in any such clause and the corresponding clause
contained in the Other Standby Purchase Commitments to which such Affiliated
Standby Purchasers are parties (with the vote of the Affiliated Standby
Purchasers holding at least 85% of the aggregate amount of Unsecured Claims held
by such Affiliated Standby Purchasers to control with respect to the taking of
any such action).
6. Additional Condition. The Commitment is subject to the further
--------------------
condition that there shall not have occurred between the Buyer Balance Sheet
Date and the Confirmation Date, and, if the Effective Date does not occur within
90 days following the Confirmation Date, between the Buyer Balance Sheet Date
and the Effective Date (i) any event or events (other than events which affect
generally the economy or the industry in which Buyer and MobileMedia conduct
their respective businesses) which has had or would have a material adverse
effect on the business, assets (including licenses, franchise and other
intangible assets), financial condition, operating income or prospects
(determined in each case, where applicable, in accordance with generally
accepted accounting principles and in a manner consistent with the past
practices of Arch and MobileMedia) of Arch, MobileMedia and their respective
subsidiaries, taken as a whole (collectively, the "Combined Company") (a
"Combined Company Material Adverse Effect"), (ii) any event or events involving
a regulatory or statutory change and affecting generally the industry in which
Arch and MobileMedia conduct their respective businesses which would materially
and adversely affect the ability of the Combined Company to operate its
business, or (iii) any event or events affecting generally the industry in which
Arch and MobileMedia conduct their respective business which would materially
and adversely affect the
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 11
ability of the Combined Company to operate its business; provided, however, that
-------- -------
the Standby Purchaser may not assert the condition contained in this clause
(iii) if each of the Unaffiliated Standby Purchasers, acting in good faith,
shall have waived the condition in Section 6(iii) of the Other Standby Purchase
Commitment to which such Unaffiliated Standby Purchaser is a party.
7. Consideration for the Commitment. In consideration for the
--------------------------------
Commitment, on the Effective Date at the Closing the Standby Purchaser will
receive its pro rata share of Arch Warrants entitling the holders thereof to
purchase, in the aggregate, a number of shares of Existing Arch Common Stock
equal to 2.50% of the issued and outstanding shares of Existing Arch Common
Stock and, if applicable, Arch Class B Common Stock, computed on a Fully Diluted
Basis (as defined in the Plan) on the date the "Buyer Market Price" is
determined in accordance with Schedule II to the Merger Agreement giving effect
to the Plan as if the Effective Date had occurred on such date and assuming
21,067,110 shares of Existing Arch Common Stock are issued and outstanding
immediately prior thereto. Such Arch Warrants will be delivered to the Standby
Purchaser and the Other Standby Purchasers, in accordance with the percentages
specified in Column D of Annex I hereto.
-----
8. Satisfaction of the Commitment. The Standby Purchaser may, in its
------------------------------
sole discretion, satisfy the Commitment directly and/or indirectly through one
or more of its affiliates, separate accounts within its control or investment
funds under its or its affiliates' management.
9. Representations and Warranties. (a) Arch hereby represents and
------------------------------
warrants to the Standby Purchaser that:
(i) Arch is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to execute, deliver and
perform its obligations hereunder and to consummate the transactions
contemplated hereby;
(ii) Subject to the approval of the Buyer Charter Amendment and
the Buyer Share Issuance by the Stockholders of Arch, the execution,
delivery and performance of this letter agreement by Arch and the
consummation by Arch of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the
part of Arch;
(iii) This letter agreement constitutes the legal, valid and
binding obligation of Arch, enforceable against Arch in accordance
with its terms;
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 12
(iv) Subject to entry of the Certification Order, and except as
described in Section 3.3 of the Buyer Disclosure Schedule and except
for the applicable requirements of the Securities Act, the Exchange
Act and any applicable state and foreign securities laws, the HSR Act,
the Communications Act and the regulations of the FCC, state public
utility, telecommunications or public service laws and the Bankruptcy
Code, the Confirmation Order and the Amended Plan (collectively, the
"Applicable Requirements"), the execution, delivery and performance of
this letter agreement by Arch and the consummation by Arch of the
transactions contemplated hereby in accordance with the terms hereof
do not and will not conflict with, violate or constitute a breach of
any material contract, agreement or instrument by which Arch is bound
or any judgment, order, decree, law, statute, rule, regulation or
other judicial or governmental restriction to which Arch is subject;
(v) Except as described in the Buyer Disclosure Schedule, the
representations and warranties of Arch contained in the Merger
Agreement (other than those contained in Sections 3.6, 3.7, 3.26 and
3.27 thereof), which representations and warranties shall be deemed
for purposes of this clause (v) not to include any qualification or
limitation with respect to materiality (whether by reference to "Buyer
Material Adverse Effect" or otherwise), are true and correct, except
where the matters in respect of which such representations and
warranties are not true and correct would not have a Buyer Material
Adverse Effect;
(vi) True, complete and correct copies of the following
documents are attached hereto as indicated:
Document Exhibit Hereto
------------------------------------------- --------------
Merger Agreement (including all exhibits A
and schedules thereto)
Buyer Disclosure Schedule B
Other Standby Purchase Commitments C
Certificate of Incorporation of Arch, as D
amended through the date hereof
By-laws of Arch, as amended through the E
date hereof
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 13
Document Exhibit Hereto
------------------------------------------- --------------
Rights Agreement, dated as of October 13, F
1995, between Arch and the Bank of New
York, as Rights Agent, as amended
through the date hereof (the "Rights
Agreement")
Draft of the Proxy Statement dated G
August 18, 1998 (the "Draft Proxy
Statement")
Existing Registration Rights Agreements H
(as defined in Section 9(a)(xi) below),
Bridge Commitment Letter I
(vii) As of the date hereof, the Draft Proxy Statement contains
no untrue statement of a material fact or omits to state any material
fact necessary, in light of the circumstances under which it was made,
in order to make the statements therein not misleading; provided,
however, Arch makes no representation with respect to either (A)
information supplied by MobileMedia for inclusion therein or (B) the
descriptions of the Merger Agreement, the Plan and the other exhibits
to the Merger Agreement, and of this letter agreement and the Other
Standby Purchase Commitments, contained therein;
(viii) No representation or warranty of Arch contained in this
letter agreement, and no statement relating to Arch contained in the
Merger Agreement, the Buyer Disclosure Schedule or any other document,
certificate or other instrument delivered or to be delivered by or on
behalf of Arch pursuant to this letter agreement (including the
definitive Proxy Statement and the Registration Statement as declared
effective by the SEC), contains or will as of the Effective Date
contain any untrue statement of a material fact or omits or will as of
the Effective Date omit to state any material fact necessary, in light
of the circumstances under which it was or will be made, in order to
make the statements herein or therein not misleading;
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 14
(ix) Between the Buyer Balance Sheet Date and the date hereof,
there has not occurred with respect to Arch (A) any event or events
(other than events which affect generally the economy or the industry
in which Arch and MobileMedia conduct their respective businesses)
which has had or would have a Combined Company Material Adverse Effect
or (B) any event or events involving a regulatory or statutory change
and affecting generally the industry in which Arch and MobileMedia
conduct their respective business which would materially and adversely
affect the ability of the Combined Company to operate its business;
(x) The shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the
Merger Agreement and the shares of Existing Arch Common Stock, the
shares of Arch Class B Common Stock, if applicable, and the Arch
Warrants to be issued and delivered as contemplated by Section 1 and
Section 3 above, and the Arch Warrants to be issued as contemplated by
Section 7 above, in each case when so issued and distributed or
delivered, as the case may be, and the shares of Existing Arch Common
Stock issued upon conversion of such shares of Arch Class B Common
Stock, if applicable, when so converted in accordance with the Arch
Charter Amendment, and the shares of Existing Arch Common Stock issued
upon exercise of such Arch Warrants, when issued, paid for and
delivered as provided in the Arch Warrant Agreement, will be duly
authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights; and
(xi) Schedule 9(a)(xi) hereto sets forth a true, complete and
-----------------
correct list of all agreements that are in effect as of the date
hereof pursuant to which the Company has granted any registration
rights to any person or entity (the "Existing Registration Rights
----------------------------
Agreements"), and, except as specified in Schedule 9(a)(xi) hereto,
----------
none of the Existing Registration Rights Agreements is inconsistent
with the rights to be granted to the Standby Purchaser pursuant to the
Registration Rights Agreement.
(b) MobileMedia hereby represents and warrants to the Standby
Purchaser that:
(i) MobileMedia is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and,
subject to the entry of the Confirmation Order, has all requisite
corporate power and authority to
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 15
execute, deliver and perform its obligations hereunder and to consummate
the transactions contemplated hereby;
(ii) Subject to the entry of the Confirmation Order, the
execution, delivery and performance of this letter agreement by MobileMedia
and the consummation by MobileMedia of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on
the part of MobileMedia;
(iii) Subject to the entry of the Confirmation Order and the
effectiveness of the Plan, this letter agreement constitutes the legal,
valid and binding obligation of MobileMedia, enforceable against
MobileMedia in accordance with its terms;
(iv) Subject to entry of the Confirmation Order, and except as
described in Section 2.3 of the Company Disclosure Schedule and except for
the Applicable Requirements, the execution, delivery and performance of
this letter agreement by MobileMedia and the consummation by MobileMedia of
the transactions contemplated hereby in accordance with the terms hereof do
not and will not conflict with, violate, or constitute a breach of any
material contract, agreement or instrument by which MobileMedia is bound or
any judgment, order, decree, law, statute, rule, regulation or other
judicial or governmental restriction to which MobileMedia is subject;
(v) Except as described in the Company Disclosure Schedule,
the representations and warranties of MobileMedia contained in the Merger
Agreement (other than those contained in Sections 2.6, 2.7, 2.23 and 2.24
thereof), which representations and warranties shall be deemed for purposes
of this clause (v) not to include any qualification or limitation with
respect to materiality (whether by reference to "Company Material Adverse
Effect" or otherwise), are true and correct, except where the matters in
respect of which such representations and warranties are not true and
correct would not have a Company Material Adverse Effect;
(vi) True, complete and correct copies of the following
documents are attached hereto as indicated:
Document Exhibit Hereto
- ------------------------------------------- --------------
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 16
Merger Agreement (including all exhibits A
and schedules thereto)
Other Standby Purchase Commitments C
Company Disclosure Schedule J
Agreement, dated the date hereof (the K
"Debtor/Committee Agreement"), between
MobileMedia, on behalf of itself and the
other Debtors, and the Committee (as
defined in the Plan)
(vii) As of the date hereof, the information included in the
Draft Proxy Statement that was provided for inclusion therein by
MobileMedia contains no untrue statement of a material fact or omits to
state any material fact necessary, in light of the circumstances under
which it was made, in order to make the statements therein not misleading;
(viii) No representation or warranty of MobileMedia contained
in this letter agreement, and no statement relating to MobileMedia
contained in the Merger Agreement, the Company Disclosure Schedule or any
other document, certificate, or other instrument delivered or to be
delivered by or on behalf of MobileMedia pursuant to this letter agreement,
contains or will as of the Effective Date contain any untrue statement of a
material fact or omits or will as of the Effective Date omit to state any
material fact necessary, in light of the circumstances under which it was
or will be made, in order to make the statements herein or therein not
misleading; and
(ix) Between the Company Balance Sheet Date and the date
hereof, there has not occurred with respect to MobileMedia (A) any event or
events (other than events which affect generally the economy or the
industry in which Arch and MobileMedia conduct their respective businesses)
which has had or would have a Combined Company Material Adverse Effect or
(B) any event or events involving a regulatory or statutory change and
affecting generally the industry in which Arch and MobileMedia conduct
their respective businesses which would materially and adversely affect the
ability of the Combined Company to operate its business.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 17
(c) The Standby Purchaser hereby represents and warrants to each of
Arch and MobileMedia that:
(i) The Standby Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Maryland and has all requisite corporate power and authority to execute,
deliver and perform its obligations hereunder and to consummate the
transactions contemplated hereby;
(ii) The execution, delivery and performance of this letter
agreement by the Standby Purchaser and the consummation by the Standby
Purchaser of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of the
Standby Purchaser;
(iii) This letter agreement constitutes the legal, valid and
binding obligation of the Standby Purchaser, enforceable against the
Standby Purchaser in accordance with its terms;
(iv) Except for the Applicable Requirements, the execution,
delivery and performance of this letter agreement by the Standby Purchaser
and the consummation by the Standby Purchaser of the transactions
contemplated hereby in accordance with the terms hereof do not and will not
conflict with, violate or constitute a breach of any material contract,
agreement, or instrument by which the Standby Purchaser is bound or any
judgment, order, decree, law, statute, rule, regulation or other judicial
or governmental restriction to which the Standby Purchaser is subject,
except where such conflicts, violations or breaches, individually or in the
aggregate, would not have a material adverse effect on the ability of the
Standby Purchaser to consummate the transactions contemplated hereby;
(v) No representation or warranty of the Standby Purchaser
contained in this letter agreement, and no statement contained in any other
document, certificate or other instrument delivered or to be delivered by
or on behalf of the Standby Purchaser pursuant to this letter agreement,
contains or will as of the Effective Date contain any untrue statement of a
material fact or omits or will as of the Effective Date omit to state any
material fact necessary, in light of the circumstances under which it was
or will be made, in order to make the statements herein or therein not
misleading; and
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 18
(vi) As of the date hereof, the Standby Purchaser holds the
aggregate stated principal amount of 9 3/8% Notes and 10 1/2% Notes (as
such terms are defined in the Plan) indicated under the Standby Purchaser's
name and address on Annex I hereto.
-------
(d) None of the representations and warranties made herein or in any
certificate to be delivered as contemplated hereby will survive the Closing.
10. Certain Covenants. (a) Each of Arch and MobileMedia (i) acknowledges
-----------------
that the Debtors have agreed to provide to the Committee copies of any and all
notices, documents or information to be provided by or made available by the
Debtors to Arch pursuant to the Merger Agreement or provided by or made
available by Arch to the Debtors pursuant to the Merger Agreement, promptly
after the receipt or provision thereof by or to the Debtors, as applicable, and
that the Committee, pursuant to the undertaking attached as Annex II hereto, has
--------
agreed to distribute copies of the same to the Standby Purchaser and to take
certain other actions and (ii) agrees that the Committee may do so.
(b) Without limiting the generality of the foregoing clause (a) of
this Section 10, Arch will, before filing the Registration Statement with the
SEC, furnish to the Standby Purchaser and its counsel copies of the Registration
Statement (including all exhibits thereto) proposed to be filed, will provide
the Standby Purchaser and its counsel a reasonable opportunity to review and
comment on such Registration Statement and will not file such Registration
Statement if the Standby Purchaser shall reasonably object thereto within three
calendar days after the receipt thereof.
(c) Arch will deliver to the Standby Purchaser copies of the
definitive Proxy Statement in the form filed with the SEC and mailed to
Stockholders of Arch and the Registration Statement in the form declared
effective by the SEC.
(d) Without limiting the generality of the foregoing clause (a) of
this Section 10, Arch will, before filing the Shelf Registration Statement or
any pre-effective amendment thereto, furnish to the Standby Purchaser and its
counsel copies of the Shelf Registration Statement or such pre-effective
amendment thereto, as applicable, proposed to be filed, will provide Standby
Purchaser and its counsel with a reasonable opportunity to review and comment on
the Shelf Registration Statement or such pre-effective amendment thereto, as
applicable, and will not file the Shelf Registration Statement or such pre-
effective amendment thereto, as applicable, to which the Standby Purchaser or
its counsel shall reasonably object within three business days after the receipt
thereof. The Standby Purchaser will furnish to Arch
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 19
such information regarding the Standby Purchaser and its plan and method of
distribution of the Registrable Securities as Arch may reasonably request in
writing in connection with the preparation of the Shelf Registration Statement.
(e) Each of Arch, MobileMedia and the Standby Purchaser will use its
reasonable best efforts to obtain all approvals, waivers, consents and other
authorizations required by the Applicable Requirements, including without
limitation the applicable requirement of the HSR Act, necessary in connection
with the performance of this letter agreement by the Standby Purchaser and the
consummation by the Standby Purchaser of the transactions contemplated hereby.
(f) Arch will, as requested by the Standby Purchaser, either pay
directly to the appropriate Governmental Entity, on behalf of the Standby
Purchaser, or reimburse the Standby Purchaser for, any fees required to be paid
by the Standby Purchaser in connection with its compliance with the applicable
requirements of the HSR Act. In addition, following the Effective Date, Arch
will reimburse, promptly upon written request (accompanied by appropriate
supporting documentation), costs and expenses (including without limitation
reasonable fees and expenses of legal counsel, including a reasonable allocation
with respect to the cost of any internal counsel), incurred by the Standby
Purchaser in connection with this letter agreement and the transactions
contemplated hereby; provided, however, the reimbursable costs and expenses of
-------- -------
the Affiliated Standby Purchasers shall not exceed $100,000 in the aggregate.
11. Certain Prohibited Transactions. The Standby Purchaser hereby
-------------------------------
covenants that, from and after the date hereof, so long as its commitment
hereunder remains in effect, it will not sell, or enter into any agreement
relating to the sale (including without limitation any short sale, equity swap
or other hedge position) of, any shares of Arch capital stock or, except as
otherwise expressly contemplated by this Section 11, engage in any other
disposition of such shares that might negatively affect the market price of such
shares; provided, however, that the foregoing provision will not apply to any
-------- -------
agreement entered into prior to the date hereof (if not entered into in
contemplation of the transactions contemplated by the Plan, the Merger Agreement
or this letter agreement) or any transaction effected pursuant to the terms
thereof. Notwithstanding the immediately preceding sentence, but subject to
Section 3 above and Section 12 below, the Standby Purchaser may at any time, as
it may determine in its sole and absolute discretion, sell or otherwise
transfer, or acquire, or enter into any agreement relating to the sale, transfer
or acquisition of, Rights or Unsecured Claims. The Standby Purchaser
acknowledges that it has received copies of the Rights Agreement and the
amendment thereto attached as Exhibit D to the Merger Agreement (the "Rights
Plan Amendment"). Arch hereby covenants that it will not, without the prior
written consent of the Standby Purchaser, further amend the Rights Agreement
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 20
in any manner that would eliminate or reduce the ownership thresholds applicable
to the Standby Purchaser thereunder; provided, however, that this sentence shall
-------- -------
cease to be of any further force or effect at such time after the Effective Date
as the Standby Purchaser ceases to beneficially own in the aggregate at least
10.0% of the outstanding shares of Existing Arch Common Stock.
12. Voting Agreement. The Standby Purchaser hereby covenants that (a) so
----------------
long as the Bankruptcy Court approves the Disclosure Statement not later than
December 31, 1998 and the Confirmation Order is entered not later than March 31,
1999, (i) it will vote, or cause to be voted, for the acceptance of the Plan all
Unsecured Claims held by it on the date fixed for determining holders of
Unsecured Claims entitled to vote for acceptance or rejection of the Plan (the
"Record Date"), (ii) it will not withdraw or otherwise revoke, or cause to be
withdrawn or otherwise revoked, such vote for the acceptance of the Plan, and
(iii) it will not grant, or cause to be granted, to any other person or entity
any proxy to vote with respect to any such Unsecured Claims (other than a proxy
to vote for the acceptance of the Plan) and (b) except with respect to accounts
which cease to be within the Standby Purchaser's control and investment funds
which cease to be under its management, it will not, on or prior to the Record
Date, sell or otherwise transfer any Unsecured Claims held by it unless the
transferee shall have agreed in writing in the form attached as Annex III hereto
---------
(i) to vote for the acceptance of the Plan with respect to such Unsecured Claims
and (ii) not to sell or otherwise transfer such Unsecured Claims unless its
transferee shall agree to be bound in the same manner provided in this clause
(b) with respect to such Unsecured Claims.
13. Other Standby Purchase Commitments. (a) Each of Arch and MobileMedia
----------------------------------
covenants that it will not agree to any amendment or modification to any of the
letter agreements, dated the date hereof, among Arch, MobileMedia and any of the
Other Standby Purchasers (the "Other Standby Purchase Commitments"), without the
prior written consent of the Standby Purchaser. Notwithstanding the immediately
preceding sentence, Arch and MobileMedia may, without the prior written consent
of the Standby Purchaser, agree to an amendment or modification to any of the
Other Standby Purchase Commitments to the extent that (i) such amendment or
modification has the sole effect of reducing or eliminating the financial
commitment thereunder and (ii) simultaneously therewith, a qualified
institutional buyer (as such term is defined in Rule 144A promulgated under the
Securities Act) reasonably acceptable to the Standby Purchaser makes a
commitment in a corresponding amount on terms identical in all material respects
to those set forth in such Other Standby Purchase Commitment.
(b) The Standby Purchaser will have no liability for the commitment
of any Other Standby Purchaser under any Other Standby Purchase Commitments or
the commitment of any other person contemplated by Section 13(a) above.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 21
14. Certain Notices; Certain Information. (a) Each of Arch and
------------------------------------
MobileMedia hereby covenants that it will promptly deliver to the Standby
Purchaser, and the Standby Purchaser hereby covenants that it will promptly
deliver to Arch and MobileMedia, written notice of any matter, event or
development that would (i) render any representation or warranty made by it
herein inaccurate or incomplete in any respect or (ii) constitute or result in a
breach by it of, or a failure by it to comply with, any covenant herein
applicable to it.
(b) Each of Arch and MobileMedia will furnish the Standby Purchaser
with such information regarding itself as the Standby Purchaser may reasonably
request.
15. Certain Consent Rights. (a) Notwithstanding anything to the contrary
----------------------
herein contained, except as expressly contemplated by the Merger Agreement or
the Plan, Arch hereby covenants that it will not take, or agree in writing to
take, any action contemplated by Section 4.5(b)(ii), (iii), (iv), (viii) or (ix)
of the Merger Agreement without the prior written consent of the Standby
Purchaser.
(b) Arch hereby covenants that, without the prior written consent of
the Standby Purchaser, it will not, prior to the Effective Date, enter into any
agreement with respect to its securities, or amend any existing agreement with
respect to its securities (including without limitation the Existing
Registration Rights Agreements) in any manner inconsistent with the rights to be
granted to the Standby Purchaser pursuant to the Registration Rights Agreement.
16. Removal of Legends. In the event that, following the
------------------
transactions contemplated by the Merger Agreement, the Plan and this letter
agreement, any certificates evidencing securities ("Certificates") of Arch held
by the Standby Purchaser bear a restrictive legend then:
(a) if the Standby Purchaser delivers to Arch (i) a certificate, in a
form reasonably satisfactory to Arch, certifying that securities evidenced
by such Certificate have been transferred pursuant to a registration
statement that is effective under the Securities Act or (ii) a certificate,
in a form reasonably satisfactory to Arch, certifying that securities
evidenced by such Certificate have been transferred without registration in
accordance with the requirements of Rule 144 under the Securities Act, Arch
will, or will instruct its transfer agent to, issue upon surrender of such
Certificate one or more new Certificates evidencing the securities so
transferred evidenced by the Certificate so surrendered, which new
Certificate or Certificates will not bear any such legend; and
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 22
(b) if the Standby Purchaser delivers to Arch an opinion of counsel
to the Standby Purchaser (which may be internal counsel to the Standby
Purchaser) that, in the opinion of such counsel, such legend is not, or is
no longer, required to ensure compliance with the Securities Act, Arch
will, or will instruct its transfer agent to, issue upon surrender of such
Certificate one or more new Certificates evidencing the securities
evidenced by the Certificate so surrendered, which new Certificate or
Certificates will not bear any such legend.
* * * * *
If you are in agreement with the foregoing, please execute the enclosed
copy of this letter agreement as indicated and return it to the undersigned.
This letter agreement will become effective upon (i) the delivery to us of
executed counterparts of this letter agreement by each of you and (ii) the
execution and delivery of each of the Other Standby Purchase Commitments by each
of the parties thereto. Once effective, this letter agreement will terminate on
(i) the date on which the Debtor Tower Agreement is terminated, unless prior to
or simultaneously with such termination, MobileMedia shall have entered into a
definitive agreement which shall be comparable in form and substance to the
Debtor Tower Agreement and a copy of which shall be delivered to the Standby
Purchaser promptly following execution thereof, with a bona fide third-party
purchaser providing for a sale to such third party of the assets or
substantially all of the assets to be sold to Pinnacle pursuant to the Debtor
Tower Agreement resulting in net proceeds to MobileMedia of not less than $165.0
million (an "Acceptable Sale"), (ii) December 31, 1998, unless the Closing (as
defined in the Debtor Tower Agreement) or the closing of an Acceptable Sale
shall have occurred on or before such date, (iii) March 31, 1999, unless the
Confirmation Order shall have been entered by the Bankruptcy Court on or before
such date, (iv) June 30, 1999, unless the effectiveness of the Plan occurs on or
before such date, or (v) if not theretofore terminated pursuant to one of the
foregoing clauses, the date on which the Merger Agreement is terminated in
accordance with the terms thereof.
All notices and other communications hereunder must be in writing. Any
notice or other communication hereunder will be deemed duly delivered three
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or two business days after it is sent via a
reputable international overnight courier service, in each case to the intended
recipient at the address therefor set forth on the signature page hereto. Any
party hereto may give any notice or other communication hereunder by personal
delivery or telecopy, but no such notice or other communication will be deemed
to have been duly given unless and until it actually is received by the party
for whom it is intended. Any party may change the address to
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 23
which notices and other communications hereunder are to be delivered by giving
the other parties notice in the manner herein set forth.
This letter agreement represents the final agreement among the parties
hereto with respect to the subject matter hereof and may not be contradicted by
evidence of prior or contemporaneous agreements of the parties. There are no
unwritten oral agreements between the parties relating to the subject matter
hereof. This letter agreement may not be amended or modified except by a
written instrument signed by each of the Standby Purchaser, Arch and
MobileMedia.
This letter agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to its principles of conflicts
of law.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 24
This letter agreement may be executed in counterparts which, taken
together, shall constitute one and the same instrument.
Very truly yours,
NORTHWESTERN MUTUAL SERIES FUND, INC.
FOR THE HIGH YIELD BOND PORTFOLIO
By: /s/ Timothy S. Collins
-------------------------------------
Name: Timothy S. Collins
Its: Vice President
Address: c/o The Northwestern Mutual Life
Insurance Company
720 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Securities Department
ACCEPTED AND AGREED TO:
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
-------------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 25
Attn: Jay E. Bothwick
Subject to entry of the Confirmation Order:
MOBILEMEDIA COMMUNICATIONS, INC.
By: /s/ Joseph A. Bondi
------------------------------------
Name: Joseph A. Bondi
Its: Chairman - Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman - Restructuring
With copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, New York 10022
Attn: James D. Johnson
<PAGE>
ANNEX I
-------
<TABLE>
<CAPTION>
COMMITMENT AMOUNTS
-------------------
(dollars in millions)
Column A Column B Column C Column D
-------- -------- -------- --------
Rights Exercise Unexercised Rights Total
Commitment Commitment Commitment Commitment
Name and Address of Standby Purchasers Amount (1) Amount (2) Amount Percentage
- -------------------------------------- ---------------- ------------------- ---------- ------------
<S> <C> <C> <C> <C>
W.R. Huff Asset Management Co., L.L.C., as $ 39.27 $ 35.80 $ 75.07 34.60%
agent for its affiliates and discretionary
accounts
67 Park Place, 9th Floor
Morristown, New Jersey 07960
Stated Principal Amount of 9 3/8% Notes:
$ 57,847,000
- ----------------
Stated Principal Amount of 10 1/2% Notes:
$ 27,970,000
- ----------------
The Northwestern Mutual Life Insurance $ 10.95 $ 9.97 $ 20.92 9.64%
Company*
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8% Notes:
$ 19,776,000
- ----------------
Stated Principal Amount of 10 1/2% Notes:
$ 3,350,000
- ----------------
The Northwestern Mutual Life Insurance $ 2.65 $ 2.42 $ 5.07 2.34%
Company for its Group Annuity Separate
Account*
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8% Notes:
$ -0-
- ----------------
Stated Principal Amount of 10 1/2% Notes
$ 7,000,000
- ----------------
Northwestern Mutual Series Fund, Inc. for the $ .75 $ .69 $ 1.44 0.66%
High Yield Bond Portfolio*
</TABLE>
__________________
* The Northwestern Mutual Life Insurance Company, The Northwestern Mutual Life
Insurance Company for its Group Annuity Separate Account and Northwestern Mutual
Series Fund, Inc. for the High Yield Bond Portfolio are affiliated entities for
purposes of clauses (a) and (k) of Section 5 and clause (iii) of Section 6.
<PAGE>
<TABLE>
<CAPTION>
COMMITMENT AMOUNTS
-------------------
(dollars in millions)
Column A Column B Column C Column D
-------- -------- -------- --------
Rights Exercise Unexercised Rights Total
Commitment Commitment Commitment Commitment
Name and Address of Standby Purchasers Amount (1) Amount (2) Amount Percentage
- -------------------------------------- ---------------- ------------------- ---------- ------------
<S> <C> <C> <C> <C>
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8% Notes:
$ -0-
- -----------------
Stated Principal Amount of 10 1/2% Notes:
$ 2,000,000
- -----------------
Credit Suisse First Boston Corporation $ 29.48 $ 26.88 $ 56.36 25.97%
11 Madison Avenue, 4th Floor
New York, New York 10010
Stated Principal Amount of 9 3/8% Notes:
$ 32,453,000
- -----------------
Stated Principal Amount of 10 1/2% Notes:
$ 35,930,000
- -----------------
Whippoorwill Associates, Inc., as general partner $ 30.42 $ 27.72 $ 58.14 26.79%
and/or agent for the parties set forth on
Schedule A hereto in the percentages noted
thereon
11 Martine Avenue
White Plains, New York 10606
Stated Principal Amount of 9 3/8% Notes:
$ 37,855,000
- -----------------
Stated Principal Amount of 10 1/2% Notes:
$ 31,410,000
- -----------------
Total: $113.52 $103.48 $217.00 100.00%
------- ------- -------
</TABLE>
_________________
(1) The "Rights Exercise Commitment Amount", for each Standby Purchaser, shall
mean an amount equal to the product of (i) the Rights Subscription Price (as
defined in Schedule II to the Merger Agreement) and (ii) the number of
Rights issuable in respect of an amount of Allowed Unsecured Claims derived
from the principal amount of 9 3/8% Notes and the 10 1/2% Notes indicated
under the Standby Purchaser's name on this Annex I held by such Standby
Purchaser on the date hereof. The dollar amounts set forth under Column A
are estimates provided for illustrative purposes only, based on the
assumptions that (x) there is a total of $475 million of Allowed Unsecured
Claims, (y) there is no Rights Reserve (as defined in the Plan) and (z) the
aggregate amount of Subordinated Noteholder Claims (as defined in the Plan)
is $441,819,762.
(2) The "Unexercised Rights Commitment Amount", for each Standby Purchaser,
shall mean an amount equal to (i) the Total Commitment Amount indicated in
Column C for such Standby Purchaser less (ii) the Rights Exercise Commitment
Amount for such Standby Purchaser. The dollar amounts set forth under
Column B are estimates provided for illustrative purposes only, based on the
estimates set forth in Column A.
<PAGE>
ANNEX II
--------
UNDERTAKING
-----------
The Committee hereby undertakes to distribute to the Standby Purchaser
(until instructed by the Standby Purchaser to do otherwise) copies of any and
all notices, documents or information to be provided by or made available by the
Debtors to Arch pursuant to the Merger Agreement or provided by or made
available by Arch to the Debtors pursuant to the Merger Agreement that are
received by the Committee pursuant to the Debtor/Committee Agreement as soon as
practicable with its receipt thereof. The Committee hereby further undertakes
to consult with the Standby Purchaser (until instructed by the Standby Purchaser
to do otherwise) prior to delivering any written consent or exercising any other
right of the Committee (other than the distribution of notices, documents or
information to the Standby Purchaser or the Other Standby Purchasers) pursuant
to the Debtor/Committee Agreement or the Plan. The Committee will not enter
into any amendment to the Debtor/Committee Agreement without the prior written
consent of the Standby Purchaser.
THE OFFICIAL COMMITTEE
OF UNSECURED CREDITORS
By: /s/ Bryan E. Bloom
-------------------------------
Its: Chairman
<PAGE>
ANNEX III
---------
VOTING AGREEMENT
----------------
The undersigned transferee of indebtedness of MobileMedia Corporation or
one of its direct or indirect subsidiaries (collectively, "MobileMedia")
described in Schedule A attached hereto (the "Claim"), hereby acknowledges and
----------
agrees as follows:
1. MobileMedia is a debtor-in-possession under Chapter 11 of the
Bankruptcy Code and has proposed a First Amended Joint Plan of
Reorganization dated August __, 1998 (the "Amended Plan").
2. By acquiring the Claim the undersigned may also acquire rights to vote
on the adoption of the Amended Plan.
3. As a condition of the transfer of the Claim, the undersigned hereby
agrees to exercise all voting rights it may have as holder of the
Claim in favor of the Amended Plan unless the Amended Plan shall have
been withdrawn.
4. The undersigned agrees that it shall not subsequently transfer the
Claim or any portion thereof unless and until it obtains from its
transferee a Voting Agreement identical to the form hereof.
IN WITNESS HEREOF, the undersigned transferee has executed this Voting
Agreement this _____ day of __________, 199_.
[TRANSFEREE]
By:____________________________
Title:
Accepted By:
_________________________
[Transferor]
<PAGE>
SCHEDULE A
TO
VOTING AGREEMENT
----------------
[Describe Claim.]
<PAGE>
SCHEDULE 9(a)(xi)
-----------------
Existing Registration Rights Agreement
- --------------------------------------
(1) Registration Rights Agreement, dated as of June 24, 1998, by and among Arch
Communications Group, Inc., Sandler Capital Partner, IV, L.P., Sandler
Capital Partners IV FTE, L.P. Harvey Sandler, John Kornreich, Michael J.
Marocco, Andrew Sandler, South Fork Partners, The Georgica International
Fund Limited, Aspen Partners and Consolidated Press International Limited,
as amended
(2) Registration Rights Agreement, dated as of June 29, 1998, Arch
Communications Group, Inc. Adelphia Communications Corporation and Lisa-
Gaye Shearing
Inconsistencies:
- ---------------
The provisions of the Registration Rights Agreement listed at (2) above are
inconsistent in certain respects with the provisions of the Registration Rights
Agreement.
<PAGE>
CREDIT SUISSE FIRST BOSTON CORPORATION
11 Madison Avenue, Fourth Floor
New York, New York 10010
August 18, 1998
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Commitment to Purchase Stock and Warrants
-----------------------------------------
Gentlemen:
Arch Communications Group, Inc., a Delaware corporation ("Arch"), and
MobileMedia Communications, Inc., a Delaware corporation ("MobileMedia"), intend
to engage in a business combination transaction (the "Combination") as part of a
reorganization (the "Reorganization") of MobileMedia, MobileMedia Corporation,
the sole stockholder of MobileMedia ("Parent"), and all of MobileMedia's
subsidiaries (collectively, the "Debtors") pursuant to chapter 11 of title 11,
United States Code, 11 U.S.C. (S)(S) 101 et seq. (the "Bankruptcy Code"). It is
our understanding that in connection with the Reorganization, among other
things: (a) pursuant to the Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), among Arch, a wholly owned subsidiary of Arch
("Merger Sub"), Parent and MobileMedia, MobileMedia will merge with and into
Merger Sub, with Merger Sub continuing as the surviving corporation and a wholly
owned subsidiary of Arch; (b) pursuant to the Merger Agreement, Arch will make
available for distribution pursuant to a plan of reorganization of the Debtors
in the form attached as Exhibit A to the Merger Agreement, with such amendments
and modifications thereto as are made in a manner consistent with clause (e) of
Section 5 hereto (such plan of reorganization being referred to herein as the
"Plan"), (i) cash, (ii) shares of its Common Stock, par value $.01 per share
("Existing Arch Common Stock"), and (iii) warrants entitling the holders thereof
to purchase shares of Existing Arch Common Stock ("Arch Warrants"), with such
Arch Warrants to be issued pursuant to, and to have the terms set forth in, a
warrant agreement in the form attached as Exhibit B to the Merger Agreement (the
"Arch Warrant Agreement"); (c) holders of unsecured non-priority claims against
the Debtors ("Unsecured Claims"), to the extent such Unsecured Claims are
Allowed (as defined in the Plan), will receive pursuant to the
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
Plan (i) shares of Existing Arch Common Stock and (ii) rights to purchase
("Rights") for cash units consisting of (A) shares of Existing Arch Common Stock
and (B) Arch Warrants; (d) holders of claims arising under or relating to the
Credit Agreement, dated December 4, 1995, as amended, among MobileMedia and the
other parties thereto ("Secured Claims"), to the extent such Secured Claims are
Allowed, will receive pursuant to the Plan cash in an amount equal to 100% of
such claims; (e) all of the outstanding equity interests in MobileMedia and
Parent will be canceled without consideration and Parent will be dissolved; and
(f) the commitments under the DIP Loan Agreement will terminate and all amounts
owed under or in respect of the DIP Loan Agreement will be paid in full in cash.
Terms used herein with initial capital letters that are not otherwise
defined shall have the meanings ascribed to such terms in the Merger Agreement.
1. The Commitment. In connection with the foregoing, Credit Suisse First
--------------
Boston Corporation (the "Standby Purchaser") hereby advises you of its
commitment (the "Commitment"), subject to the conditions set forth herein:
(a) to exercise any Rights distributed to it in respect of its Allowed
Unsecured Claims in accordance with the Plan and not thereafter sold or
transferred as permitted by Section 3 below to purchase units consisting of
shares of Existing Arch Common Stock and Arch Warrants underlying such
Rights, to the extent that the aggregate purchase price payable upon such
exercise, as determined in accordance with Schedule II to the Merger
Agreement (the "Subscription Price"), does not exceed the Rights Exercise
Commitment Amount of the Standby Purchaser as set forth in Annex I hereto;
-------
(b) if (i) the Standby Purchaser sells or otherwise transfers any or
all of (A) the Rights distributed to it in accordance with the Plan or (B)
Unsecured Claims held by it as of the date hereof in respect of which
Rights are to be distributed, in each case as permitted by Section 3 below,
and (ii) the Rights sold or transferred by the Standby Purchaser or the
Rights distributed in respect of Unsecured Claims held by it as of the date
hereof that are hereafter sold or transferred by the Standby Purchaser are
not exercised prior to the expiration thereof (at which time such Rights
will be void and will no longer be exercisable), to purchase for cash
(based upon the Subscription Price payable upon exercise of such Rights)
identical units consisting of shares of Existing Arch Common Stock and Arch
Warrants underlying such unexercised Rights, to the extent that the
aggregate purchase price therefor, together with the aggregate Subscription
Price payable upon exercise of Rights exercised as contemplated by clause
(a) above, does not exceed the Rights Exercise Commitment Amount of the
Standby Purchaser as set forth in Annex I hereto; and
-------
(c) if any Rights distributed in accordance with the Plan (other than
(i) Rights distributed to the Standby Purchaser or the other holders of
Unsecured Claims listed on Annex I
-------
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
hereto (the "Other Standby Purchasers") and retained by them (which Rights
are referred to in Section 1(a) above and Section 1(a) of each of the Other
Standby Purchase Commitments (as defined in Section 13(a) below)) or (ii)
subject to Section 3(b) below, Rights distributed in respect of Unsecured
Claims held by the Standby Purchaser or the Other Standby Purchasers as of
the date hereof that are hereafter sold or transferred by them (which
Rights are referred to in Sections 1(b) and 3 hereof and Section 1(b) and 3
of each of the Other Standby Purchase Commitments)) remain unexercised upon
the expiration thereof (at which time such Rights will be void and will no
longer be exercisable), to purchase for cash (based on the Subscription
Price payable upon exercise of such Rights) pro rata in accordance with and
up to the Unexercised Rights Commitment Amount of the Standby Purchaser as
set forth in Annex I hereto identical units consisting of shares of
-------
Existing Arch Common Stock and Arch Warrants underlying such unexercised
Rights.
2. Arch Class B Common Stock. (a) Notwithstanding anything to the
-------------------------
contrary herein contained, if the purchases by the Standby Purchaser
contemplated by Section 1 above would cause the Standby Purchaser, the Other
Standby Purchasers, and any other persons or entities who, when taken together
with any one or more of the Standby Purchaser and the Other Standby Purchasers,
would constitute a "person" or "group" as used in Section 13(d) or Section 14(d)
of the Exchange Act or Rule 13d-3 or Rule 13d-5 promulgated thereunder, or any
"affiliate" as defined in Rule 405 promulgated under the Securities Act of any
of them (collectively, the "Standby Class B Holders"), in the aggregate, to
beneficially own on the effective date of the Plan (the "Effective Date") shares
representing more than 49.0% of the capital stock of Arch generally entitled to
vote in the election of directors or more than 49.0% of the total voting power
of the capital stock of Arch, Arch will substitute shares of Class B Common
Stock, par value $.01 per share, of Arch ("Arch Class B Common Stock"), with
such Arch Class B Common Stock having the terms set forth in the form of
Certificate of Amendment to Certificate of Incorporation of Arch attached as
Exhibit F to the Merger Agreement (the "Arch Charter Amendment"), for shares of
Existing Arch Common Stock included in the units so purchased on a one-for-one
basis such that on the Effective Date the Standby Class B Holders, in the
aggregate, will beneficially own shares representing not more than 49.0% of the
capital stock of Arch generally entitled to vote in the election of directors
and not more than 49.0% of the total voting power of the capital stock of Arch,
all as provided in the Plan. For purposes of this letter agreement, "beneficial
ownership" shall be determined as provided in Rule 13d-3 and Rule 13d-5
promulgated under the Exchange Act, except that a person or entity shall be
deemed to have "beneficial ownership" of all securities that such person or
entity has the right to acquire, whether such right is exercisable immediately
or only after the passage of time.
(b) For purposes of calculating the percentages referred to in Section
2(a) above, it will be assumed that no additional Unsecured Claims are allowed
after the Effective Date and all of the shares of Existing Arch Common Stock in
the Creditor Stock Pool (as defined in the Plan) are
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
distributed in accordance with the Plan to the holders of Allowed Unsecured
Claims as of the Effective Date.
(c) Substitution of shares of Class B Common Stock as contemplated by
Section 2(a) above will be effectuated as follows:
(i) first, to the extent that the Standby Purchaser or any Other
Standby Purchaser beneficially owns shares of Existing Arch Common
Stock as of the Effective Date, other than those acquired as
contemplated by the Plan, the Merger Agreement, this letter agreement
and the Other Standby Purchase Commitments ("Non-Plan Arch Shares"),
among the Standby Purchaser and such Other Standby Purchaser pro rata
based on ownership of Non-Plan Arch Shares up to an amount equal to
the aggregate number of Non-Plan Arch Shares beneficially owned by
them as of the Effective Date; and
(ii) second, if necessary, among the Standby Purchaser and the
Other Standby Purchasers in accordance with the percentages set forth
in Column D of Annex I hereto.
-------
(d) The Standby Purchaser hereby disclaims beneficial ownership of
any securities of Arch owned by the Other Standby Purchasers.
3. Certain Transfer Restrictions. (a) Subject to Section 12 below, the
-----------------------------
Standby Purchaser may (i) sell or otherwise transfer any or all of (A) the
Rights distributed to it in accordance with the Plan or (B) Unsecured Claims in
respect of which Rights are to be distributed or (ii) purchase or otherwise
acquire (A) Rights distributed to others in accordance with the Plan or (B)
Unsecured Claims in respect of which Rights are to be distributed; provided,
--------
however, that, with respect to clause (i) of this sentence, (X)
- -------
contemporaneously with the consummation of any such sale or other transfer of
Rights or Unsecured Claims, the Standby Purchaser will notify Arch and
MobileMedia of the occurrence thereof and (Y) the Standby Purchaser will not
consummate any such sale or other transfer unless the transferee or transferees
of such Rights or Unsecured Claims shall have entered into a written agreement
(a "Tracking Agreement") (I) to notify the Standby Purchaser, Arch and
MobileMedia of any subsequent transfer by it of such Rights or Unsecured Claims
or any Rights distributed to it in respect of such Unsecured Claims and (II) not
to sell or otherwise transfer such Rights or Unsecured Claims or Rights
distributed to it in respect of such Unsecured Claims, unless its transferee or
transferees shall agree in writing to be bound in the same manner provided in
this clause (Y) with respect to any subsequent transfer by it.
(b) Notwithstanding the provisions of clause (Y) of the proviso in Section
3(a) above, the Standby Purchaser may elect to sell or otherwise transfer (i)
any or all of the Rights distributed to it in
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
accordance with the Plan or (ii) Unsecured Claims in respect of which Rights are
to be so distributed, in either case without entering into a Tracking Agreement
with its transferee or transferees (any Rights so transferred and any Rights
distributed in respect of Allowed Claims so transferred, together with any
Rights so transferred and any Rights distributed in respect of Allowed Claims so
transferred by the Other Standby Purchasers pursuant to Section 3(b) of the
Other Standby Purchase Commitments, being referred to herein collectively as
"Untracked Rights"). Any Rights that remain unexercised upon expiration thereof
will be deemed to be "Section 3(b) Rights" up to, but not exceeding, the amount
of Untracked Rights. The Section 3(b) Rights shall be exercised as follows prior
to the application of Section 1(c) above and Section 1(c) of the Other Standby
Purchase Commitments: (A) the Standby Purchaser and the Other Standby Purchasers
will first be given the opportunity to purchase for cash (based on the
Subscription Price payable upon exercise of such Rights) units consisting of
shares of Arch Common Stock and Arch Warrants underlying a number of unexercised
Rights up to the amount of Section 3(b) Rights in accordance with the
percentages set forth in Column D of Annex I hereto and (B) to the extent such
-------
units are not so purchased, the Standby Purchaser and any Other Standby
Purchasers that are responsible for the existence of the Section 3(b) Rights
will be required to purchase such units pro rata based on the number of Section
3(b) Rights resulting from their respective transfers. Nothing in this Section
3(b) will in any way reduce the commitment of the Standby Purchaser specified in
Section 1(c) above or the Unexercised Rights Commitment Amount as set forth in
Annex I hereto.
- -------
4. The Closing. (a) Notwithstanding anything to the contrary herein
-----------
contained or the terms of the Rights or the Plan, subject to the conditions set
forth herein, on the Effective Date the Standby Purchaser, in satisfaction of
the Commitment, will deliver at the Closing (i) the aggregate Subscription Price
payable upon exercise of any Rights exercised by it and (ii) the purchase price
payable in consideration of any shares of Existing Arch Common Stock or, if
applicable, Arch Class B Common Stock and Arch Warrants to be otherwise
purchased by it pursuant to the Commitment; provided, however, that, if
-------- -------
requested by the Standby Purchaser in writing at least two business days prior
to the Effective Date, any cash to be distributed to the Standby Purchaser in
respect of Allowed Secured Claims pursuant to the Plan will, prior to the
distribution thereof pursuant to the Plan and in accordance with the instruction
included in such written request, be first applied, on behalf of the Standby
Purchaser, to the payment of such amounts payable on the Effective Date as
provided in this Section 4(a).
(b) Upon payment of the amounts payable as provided in Section 4(a),
on the Effective Date at the Closing Arch will deliver to the Standby Purchaser
(or its designees) certificates representing the shares of Existing Arch Common
Stock, shares of Arch Class B Common Stock, if applicable, and the Arch
Warrants, in each case, (i) issuable upon exercise of any Rights exercised by
the Standby Purchaser or (ii) otherwise purchased by the Standby Purchaser
pursuant to the Commitment.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
(c) Arch will deliver to the Standby Purchaser at least five business
days prior to the Effective Date a written notice which shall (i) specify the
amounts payable at the Closing by it in satisfaction of the Commitment, (ii)
specify the date on which the Effective Date is to occur and the last date on
which the notice referred to in Section 4(d) may to be delivered, and (iii)
indicate the matters required to be addressed in such notice.
(d) At least two business days prior to the Effective Date, the
Standby Purchaser will deliver to Arch and MobileMedia a written notice which
shall set forth the number of shares of Existing Arch Common Stock beneficially
owned by it as of such date. During the period from the date of such notice
through the Effective Date, neither the Standby Purchaser nor any affiliate
thereof shall acquire beneficial ownership of, or any rights to acquire, any
additional shares of Existing Arch Common Stock or any Unsecured Claim.
5. Certain Conditions. The Commitment is subject to the conditions that:
------------------
(a) (i) the Confirmation Order (as defined in the Plan), in a form
reasonably satisfactory to the Standby Purchaser, shall have been entered
by the Bankruptcy Court (as defined in the Plan) and (ii) such Confirmation
Order shall have become a Final Order (as defined in Section 5.1(h) of the
Merger Agreement); provided, however, that (A) the Standby Purchaser may
-------- -------
not assert the condition contained in clause (ii) above if each of the
Other Standby Purchasers that is not affiliated with the Standby Purchaser
(each, an "Unaffiliated Standby Purchaser"), acting in good faith, shall
have waived the condition contained in Section 5(a) of the Other Standby
Purchase Commitments to which such Unaffiliated Standby Purchaser is a
party and (B) the Standby Purchaser may not assert the condition contained
in either clause (i) or clause (ii) above if the sole reason for the
failure of such condition to be satisfied is the failure or the threatened
failure of the Standby Purchaser or any of its affiliates to fulfill the
Commitment;
(b) the satisfaction or, with the written consent of the Standby
Purchaser, waiver of all conditions precedent to the obligations of each of
the parties to the Merger Agreement contained in the Merger Agreement and
all conditions precedent to the effectiveness of the Plan contained in the
Plan; provided, however, that (i) the conditions contained in Section
-------- -------
5.1(e) and (h), Section 5.2(a), (b), (c), (d) and (e) and Section 5.3(a),
(b), (c) and (e) of the Merger Agreement (collectively, the "Unilateral
Conditions") may be waived without the written consent of the Standby
Purchaser and (ii) the Standby Purchaser may not assert the condition
contained in this clause (b) if the sole reason for the failure of such
condition to be satisfied is the failure or the threatened failure of the
Standby Purchaser or any of its affiliates to fulfill the Commitment;
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 7
(c) there shall be effective under the Securities Act, a registration
statement (the "Shelf Registration Statement") covering the resale by the
Standby Purchaser of (i) all shares of Existing Arch Common Stock, all
shares of Arch Class B Common Stock, if applicable, and all Arch Warrants
received by the Standby Purchaser as a result of the transactions
contemplated by the Plan (including those received upon the exercise of
Rights and pursuant to this letter agreement) and (ii) all shares of
Existing Arch Common Stock issuable upon conversion of any such shares of
the Arch Class B Common Stock or exercise of any such Arch Warrants (the
securities referred to in the foregoing clauses (i) and (ii) are referred
to herein as the "Registrable Securities");
(d) Arch shall have executed and delivered to the Standby Purchaser a
registration rights agreement in the form attached as Exhibit C to the
Merger Agreement (the "Registration Rights Agreement") granting the Standby
Purchaser certain demand and piggyback registration rights with respect to
the Registrable Securities;
(e) any and all amendments or modifications to the Merger Agreement
or any exhibit or schedule thereto (including without limitation the Plan,
the Arch Charter Amendment, the Arch Warrant Agreement and the Registration
Rights Agreement) on or after the date hereof and any consents or waivers
delivered on or after the date hereof by Arch or MobileMedia to the other
under the Merger Agreement (other than (i) subject to Section 15(a) below,
consents under Section 4.5 of the Merger Agreement or (ii) waivers of
Unilateral Conditions) shall have been in form and substance reasonably
satisfactory to the Standby Purchaser;
(f) the representations and warranties of Arch contained in this
letter agreement shall be true and correct, in all material respects
(except for the representations and warranties set forth at clauses (a)(v)
and (a)(vi) of Section 9 below, which shall be true and correct in all
respects, and except for the representations and warranties set forth at
clauses (a)(vii) and (viii) of Section 9 below, which shall be disregarded
for purposes of this clause (f) insofar as they relate to financial
projections), on the Effective Date, with the same effect as though such
representations and warranties were made on the Effective Date, and Arch
shall have performed or complied with, in all material respects, its
covenants required to be performed or complied with under this letter
agreement on or prior to the Effective Date (and Arch shall have delivered
to the Standby Purchaser a certificate to the effect that each of the
conditions specified in this clause (f) is satisfied in all respects);
(g) the representations and warranties of MobileMedia contained in
this letter agreement shall be true and correct, in all material respects
(except for the representations and warranties set forth at clauses (b)(v)
and (b)(vi) of Section 9 below, which shall be true and correct in all
respects, and except for the representations and warranties set forth at
clauses (b)(vii) and (viii) of Section 9 below, which shall be disregarded
for purposes of this
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 8
clause (f) insofar as they relate to financial projections), on the
Effective Date, with the same effect as though such representations and
warranties were made on the Effective Date, and MobileMedia shall have
performed or complied with, in all material respects, its covenants
required to be performed or complied with, under this letter agreement on
or prior to the Effective Date (and MobileMedia shall have delivered to the
Standby Purchaser a certificate to the effect that each of the conditions
specified in this clause (g) is satisfied in all respects);
(h) simultaneously with the transactions contemplated by Section 4
above, Arch shall have performed its obligation under clause (e) of Section
1.3 of the Merger Agreement and any debt financing (other than secured bank
financing) obtained by Arch to enable it to do so shall have terms no less
favorable to Arch than those set forth in the Bridge Commitment Letter (the
"Bridge Commitment Letter"); provided, however, that the Standby Purchaser
-------- -------
may not assert the condition contained in this clause (h) if the sole
reason for the failure of such condition to be satisfied is the failure or
threatened failure of the Standby Purchaser or any of its affiliates to
fulfill the Commitment;
(i) simultaneously with the transactions contemplated by Section 4
above, each of the Other Standby Purchasers shall have fulfilled its
commitment under the Other Standby Purchase Commitment to which it is a
party, and, if applicable, any other person having a commitment
contemplated by Section 13(a) hereof shall have fulfilled such commitment;
(j) (i) the shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement shall be so issued and distributed pursuant to an exemption from
registration under the Securities Act provided by Section 1145 of the
Bankruptcy Code, and (ii) (A) the issuance of the Rights, (B) the issuance
of the shares of Existing Arch Common Stock, the shares of Arch Class B
Common Stock, if applicable, and the Arch Warrants upon exercise of the
Rights, (C) the issuance to the Standby Purchaser of the shares of Existing
Arch Common Stock, the shares of Arch Class B Common Stock, if applicable,
and the Arch Warrants as contemplated by Section 1 and Section 3 above and
the Arch Warrants as contemplated by Section 7 below, and (D) the issuance
of Existing Arch Common Stock upon exercise of the Arch Warrants or
conversion of Arch Class B Common Stock, if applicable, shall be covered
by the Registration Statement, the Registration Statement shall have been
declared effective and no stop order with respect thereto shall be in
effect;
(k) (i) the FCC Grant shall have been issued by the FCC and (ii) such
FCC Grant shall have become a Final Order (as defined in Section 5.1(e) of
the Merger Agreement); provided, however, that (A) the Standby Purchaser
-------- -------
may not assert the condition contained in clause (ii) above if each of the
Unaffiliated Standby Purchasers, acting in good faith, shall have waived
the condition contained in Section 5(k) of the Other Standby Purchase
Commitment to
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 9
which such Unaffiliated Standby Purchaser is a party and (B) the Standby
Purchaser may not assert the condition contained in either clause (i) or
clause (ii) above if the sole reason for the failure of such condition to
be satisfied is an appeal, a motion for reconsideration or similar action
taken by any present or former officer of any Debtor considered or
determined by the FCC to be an alleged or actual wrongdoer for purposes of
the FCC Proceeding;
(l) any applicable waiting period under the HSR Act shall have
expired or been terminated early; and
(m) Arch shall have filed with the SEC no later than Friday, August
21, 1998 a preliminary Proxy Statement which shall not include any
information that a reasonable investor would consider important in
determining whether to make an investment decision regarding a purchase of
Existing Arch Common Stock and would view its disclosure as significantly
altering the total mix of information otherwise contained therein, which
information is not included in the Draft Proxy Statement; provided,
--------
however, that the Standby Purchaser may not assert the condition in this
-------
clause (m) unless (i) the information with respect to which the Standby
Purchaser seeks to assert such condition relates to information other than
the descriptions of the Merger, the Plan and the other exhibits thereto
contained in the preliminary Proxy Statement and (ii) such condition is
asserted by the Standby Purchaser not later than two business days after
Arch delivers to the Standby Purchaser a copy of the preliminary Proxy
Statement as filed with the SEC indicating the changes therein from the
Draft Proxy Statement (which copy Arch will deliver as promptly as
practicable following filing the same with the SEC).
The Standby Purchaser hereby acknowledges and agrees that (i) the entities with
an asterisk next to their names on Annex I hereto (the "Affiliated Standby
-------
Purchasers") shall be deemed to be affiliated with each other for purposes of
clauses (a) and (k) above and clause (iii) of Section 6 below, and (ii) the
Affiliated Standby Purchasers will act jointly with respect to any decision to
waive the condition contained in any such clause and the corresponding clause
contained in the Other Standby Purchase Commitments to which such Affiliated
Standby Purchasers are parties (with the vote of the Affiliated Standby
Purchasers holding at least 85% of the aggregate amount of Unsecured Claims held
by such Affiliated Standby Purchasers to control with respect to the taking of
any such action).
6. Additional Condition. The Commitment is subject to the further
--------------------
condition that there shall not have occurred between the Buyer Balance Sheet
Date and the Confirmation Date, and, if the Effective Date does not occur within
90 days following the Confirmation Date, between the Buyer Balance Sheet Date
and the Effective Date (i) any event or events (other than events which affect
generally the economy or the industry in which Arch and MobileMedia conduct
their respective businesses) which has had or would have a material adverse
effect on the business, assets (including licenses, franchise and other
intangible assets), financial condition, operating income or prospects
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 10
(determined in each case, where applicable, in accordance with generally
accepted accounting principles and in a manner consistent with the past
practices of Arch and MobileMedia) of Arch, MobileMedia and their respective
subsidiaries, taken as a whole (collectively, the "Combined Company") (a
"Combined Company Material Adverse Effect"), (ii) any event or events involving
a regulatory or statutory change and affecting generally the industry in which
Arch and MobileMedia conduct their respective businesses which would materially
and adversely affect the ability of the Combined Company to operate its
business, or (iii) any event or events affecting generally the industry in which
Arch and MobileMedia conduct their respective business which would materially
and adversely affect the ability of the Combined Company to operate its
business; provided, however, that the Standby Purchaser may not assert the
-------- -------
condition contained in this clause (iii) if each of the Unaffiliated Standby
Purchasers, acting in good faith, shall have waived the condition in Section
6(iii) of the Other Standby Purchase Commitment to which such Unaffiliated
Standby Purchaser is a party.
7. Consideration for the Commitment. In consideration for the
--------------------------------
Commitment, on the Effective Date at the Closing the Standby Purchaser will
receive its pro rata share of Arch Warrants entitling the holders thereof to
purchase, in the aggregate, a number of shares of Existing Arch Common Stock
equal to 2.50% of the issued and outstanding shares of Existing Arch Common
Stock and, if applicable, Arch Class B Common Stock, computed on a Fully Diluted
Basis (as defined in the Plan) on the date the "Buyer Market Price" is
determined in accordance with Schedule II to the Merger Agreement giving effect
to the Plan as if the Effective Date had occurred on such date and assuming
21,067,110 shares of Existing Arch Common Stock are issued and outstanding
immediately prior thereto. Such Arch Warrants will be delivered to the Standby
Purchaser and the Other Standby Purchasers, in accordance with the percentages
specified in Column D of Annex I hereto.
-----
8. Satisfaction of the Commitment. The Standby Purchaser may, in its
------------------------------
sole discretion, satisfy the Commitment directly and/or indirectly through one
or more of its affiliates, separate accounts within its control or investment
funds under its or its affiliates' management.
9. Representations and Warranties. (a) Arch hereby represents and
------------------------------
warrants to the Standby Purchaser that:
(i) Arch is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to execute, deliver and
perform its obligations hereunder and to consummate the transactions
contemplated hereby;
(ii) Subject to the approval of the Buyer Charter Amendment and
the Buyer Share Issuance by the Stockholders of Arch, the execution,
delivery and performance of this letter agreement by Arch and the
consummation by Arch of the transactions
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 11
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Arch;
(iii) This letter agreement constitutes the legal, valid and
binding obligation of Arch, enforceable against Arch in accordance with its
terms;
(iv) Subject to entry of the Confirmation Order, and except
as described in Section 3.3 of the Buyer Disclosure Schedule and except for
the applicable requirements of the Securities Act, the Exchange Act and any
applicable state and foreign securities laws, the HSR Act, the
Communications Act and the regulations of the FCC, state public utility,
telecommunications or public service laws and the Bankruptcy Code, the
Confirmation Order and the Amended Plan (collectively, the "Applicable
Requirements"), the execution, delivery and performance of this letter
agreement by Arch and the consummation by Arch of the transactions
contemplated hereby in accordance with the terms hereof do not and will not
conflict with, violate or constitute a breach of any material contract,
agreement or instrument by which Arch is bound or any judgment, order,
decree, law, statute, rule, regulation or other judicial or governmental
restriction to which Arch is subject;
(v) Except as described in the Buyer Disclosure Schedule,
the representations and warranties of Arch contained in the Merger
Agreement (other than those contained in Sections 3.6, 3.7, 3.26 and 3.27
thereof), which representations and warranties shall be deemed for purposes
of this clause (v) not to include any qualification or limitation with
respect to materiality (whether by reference to "Buyer Material Adverse
Effect" or otherwise), are true and correct, except where the matters in
respect of which such representations and warranties are not true and
correct would not have a Buyer Material Adverse Effect;
(vi) True, complete and correct copies of the following
documents are attached hereto as indicated:
Document Exhibit Hereto
----------------------------------- --------------
Merger Agreement (including all A
exhibits and schedules thereto)
Buyer Disclosure Schedule B
Other Standby Purchase Commitments C
Certificate of Incorporation of D
Arch, as
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 12
Document Exhibit Hereto
----------------------------------- --------------
amended through the date hereof D
By-laws of Arch, as amended through the E
date hereof
Rights Agreement, dated as of October 13, F
1995, between Arch and the Bank of New
York, as Rights Agent, as amended
through the date hereof (the "Rights
Agreement")
Draft of the Proxy Statement dated G
August 18, 1998 (the "Draft Proxy
Statement")
Existing Registration Rights Agreements H
(as defined in Section 9(a)(xi) below),
Bridge Commitment Letter I
(vii) As of the date hereof, the Draft Proxy Statement
contains no untrue statement of a material fact or omits to state any
material fact necessary, in light of the circumstances under which it
was made, in order to make the statements therein not misleading;
provided, however, Arch makes no representation with respect to either
-------- -------
(A) information supplied by MobileMedia for inclusion therein or (B)
the descriptions of the Merger Agreement, the Plan and the other
exhibits to the Merger Agreement, and of this letter agreement and the
Other Standby Purchase Commitments, contained therein;
(viii) No representation or warranty of Arch contained in this
letter agreement, and no statement relating to Arch contained in the Merger
Agreement, the Buyer Disclosure Schedule or any other document, certificate
or other instrument delivered or to be delivered by or on behalf of Arch
pursuant to this letter agreement (including the definitive Proxy Statement
and the Registration Statement as declared effective by the SEC), contains
or will as of the Effective Date contain any untrue statement of a material
fact or omits or will as of the Effective Date omit to state any material
fact necessary, in light of the circumstances under which it was or will be
made, in order to make the statements herein or therein not misleading;
(ix) Between the Buyer Balance Sheet Date and the date
hereof, there has not occurred with respect to Arch (A) any event or events
(other than events which affect
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 13
generally the economy or the industry in which Arch and MobileMedia conduct
their respective businesses) which has had or would have a Combined Company
Material Adverse Effect or (B) any event or events involving a regulatory
or statutory change and affecting generally the industry in which Arch and
MobileMedia conduct their respective business which would materially and
adversely affect the ability of the Combined Company to operate its
business;
(x) The shares of Existing Arch Common Stock to be issued
and distributed as contemplated by Section 1.3(e) and Section 1.6 of the
Merger Agreement and the shares of Existing Arch Common Stock, the shares
of Arch Class B Common Stock, if applicable, and the Arch Warrants to be
issued and delivered as contemplated by Section 1 and Section 3 above, and
the Arch Warrants to be issued as contemplated by Section 7 above, in each
case when so issued and distributed or delivered, as the case may be, and
the shares of Existing Arch Common Stock issued upon conversion of such
shares of Arch Class B Common Stock, if applicable, when so converted in
accordance with the Arch Charter Amendment, and the shares of Existing Arch
Common Stock issued upon exercise of such Arch Warrants, when issued, paid
for and delivered as provided in the Arch Warrant Agreement, will be duly
authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights; and
(xi) Schedule 9(a)(xi) hereto sets forth a true, complete
-----------------
and correct list of all agreements that are in effect as of the date hereof
pursuant to which the Company has granted any registration rights to any
person or entity (the "Existing Registration Rights Agreements"), and,
except as specified in Schedule 9(a)(xi) hereto, none of the Existing
-----------------
Registration Rights Agreements is inconsistent with the rights to be
granted to the Standby Purchaser pursuant to the Registration Rights
Agreement.
(b) MobileMedia hereby represents and warrants to the Standby
Purchaser that:
(i) MobileMedia is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and,
subject to the entry of the Confirmation Order, has all requisite corporate
power and authority to execute, deliver and perform its obligations
hereunder and to consummate the transactions contemplated hereby;
(ii) Subject to the entry of the Confirmation Order, the
execution, delivery and performance of this letter agreement by MobileMedia
and the consummation by MobileMedia of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on
the part of MobileMedia;
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 14
(iii) Subject to the entry of the Confirmation Order and the
effectiveness of the Plan, this letter agreement constitutes the legal,
valid and binding obligation of MobileMedia, enforceable against
MobileMedia in accordance with its terms;
(iv) Subject to entry of the Confirmation Order, and except as
described in Section 2.3 of the Company Disclosure Schedule and except for
the Applicable Requirements, the execution, delivery and performance of
this letter agreement by MobileMedia and the consummation by MobileMedia of
the transactions contemplated hereby in accordance with the terms hereof do
not and will not conflict with, violate, or constitute a breach of any
material contract, agreement or instrument by which MobileMedia is bound or
any judgment, order, decree, law, statute, rule, regulation or other
judicial or governmental restriction to which MobileMedia is subject;
(v) Except as described in the Company Disclosure Schedule,
the representations and warranties of MobileMedia contained in the Merger
Agreement (other than those contained in Sections 2.6, 2.7, 2.23 and 2.24
thereof), which representations and warranties shall be deemed for purposes
of this clause (v) not to include any qualification or limitation with
respect to materiality (whether by reference to "Company Material Adverse
Effect" or otherwise), are true and correct, except where the matters in
respect of which such representations and warranties are not true and
correct would not have a Company Material Adverse Effect;
(vi) True, complete and correct copies of the following
documents are attached hereto as indicated:
Document Exhibit Hereto
------------------------------------------- --------------
Merger Agreement (including all exhibits A
and schedules thereto)
Other Standby Purchase Commitments C
Company Disclosure Schedule J
Agreement, dated the date hereof (the K
"Debtor/Committee Agreement"), between
MobileMedia, on behalf of itself and the
other Debtors, and the Committee (as
defined in the Plan)
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 15
(vii) As of the date hereof, the information included in the
Draft Proxy Statement that was provided for inclusion therein by
MobileMedia contains no untrue statement of a material fact or omits to
state any material fact necessary, in light of the circumstances under
which it was made, in order to make the statements therein not misleading;
(viii) No representation or warranty of MobileMedia contained
in this letter agreement, and no statement relating to MobileMedia
contained in the Merger Agreement, the Company Disclosure Schedule or any
other document, certificate, or other instrument delivered or to be
delivered by or on behalf of MobileMedia pursuant to this letter agreement,
contains or will as of the Effective Date contain any untrue statement of a
material fact or omits or will as of the Effective Date omit to state any
material fact necessary, in light of the circumstances under which it was
or will be made, in order to make the statements herein or therein not
misleading; and
(ix) Between the Company Balance Sheet Date and the date
hereof, there has not occurred with respect to MobileMedia (A) any event or
events (other than events which affect generally the economy or the
industry in which Arch and MobileMedia conduct their respective businesses)
which has had or would have a Combined Company Material Adverse Effect or
(B) any event or events involving a regulatory or statutory change and
affecting generally the industry in which Arch and MobileMedia conduct
their respective businesses which would materially and adversely affect the
ability of the Combined Company to operate its business.
(c) The Standby Purchaser hereby represents and warrants to each of
Arch and MobileMedia that:
(i) The Standby Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts and has all requisite corporate power and authority to
execute, deliver and perform its obligations hereunder and to consummate
the transactions contemplated hereby;
(ii) The execution, delivery and performance of this letter
agreement by the Standby Purchaser and the consummation by the Standby
Purchaser of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of the
Standby Purchaser;
(iii) This letter agreement constitutes the legal, valid and
binding obligation of the Standby Purchaser, enforceable against the
Standby Purchaser in accordance with its terms;
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 16
(iv) Except for the Applicable Requirements, the execution,
delivery and performance of this letter agreement by the Standby
Purchaser and the consummation by the Standby Purchaser of the
transactions contemplated hereby in accordance with the terms hereof
do not and will not conflict with, violate or constitute a breach of
any material contract, agreement, or instrument by which the Standby
Purchaser is bound or any judgment, order, decree, law, statute, rule,
regulation or other judicial or governmental restriction to which the
Standby Purchaser is subject, except where such conflicts, violations
or breaches, individually or in the aggregate, would not have a
material adverse effect on the ability of the Standby Purchaser to
consummate the transactions contemplated hereby;
(v) No representation or warranty of the Standby Purchaser
contained in this letter agreement, and no statement contained in any
other document, certificate or other instrument delivered or to be
delivered by or on behalf of the Standby Purchaser pursuant to this
letter agreement, contains or will as of the Effective Date contain
any untrue statement of a material fact or omits or will as of the
Effective Date omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading; and
(vi) As of the date hereof, the Standby Purchaser holds
directly, or indirectly through its affiliates, separate accounts
within its control or investment funds under its or its affiliates'
management, the aggregate stated principal amount of 9 3/8% Notes and
10 1/2% Notes (as such terms are defined in the Plan) indicated under
the Standby Purchaser's name and address on Annex I hereto.
-------
(d) None of the representations and warranties made herein or in any
certificate to be delivered as contemplated hereby will survive the Closing.
10. Certain Covenants. (a) Each of Arch and MobileMedia (i) acknowledges
-----------------
that the Debtors have agreed to provide to the Committee copies of any and all
notices, documents or information to be provided by or made available by the
Debtors to Arch pursuant to the Merger Agreement or provided by or made
available by Arch to the Debtors pursuant to the Merger Agreement, promptly
after the receipt or provision thereof by or to the Debtors, as applicable, and
that the Committee, pursuant to the undertaking attached as Annex II hereto, has
--------
agreed to distribute copies of the same to the Standby Purchaser and to take
certain other actions and (ii) agrees that the Committee may do so.
(b) Without limiting the generality of the foregoing clause (a) of
this Section 10, Arch will, before filing the Registration Statement with the
SEC, furnish to the Standby Purchaser and
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 17
its counsel copies of the Registration Statement (including all exhibits
thereto) proposed to be filed, will provide the Standby Purchaser and its
counsel a reasonable opportunity to review and comment on such Registration
Statement and will not file such Registration Statement if the Standby Purchaser
shall reasonably object thereto within three calendar days after the receipt
thereof.
(c) Arch will deliver to the Standby Purchaser copies of the
definitive Proxy Statement in the form filed with the SEC and mailed to
Stockholders of Arch and the Registration Statement in the form declared
effective by the SEC.
(d) Without limiting the generality of the foregoing clause (a) of
this Section 10, Arch will, before filing the Shelf Registration Statement or
any pre-effective amendment thereto, furnish to the Standby Purchaser and its
counsel copies of the Shelf Registration Statement or such pre-effective
amendment thereto, as applicable, proposed to be filed, will provide Standby
Purchaser and its counsel with a reasonable opportunity to review and comment on
the Shelf Registration Statement or such pre-effective amendment thereto, as
applicable, and will not file the Shelf Registration Statement or such pre-
effective amendment thereto, as applicable, to which the Standby Purchaser or
its counsel shall reasonably object within three business days after the receipt
thereof. The Standby Purchaser will furnish to Arch such information regarding
the Standby Purchaser and its plan and method of distribution of the Registrable
Securities as Arch may reasonably request in writing in connection with the
preparation of the Shelf Registration Statement.
(e) Each of Arch, MobileMedia and the Standby Purchaser will use its
reasonable best efforts to obtain all approvals, waivers, consents and other
authorizations required by the Applicable Requirements, including without
limitation the applicable requirement of the HSR Act, necessary in connection
with the performance of this letter agreement by the Standby Purchaser and the
consummation by the Standby Purchaser of the transactions contemplated hereby.
(f) Arch will, as requested by the Standby Purchaser, either pay
directly to the appropriate Governmental Entity, on behalf of the Standby
Purchaser, or reimburse the Standby Purchaser for, any fees required to be paid
by the Standby Purchaser in connection with its compliance with the applicable
requirements of the HSR Act. In addition, following the Effective Date, Arch
will reimburse, promptly upon written request (accompanied by appropriate
supporting documentation), costs and expenses (including without limitation
reasonable fees and expenses of legal counsel, including a reasonable allocation
with respect to the cost of any internal counsel), not to exceed $100,000,
incurred by the Standby Purchaser in connection with this letter agreement and
the transactions contemplated hereby.
11. Certain Prohibited Transactions. The Standby Purchaser hereby
-------------------------------
covenants that, from and after the date hereof, so long as its commitment
hereunder remains in effect, it will not sell, or enter into any agreement
relating to the sale (including without limitation any short sale, equity swap
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 18
or other hedge position) of, any shares of Arch capital stock or, except as
otherwise expressly contemplated by this Section 11, engage in any other
disposition of such shares that might negatively affect the market price of such
shares; provided, however, that the foregoing provision will not apply to any
-------- -------
agreement entered into prior to the date hereof (if not entered into in
contemplation of the transactions contemplated by the Plan, the Merger Agreement
or this letter agreement) or any transaction effected pursuant to the terms
thereof. Notwithstanding the immediately preceding sentence, but subject to
Section 3 above and Section 12 below, the Standby Purchaser may at any time, as
it may determine in its sole and absolute discretion, sell or otherwise
transfer, or acquire, or enter into any agreement relating to the sale, transfer
or acquisition of, Rights or Unsecured Claims. The Standby Purchaser
acknowledges that it has received copies of the Rights Agreement and the
amendment thereto attached as Exhibit D to the Merger Agreement (the "Rights
Plan Amendment"). Arch hereby covenants that it will not, without the prior
written consent of the Standby Purchaser, further amend the Rights Agreement in
any manner that would eliminate or reduce the ownership thresholds applicable to
the Standby Purchaser thereunder; provided, however, that this sentence shall
-------- -------
cease to be of any further force or effect at such time after the Effective Date
as the Standby Purchaser ceases to beneficially own in the aggregate at least
10.0% of the outstanding shares of Existing Arch Common Stock.
12. Voting Agreement. The Standby Purchaser hereby covenants that (a) so
----------------
long as the Bankruptcy Court approves the Disclosure Statement not later than
December 31, 1998 and the Confirmation Order is entered not later than March 31,
1999, (i) it will vote, or cause to be voted, for the acceptance of the Plan all
Unsecured Claims held by it on the date fixed for determining holders of
Unsecured Claims entitled to vote for acceptance or rejection of the Plan (the
"Record Date"), (ii) it will not withdraw or otherwise revoke, or cause to be
withdrawn or otherwise revoked, such vote for the acceptance of the Plan, and
(iii) it will not grant, or cause to be granted, to any other person or entity
any proxy to vote with respect to any such Unsecured Claims (other than a proxy
to vote for the acceptance of the Plan) and (b) except with respect to accounts
which cease to be within the Standby Purchaser's control and investment funds
which cease to be under its management, it will not, on or prior to the Record
Date, sell or otherwise transfer any Unsecured Claims held by it unless the
transferee shall have agreed in writing in the form attached as Annex III hereto
---------
(i) to vote for the acceptance of the Plan with respect to such Unsecured Claims
and (ii) not to sell or otherwise transfer such Unsecured Claims unless its
transferee shall agree to be bound in the same manner provided in this clause
(b) with respect to such Unsecured Claims.
13. Other Standby Purchase Commitments. (a) Each of Arch and MobileMedia
----------------------------------
covenants that it will not agree to any amendment or modification to any of the
letter agreements, dated the date hereof, among Arch, MobileMedia and any of the
Other Standby Purchasers (the "Other Standby Purchase Commitments"), without the
prior written consent of the Standby Purchaser. Notwithstanding the immediately
preceding sentence, Arch and MobileMedia may, without the prior written consent
of the Standby Purchaser, agree to an amendment or modification to any of the
Other
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 19
Standby Purchase Commitments to the extent that (i) such amendment or
modification has the sole effect of reducing or eliminating the financial
commitment thereunder and (ii) simultaneously therewith, a qualified
institutional buyer (as such term is defined in Rule 144A promulgated under the
Securities Act) reasonably acceptable to the Standby Purchaser makes a
commitment in a corresponding amount on terms identical in all material respects
to those set forth in such Other Standby Purchase Commitment.
(b) The Standby Purchaser will have no liability for the commitment
of any Other Standby Purchaser under any Other Standby Purchase Commitments or
the commitment of any other person contemplated by Section 13(a) above.
14. Certain Notices; Certain Information. (a) Each of Arch and
------------------------------------
MobileMedia hereby covenants that it will promptly deliver to the Standby
Purchaser, and the Standby Purchaser hereby covenants that it will promptly
deliver to Arch and MobileMedia, written notice of any matter, event or
development that would (i) render any representation or warranty made by it
herein inaccurate or incomplete in any respect or (ii) constitute or result in a
breach by it of, or a failure by it to comply with, any covenant herein
applicable to it.
(b) Each of Arch and MobileMedia will furnish the Standby Purchaser
with such information regarding itself as the Standby Purchaser may reasonably
request.
15. Certain Consent Rights. (a) Notwithstanding anything to the contrary
----------------------
herein contained, except as expressly contemplated by the Merger Agreement or
the Plan, Arch hereby covenants that it will not take, or agree in writing to
take, any action contemplated by Section 4.5(b)(ii), (iii), (iv), (viii) or (ix)
of the Merger Agreement without the prior written consent of the Standby
Purchaser.
(b) Arch hereby covenants that, without the prior written consent of
the Standby Purchaser, it will not, prior to the Effective Date, enter into any
agreement with respect to its securities, or amend any existing agreement with
respect to its securities (including without limitation the Existing
Registration Rights Agreements) in any manner inconsistent with the rights to be
granted to the Standby Purchaser pursuant to the Registration Rights Agreement.
16. Removal of Legends. In the event that, following the transactions
------------------
contemplated by the Merger Agreement, the Plan and this letter agreement, any
certificates evidencing securities ("Certificates") of Arch held by the Standby
Purchaser bear a restrictive legend then:
(a) if the Standby Purchaser delivers to Arch (i) a certificate, in a
form reasonably satisfactory to Arch, certifying that securities evidenced
by such Certificate have been transferred pursuant to a registration
statement that is effective under the Securities Act or (ii) a
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 20
certificate, in a form reasonably satisfactory to Arch, certifying that
securities evidenced by such Certificate have been transferred without
recgistration in accordance with the requirements of Rule 144 under the
Securities Act, Arch will, or will instruct its transfer agent to, issue
upon surrender of such Certificate one or more new Certificates evidencing
the securities so transferred evidenced by the Certificate so surrendered,
which new Certificate or Certificates will not bear any such legend; and
(b) if the Standby Purchaser delivers to Arch an opinion of counsel
to the Standby Purchaser (which may be internal counsel to the Standby
Purchaser) that, in the opinion of such counsel, such legend is not, or is
no longer, required to ensure compliance with the Securities Act, Arch
will, or will instruct its transfer agent to, issue upon surrender of such
Certificate one or more new Certificates evidencing the securities
evidenced by the Certificate so surrendered, which new Certificate or
Certificates will not bear any such legend.
* * * * *
If you are in agreement with the foregoing, please execute the enclosed
copy of this letter agreement as indicated and return it to the undersigned.
This letter agreement will become effective upon (i) the delivery to us of
executed counterparts of this letter agreement by each of you and (ii) the
execution and delivery of each of the Other Standby Purchase Commitments by each
of the parties thereto. Once effective, this letter agreement will terminate on
(i) the date on which the Debtor Tower Agreement is terminated, unless prior to
or simultaneously with such termination, MobileMedia shall have entered into a
definitive agreement (which shall be comparable in form and substance to the
Debtor Tower Agreement and a copy of which shall be delivered to the Standby
Purchaser promptly following the execution thereof) with a bona fide third-party
purchaser providing for a sale to such third party of the assets or
substantially all of the assets to be sold to Pinnacle pursuant to the Debtor
Tower Agreement resulting in net proceeds to MobileMedia of not less than $165.0
million (an "Acceptable Sale"), (ii) December 31, 1998, unless the Closing (as
defined in the Debtor Tower Agreement) or the closing of an Acceptable Sale
shall have occurred on or before such date, (iii) March 31, 1999, unless the
Confirmation Order shall have been entered by the Bankruptcy Court on or before
such date, (iv) June 30, 1999, unless the effectiveness of the Plan occurs on or
before such date, or (v) if not theretofore terminated pursuant to one of the
foregoing clauses, the date on which the Merger Agreement is terminated in
accordance with the terms thereof.
All notices and other communications hereunder must be in writing. Any
notice or other communication hereunder will be deemed duly delivered three
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or two business days after it is sent via a
reputable international overnight courier service, in each case to the intended
recipient at the address therefor set forth on the signature page hereto. Any
party hereto may give any notice or other communication
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 21
will be deemed to have been duly given unless and until it actually is received
by the party for whom it is intended. Any party may change the address to which
notices and other communications hereunder are to be delivered by giving the
other parties notice in the manner herein set forth.
This letter agreement represents the final agreement among the parties
hereto with respect to the subject matter hereof and may not be contradicted by
evidence of prior or contemporaneous agreements of the parties. There are no
unwritten oral agreements between the parties relating to the subject matter
hereof. This letter agreement may not be amended or modified except by a
written instrument signed by each of the Standby Purchaser, Arch and
MobileMedia.
This letter agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to its principles of conflicts
of law.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 22
This letter agreement may be executed in counterparts which, taken
together, shall constitute one and the same instrument.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ David J. Matlin
---------------------------------------
Name: David J. Matlin
Its: Managing Director
Address: 11 Madison Avenue
New York, New York 10010
Attn: David J. Matlin
Alex Lagetko
With copy to: Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attn: Michael J. Sage
ACCEPTED AND AGREED TO:
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
-------------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With copy to: Hale and Dorr LLP
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 23
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
Subject to entry of the Confirmation Order:
MOBILEMEDIA COMMUNICATIONS, INC.
By: /s/ Joseph A. Bondi
-------------------------------------
Name: Joseph A. Bondi
Its: Chairman - Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman - Restructuring
With copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, New York 10022
Attn: James D. Johnson
<PAGE>
ANNEX I
-------
<TABLE>
<CAPTION>
COMMITMENT AMOUNTS
------------------
(dollars in millions)
Column A Column B Column C Column D
---------------- ------------------- ---------- -----------
Rights Exercise Unexercised Rights Total Commitment
Name and Address of Standby Purchasers Commitment Commitment Commitment Percentage
- -------------------------------------- Amount (1) Amount (2) Amount -----------
---------------- ------------------- ----------
<S> <C> <C> <C> <C>
W.R. Huff Asset Management Co., L.L.C., as $ 39.27 $ 35.80 $ 75.07 34.60%
agent for its affiliates and discretionary
accounts
67 Park Place, 9th Floor
Morristown, New Jersey 07960
Stated Principal Amount of 9 3/8% Notes:
$ 57,847,000
---------------
Stated Principal Amount of 10 1/2% Notes:
$ 27,970,000
- ----------------
The Northwestern Mutual Life Insurance $ 10.95 $ 9.97 $ 20.92 9.64%
Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8% Notes:
$ 19,776,000
- -------------
Stated Principal Amount of 10 1/2% Notes:
$ 3,350,000
- --------------
The Northwestern Mutual Life Insurance $ 2.65 $ 2.42 $ 5.07 2.34%
Company for its Group Annuity Separate
Account *
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8% Notes:
$ -0-
- ---------------
Stated Principal Amount of 10 1/2% Notes
$ 7,000,000
- ----------------
Northwestern Mutual Series Fund, Inc. for the $ .75 $ .69 $ 1.44 0.66%
</TABLE>
____________________________
* The Northwestern Mutual Life Insurance Company, The Northwestern Mutual
Life Insurance Company for its Group Annuity Separate Account and Northwestern
Mutual Series Fund, Inc. for the High Yield Bond Portfolio are affiliated
entities for purposes of clauses (a) and (k) of Section 5 and clause (iii) of
Section 6.
<PAGE>
<TABLE>
<CAPTION>
COMMITMENT AMOUNTS
------------------
(dollars in millions)
Column A Column B Column C Column D
---------------- ------------------- ---------- -----------
Rights Exercise Unexercised Rights Total Commitment
Name and Address of Standby Purchasers Commitment Commitment Commitment Percentage
- -------------------------------------- Amount (1) Amount (2) Amount -----------
---------------- ------------------- ----------
<S> <C> <C> <C> <C>
High Yield Bond Portfolio*
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8% Notes:
$ -0-
- ----------------
Stated Principal Amount of 10 1/2% Notes:
$ 2,000,000
- ----------------
Credit Suisse First Boston Corporation $ 29.48 $ 26.88 $ 56.36 25.97%
11 Madison Avenue, 4th Floor
New York, New York 10010
Stated Principal Amount of 9 3/8% Notes:
$ 32,453,000
- ----------------
Stated Principal Amount of 10 1/2% Notes:
$ 35,930,000
- ---------------
Whippoorwill Associates, Inc., as general partner $ 30.42 $ 27.72 $ 58.14 26.79%
and/or agent for the parties set forth on
Schedule A hereto in the percentages noted
thereon
11 Martine Avenue
White Plains, New York 10606
Stated Principal Amount of 9 3/8% Notes:
$ 37,855,000
- ----------------
Stated Principal Amount of 10 1/2% Notes:
$ 31,410,000
- ---------------
Total: $113.52 $103.48 $217.00 100.00%
------- ------- -------
</TABLE>
__________________
(1) The "Rights Exercise Commitment Amount", for each Standby Purchaser, shall
mean an amount equal to the product of (i) the Rights Subscription Price (as
defined in Schedule II to the Merger Agreement) and (ii) the number of
Rights issuable in respect of an amount of Allowed Unsecured Claims derived
from the principal amount of 9 3/8% Notes and the 10 1/2% Notes indicated
under the Standby Purchaser's name on this Annex I held by such Standby
Purchaser on the date hereof. The dollar amounts set forth under Column A
are estimates provided for illustrative purposes only, based on the
assumptions that (x) there is a total of $475 million of Allowed Unsecured
Claims, (y) there is no Rights Reserve (as defined in the Plan), and (z) the
aggregate amount of Subordinated Noteholder Claims (as defined in the Plan)
is $441,819,762.
(2) The "Unexercised Rights Commitment Amount", for each Standby Purchaser,
shall mean an amount equal to (i) the Total Commitment Amount indicated in
Column C for such Standby Purchaser less (ii) the Rights Exercise
<PAGE>
Commitment Amount for such Standby Purchaser. The dollar amounts set forth
under Column B are estimates provided for illustrative purposes only, based
on the estimates set forth in Column A.
ANNEX II
--------
UNDERTAKING
-----------
The Committee hereby undertakes to distribute to the Standby Purchaser
(until instructed by the Standby Purchaser to do otherwise) copies of any and
all notices, documents or information to be provided by or made available by the
Debtors to Arch pursuant to the Merger Agreement or provided by or made
available by Arch to the Debtors pursuant to the Merger Agreement that are
received by the Committee pursuant to the Debtor/Committee Agreement as soon as
practicable with its receipt thereof. The Committee hereby further undertakes
to consult with the Standby Purchaser (until instructed by the Standby Purchaser
to do otherwise) prior to delivering any written consent or exercising any other
right of the Committee (other than the distribution of notices, documents or
information to the Standby Purchaser or the Other Standby Purchasers) pursuant
to the Debtor/Committee Agreement or the Plan. The Committee will not enter
into any amendment to the Debtor/Committee Agreement without the prior written
consent of the Standby Purchaser.
THE OFFICIAL COMMITTEE
OF UNSECURED CREDITORS
By: /s/ Bryan E. Bloom
--------------------------------
Its: Chairman
<PAGE>
ANNEX III
---------
VOTING AGREEMENT
----------------
The undersigned transferee of indebtedness of MobileMedia Corporation or
one of its direct or indirect subsidiaries (collectively, "MobileMedia")
described in Schedule A attached hereto (the "Claim"), hereby acknowledges and
----------
agrees as follows:
1. MobileMedia is a debtor-in-possession under Chapter 11 of the
Bankruptcy Code and has proposed a First Amended Joint Plan of
Reorganization dated August __, 1998 (the "Amended Plan").
2. By acquiring the Claim the undersigned may also acquire rights to vote
on the adoption of the Amended Plan.
3. As a condition of the transfer of the Claim, the undersigned hereby
agrees to exercise all voting rights it may have as holder of the
Claim in favor of the Amended Plan unless the Amended Plan shall have
been withdrawn.
4. The undersigned agrees that it shall not subsequently transfer the
Claim or any portion thereof unless and until it obtains from its
transferee a Voting Agreement identical to the form hereof.
IN WITNESS HEREOF, the undersigned transferee has executed this Voting
Agreement this _____ day of __________, 199_.
[TRANSFEREE]
By:____________________________
Title:
Accepted By:
_________________________
[Transferor]
<PAGE>
SCHEDULE A
TO
VOTING AGREEMENT
----------------
[Describe claim.]
<PAGE>
SCHEDULE 9(a)(xi)
-----------------
Existing Registration Rights Agreement
- --------------------------------------
(1) Registration Rights Agreement, dated as of June 24, 1998, by and among Arch
Communications Group, Inc., Sandler Capital Partner, IV, L.P., Sandler
Capital Partners IV FTE, L.P. Harvey Sandler, John Kornreich, Michael J.
Marocco, Andrew Sandler, South Fork Partners, The Georgica International
Fund Limited, Aspen Partners and Consolidated Press International Limited,
as amended
(2) Registration Rights Agreement, dated as of June 29, 1998, Arch
Communications Group, Inc. Adelphia Communications Corporation and Lisa-
Gaye Shearing
Inconsistencies:
- ---------------
The provisions of the Registration Rights Agreement listed at (2) above are
inconsistent in certain respects with the provisions of the Registration Rights
Agreement.
<PAGE>
WHIPPOORWILL ASSOCIATES, INC.
11 Martine Avenue
White Plains, New York 10606
August 18, 1998
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Commitment to Purchase Stock and Warrants
-----------------------------------------
Gentlemen:
Arch Communications Group, Inc., a Delaware corporation ("Arch"), and
MobileMedia Communications, Inc., a Delaware corporation ("MobileMedia"), intend
to engage in a business combination transaction (the "Combination") as part of a
reorganization (the "Reorganization") of MobileMedia, MobileMedia Corporation,
the sole stockholder of MobileMedia ("Parent"), and all of MobileMedia's
subsidiaries (collectively, the "Debtors") pursuant to chapter 11 of title 11,
United States Code, 11 U.S.C. (S)(S) 101 et seq. (the "Bankruptcy Code"). It is
our understanding that in connection with the Reorganization, among other
things: (a) pursuant to the Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), among Arch, a wholly owned subsidiary of Arch
("Merger Sub"), Parent and MobileMedia, MobileMedia will merge with and into
Merger Sub, with Merger Sub continuing as the surviving corporation and a wholly
owned subsidiary of Arch; (b) pursuant to the Merger Agreement, Arch will make
available for distribution pursuant to a plan of reorganization of the Debtors
in the form attached as Exhibit A to the Merger Agreement, with such amendments
and modifications thereto as are made in a manner consistent with clause (e) of
Section 5 hereto (such plan of reorganization being referred to herein as the
"Plan"), (i) cash, (ii) shares of its Common Stock, par value $.01 per share
("Existing Arch Common Stock"), and (iii) warrants entitling the holders thereof
to purchase shares of Existing Arch Common Stock ("Arch Warrants"), with such
Arch Warrants to be issued pursuant to, and to have the terms set forth in, a
warrant agreement in the form attached as Exhibit B to
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
the Merger Agreement (the "Arch Warrant Agreement"); (c) holders of unsecured
non-priority claims against the Debtors ("Unsecured Claims"), to the extent such
Unsecured Claims are Allowed (as defined in the Plan), will receive pursuant to
the Plan (i) shares of Existing Arch Common Stock and (ii) rights to purchase
("Rights") for cash units consisting of (A) shares of Existing Arch Common Stock
and (B) Arch Warrants; (d) holders of claims arising under or relating to the
Credit Agreement, dated December 4, 1995, as amended, among MobileMedia and the
other parties thereto ("Secured Claims"), to the extent such Secured Claims are
Allowed, will receive pursuant to the Plan cash in an amount equal to 100% of
such claims; (e) all of the outstanding equity interests in MobileMedia and
Parent will be canceled without consideration and Parent will be dissolved; and
(f) the commitments under the DIP Loan Agreement will terminate and all amounts
owed under or in respect of the DIP Loan Agreement will be paid in full in cash.
Terms used herein with initial capital letters that are not otherwise
defined shall have the meanings ascribed to such terms in the Merger Agreement.
1. The Commitment. In connection with the foregoing, Whippoorwill
--------------
Associates, Inc. ("Whippoorwill"), as agent for each account, fund or entity
listed in Schedule A to Annex I hereto (each, a "Whippoorwill Account" and
-------
collectively, the "Standby Purchaser"), hereby advises you of the Standby
Purchaser's commitment (the "Commitment"), subject to the conditions set forth
herein:
(a) to exercise any Rights distributed to it in respect of its Allowed
Unsecured Claims in accordance with the Plan and not thereafter sold or
transferred as permitted by Section 3 below to purchase units consisting of
shares of Existing Arch Common Stock and Arch Warrants underlying such
Rights, to the extent that the aggregate purchase price payable upon such
exercise, as determined in accordance with Schedule II to the Merger
Agreement (the "Subscription Price"), does not exceed the Rights Exercise
Commitment Amount of the Standby Purchaser as set forth in Annex I hereto;
-------
(b) if (i) the Standby Purchaser sells or otherwise transfers any or
all of (A) the Rights distributed to it in accordance with the Plan or (B)
Unsecured Claims held by it as of the date hereof in respect of which
Rights are to be distributed, in each case as permitted by Section 3 below,
and (ii) the Rights sold or transferred by the Standby Purchaser or the
Rights distributed in respect of Unsecured Claims held by it as of the date
hereof that are hereafter sold or transferred by the Standby Purchaser are
not exercised prior to the
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
expiration thereof (at which time such Rights will be void and will no
longer be exercisable), to purchase for cash (based upon the Subscription
Price payable upon exercise of such Rights) identical units consisting of
shares of Existing Arch Common Stock and Arch Warrants underlying such
unexercised Rights, to the extent that the aggregate purchase price
therefor, together with the aggregate Subscription Price payable upon
exercise of Rights exercised as contemplated by clause (a) above, does not
exceed the Rights Exercise Commitment Amount of the Standby Purchaser as
set forth in Annex I hereto; and
-------
(c) if any Rights distributed in accordance with the Plan (other than
(i) Rights distributed to the Standby Purchaser or the other holders of
Unsecured Claims listed on Annex I hereto (the "Other Standby Purchasers")
-------
and retained by them (which Rights are referred to in Section 1(a) above
and Section 1(a) of each of the Other Standby Purchase Commitments (as
defined in Section 13(a) below)) or (ii) subject to Section 3(b) below,
Rights distributed in respect of Unsecured Claims held by the Standby
Purchaser or the Other Standby Purchasers as of the date hereof that are
hereafter sold or transferred by them (which Rights are referred to in
Sections 1(b) and 3 hereof and Sections 1(b) and 3 of each of the Other
Standby Purchase Commitments)) remain unexercised upon the expiration
thereof (at which time such Rights will be void and will no longer be
exercisable), to purchase for cash (based on the Subscription Price payable
upon exercise of such Rights) pro rata in accordance with and up to the
Unexercised Rights Commitment Amount of the Standby Purchaser as set forth
in Annex I hereto identical units consisting of shares of Existing Arch
-------
Common Stock and Arch Warrants underlying such unexercised Rights.
2. Arch Class B Common Stock. (a) Notwithstanding anything to the
-------------------------
contrary herein contained, if the purchases by the Standby Purchaser
contemplated by Section 1 above would cause the Standby Purchaser, the Other
Standby Purchasers, and any other persons or entities who, when taken together
with any one or more of the Standby Purchaser and the Other Standby Purchasers,
would constitute a "person" or "group" as used in Section 13(d) or Section 14(d)
of the Exchange Act or Rule 13d-3 or Rule 13d-5 promulgated thereunder, or any
"affiliate" as defined in Rule 405 promulgated under the Securities Act of any
of them (collectively, the "Standby Class B Holders"), in the aggregate, to
beneficially own on the effective date of the Plan (the "Effective Date") shares
representing more than 49.0% of the capital stock of Arch generally entitled to
vote in the election of directors
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
or more than 49.0% of the total voting power of the capital stock of Arch, Arch
will substitute shares of Class B Common Stock, par value $.01 per share, of
Arch ("Arch Class B Common Stock"), with such Arch Class B Common Stock having
the terms set forth in the form of Certificate of Amendment to Certificate of
Incorporation of Arch attached as Exhibit F to the Merger Agreement (the "Arch
Charter Amendment"), for shares of Existing Arch Common Stock included in the
units so purchased on a one-for-one basis such that on the Effective Date the
Standby Class B Holders, in the aggregate, will beneficially own shares
representing not more than 49.0% of the capital stock of Arch generally entitled
to vote in the election of directors and not more than 49.0% of the total voting
power of the capital stock of Arch, all as provided in the Plan. For purposes
of this letter agreement, "beneficial ownership" shall be determined as provided
in Rule 13d-3 and Rule 13d-5 promulgated under the Exchange Act, except that a
person or entity shall be deemed to have "beneficial ownership" of all
securities that such person or entity has the right to acquire, whether such
right is exercisable immediately or only after the passage of time.
(b) For purposes of calculating the percentages referred to in
Section 2(a) above, it will be assumed that no additional Unsecured Claims are
allowed after the Effective Date and all of the shares of Existing Arch Common
Stock in the Creditor Stock Pool (as defined in the Plan) are distributed in
accordance with the Plan to the holders of Allowed Unsecured Claims as of the
Effective Date.
(c) Substitution of shares of Class B Common Stock as contemplated by
Section 2(a) above will be effectuated as follows:
(i) first, to the extent that the Standby Purchaser or any Other
Standby Purchaser beneficially owns shares of Existing Arch Common Stock as
of the Effective Date, other than those acquired as contemplated by the
Plan, the Merger Agreement, this letter agreement and the Other Standby
Purchase Commitments ("Non-Plan Arch Shares"), among the Standby Purchaser
and such Other Standby Purchaser pro rata based on ownership of Non-Plan
Arch Shares up to an amount equal to the aggregate number of Non-Plan Arch
Shares beneficially owned by them as of the Effective Date; and
(ii) second, if necessary, among the Standby Purchaser and the
Other Standby Purchasers in accordance with the percentages set forth in
Column D of Annex I hereto.
-------
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
(d) The Standby Purchaser hereby disclaims beneficial ownership of
any securities of Arch owned by the Other Standby Purchasers.
3. Certain Transfer Restrictions. (a) Subject to Section 12 below, the
-----------------------------
Standby Purchaser may (i) sell or otherwise transfer any or all of (A) the
Rights distributed to it in accordance with the Plan or (B) Unsecured Claims in
respect of which Rights are to be distributed or (ii) purchase or otherwise
acquire (A) Rights distributed to others in accordance with the Plan or (B)
Unsecured Claims in respect of which Rights are to be distributed; provided,
--------
however, that, with respect to clause (i) of this sentence, (X)
- -------
contemporaneously with the consummation of any such sale or other transfer of
Rights or Unsecured Claims, the Standby Purchaser will notify Arch and
MobileMedia of the occurrence thereof and (Y) the Standby Purchaser will not
consummate any such sale or other transfer unless the transferee or transferees
of such Rights or Unsecured Claims shall have entered into a written agreement
(a "Tracking Agreement") (I) to notify the Standby Purchaser, Arch and
MobileMedia of any subsequent transfer by it of such Rights or Unsecured Claims
or any Rights distributed to it in respect of such Unsecured Claims and (II) not
to sell or otherwise transfer such Rights or Unsecured Claims or Rights
distributed to it in respect of such Unsecured Claims, unless its transferee or
transferees shall agree in writing to be bound in the same manner provided in
this clause (Y) with respect to any subsequent transfer by it.
(b) Notwithstanding the provisions of clause (Y) of the proviso in
Section 3(a) above, the Standby Purchaser may elect to sell or otherwise
transfer (i) any or all of the Rights distributed to it in accordance with the
Plan or (ii) Unsecured Claims in respect of which Rights are to be so
distributed, in either case without entering into a Tracking Agreement with its
transferee or transferees (any Rights so transferred and any Rights distributed
in respect of Allowed Claims so transferred, together with any Rights so
transferred and any Rights distributed in respect of Allowed Claims so
transferred by the Other Standby Purchasers pursuant to Section 3(b) of the
Other Standby Purchase Commitments, being referred to herein collectively as
"Untracked Rights"). Any Rights that remain unexercised upon expiration thereof
will be deemed to be "Section 3(b) Rights" up to, but not exceeding, the amount
of Untracked Rights. The Section 3(b) Rights shall be exercised as follows prior
to the application of Section 1(c) above and Section 1(c) of the Other Standby
Purchase Commitments: (A) the Standby Purchaser and the Other Standby Purchasers
will first be given the opportunity to purchase for cash (based on the
Subscription Price payable upon exercise of such Rights) units consisting of
shares of Arch Common Stock and Arch Warrants underlying a number of unexercised
Rights up to the amount of Section
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
3(b) Rights in accordance with the percentages set forth in Column D of Annex I
-------
hereto and (B) to the extent such units are not so purchased, the Standby
Purchaser and any Other Standby Purchasers that are responsible for the
existence of the Section 3(b) Rights will be required to purchase such units pro
rata based on the number of Section 3(b) Rights resulting from their respective
transfers. Nothing in this Section 3(b) will in any way reduce the commitment
of the Standby Purchaser specified in Section 1(c) above or the Unexercised
Rights Commitment Amount as set forth in Annex I hereto.
-------
4. The Closing. (a) Notwithstanding anything to the contrary herein
-----------
contained or the terms of the Rights or the Plan, subject to the conditions set
forth herein, on the Effective Date the Standby Purchaser, in satisfaction of
the Commitment, will deliver at the Closing (i) the aggregate Subscription Price
payable upon exercise of any Rights exercised by it and (ii) the purchase price
payable in consideration of any shares of Existing Arch Common Stock or, if
applicable, Arch Class B Common Stock and Arch Warrants to be otherwise
purchased by it pursuant to the Commitment; provided, however, that, if
-------- -------
requested by the Standby Purchaser in writing at least two business days prior
to the Effective Date, any cash to be distributed to the Standby Purchaser in
respect of Allowed Secured Claims pursuant to the Plan will, prior to the
distribution thereof pursuant to the Plan and in accordance with the instruction
included in such written request, be first applied, on behalf of the Standby
Purchaser, to the payment of such amounts payable on the Effective Date as
provided in this Section 4(a).
(b) Upon payment of the amounts payable as provided in Section 4(a),
on the Effective Date at the Closing Arch will deliver to the Standby Purchaser
(or its designees) certificates representing the shares of Existing Arch Common
Stock, shares of Arch Class B Common Stock, if applicable, and the Arch
Warrants, in each case, (i) issuable upon exercise of any Rights exercised by
the Standby Purchaser or (ii) otherwise purchased by the Standby Purchaser
pursuant to the Commitment.
(c) Arch will deliver to the Standby Purchaser at least five business
days prior to the Effective Date a written notice which shall (i) specify the
amounts payable at the Closing by it in satisfaction of the Commitment, (ii)
specify the date on which the Effective Date is to occur and the last date on
which the notice referred to in Section 4(d) may to be delivered, and (iii)
indicate the matters required to be addressed in such notice.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 7
(d) At least two business days prior to the Effective Date, the
Standby Purchaser will deliver to Arch and MobileMedia a written notice which
shall set forth the number of shares of Existing Arch Common Stock beneficially
owned by it as of such date. During the period from the date of such notice
through the Effective Date, neither the Standby Purchaser nor any affiliate
thereof shall acquire beneficial ownership of, or any rights to acquire, any
additional shares of Existing Arch Common Stock or any Unsecured Claim.
5. Certain Conditions. The Commitment is subject to the conditions that:
------------------
(a) (i) the Confirmation Order (as defined in the Plan), in a form
reasonably satisfactory to the Standby Purchaser, shall have been entered
by the Bankruptcy Court (as defined in the Plan) and (ii) such Confirmation
Order shall have become a Final Order (as defined in Section 5.1(h) of the
Merger Agreement); provided, however, that (A) the Standby Purchaser may
-------- -------
not assert the condition contained in clause (ii) above if each of the
Other Standby Purchasers that is not affiliated with the Standby Purchaser
(each, an "Unaffiliated Standby Purchaser"), acting in good faith, shall
have waived the condition contained in Section 5(a) of the Other Standby
Purchase Commitments to which such Unaffiliated Standby Purchaser is a
party and (B) the Standby Purchaser may not assert the condition contained
in either clause (i) or clause (ii) above if the sole reason for the
failure of such condition to be satisfied is the failure or the threatened
failure of the Standby Purchaser or any of its affiliates to fulfill the
Commitment;
(b) the satisfaction or, with the written consent of the Standby
Purchaser, waiver of all conditions precedent to the obligations of each of
the parties to the Merger Agreement contained in the Merger Agreement and
all conditions precedent to the effectiveness of the Plan contained in the
Plan; provided, however, that (i) the conditions contained in Section
-------- -------
5.1(e) and (h), Section 5.2(a), (b), (c), (d) and (e) and Section 5.3(a),
(b), (c) and (e) of the Merger Agreement (collectively, the "Unilateral
Conditions") may be waived without the written consent of the Standby
Purchaser and (ii) the Standby Purchaser may not assert the condition
contained in this clause (b) if the sole reason for the failure of such
condition to be satisfied is the failure or the threatened failure of the
Standby Purchaser or any of its affiliates to fulfill the Commitment;
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 8
(c) there shall be effective under the Securities Act, a registration
statement (the "Shelf Registration Statement") covering the resale by the
Standby Purchaser of (i) all shares of Existing Arch Common Stock, all
shares of Arch Class B Common Stock, if applicable, and all Arch Warrants
received by the Standby Purchaser as a result of the transactions
contemplated by the Plan (including those received upon the exercise of
Rights and pursuant to this letter agreement) and (ii) all shares of
Existing Arch Common Stock issuable upon conversion of any such shares of
the Arch Class B Common Stock or exercise of any such Arch Warrants (the
securities referred to in the foregoing clauses (i) and (ii) are referred
to herein as the "Registrable Securities");
(d) Arch shall have executed and delivered to the Standby Purchaser a
registration rights agreement in the form attached as Exhibit C to the
Merger Agreement (the "Registration Rights Agreement") granting the Standby
Purchaser certain demand and piggyback registration rights with respect to
the Registrable Securities;
(e) any and all amendments or modifications to the Merger Agreement or
any exhibit or schedule thereto (including without limitation the Plan, the
Arch Charter Amendment, the Arch Warrant Agreement and the Registration
Rights Agreement) on or after the date hereof and any consents or waivers
delivered on or after the date hereof by Arch or MobileMedia to the other
under the Merger Agreement (other than (i) subject to Section 15(a) below,
consents under Section 4.5 of the Merger Agreement or (ii) waivers of
Unilateral Conditions) shall have been in form and substance reasonably
satisfactory to the Standby Purchaser;
(f) the representations and warranties of Arch contained in this
letter agreement shall be true and correct, in all material respects
(except for the representations and warranties set forth at clauses (a)(v)
and (a)(vi) of Section 9 below, which shall be true and correct in all
respects, and except for the representations and warranties set forth at
clauses (a)(vii) and (a)(viii) of Section 9 below, which shall be
disregarded for purposes of this clause (f) insofar as they relate to
financial projections), on the Effective Date, with the same effect as
though such representations and warranties were made on the Effective Date,
and Arch shall have performed or complied with, in all material respects,
its covenants required to be performed or complied with under this letter
agreement on or prior to the Effective Date (and Arch shall
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 9
have delivered to the Standby Purchaser a certificate to the effect that
each of the conditions specified in this clause (f) is satisfied in all
respects);
(g) the representations and warranties of MobileMedia contained in
this letter agreement shall be true and correct, in all material respects
(except for the representations and warranties set forth at clauses (b)(v)
and (b)(vi) of Section 9 below, which shall be true and correct in all
respects, and except for the representations and warranties set forth at
clauses (b)(vii) and (b)(viii) of Section 9 below, which shall be
disregarded for purposes of this clause (f) insofar as they relate to
financial projections), on the Effective Date, with the same effect as
though such representations and warranties were made on the Effective Date,
and MobileMedia shall have performed or complied with, in all material
respects, its covenants required to be performed or complied with, under
this letter agreement on or prior to the Effective Date (and MobileMedia
shall have delivered to the Standby Purchaser a certificate to the effect
that each of the conditions specified in this clause (g) is satisfied in
all respects);
(h) simultaneously with the transactions contemplated by Section 4
above, Arch shall have performed its obligation under clause (e) of Section
1.3 of the Merger Agreement and any debt financing (other than secured bank
financing) obtained by Arch to enable it to do so shall have terms no less
favorable to Arch than those set forth in the Bridge Commitment Letter (the
"Bridge Commitment Letter"); provided, however, that the Standby Purchaser
-------- -------
may not assert the condition contained in this clause (h) if the sole
reason for the failure of such condition to be satisfied is the failure or
threatened failure of the Standby Purchaser or any of its affiliates to
fulfill the Commitment;
(i) simultaneously with the transactions contemplated by Section 4
above, each of the Other Standby Purchasers shall have fulfilled its
commitment under the Other Standby Purchase Commitment to which it is a
party, and, if applicable, any other person having a commitment
contemplated by Section 13(a) hereof shall have fulfilled such commitment;
(j) (i) the shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement shall be so issued and distributed pursuant to an exemption from
registration under the Securities Act provided by Section 1145 of the
Bankruptcy Code, and (ii) (A) the issuance of the Rights, (B) the issuance
of the shares of Existing Arch Common Stock, the shares of Arch Class B
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 10
Common Stock, if applicable, and the Arch Warrants upon exercise of the
Rights, (C) the issuance to the Standby Purchaser of the shares of Existing
Arch Common Stock, the shares of Arch Class B Common Stock, if applicable,
and the Arch Warrants otherwise as contemplated by Section 1 and Section 3
above and the Arch Warrants contemplated by Section 7 below, and (D) the
issuance of Existing Arch Common Stock upon exercise of the Arch Warrants
or conversion of Arch Class B Common Stock, if applicable, shall be
covered by the Registration Statement, the Registration Statement shall
have been declared effective and no stop order with respect thereto shall
be in effect;
(k) (i) the FCC Grant shall have been issued by the FCC and (ii) such
FCC Grant shall have become a Final Order (as defined in Section 5.1(e) of
the Merger Agreement); provided, however, that (A) the Standby Purchaser
-------- -------
may not assert the condition contained in clause (ii) above if each of the
Unaffiliated Standby Purchasers, acting in good faith, shall have waived
the condition contained in Section 5(k) of the Other Standby Purchase
Commitment to which such Unaffiliated Standby Purchaser is a party or (B)
the Standby Purchaser may not assert the condition contained in either
clause (i) or clause (ii) above if the sole reason for the failure of such
condition to be satisfied is an appeal, a motion for reconsideration or
similar action taken by any present or former officer of any Debtor
considered or determined by the FCC to be an alleged or actual wrongdoer
for purposes of the FCC Proceeding;
(l) any applicable waiting period under the HSR Act shall have expired
or been terminated early; and
(m) Arch shall have filed with the SEC no later than Friday, August
21, 1998 a preliminary Proxy Statement which shall not include any
information that a reasonable investor would consider important in
determining whether to make an investment decision regarding a purchase of
Existing Arch Common Stock and would view its disclosure as significantly
altering the total mix of information otherwise contained therein, which
information is not included in the Draft Proxy Statement; provided,
--------
however, that the Standby Purchaser may not assert the condition in this
-------
clause (m) unless (i) the information with respect to which the Standby
Purchaser seeks to assert such condition relates to information other than
the descriptions of the Merger, the Plan and the other exhibits thereto
contained in the preliminary Proxy Statement and (ii) such condition is
asserted by the Standby Purchaser not later than two business days after
Arch delivers to the Standby Purchaser a
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 11
copy of the preliminary Proxy Statement as filed with the SEC indicating
the changes therein from the Draft Proxy Statement (which copy Arch will
deliver as promptly as practicable following filing the same with the SEC).
The Standby Purchaser hereby acknowledges and agrees that (i) the entities with
an asterisk next to their names on Annex I hereto (the "Affiliated Standby
-------
Purchasers") shall be deemed to be affiliated with each other for purposes of
clauses (a) and (k) above and clause (iii) of Section 6 below, and (ii) the
Affiliated Standby Purchasers will act jointly with respect to any decision to
waive the condition contained in any such clause and the corresponding clause
contained in the Other Standby Purchase Commitments to which such Affiliated
Standby Purchasers are parties (with the vote of the Affiliated Standby
Purchasers holding at least 85% of the aggregate amount of Unsecured Claims held
by such Affiliated Standby Purchasers to control with respect to the taking of
any such action).
6. Additional Condition. The Commitment is subject to the further
--------------------
condition that there shall not have occurred between the Buyer Balance Sheet
Date and the Confirmation Date, and, if the Effective Date does not occur within
90 days following the Confirmation Date, between the Buyer Balance Sheet Date
and the Effective Date (i) any event or events (other than events which affect
generally the economy or the industry in which Arch and MobileMedia conduct
their respective businesses) which has had or would have a material adverse
effect on the business, assets (including licenses, franchise and other
intangible assets), financial condition, operating income or prospects
(determined in each case, where applicable, in accordance with generally
accepted accounting principles and in a manner consistent with the past
practices of Arch and MobileMedia) of Arch, MobileMedia and their respective
subsidiaries, taken as a whole (collectively, the "Combined Company") (a
"Combined Company Material Adverse Effect"), (ii) any event or events involving
a regulatory or statutory change and affecting generally the industry in which
Arch and MobileMedia conduct their respective businesses which would materially
and adversely affect the ability of the Combined Company to operate its
business, or (iii) any event or events affecting generally the industry in which
Arch and MobileMedia conduct their respective business which would materially
and adversely affect the ability of the Combined Company to operate its
business; provided, however, that the Standby Purchaser may not assert the
-------- -------
condition contained in this clause (iii) if each of the Unaffiliated Standby
Purchasers, acting in good faith, shall have waived the condition in Section
6(iii) of the Other Standby Purchase Commitment to which such Unaffiliated
Standby Purchaser is a party.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 12
7. Consideration for the Commitment. In consideration for the
--------------------------------
Commitment, on the Effective Date at the Closing the Standby Purchaser will
receive its pro rata share of Arch Warrants entitling the holders thereof to
purchase, in the aggregate, a number of shares of Existing Arch Common Stock
equal to 2.50% of the issued and outstanding shares of Existing Arch Common
Stock and, if applicable, Arch Class B Common Stock, computed on a Fully Diluted
Basis (as defined in the Plan) on the date the "Buyer Market Price" is
determined in accordance with Schedule II to the Merger Agreement giving effect
to the Plan as if the Effective Date had occurred on such date and assuming
21,067,110 shares of Existing Arch Common Stock are issued and outstanding
immediately prior thereto. Such Arch Warrants will be delivered to the Standby
Purchaser and the Other Standby Purchasers, in accordance with the percentages
specified in Column D of Annex I hereto.
-----
8. Satisfaction of the Commitment. The Standby Purchaser may, in its
------------------------------
sole discretion, satisfy the Commitment directly and/or indirectly through one
or more of its affiliates, separate accounts within its control or investment
funds under its or its affiliates' management.
9. Representations and Warranties. (a) Arch hereby represents and
------------------------------
warrants to the Standby Purchaser that:
(i) Arch is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to execute, deliver and perform its
obligations hereunder and to consummate the transactions contemplated
hereby;
(ii) Subject to the approval of the Buyer Charter Amendment and
the Buyer Share Issuance by the Stockholders of Arch, the execution,
delivery and performance of this letter agreement by Arch and the
consummation by Arch of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of
Arch;
(iii) This letter agreement constitutes the legal, valid and
binding obligation of Arch, enforceable against Arch in accordance with its
terms;
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 13
(iv) Except as described in Section 3.3 of the Buyer Disclosure
Schedule and except for the applicable requirements of the Securities Act,
the Exchange Act and any applicable state and foreign securities laws, the
HSR Act, the Communications Act and the regulations of the FCC, state
public utility, telecommunications or public service laws and the
Bankruptcy Code, the Confirmation Order and the Amended Plan (collectively,
the "Applicable Requirements"), the execution, delivery and performance of
this letter agreement by Arch and the consummation by Arch of the
transactions contemplated hereby in accordance with the terms hereof do not
and will not conflict with, violate or constitute a breach of any material
contract, agreement or instrument by which Arch is bound or any judgment,
order, decree, law, statute, rule, regulation or other judicial or
governmental restriction to which Arch is subject;
(v) Except as described in the Buyer Disclosure Schedule, the
representations and warranties of Arch contained in the Merger Agreement
(other than those contained in Sections 3.6, 3.7, 3.26 and 3.27 thereof),
which representations and warranties shall be deemed for purposes of this
clause (v) not to include any qualification or limitation with respect to
materiality (whether by reference to "Buyer Material Adverse Effect" or
otherwise), are true and correct, except where the matters in respect of
which such representations and warranties are not true and correct would
not have a Buyer Material Adverse Effect;
(vi) True, complete and correct copies of the following
documents are attached hereto as indicated:
<TABLE>
<CAPTION>
Document Exhibit
------------------------------- -------
Hereto
-------
<S> <C>
Merger Agreement (including all A
exhibits and schedules thereto)
Buyer Disclosure Schedule B
Other Standby Purchase C
Commitments
Certificate of Incorporation of Arch, D
as amended through the date hereof
</TABLE>
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 14
<TABLE>
<CAPTION>
Document Exhibit
------------------------------- -------
Hereto
-------
<S> <C>
By-laws of Arch, as amended through
the date hereof E
Rights Agreement, dated as of F
October 13, 1995, between Arch and
the Bank of New York, as Rights
Agent, as amended through the date
hereof (the "Rights Agreement")
Draft of the Proxy Statement dated G
August 18, 1998 (the "Draft Proxy
Statement")
Existing Registration Rights H
Agreements (as defined in Section
9(a)(xi) below),
Bridge Commitment Letter I
</TABLE>
(vii) As of the date hereof, the Draft Proxy Statement contains no
untrue statement of a material fact or omits to state any material fact
necessary, in light of the circumstances under which it was made, in order
to make the statements therein not misleading; provided, however, Arch
makes no representation with respect to either (A) information supplied by
MobileMedia for inclusion therein or (B) the descriptions of the Merger
Agreement, the Plan and the other exhibits to the Merger Agreement, and of
this letter agreement and the Other Standby Purchase Commitments, contained
therein;
(viii) No representation or warranty of Arch contained in this
letter agreement, and no statement relating to Arch contained in the Merger
Agreement, the Buyer Disclosure Schedule or any other document, certificate
or other instrument delivered or to be delivered by or on behalf of Arch
pursuant to this letter agreement (including the definitive Proxy Statement
and the Registration Statement as declared effective by the SEC), contains
or will as of the Effective Date contain any untrue statement of a material
fact or omits or will as of the Effective Date omit to state any material
fact necessary, in light of the
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 15
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading;
(ix) Between the Buyer Balance Sheet Date and the date hereof,
there has not occurred with respect to Arch (A) any event or events (other
than events which affect generally the economy or the industry in which
Arch and MobileMedia conduct their respective businesses) which has had or
would have a Combined Company Material Adverse Effect or (B) any event or
events involving a regulatory or statutory change and affecting generally
the industry in which Arch and MobileMedia conduct their respective
business which would materially and adversely affect the ability of the
Combined Company to operate its business;
(x) The shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement and the shares of Existing Arch Common Stock, the shares of Arch
Class B Common Stock, if applicable, and the Arch Warrants to be issued and
delivered as contemplated by Section 1 and Section 3 above, and the Arch
Warrants to be issued as contemplated by Section 7 above, in each case when
so issued and distributed or delivered, as the case may be, and the shares
of Existing Arch Common Stock issued upon conversion of such shares of Arch
Class B Common Stock, if applicable, when so converted in accordance with
the Arch Charter Amendment, and the shares of Existing Arch Common Stock
issued upon exercise of such Arch Warrants, when issued, paid for and
delivered as provided in the Arch Warrant Agreement, will be duly
authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights; and
(xi) Schedule 9(a)(xi) hereto sets forth a true, complete and
-----------------
correct list of all agreements that are in effect as of the date hereof
pursuant to which the Company has granted any registration rights to any
person or entity (the "Existing Registration Rights Agreements"), and,
except as specified in Schedule 9(a)(xi) hereto, none of the Existing
-----------------
Registration Rights Agreements is inconsistent with the rights to be
granted to the Standby Purchaser pursuant to the Registration Rights
Agreement.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 16
(b) MobileMedia hereby represents and warrants to the Standby
Purchaser that:
(i) MobileMedia is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and,
subject to the entry of the Confirmation Order, has all requisite corporate
power and authority to execute, deliver and perform its obligations
hereunder and to consummate the transactions contemplated hereby;
(ii) Subject to the entry of the Confirmation Order, the
execution, delivery and performance of this letter agreement by MobileMedia
and the consummation by MobileMedia of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on
the part of MobileMedia;
(iii) Subject to the entry of the Confirmation Order and the
effectiveness of the Plan, this letter agreement constitutes the legal,
valid and binding obligation of MobileMedia, enforceable against
MobileMedia in accordance with its terms;
(iv) Subject to entry of the Confirmation Order, and except as
described in Section 2.3 of the Company Disclosure Schedule and except for
the Applicable Requirements, the execution, delivery and performance of
this letter agreement by MobileMedia and the consummation by MobileMedia of
the transactions contemplated hereby in accordance with the terms hereof do
not and will not conflict with, violate, or constitute a breach of any
material contract, agreement or instrument by which MobileMedia is bound or
any judgment, order, decree, law, statute, rule, regulation or other
judicial or governmental restriction to which MobileMedia is subject;
(v) Except as described in the Company Disclosure Schedule, the
representations and warranties of MobileMedia contained in the Merger
Agreement (other than those contained in Sections 2.6, 2.7, 2.23 and 2.24
thereof), which representations and warranties shall be deemed for purposes
of this clause (v) not to include any qualification or limitation with
respect to materiality (whether by reference to "Company Material Adverse
Effect" or otherwise), are true and correct,
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 17
except where the matters in respect of which such representations and
warranties are not true and correct would not have a Company Material
Adverse Effect;
(vi) True, complete and correct copies of the following documents
are attached hereto as indicated:
<TABLE>
<CAPTION>
Document Exhibit
------------------------------- -------
Hereto
-------
<S> <C>
Merger Agreement (including all A
exhibits and schedules thereto)
Other Standby Purchase C
Commitments
Company Disclosure Schedule J
Agreement, dated the date hereof (the K
"Debtor/Committee Agreement"),
between MobileMedia, on behalf of
itself and the other Debtors, and the
Committee (as defined in the Plan)
</TABLE>
(vii) As of the date hereof, the information included in the Draft
Proxy Statement that was provided for inclusion therein by MobileMedia contains
no untrue statement of a material fact or omits to state any material fact
necessary, in light of the circumstances under which it was made, in order to
make the statements therein not misleading;
(viii) No representation or warranty of MobileMedia contained
in this letter agreement, and no statement relating to MobileMedia
contained in the Merger Agreement, the Company Disclosure Schedule or any
other document, certificate, or other instrument delivered or to be
delivered by or on behalf of MobileMedia pursuant to this letter agreement,
contains or will as of the Effective Date contain any untrue statement of a
material fact or omits or will as of the Effective Date omit to state any
material fact necessary, in light of the circumstances under
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 18
which it was or will be made, in order to make the statements herein or
therein not misleading; and
(ix) Between the Company Balance Sheet Date and the date hereof,
there has not occurred with respect to MobileMedia (A) any event or events
(other than events which affect generally the economy or the industry in
which Arch and MobileMedia conduct their respective businesses) which has
had or would have a Combined Company Material Adverse Effect or (B) any
event or events involving a regulatory or statutory change and affecting
generally the industry in which Arch and MobileMedia conduct their
respective businesses which would materially and adversely affect the
ability of the Combined Company to operate its business.
(c) Whippoorwill, with respect to itself, and as general partner and/or
agent for, each Whippoorwill Account, with respect to such Whippoorwill Account,
hereby represents and warrants to each of Arch and MobileMedia that:
(i) Whippoorwill is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has
authority to execute this Agreement on behalf of each Whippoorwill Account
and to cause each of them to perform its obligations hereunder and to
consummate the transactions contemplated hereby;
(ii) The execution and delivery of this letter agreement by
Whippoorwill on behalf of each Whippoorwill Account, and each Whippoorwill
Account's performance hereunder and the consummation by each Whippoorwill
Account of the transactions contemplated hereby, have been duly and validly
authorized by all necessary corporate or partnership action;
(iii) This letter agreement constitutes the legal, valid and
binding obligation of each Whippoorwill Account, enforceable against the
Whippoorwill Account in accordance with its terms;
(iv) Except for the Applicable Requirements, the execution,
delivery and performance of this letter agreement by Whippoorwill on behalf
of each Whippoorwill Account and the consummation by each
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 19
Whippoorwill Account of the transactions contemplated hereby in accordance
with the terms hereof do not and will not conflict with, violate or
constitute a breach of any material contract, agreement or instrument by
which Whippoorwill or such Whippoorwill Account is bound or any judgment,
order, decree, law, statute, rule, regulation or other judicial or
governmental restriction to which either Whippoorwill or any Whippoorwill
Account is subject, except where such conflicts, violations or breaches,
individually or in the aggregate, would not have a material adverse effect
on the ability of the Whippoorwill Account to consummate the transactions
contemplated hereby;
(v) No representation or warranty of Whippoorwill or any
Whippoorwill Account contained in this letter agreement, and no statement
contained in any other document, certificate or other instrument delivered
or to be delivered by or on behalf of Whippoorwill or any Whippoorwill
Account pursuant to this letter agreement, contains or will as of the
Effective Date contain any untrue statement of a material fact or omits or
will as of the Effective Date omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to
make the statements herein or therein not misleading; and
(vi) As of the date hereof, the Standby Purchaser holds the
aggregate stated principal amount of 9 3/8% Notes and 10 1/2% Notes (as
such terms are defined in the Plan) indicated under the Standby Purchaser's
name and address on Annex I hereto.
-------
(d) None of the representations and warranties made herein or in any
certificate to be delivered as contemplated hereby will survive the Closing.
(e) Notwithstanding any provision of this letter agreement, (i) the
obligation of each Whippoorwill Account is several and not joint and limited to
the Whippoorwill Account's percentage of the whole as set forth opposite its
name on Schedule A to Annex I hereto, (ii) no Whippoorwill Account will have any
-------
liability or obligation on account of any other Whippoorwill Account's breach of
this letter agreement or default hereunder, and (iii) neither Arch nor
MobileMedia will have recourse against any shareholder, partner, director,
officer, employee, beneficiary, trustee, agent or independent contractor (A) of
Whippoorwill, in respect to any liability or obligation assumed or undertaken by
Whippoorwill hereunder in its own
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 20
capacity, or (B) of any Whippoorwill Account in respect of any liability or
obligation undertaken by the Whippoorwill Account hereunder.
10. Certain Covenants. (a) Each of Arch and MobileMedia (i) acknowledges
-----------------
that the Debtors have agreed to provide to the Committee copies of any and all
notices, documents or information to be provided by or made available by the
Debtors to Arch pursuant to the Merger Agreement or provided by or made
available by Arch to the Debtors pursuant to the Merger Agreement, promptly
after the receipt or provision thereof by or to the Debtors, as applicable, and
that the Committee, pursuant to the undertaking attached as Annex II hereto, has
--------
agreed to distribute copies of the same to the Standby Purchaser and to take
certain other actions and (ii) agrees that the Committee may do so.
(b) Without limiting the generality of the foregoing clause (a) of
this Section 10, Arch will, before filing the Registration Statement with the
SEC, furnish to the Standby Purchaser and its counsel copies of the Registration
Statement (including all exhibits thereto) proposed to be filed, will provide
the Standby Purchaser and its counsel a reasonable opportunity to review and
comment on such Registration Statement and will not file such Registration
Statement if the Standby Purchaser shall reasonably object thereto within three
calendar days after the receipt thereof.
(c) Arch will deliver to the Standby Purchaser copies of the
definitive Proxy Statement in the form filed with the SEC and mailed to
Stockholders of Arch and the Registration Statement in the form declared
effective by the SEC.
(d) Without limiting the generality of the foregoing clause (a) of
this Section 10, Arch will, before filing the Shelf Registration Statement or
any pre-effective amendment thereto, furnish to the Standby Purchaser and its
counsel copies of the Shelf Registration Statement or such pre-effective
amendment thereto, as applicable, proposed to be filed, will provide Standby
Purchaser and its counsel with a reasonable opportunity to review and comment on
the Shelf Registration Statement or such pre-effective amendment thereto, as
applicable, and will not file the Shelf Registration Statement or such pre-
effective amendment thereto, as applicable, to which the Standby Purchaser or
its counsel shall reasonably object within three business days after the receipt
thereof. The Standby Purchaser will furnish to Arch such information regarding
the Standby Purchaser and its plan and method of distribution of the Registrable
Securities as Arch may reasonably request in writing in connection with the
preparation of the Shelf Registration Statement.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 21
(e) Each of Arch, MobileMedia and the Standby Purchaser will use its
reasonable best efforts to obtain all approvals, waivers, consents and other
authorizations required by the Applicable Requirements, including without
limitation the applicable requirement of the HSR Act, necessary in connection
with the performance of this letter agreement by the Standby Purchaser and the
consummation by the Standby Purchaser of the transactions contemplated hereby.
(f) Arch will, as requested by the Standby Purchaser, either pay
directly to the appropriate Governmental Entity, on behalf of the Standby
Purchaser, or reimburse the Standby Purchaser for, any fees required to be paid
by the Standby Purchaser in connection with its compliance with the applicable
requirements of the HSR Act. In addition, following the Effective Date, Arch
will reimburse, promptly upon written request (accompanied by appropriate
supporting documentation), costs and expenses (including without limitation
reasonable fees and expenses of legal counsel, including a reasonable allocation
with respect to the cost of any internal counsel), not to exceed $100,000,
incurred by the Standby Purchaser in connection with this letter agreement and
the transactions contemplated hereby.
11. Certain Prohibited Transactions. The Standby Purchaser hereby
-------------------------------
covenants that, from and after the date hereof, so long as its commitment
hereunder remains in effect, it will not sell, or enter into any agreement
relating to the sale (including without limitation any short sale, equity swap
or other hedge position) of, any shares of Arch capital stock or, except as
otherwise expressly contemplated by this Section 11, engage in any other
disposition of such shares that might negatively affect the market price of such
shares; provided, however, that the foregoing provision will not apply to any
-------- -------
agreement entered into prior to the date hereof (if not entered into in
contemplation of the transactions contemplated by the Plan, the Merger Agreement
or this letter agreement) or any transaction effected pursuant to the terms
thereof. Notwithstanding the immediately preceding sentence, but subject to
Section 3 above and Section 12 below, the Standby Purchaser may at any time, as
it may determine in its sole and absolute discretion, sell or otherwise
transfer, or acquire, or enter into any agreement relating to the sale, transfer
or acquisition of, Rights or Unsecured Claims. The Standby Purchaser
acknowledges that it has received copies of the Rights Agreement and the
amendment thereto attached as Exhibit D to the Merger Agreement (the "Rights
Plan Amendment"). Arch hereby covenants that it will not, without the prior
written consent of the Standby Purchaser, further amend the Rights Agreement in
any manner that would eliminate or reduce the ownership thresholds applicable to
the Standby Purchaser thereunder; provided, however, that this sentence shall
-------- -------
cease to be of any further force or effect at such time
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 22
after the Effective Date as the Standby Purchaser ceases to beneficially own in
the aggregate at least 10.0% of the outstanding shares of Existing Arch Common
Stock.
12. Voting Agreement. The Standby Purchaser hereby covenants that so long
----------------
as the Bankruptcy Court approves the Disclosure Statement not later than
December 31, 1998 and the Confirmation Order is entered not later than March 31,
1999, (a) it will vote, or cause to be voted, for the acceptance of the Plan all
Unsecured Claims held by it on the date fixed for determining holders of
Unsecured Claims entitled to vote for acceptance or rejection of the Plan (the
"Record Date"), (b) it will not withdraw or otherwise revoke, or cause to be
withdrawn or otherwise revoked, such vote for the acceptance of the Plan, and
(c) it will not grant, or cause to be granted, to any other person or entity any
proxy to vote with respect to any such Unsecured Claims (other than a proxy to
vote for the acceptance of the Plan). Except with respect to Whippoorwill
Accounts which cease to be within Whippoorwill's control and investment funds
which cease to be under Whippoorwill's management, the Standby Purchaser will
not, on or prior to the Record Date, sell or otherwise transfer any Unsecured
Claims held by it unless the transferee shall have agreed in writing in the form
attached as Annex III hereto (i) to vote for the acceptance of the Plan with
---------
respect to such Unsecured Claims and (ii) not to sell or otherwise transfer such
Unsecured Claims unless its transferee shall agree to be bound in the same
manner provided in this sentence with respect to such Unsecured Claims.
13. Other Standby Purchase Commitments. (a) Each of Arch and MobileMedia
----------------------------------
covenants that it will not agree to any amendment or modification to any of the
letter agreements, dated the date hereof, among Arch, MobileMedia and any of the
Other Standby Purchasers (the "Other Standby Purchase Commitments"), without the
prior written consent of the Standby Purchaser. Notwithstanding the immediately
preceding sentence, Arch and MobileMedia may, without the prior written consent
of the Standby Purchaser, agree to an amendment or modification to any of the
Other Standby Purchase Commitments to the extent that (i) such amendment or
modification has the sole effect of reducing or eliminating the financial
commitment thereunder and (ii) simultaneously therewith, a qualified
institutional buyer (as such term is defined in Rule 144A promulgated under the
Securities Act) reasonably acceptable to the Standby Purchaser makes a
commitment in a corresponding amount on terms identical in all material respects
to those set forth in such Other Standby Purchase Commitment.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 23
(b) The Standby Purchaser will have no liability for the commitment of
any Other Standby Purchaser under any Other Standby Purchase Commitments or the
commitment of any other person contemplated by Section 13(a) above.
14. Certain Notices; Certain Information. (a) Each of Arch and
------------------------------------
MobileMedia hereby covenants that it will promptly deliver to the Standby
Purchaser, and the Standby Purchaser hereby covenants that it will promptly
deliver to Arch and MobileMedia, written notice of any matter, event or
development that would (i) render any representation or warranty made by it
herein inaccurate or incomplete in any respect or (ii) constitute or result in a
breach by it of, or a failure by it to comply with, any covenant herein
applicable to it.
(b) Each of Arch and MobileMedia will furnish the Standby Purchaser
with such information regarding itself as the Standby Purchaser may reasonably
request.
15. Certain Consent Rights. (a) Notwithstanding anything to the contrary
----------------------
herein contained, except as expressly contemplated by the Merger Agreement or
the Plan, Arch hereby covenants that it will not take, or agree in writing to
take, any action contemplated by Section 4.5(b)(ii), (iii), (iv), (viii) or (ix)
of the Merger Agreement without the prior written consent of the Standby
Purchaser.
(b) Arch hereby covenants that, without the prior written consent of
the Standby Purchaser, it will not, prior to the Effective Date, enter into any
agreement with respect to its securities, or amend any existing agreement with
respect to its securities (including without limitation the Existing
Registration Rights Agreements) in any manner inconsistent with the rights to be
granted to the Standby Purchaser pursuant to the Registration Rights Agreement.
16. Board Representation. Arch hereby covenants that: (a) on or prior to
--------------------
the Effective Date, Arch will cause a vacancy to be created on its Board of
Directors (by increasing the number of members of such Board or otherwise) and
effective no later than the Effective Date will cause one person designated by
the Standby Purchaser (the "Designee") to be elected or appointed to such Board
with an initial term expiring at Arch's Annual Meeting of Stockholders to be
held in the year 2000; and (b) so long as the Standby Purchaser beneficially
owns (as a result of its discretionary control of accounts, management
discretion over investment funds or otherwise) capital stock of Arch
representing at least (x) with respect to Arch's Meeting of Stockholders to be
held in the year 2003 and meetings of Arch's
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 24
stockholders held prior thereto, 5.0% and (y) with respect to meetings of Arch's
stockholders held thereafter 10.0%, of the outstanding voting power, Arch will
(i) nominate and recommend the Designee (or another person designated by the
Standby Purchaser as the Designee's successor) for election at any meeting of
Arch's stockholders at which the term of the Designee or any successor thereto
would otherwise expire and (ii) fill any vacancy on Arch's Board of Directors
created by the death, resignation or removal of the Designee or any successor
thereto with another person designated by the Standby Purchaser as the
Designee's successor. The Standby Purchaser hereby acknowledges that the
Designee will be required to execute and deliver to Arch a confidentiality
agreement in the form executed by the existing members of Arch's Board of
Directors. The commitment of the Standby Purchaser hereunder is subject to the
additional condition that Arch shall have performed its covenant set forth in
clause (a) of the first sentence of this Section 16.
17. Removal of Legends. In the event that, following the transactions
------------------
contemplated by the Merger Agreement, the Plan and this letter agreement, any
certificates evidencing securities ("Certificates") of Arch held by the Standby
Purchaser bear a restrictive legend then:
(a) if the Standby Purchaser delivers to Arch (i) a certificate, in a
form reasonably satisfactory to Arch, certifying that securities evidenced
by such Certificate have been transferred pursuant to a registration
statement that is effective under the Securities Act or (ii) a certificate,
in a form reasonably satisfactory to Arch, certifying that securities
evidenced by such Certificate have been transferred without registration in
accordance with the requirements of Rule 144 under the Securities Act, Arch
will, or will instruct its transfer agent to, issue upon surrender of such
Certificate one or more new Certificates evidencing the securities so
transferred evidenced by the Certificate so surrendered, which new
Certificate or Certificates will not bear any such legend; and
(b) if the Standby Purchaser delivers to Arch an opinion of counsel to
the Standby Purchaser (which may be internal counsel to the Standby
Purchaser) that, in the opinion of such counsel, such legend is not, or is
no longer, required to ensure compliance with the Securities Act, Arch
will, or will instruct its transfer agent to, issue upon surrender of such
Certificate one or more new Certificates evidencing the securities
evidenced by the Certificate so surrendered, which new Certificate or
Certificates will not bear any such legend.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 25
* * * * *
If you are in agreement with the foregoing, please execute the enclosed
copy of this letter agreement as indicated and return it to the undersigned.
This letter agreement will become effective upon (i) the delivery to us of
executed counterparts of this letter agreement by each of you and (ii) the
execution and delivery of each of the Other Standby Purchase Commitments by each
of the parties thereto. Once effective, this letter agreement will terminate on
(i) the date on which the Debtor Tower Agreement is terminated, unless prior to
or simultaneously with such termination, MobileMedia shall have entered into a
definitive agreement (which shall be comparable in form and substance to the
Debtor Tower Agreement and a copy of which shall be delivered to the Standby
Purchaser promptly following the execution thereof), with a bona fide third-
party purchaser providing for a sale to such third party of the assets or
substantially all of the assets to be sold to Pinnacle pursuant to the Debtor
Tower Agreement resulting in net proceeds to MobileMedia of not less than $165.0
million (an "Acceptable Sale"), (ii) December 31, 1998, unless the Closing (as
defined in the Debtor Tower Agreement) or the closing of an Acceptable Sale
shall have occurred on or before such date, (iii) March 31, 1999, unless the
Confirmation Order shall have been entered by the Bankruptcy Court on or before
such date, (iv) June 30, 1999, unless the effectiveness of the Plan occurs on or
before such date, or (v) if not theretofore terminated pursuant to one of the
foregoing clauses, the date on which the Merger Agreement is terminated in
accordance with the terms thereof.
All notices and other communications hereunder must be in writing. Any
notice or other communication hereunder will be deemed duly delivered three
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or two business days after it is sent via a
reputable international overnight courier service, in each case to the intended
recipient at the address therefor set forth on the signature page hereto. Any
party hereto may give any notice or other communication hereunder by personal
delivery or telecopy, but no such notice or other communication will be deemed
to have been duly given unless and until it actually is received by the party
for whom it is intended. Any party may change the address to which notices and
other communications hereunder are to be delivered by giving the other parties
notice in the manner herein set forth.
This letter agreement represents the final agreement among the parties
hereto with respect to the subject matter hereof and may not be contradicted by
evidence of prior or contemporaneous agreements of the parties. There are no
unwritten oral
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 26
agreements between the parties relating to the subject matter hereof. This
letter agreement may not be amended or modified except by a written instrument
signed by each of the Standby Purchaser, Arch and MobileMedia.
This letter agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to its principles of conflicts
of law.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 27
This letter agreement may be executed in counterparts which, taken
together, shall constitute one and the same instrument.
Very truly yours,
WHIPPOORWILL ASSOCIATES, INC.,
AS GENERAL PARTNER OF AND/OR AS AGENT FOR,
EACH WHIPPOORWILL ACCOUNT
By: /s/ David Strumwasser
--------------------------------------
Its: Managing Director
Address: 11 Martine Avenue
White Plains, New York 10606
Attn: David Strumwasser
ACCEPTED AND AGREED TO:
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
-------------------------------------
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 28
Subject to entry of the Confirmation Order:
MOBILEMEDIA COMMUNICATIONS, INC.
By: /s/ Joseph A. Bondi
-------------------------------------
Its: Chairman - Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman - Restructuring
With copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, New York 10022
Attn: James D. Johnson
<PAGE>
<TABLE>
<CAPTION>
COMMITMENT AMOUNTS
------------------
(dollars in millions)
Column A Column B Column C Column D
----------- ------------ -------- -----------
Rights Unexercised Total
Exercise Rights Commitme
Commitment Commitment nt Commitment
Name and Address of Standby Amount (1) Amount (2) Amount Percentage
- -------------------------------------------- ----------- ------------ -------- -----------
Purchasers - -
- ----------
<S> <C> <C> <C> <C>
Northwestern Mutual Series Fund,
Inc. for the High Yield Bond Portfolio/*/ $ .75 $ .69 $ 1.44 0.66%
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8%
Notes:
$ -0-
- ----------------------------
Stated Principal Amount of 10 1/2%
Notes:
$ 2,000,000
- ----------------------------
Credit Suisse First Boston Corporation $ 29.48 $ 26.88 $ 56.36 25.97%
11 Madison Avenue, 4th Floor
New York, New York 10010
Stated Principal Amount of 9 3/8%
Notes: $ 32,453,000
-------------
Stated Principal Amount of 10 1/2%
Notes: $ 35,930,000
-------------
Whippoorwill Associates, Inc., as general $ 30.42 $ 27.72 $ 58.14 26.79%
partner and/or agent for the parties set
forth on Schedule A hereto in the
percentages noted thereon
11 Martine Avenue
White Plains, New York 10606
Stated Principal Amount of 9 3/8%
Notes: $ 37,855,000
-------------
Stated Principal Amount of 10 1/2%
Notes: $ 31,410,000
-------------
Total: $113.52 $103.48 $217.00 100.00%
------- ------- -------
</TABLE>
________________________________________
(1) The "Rights Exercise Commitment Amount", for each Standby Purchaser, shall
mean an amount equal to the product of (i) the Rights Subscription Price
(as defined in Schedule II to the Merger Agreement) and (ii) the number of
Rights issuable in respect of an amount of Allowed Unsecured Claims derived
from the principal amount of 9 3/8% Notes and the 101/2% Notes indicated
under the Standby Purchaser's name on this Annex I held by such Standby
Purchaser on the date hereof. The dollar amounts set forth under Column A
are estimates provided for illustrative purposes only, based on the
assumptions that (x) there is a total of $475 million of Allowed Unsecured
Claims, (y) there is no Rights Reserve (as defined in the Plan), and (z)
the aggregate amount of Subordinated Noteholder Claims (as defined in the
Plan) is $441,819,762.
<PAGE>
(2) The "Unexercised Rights Commitment Amount", for each Standby Purchaser,
shall mean an amount equal to (i) the Total Commitment Amount indicated in
Column C for such Standby Purchaser less (ii) the Rights Exercise
Commitment Amount for such Standby Purchaser. The dollar amounts set forth
under Column B are estimates provided for illustrative purposes only, based
on the estimates set forth in Column A.
ANNEX II
--------
UNDERTAKING
-----------
The Committee hereby undertakes to distribute to the Standby
Purchaser (until instructed by the Standby Purchaser to do otherwise)
copies of any and all notices, documents or information to be provided
by or made available by the Debtors to Arch pursuant to the Merger
Agreement or provided by or made available by Arch to the Debtors
pursuant to the Merger Agreement that are received by the Committee
pursuant to the Debtor/Committee Agreement as soon as practicable with
its receipt thereof. The Committee hereby further undertakes to
consult with the Standby Purchaser (until instructed by the Standby
Purchaser to do otherwise) prior to delivering any written consent or
exercising any other right of the Committee (other than the
distribution of notices, documents or information to the Standby
Purchaser or the Other Standby Purchasers) pursuant to the
Debtor/Committee Agreement or the Plan. The Committee will not enter
into any amendment to the Debtor/Committee Agreement without the prior
written consent of the Standby Purchaser.
THE OFFICIAL COMMITTEE
OF UNSECURED CREDITORS
By: /s/ Bryan E. Bloom
------------------------------
Its: Chairman
<PAGE>
ANNEX III
---------
VOTING AGREEMENT
----------------
The undersigned transferee of indebtedness of MobileMedia Corporation or
one of its direct or indirect subsidiaries (collectively, "MobileMedia")
described in Schedule A attached hereto (the "Claim"), hereby acknowledges and
----------
agrees as follows:
1. MobileMedia is a debtor-in-possession under Chapter 11 of the
Bankruptcy Code and has proposed a First Amended Joint Plan of
Reorganization dated August __, 1998 (the "Amended Plan").
2. By acquiring the Claim the undersigned may also acquire rights to vote
on the adoption of the Amended Plan.
3. As a condition of the transfer of the Claim, the undersigned hereby
agrees to exercise all voting rights it may have as holder of the
Claim in favor of the Amended Plan unless the Amended Plan shall have
been withdrawn.
4. The undersigned agrees that it shall not subsequently transfer the
Claim or any portion thereof unless and until it obtains from its
transferee a Voting Agreement identical to the form hereof.
IN WITNESS HEREOF, the undersigned transferee has executed this Voting
Agreement this _____ day of __________, 199_.
[TRANSFEREE]
By:____________________________
Title:
Accepted By:
_________________________
[Transferor]
<PAGE>
SCHEDULE A
TO
VOTING AGREEMENT
----------------
[Describe Claim.]
<PAGE>
SCHEDULE 9(a)(xi)
-----------------
Existing Registration Rights Agreement
- --------------------------------------
(1) Registration Rights Agreement, dated as of June 24, 1998, by and among Arch
Communications Group, Inc., Sandler Capital Partner, IV, L.P., Sandler
Capital Partners IV FTE, L.P. Harvey Sandler, John Kornreich, Michael J.
Marocco, Andrew Sandler, South Fork Partners, The Georgica International
Fund Limited, Aspen Partners and Consolidated Press International Limited,
as amended
(2) Registration Rights Agreement, dated as of June 29, 1998, Arch
Communications Group, Inc. Adelphia Communications Corporation and Lisa-
Gaye Shearing
Inconsistencies:
- ---------------
The provisions of the Registration Rights Agreement listed at (2) above are
inconsistent in certain respects with the provisions of the Registration Rights
Agreement.
-34-
<PAGE>
ANNEX I
-------
<TABLE>
<CAPTION>
COMMITMENT AMOUNTS
-----------------------
(dollars in millions)
-----------------------
Column A Column B Column C Column D
----------- ------------ -------- -----------
Rights Unexercised Total
Exercise Rights Commitme
Commitment Commitment nt Commitment
Name and Address of Standby Amount (1) Amount (2) Amount Percentage
- --------------------------- ----------- ------------ -------- -----------
Purchasers
- ---------- - -
<S> <C> <C> <C> <C>
W.R. Huff Asset Management Co., L.L.C., $ 39.27 $ 35.80 $ 75.07 34.60%
as agent for its affiliates and
discretionary accounts
67 Park Place, 9th Floor
Morristown, New Jersey 07960
Stated Principal Amount of 9 3/8%
Notes: $ 57,847,000
---------------
Stated Principal Amount of 10 1/2%
Notes: $ 27,970,000
---------------
The Northwestern Mutual Life Insurance $ 10.95 $ 9.97 $ 20.92 9.64%
Company*
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8%
Notes:
$ 19,776,000
- -------------
Stated Principal Amount of 10 1/2%
Notes:
$ 3,350,000
- --------------
The Northwestern Mutual Life Insurance $ 2.65 $ 2.42 $ 5.07 2.34%
Company for its Group Annuity
Separate Account*
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Stated Principal Amount of 9 3/8%
Notes:
$ -0-
- ---------------
Stated Principal Amount of 10 1/2%
Notes
$ 7,000,000
- ---------------
</TABLE>
_______________________
* The Northwestern Mutual Life Insurance Company, The Northwestern Mutual
Life Insurance Company for its Group Annuity Separate Account and Northwestern
Mutual Series Fund, Inc. for the High Yield Bond Portfolio are affiliated
entities for purposes of clauses (a) and (k) of Section 5 and clause (iii) of
Section 6.
<PAGE>
EXHIBIT 10.7
W.R. HUFF ASSET MANAGEMENT CO., L.L.C.
67 Park Place, Ninth Floor
Morristown, New Jersey 07960
September 3, 1998
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Amendment to Commitment
-----------------------
Gentlemen:
Reference is made to the letter agreement, dated August 18, 1998 (the
"Standby Commitment Letter"), among Arch Communications Group, Inc., MobileMedia
Communications, Inc. and W.R. Huff Asset Management Co., L.L.C. Terms used
herein with initial capital letters that are not otherwise defined shall have
the meanings ascribed to such terms in the Standby Commitment Letter.
The parties hereto hereby agree as follows:
1. First Paragraph. The second sentence of the first paragraph of the
---------------
Standby Commitment Letter is hereby amended in its entirety to read as follows:
It is our understanding that in connection with the Reorganization, among
other things: (a) pursuant to the Agreement and Plan of Merger, dated as of
the date hereof (as amended by the First Amendment thereto dated as of
September 3, 1998 (the "Merger Agreement"), among Arch, a wholly owned
subsidiary of Arch ("Merger Sub"), Parent and MobileMedia, MobileMedia will
merge with and into Merger Sub, with Merger Sub continuing as the surviving
corporation and a wholly owned subsidiary of Arch; (b) pursuant to the
Merger Agreement, Arch will make available for distribution pursuant to a
plan of reorganization of the Debtors in the form attached as Exhibit A to
the Merger Agreement, with such amendments and modifications thereto as are
made in a manner consistent with clause (e) of Section 5 hereto (such plan
of reorganization being referred to herein as the "Plan"), (i) cash, (ii)
shares of its Common Stock, par value $.01 per share ("Existing Arch Common
Stock"), and (iii) either (A) if a Rights Offering Adjustment (as defined
in Schedule II to the Merger Agreement) shall not have occurred, warrants
entitling the holders
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
thereof to purchase shares of Existing Arch Common Stock ("Arch Warrants"),
with such Arch Warrants to be issued pursuant to, and to have the terms set
forth in, a warrant agreement in the form attached as Exhibit B to the
Merger Agreement (the "Arch Warrant Agreement") or (B) if a Rights Offering
Adjustment shall have occurred, warrants entitling the holders thereof to
purchase shares of Existing Arch Common Stock ("Arch Participation
Warrants"), with such Arch Participation Warrants to be issued pursuant to,
and to have the terms set forth in, a warrant agreement in the form
attached as Exhibit B-1 to the Merger Agreement (the "Arch Participation
Warrant Agreement"); (c) holders of unsecured non-priority claims against
the Debtors ("Unsecured Claims"), to the extent such Unsecured Claims are
Allowed (as defined in the Plan), will receive pursuant to the Plan (i)
shares of Existing Arch Common Stock and (ii) rights to purchase ("Rights")
for cash either (A) if a Rights Offering Adjustment shall not have
occurred, units ("Units") consisting of (x) shares of Existing Arch Common
Stock and (y) Arch Warrants or (B) if a Rights Offering Adjustment shall
have occurred, shares of Existing Arch Common Stock ("Rights Shares"); (d)
holders of claims arising under or relating to the Credit Agreement, dated
December 4, 1995, as amended, among MobileMedia and the other parties
thereto ("Secured Claims"), to the extent such Secured Claims are Allowed,
will receive pursuant to the Plan cash in an amount equal to 100% of such
claims; (e) all of the outstanding equity interests in MobileMedia and
Parent will be canceled without consideration and Parent will be dissolved;
and (f) the commitments under the DIP Loan Agreement will terminate and all
amounts owed under or in respect of the DIP Loan Agreement will be paid in
full in cash. Arch will conduct the Stockholder Rights Offering, in which
it will issue to holders of Buyer Stock Stockholder Rights to acquire
shares of Existing Arch Common Stock if a Rights Offering Adjustment shall
have occurred, and, in addition, if a Rights Offering Adjustment shall have
occurred, immediately following the Combination, Arch will issue Arch
Participation Warrants to the stockholders of Arch to the extent any
Stockholder Rights issued to such Stockholder Rights Holder were not
exercised.
2. Section 1(a). Section 1(a) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(a) to exercise any Rights distributed to it in respect of its Allowed
Unsecured Claims in accordance with the Plan and not thereafter sold or
transferred as permitted by Section 3 below to purchase either (i) if a
Rights Offering Adjustment shall not have occurred, Units or (ii) if a
Rights Offering Adjustment shall have occurred, Rights Shares, to the
extent that the aggregate purchase price payable upon such exercise, as
determined in accordance with Schedule II to the Merger Agreement (the
"Subscription Price"), does not
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
exceed the Rights Exercise Commitment Amount of the Standby Purchaser as
set forth in Annex I hereto;
-------
3. Section 1(b).Section 1(b) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(b) if (i) the Standby Purchaser sells or otherwise transfers any or
all of the (A) the Rights distributed to it in accordance with the Plan or
(B) Unsecured Claims held by it as of the date hereof in respect of which
Rights are to be distributed, in each case as permitted by Section 3 below,
and (ii) the Rights sold or transferred by the Standby Purchaser or the
Rights distributed in respect of Unsecured Claims held by it as of the date
hereof that are hereafter sold or transferred by the Standby Purchaser are
not exercised prior to the expiration thereof (at which time such Rights
will be void and will no longer be exercisable), to purchase for cash
(based upon the Subscription Price payable upon exercise of such Rights)
either (x) if a Rights Offering Adjustment shall not have occurred,
identical Units or (y) if a Rights Offering Adjustment shall have occurred,
Rights Shares underlying, in each case, such unexercised Rights, to the
extent that the aggregate purchase price therefor, together with the
aggregate Subscription Price payable upon exercise of Rights exercised as
contemplated by clause (a) above, does not exceed the Rights Exercise
Commitment Amount of the Standby Purchaser as set forth in Annex I hereto;
-------
and
4. Section 1(c). Section 1(c) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(c) if any Rights distributed in accordance with the Plan (other than
(i) Rights distributed to the Standby Purchaser or the other holders of
Unsecured Claims listed on Annex I hereto (the "Other Standby Purchasers")
-------
and retained by them (which Rights are referred to in Section 1(a) above
and Section 1(a) of each of the Other Standby Purchase Commitments (as
defined in Section 13(a) below)) or (ii) subject to Section 3(b) below,
Rights distributed in respect of Unsecured Claims held by the Standby
Purchaser or the Other Standby Purchasers as of the date hereof that are
hereafter sold or transferred by them (which Rights are referred to in
Sections 1(b) and 3 hereof and Sections 1(b) and 3 of each of the Other
Standby Purchase Commitments)) remain unexercised upon the expiration
thereof (at which time such Rights will be void and will no longer be
exercisable), to purchase for cash (based on the Subscription Price payable
upon exercise of such Rights ) pro rata in accordance with and up to the
Unexercised Rights Commitment Amount of the Standby Purchaser as set forth
in Annex I hereto either (x) if a Rights Offering Adjustment shall not have
-------
occurred, identical Units or (y) if a Rights
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
Offering Adjustment shall have occurred, Rights Shares, underlying, in each
case, such unexercised Rights.
5. Section 2(a). Section 2(a) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(a) Notwithstanding anything to the contrary herein contained, if the
purchases by the Standby Purchaser contemplated by Section 1 above would
cause the Standby Purchaser, the Other Standby Purchasers, and any other
persons or entities who, when taken together with any one or more of the
Standby Purchaser and the Other Standby Purchasers, would constitute a
"person" or "group" as used in Section 13(d) or Section 14(d) of the
Exchange Act or Rule 13d-3 or Rule 13d-5 promulgated thereunder, or any
"affiliate" as defined in Rule 405 promulgated under the Securities Act of
any of them (collectively, the "Standby Class B Holders"), in the
aggregate, to beneficially own on the effective date of the Plan (the
"Effective Date") shares representing more than 49.0% of the capital stock
of Arch generally entitled to vote in the election of directors or more
than 49.0% of the total voting power of the capital stock of Arch, Arch
will substitute shares of Class B Common Stock, par value $.01 per share,
of Arch ("Arch Class B Common Stock"), with such Arch Class B Common Stock
having the terms set forth in the form of Certificate of Amendment to
Certificate of Incorporation of Arch attached as Exhibit F to the Merger
Agreement (the "Arch Charter Amendment"), for shares of Existing Arch
Common Stock so purchased on a one-for-one basis such that on the Effective
Date the Standby Class B Holders, in the aggregate, will beneficially own
shares representing not more than 49.0% of the capital stock of Arch
generally entitled to vote in the election of directors and not more than
49.0% of the total voting power of the capital stock of Arch, all as
provided in the Plan. For purposes of this letter agreement, "beneficial
ownership" shall be determined as provided in Rule 13d-3 and Rule 13d-5
promulgated under the Exchange Act, except that a person or entity shall be
deemed to have "beneficial ownership" of all securities that such person or
entity has the right to acquire, whether such right is exercisable
immediately or only after the passage of time.
6. Section 3(b). Section 3(b) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(b) Notwithstanding the provisions of clause (Y) of the proviso in
Section 3(a) above, the Standby Purchaser may elect to sell or otherwise
transfer (i) any or all of the Rights distributed to it in accordance with
the Plan or (ii) Unsecured Claims in respect of which Rights are to be so
distributed, in either case without entering into a Tracking Agreement with
its transferee or transferees (any Rights so transferred and any Rights
distributed in respect of
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
Allowed Claims so transferred, together with any Rights so transferred and
any Rights distributed in respect of Allowed Claims so transferred by the
Other Standby Purchasers pursuant to Section 3(b) of the Other Standby
Purchase Commitments, being referred to herein collectively as "Untracked
Rights"). Any Rights that remain unexercised upon expiration thereof will
be deemed to be "Section 3(b) Rights" up to, but not exceeding, the amount
of Untracked Rights. The Section 3(b) Rights shall be exercised as follows
prior to the application of Section 1(c) above and Section 1(c) of the
Other Standby Purchase Commitments: (A) the Standby Purchaser and the Other
Standby Purchasers will first be given the opportunity to purchase for cash
(based on the Subscription Price payable upon exercise of such Rights)
either (x) if a Rights Offering Adjustment shall not have occurred, Units
or (y) if a Rights Offering Adjustment shall have occurred, Rights Shares,
underlying, in each case, a number of unexercised Rights up to the amount
of Section 3(b) Rights in accordance with the percentages set forth in
Column D of Annex I hereto and (B) to the extent such Units or Rights
-------
Shares, as the case may be, are not so purchased, the Standby Purchaser and
any Other Standby Purchasers that are responsible for the existence of the
Section 3(b) Rights will be required to purchase such Units or Rights
Shares, as the case may be, pro rata based on the number of Section 3(b)
Rights resulting from their respective transfers. Nothing in this Section
3(b) will in any way reduce the commitment of the Standby Purchaser
specified in Section 1(c) above or the Unexercised Rights Commitment Amount
as set forth in Annex I hereto.
-------
7. Section 4. Section 4 of the Standby Commitment Letter is hereby
---------
amended in its entirety to read as follows:
4. The Closing. (a) Notwithstanding anything to the contrary herein
-----------
contained or the terms of the Rights or the Plan, subject to the conditions
set forth herein, on the Effective Date the Standby Purchaser, in
satisfaction of the Commitment, will deliver at the Closing (i) the
aggregate Subscription Price payable upon exercise of any Rights exercised
by it and (ii) the purchase price payable in consideration of any shares of
Existing Arch Common Stock or, if applicable, Arch Class B Common Stock
and, if a Rights Offering Adjustment shall not have occurred, Arch Warrants
to be otherwise purchased by it pursuant to the Commitment; provided,
--------
however, that, if requested by the Standby Purchaser in writing at least
-------
two business days prior to the Effective Date, any cash to be distributed
to the Standby Purchaser in respect of Allowed Secured Claims pursuant to
the Plan will, prior to the distribution thereof pursuant to the Plan and
in accordance with the instructions included in such written request, be
first applied, on behalf of the Standby Purchaser, to the payment of such
amounts payable on the Effective Date as provided in this Section 4(a).
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
(b) Upon payment of the amounts payable as provided in Section 4(a),
on the Effective Date at the Closing Arch will deliver to the Standby
Purchaser (or its designees) certificates representing the shares of
Existing Arch Common Stock, shares of Arch Class B Common Stock, if
applicable, and, if a Rights Offering Adjustment shall not have occurred,
the Arch Warrants, in each case, (i) issuable upon exercise of any Rights
exercised by the Standby Purchaser or (ii) otherwise purchased by the
Standby Purchaser pursuant to the Commitment. At the Closing, Arch will
also deliver to the Standby Purchaser (or its designees) certificates
representing the Arch Warrants or Arch Participation Warrants, as the case
may be, contemplated by Section 7 below.
(c) (i) Arch will deliver to the Standby Purchaser two business days
after the expiration of the Stockholder Rights Offering a written notice
which shall (A) specify the amounts payable at the Closing by it in
satisfaction of the Commitment (without taking into account Section 4(e)
below), (B) specify the Maximum Reduction Number (as defined in Section
4(e) below, (C) specify the last date on which the notice referred to in
Section 4(c) (ii) below may be delivered, and (D) indicate the matters
required to be addressed in such notice.
(ii) Within 10 business days after its receipt of the notice
referred to in Section 4(c)(i) above, the Standby Purchaser will deliver to
Arch and MobileMedia a written notice which shall set forth the Elected
Reduction Number (as defined in Section 4(e) below) determined by the
Standby Purchaser in accordance with Section 4(e) below.
(d) (i) Arch will deliver to the Standby Purchaser at least five
business days prior to the Effective Date a written notice which shall
specify the date on which the Effective Date is to occur and the last date
on which the notice referred to in Section 4(d)(ii) below may be delivered.
(ii) At least two business days prior to the Effective Date, the
Standby Purchaser will deliver to Arch and MobileMedia a written notice
which shall set forth the number of shares of Existing Arch Common Stock
beneficially owned by it as of such date. During the period from the date
of such notice through the Effective Date, neither the Standby Purchaser
nor any affiliate thereof shall acquire beneficial ownership of, or any
rights to acquire, any additional shares of Existing Arch Common Stock or
any Unsecured Claim.
(e) If a Rights Offering Adjustment shall have occurred,
notwithstanding anything to the contrary herein contained, the Standby
Purchaser may elect to reduce the number of Rights Shares required to be
purchased by the Standby Purchaser in satisfaction of its Commitment by a
number (the "Elected Reduction Number") of Rights Shares equal to or less
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 7
than the product of (i) the number of shares of Existing Arch Common Stock
to be issued by Arch in the Stockholder Rights Offering and (ii) the
percentage in Column D of Annex I hereto specified opposite the Standby
-------
Purchaser's name (such product being referred to herein as the "Maximum
Reduction Number"). Subject to the immediately preceding sentence, the
Standby Purchaser shall determine the Elected Reduction Number in its sole
discretion.
8. Section 5(c). Section 5(c) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(c) there shall be effective under the Securities Act, a registration
statement (the "Shelf Registration Statement") covering the resale by the
Standby Purchaser of (i) all shares of Existing Arch Common Stock, all
shares of Arch Class B Common Stock, if applicable, and, if a Rights
Offering Adjustment shall not have occurred, all Arch Warrants received by
the Standby Purchaser as a result of the transactions contemplated by the
Plan (including those received upon the exercise of Rights and pursuant to
this letter agreement), (ii) if a Rights Offering Adjustment shall have
occurred, all Arch Participation Warrants received by the Standby Purchaser
pursuant to this letter agreement, and (iii) all shares of Existing Arch
Common Stock issuable upon conversion of any such shares of the Arch Class
B Common Stock or exercise of any such Arch Warrants or Arch Participation
Warrants, as the case may be (the securities referred to in the foregoing
clauses (i), (ii) and (iii) are referred to herein as the "Registrable
Securities");
9. Section 5(e). Section 5(e) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(e) any and all amendments or modifications to the Merger Agreement or
any exhibit or schedule thereto (including without limitation the Plan, the
Arch Charter Amendment, the Arch Warrant Agreement, the Arch Participation
Warrant Agreement and the Registration Rights Agreement) on or after the
date hereof and any consents or waivers delivered on or after the date
hereof by Arch or MobileMedia to the other under the Merger Agreement
(other than (i) subject to Section 15(a) below, consents under Section 4.5
of the Merger Agreement, (ii) waivers of Unilateral Conditions or (iii) any
amendment to the Merger Agreement solely to reduce the amount of the Buyer
Breakup Fee) shall have been in form and substance reasonably satisfactory
to the Standby Purchaser;
10. Section 5(j). Section 5(j) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 8
(j) (i) the shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement shall be so issued and distributed pursuant to an exemption from
registration under the Securities Act provided by Section 1145 of the
Bankruptcy Code, and (ii)(A) the issuance of the Rights, (B) the issuance
of the shares of Existing Arch Common Stock, the shares of Arch Class B
Common Stock, if applicable, and, if a Rights Offering Adjustment shall not
have occurred, the Arch Warrants upon exercise of the Rights, (C) the
issuance to the Standby Purchaser of the shares of Existing Arch Common
Stock, the shares of Arch Class B Common Stock, if applicable, and, if a
Rights Offering Adjustment shall not have occurred, the Arch Warrants as
contemplated by Section 1 and Section 3 above and the Arch Warrants or Arch
Participation Warrants, as the case may be, as contemplated by Section 7
below, and (D) the issuance of Existing Arch Common Stock upon exercise of
the Arch Warrants or Arch Participation Warrants, as the case may be, or
conversion of Arch Class B Common Stock, if applicable, shall be covered by
the Registration Statement, the Registration Statement shall have been
declared effective and no stop order with respect thereto shall be in
effect;
11. Section 5(m) of the Standby Commitment Letter is hereby deleted.
12. Section 7. Section 7 of the Standby Commitment Letter is hereby
---------
amended in its entirety to read as follows:
Consideration for the Commitment. In consideration for the
--------------------------------
Commitment, on the Effective Date at the Closing the Standby Purchaser will
receive its pro rata share of either (a) if a Rights Offering Adjustment
shall not have occurred, Arch Warrants entitling the holders thereof to
purchase, in the aggregate, a number of shares of Existing Arch Common
Stock equal to 2.50% of the issued and outstanding shares of Existing Arch
Common Stock and, if applicable, Arch Class B Common Stock, computed on a
Fully Diluted Basis (as defined in the Plan) on the date the "Initial Buyer
Market Price" is determined in accordance with Schedule II to the Merger
Agreement giving effect to the Plan as if the Effective Date had occurred
on such date and assuming 21,067,110 shares of Existing Arch Common Stock
are issued and outstanding immediately prior thereto or (b) if a Rights
Offering Adjustment shall have occurred, Arch Participation Warrants
entitling the holders thereof to purchase, in the aggregate, a number of
shares of Existing Arch Common Stock equal to 2.50% of the issued and
outstanding shares of Existing Arch Common Stock and, if applicable, Arch
Class B Common Stock, computed on a Fully Diluted Basis on the Rights
Offering Adjustment Determination Date giving effect to the Plan as if the
Effective Date had occurred on such date and assuming 21,067,110 shares of
Existing Arch Common Stock are issued and outstanding immediately prior
thereto. Such Arch Warrants or Arch
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 9
Participation Warrants, as the case may be, will be delivered to the
Standby Purchaser and the Other Standby Purchasers, in accordance with the
percentages specified in Column D of Annex I hereto.
-------
13. Section 9(a)(x). Section 9(a)(x) of the Standby Commitment Letter is
---------------
hereby amended in its entirety to read as follows:
(a)(x) The shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement and the shares of Existing Arch Common Stock, the shares of Arch
Class B Common Stock, if applicable, and either the Arch Warrants to be
issued and delivered as contemplated by Section 1 and Section 3 above and
the Arch Warrants to be issued as contemplated by Section 7 above or, if a
Rights Offering Adjustment shall have occurred, the Arch Participation
Warrants to be issued as contemplated by Section 7 above, in each case,
when so issued and distributed or delivered, as the case may be, and the
shares of Existing Arch Common Stock issued upon conversation of such
shares of Arch Class B Common Stock, if applicable, when so converted in
accordance with the Arch Charter Amendment, and either, if a Rights
Offering Adjustment shall not have occurred, the shares of Existing Arch
Common Stock issued upon exercise of such Arch Warrants, when issued, paid
for and delivered as provided in the Arch Warrant Agreement or, if a Rights
Offering Adjustment shall have occurred, the shares of Existing Arch Common
Stock issued upon exercise of Arch Participation Warrants, when issued,
paid for and delivered as provided in the Arch Participation Warrant
Agreement, will be duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights; and
14. Section 11. Section 11 of the Standby Commitment Letter is hereby
----------
amended to change the reference therein to "Exhibit D" to a reference to
"Exhibit D-1."
15. Schedule A to Annex I. Schedule A to Annex I to the Standby
---------------------
Commitment Letter is hereby amended to read in its entirety as Schedule A
----------
hereto.
16. Continuation of Standby Commitment Letter. Except as specifically
-----------------------------------------
amended hereby, the Standby Commitment Letter shall continue in full force and
effect and is hereby certified and confirmed in all respects.
17. Consent to Amendments. The Standby Purchaser hereby (a) consents to
---------------------
the amendments to the Other Standby Purchase Commitments to be effected by the
letter agreements attached as Exhibit C-1 hereto, which amendments shall be
-----------
entered into simultaneously herewith, (b) consents to (i) the First Amendment
dated as of September 3, 1998 to the Merger Agreement and each of the exhibits
attached thereto
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 10
and (ii) the Second Amended Joint Plan of Reorganization dated as of September
4, 1998 and each of the exhibits attached thereto, and (c) agrees that the form
and substance thereof are reasonably satisfactory to the Standby Purchaser.
18. Governing Law. This letter agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard to
its principles of conflicts of law.
19. Counterparts. This letter agreement may be executed in
------------
counterparts which, taken together, shall constitute one and the same
instrument.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 11
If the foregoing accurately reflects your understanding with respect to the
matters set forth herein, please confirm by executing and returning a copy of
this letter to the undersigned.
Very truly yours,
W.R. HUFF ASSET MANAGEMENT CO., L.L.C.,
as agent for its separate accounts and
affiliates
By: /s/ Bryan E. Bloom
-----------------------------------
Name: Bryan E. Bloom, Esq.
Its: Attorney-in-Fact
Address: 67 Park Place, 9th Floor
Morristown, NJ 07960
Attention: Cathy Markey, Esq.
ACCEPTED AND AGREED TO:
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
-------------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 12
Subject to entry of the Confirmation Order:
MOBILEMEDIA COMMUNICATIONS, INC.
By: /s/ Joseph A. Bondi
-----------------------------------------
Name: Joseph A. Bondi
Its: Chairman - Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman - Restructuring
With a copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, NY 10022
Attn: James D. Johnson
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
September 3, 1998
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Amendment to Commitment
-----------------------
Gentlemen:
Reference is made to the letter agreement, dated August 18, 1998 (the
"Standby Commitment Letter"), among Arch Communications Group, Inc., MobileMedia
Communications, Inc. and The Northwestern Mutual Life Insurance Company. Terms
used herein with initial capital letters that are not otherwise defined shall
have the meanings ascribed to such terms in the Standby Commitment Letter. The
parties hereto hereby agree as follows:
1. First Paragraph. The second sentence of the first paragraph of the
---------------
Standby Commitment Letter is hereby amended in its entirety to read as follows:
It is our understanding that in connection with the Reorganization, among
other things: (a) pursuant to the Agreement and Plan of Merger, dated as of
the date hereof (as amended by the First Amendment thereto dated as of
September 3, 1998 (the "Merger Agreement"), among Arch, a wholly owned
subsidiary of Arch ("Merger Sub"), Parent and MobileMedia, MobileMedia will
merge with and into Merger Sub, with Merger Sub continuing as the surviving
corporation and a wholly owned subsidiary of Arch; (b) pursuant to the
Merger Agreement, Arch will make available for distribution pursuant to a
plan of reorganization of the Debtors in the form attached as Exhibit A to
the Merger Agreement, with such amendments and modifications thereto as are
made in a manner consistent with clause (e) of Section 5 hereto (such plan
of reorganization being referred to herein as the "Plan"), (i) cash, (ii)
shares of its Common Stock, par value $.01 per share ("Existing Arch Common
Stock"), and (iii) either (A) if a Rights Offering Adjustment (as defined
in Schedule II to the Merger Agreement) shall not have occurred, warrants
entitling the holders
<PAGE>
Arch Communications Group, Inc.
Mobile Media Communications, Inc.
Page 2
thereof to purchase shares of Existing Arch Common Stock ("Arch Warrants"),
with such Arch Warrants to be issued pursuant to, and to have the terms set
forth in, a warrant agreement in the form attached as Exhibit B to the
Merger Agreement (the "Arch Warrant Agreement") or (B) if a Rights Offering
Adjustment shall have occurred, warrants entitling the holders thereof to
purchase shares of Existing Arch Common Stock ("Arch Participation
Warrants"), with such Arch Participation Warrants to be issued pursuant to,
and to have the terms set forth in, a warrant agreement in the form
attached as Exhibit B-1 to the Merger Agreement (the "Arch Participation
Warrant Agreement"); (c) holders of unsecured non-priority claims against
the Debtors ("Unsecured Claims"), to the extent such Unsecured Claims are
Allowed (as defined in the Plan), will receive pursuant to the Plan (i)
shares of Existing Arch Common Stock and (ii) rights to purchase ("Rights")
for cash either (A) if a Rights Offering Adjustment shall not have
occurred, units ("Units") consisting of (x) shares of Existing Arch Common
Stock and (y) Arch Warrants or (B) if a Rights Offering Adjustment shall
have occurred, shares of Existing Arch Common Stock ("Rights Shares"); (d)
holders of claims arising under or relating to the Credit Agreement, dated
December 4, 1995, as amended, among MobileMedia and the other parties
thereto ("Secured Claims"), to the extent such Secured Claims are Allowed,
will receive pursuant to the Plan cash in an amount equal to 100% of such
claims; (e) all of the outstanding equity interests in MobileMedia and
Parent will be canceled without consideration and Parent will be dissolved;
and (f) the commitments under the DIP Loan Agreement will terminate and all
amounts owed under or in respect of the DIP Loan Agreement will be paid in
full in cash. Arch will conduct the Stockholder Rights Offering, in which
it will issue to holders of Buyer Stock Stockholder Rights to acquire
shares of Existing Arch Common Stock if a Rights Offering Adjustment shall
have occurred, and, in addition, if a Rights Offering Adjustment shall have
occurred, immediately following the Combination, Arch will issue Arch
Participation Warrants to the stockholders of Arch to the extent any
Stockholder Rights issued to such Stockholder Rights Holder were not
exercised.
2. Section 1(a). Section 1(a) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(a) to exercise any Rights distributed to it in respect of its Allowed
Unsecured Claims in accordance with the Plan and not thereafter sold or
transferred as permitted by Section 3 below to purchase either (i) if a
Rights Offering Adjustment shall not have occurred, Units or (ii) if a
Rights Offering Adjustment shall have occurred, Rights Shares, to the
extent that the aggregate purchase price payable upon such exercise, as
determined in accordance with Schedule II to the Merger Agreement (the
"Subscription Price"), does not
<PAGE>
Arch Communications Group, Inc.
Mobile Media Communications, Inc.
Page 3
exceed the Rights Exercise Commitment Amount of the Standby Purchaser as
set forth in Annex I hereto;
-------
3. Section 1(b).Section 1(b) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(b) if (i) the Standby Purchaser sells or otherwise transfers any or
all of the (A) the Rights distributed to it in accordance with the Plan or
(B) Unsecured Claims held by it as of the date hereof in respect of which
Rights are to be distributed, in each case as permitted by Section 3 below,
and (ii) the Rights sold or transferred by the Standby Purchaser or the
Rights distributed in respect of Unsecured Claims held by it as of the date
hereof that are hereafter sold or transferred by the Standby Purchaser are
not exercised prior to the expiration thereof (at which time such Rights
will be void and will no longer be exercisable), to purchase for cash
(based upon the Subscription Price payable upon exercise of such Rights)
either (x) if a Rights Offering Adjustment shall not have occurred,
identical Units or (y) if a Rights Offering Adjustment shall have occurred,
Rights Shares underlying, in each case, such unexercised Rights, to the
extent that the aggregate purchase price therefor, together with the
aggregate Subscription Price payable upon exercise of Rights exercised as
contemplated by clause (a) above, does not exceed the Rights Exercise
Commitment Amount of the Standby Purchaser as set forth in Annex I hereto;
-------
and
4. Section 1(c). Section 1(c) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(c) if any Rights distributed in accordance with the Plan (other than
(i) Rights distributed to the Standby Purchaser or the other holders of
Unsecured Claims listed on Annex I hereto (the "Other Standby Purchasers")
-------
and retained by them (which Rights are referred to in Section 1(a) above
and Section 1(a) of each of the Other Standby Purchase Commitments (as
defined in Section 13(a) below)) or (ii) subject to Section 3(b) below,
Rights distributed in respect of Unsecured Claims held by the Standby
Purchaser or the Other Standby Purchasers as of the date hereof that are
hereafter sold or transferred by them (which Rights are referred to in
Sections 1(b) and 3 hereof and Sections 1(b) and 3 of each of the Other
Standby Purchase Commitments)) remain unexercised upon the expiration
thereof (at which time such Rights will be void and will no longer be
exercisable), to purchase for cash (based on the Subscription Price payable
upon exercise of such Rights ) pro rata in accordance with and up to the
Unexercised Rights Commitment Amount of the Standby Purchaser as set forth
in Annex I hereto either (x) if a Rights Offering Adjustment shall not have
-------
occurred, identical Units or (y) if a Rights
<PAGE>
Arch Communications Group, Inc.
Mobile Media Communications, Inc.
Page 4
Offering Adjustment shall have occurred, Rights Shares, underlying, in each
case, such unexercised Rights.
5. Section 2(a). Section 2(a) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(a) Notwithstanding anything to the contrary herein contained, if the
purchases by the Standby Purchaser contemplated by Section 1 above would
cause the Standby Purchaser, the Other Standby Purchasers, and any other
persons or entities who, when taken together with any one or more of the
Standby Purchaser and the Other Standby Purchasers, would constitute a
"person" or "group" as used in Section 13(d) or Section 14(d) of the
Exchange Act or Rule 13d-3 or Rule 13d-5 promulgated thereunder, or any
"affiliate" as defined in Rule 405 promulgated under the Securities Act of
any of them (collectively, the "Standby Class B Holders"), in the
aggregate, to beneficially own on the effective date of the Plan (the
"Effective Date") shares representing more than 49.0% of the capital stock
of Arch generally entitled to vote in the election of directors or more
than 49.0% of the total voting power of the capital stock of Arch, Arch
will substitute shares of Class B Common Stock, par value $.01 per share,
of Arch ("Arch Class B Common Stock"), with such Arch Class B Common Stock
having the terms set forth in the form of Certificate of Amendment to
Certificate of Incorporation of Arch attached as Exhibit F to the Merger
Agreement (the "Arch Charter Amendment"), for shares of Existing Arch
Common Stock so purchased on a one-for-one basis such that on the Effective
Date the Standby Class B Holders, in the aggregate, will beneficially own
shares representing not more than 49.0% of the capital stock of Arch
generally entitled to vote in the election of directors and not more than
49.0% of the total voting power of the capital stock of Arch, all as
provided in the Plan. For purposes of this letter agreement, "beneficial
ownership" shall be determined as provided in Rule 13d-3 and Rule 13d-5
promulgated under the Exchange Act, except that a person or entity shall be
deemed to have "beneficial ownership" of all securities that such person or
entity has the right to acquire, whether such right is exercisable
immediately or only after the passage of time.
6. Section 3(b). Section 3(b) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(b) Notwithstanding the provisions of clause (Y) of the proviso in
Section 3(a) above, the Standby Purchaser may elect to sell or otherwise
transfer (i) any or all of the Rights distributed to it in accordance with
the Plan or (ii) Unsecured Claims in respect of which Rights are to be so
distributed, in either case without entering into a Tracking Agreement with
its transferee or transferees (any Rights so transferred and any Rights
distributed in respect of
<PAGE>
Arch Communications Group, Inc.
Mobile Media Communications, Inc.
Page 5
Allowed Claims so transferred, together with any Rights so transferred and
any Rights distributed in respect of Allowed Claims so transferred by the
Other Standby Purchasers pursuant to Section 3(b) of the Other Standby
Purchase Commitments, being referred to herein collectively as "Untracked
Rights"). Any Rights that remain unexercised upon expiration thereof will
be deemed to be "Section 3(b) Rights" up to, but not exceeding, the amount
of Untracked Rights. The Section 3(b) Rights shall be exercised as follows
prior to the application of Section 1(c) above and Section 1(c) of the
Other Standby Purchase Commitments: (A) the Standby Purchaser and the Other
Standby Purchasers will first be given the opportunity to purchase for cash
(based on the Subscription Price payable upon exercise of such Rights)
either (x) if a Rights Offering Adjustment shall not have occurred, Units
or (y) if a Rights Offering Adjustment shall have occurred, Rights Shares,
underlying, in each case, a number of unexercised Rights up to the amount
of Section 3(b) Rights in accordance with the percentages set forth in
Column D of Annex I hereto and (B) to the extent such Units or Rights
-------
Shares, as the case may be, are not so purchased, the Standby Purchaser and
any Other Standby Purchasers that are responsible for the existence of the
Section 3(b) Rights will be required to purchase such Units or Rights
Shares, as the case may be, pro rata based on the number of Section 3(b)
Rights resulting from their respective transfers. Nothing in this Section
3(b) will in any way reduce the commitment of the Standby Purchaser
specified in Section 1(c) above or the Unexercised Rights Commitment Amount
as set forth in Annex I hereto.
-------
7. Section 4. Section 4 of the Standby Commitment Letter is hereby
---------
amended in its entirety to read as follows:
4. The Closing. (a) Notwithstanding anything to the contrary herein
-----------
contained or the terms of the Rights or the Plan, subject to the conditions
set forth herein, on the Effective Date the Standby Purchaser, in
satisfaction of the Commitment, will deliver at the Closing (i) the
aggregate Subscription Price payable upon exercise of any Rights exercised
by it and (ii) the purchase price payable in consideration of any shares of
Existing Arch Common Stock or, if applicable, Arch Class B Common Stock
and, if a Rights Offering Adjustment shall not have occurred, Arch Warrants
to be otherwise purchased by it pursuant to the Commitment; provided,
--------
however, that, if requested by the Standby Purchaser in writing at least
-------
two business days prior to the Effective Date, any cash to be distributed
to the Standby Purchaser in respect of Allowed Secured Claims pursuant to
the Plan will, prior to the distribution thereof pursuant to the Plan and
in accordance with the instructions included in such written request, be
first applied, on behalf of the Standby Purchaser, to the payment of such
amounts payable on the Effective Date as provided in this Section 4(a).
<PAGE>
Arch Communications Group, Inc.
Mobile Media Communications, Inc.
Page 6
(b) Upon payment of the amounts payable as provided in Section 4(a),
on the Effective Date at the Closing Arch will deliver to the Standby
Purchaser (or its designees) certificates representing the shares of
Existing Arch Common Stock, shares of Arch Class B Common Stock, if
applicable, and, if a Rights Offering Adjustment shall not have occurred,
the Arch Warrants, in each case, (i) issuable upon exercise of any Rights
exercised by the Standby Purchaser or (ii) otherwise purchased by the
Standby Purchaser pursuant to the Commitment. At the Closing, Arch will
also deliver to the Standby Purchaser (or its designees) certificates
representing the Arch Warrants or Arch Participation Warrants, as the case
may be, contemplated by Section 7 below.
(c) (i) Arch will deliver to the Standby Purchaser two business
days after the expiration of the Stockholder Rights Offering a written
notice which shall (A) specify the amounts payable at the Closing by it in
satisfaction of the Commitment (without taking into account Section 4(e)
below), (B) specify the Maximum Reduction Number (as defined in Section
4(e) below, (C) specify the last date on which the notice referred to in
Section 4(c) (ii) below may be delivered, and (D) indicate the matters
required to be addressed in such notice.
(ii) Within 10 business days after its receipt of the notice
referred to in Section 4(c)(i) above, the Standby Purchaser will deliver to
Arch and MobileMedia a written notice which shall set forth the Elected
Reduction Number (as defined in Section 4(e) below) determined by the
Standby Purchaser in accordance with Section 4(e) below.
(d) (i) Arch will deliver to the Standby Purchaser at least five
business days prior to the Effective Date a written notice which shall
specify the date on which the Effective Date is to occur and the last date
on which the notice referred to in Section 4(d)(ii) below may be delivered.
(ii) At least two business days prior to the Effective Date, the
Standby Purchaser will deliver to Arch and MobileMedia a written notice
which shall set forth the number of shares of Existing Arch Common Stock
beneficially owned by it as of such date. During the period from the date
of such notice through the Effective Date, neither the Standby Purchaser
nor any affiliate thereof shall acquire beneficial ownership of, or any
rights to acquire, any additional shares of Existing Arch Common Stock or
any Unsecured Claim.
(e) If a Rights Offering Adjustment shall have occurred,
notwithstanding anything to the contrary herein contained, the Standby
Purchaser may elect to reduce the number of Rights Shares required to be
purchased by the Standby Purchaser in satisfaction of its Commitment by a
number (the "Elected Reduction Number") of Rights Shares equal to or less
<PAGE>
Arch Communications Group, Inc.
Mobile Media Communications, Inc.
Page 7
than the product of (i) the number of shares of Existing Arch Common Stock
to be issued by Arch in the Stockholder Rights Offering and (ii) the
percentage in Column D of Annex I hereto specified opposite the Standby
-------
Purchaser's name (such product being referred to herein as the "Maximum
Reduction Number"). Subject to the immediately preceding sentence, the
Standby Purchaser shall determine the Elected Reduction Number in its sole
discretion.
8. Section 5(c). Section 5(c) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(c) there shall be effective under the Securities Act, a registration
statement (the "Shelf Registration Statement") covering the resale by the
Standby Purchaser of (i) all shares of Existing Arch Common Stock, all
shares of Arch Class B Common Stock, if applicable, and, if a Rights
Offering Adjustment shall not have occurred, all Arch Warrants received by
the Standby Purchaser as a result of the transactions contemplated by the
Plan (including those received upon the exercise of Rights and pursuant to
this letter agreement), (ii) if a Rights Offering Adjustment shall have
occurred, all Arch Participation Warrants received by the Standby Purchaser
pursuant to this letter agreement, and (iii) all shares of Existing Arch
Common Stock issuable upon conversion of any such shares of the Arch Class
B Common Stock or exercise of any such Arch Warrants or Arch Participation
Warrants, as the case may be (the securities referred to in the foregoing
clauses (i), (ii) and (iii) are referred to herein as the "Registrable
Securities");
9. Section 5(e). Section 5(e) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(e) any and all amendments or modifications to the Merger Agreement or
any exhibit or schedule thereto (including without limitation the Plan, the
Arch Charter Amendment, the Arch Warrant Agreement, the Arch Participation
Warrant Agreement and the Registration Rights Agreement) on or after the
date hereof and any consents or waivers delivered on or after the date
hereof by Arch or MobileMedia to the other under the Merger Agreement
(other than (i) subject to Section 15(a) below, consents under Section 4.5
of the Merger Agreement, (ii) waivers of Unilateral Conditions or (iii) any
amendment to the Merger Agreement solely to reduce the amount of the Buyer
Breakup Fee) shall have been in form and substance reasonably satisfactory
to the Standby Purchaser;
10. Section 5(j). Section 5(j) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
<PAGE>
Arch Communications Group, Inc.
Mobile Media Communications, Inc.
Page 8
(j) (i) the shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement shall be so issued and distributed pursuant to an exemption from
registration under the Securities Act provided by Section 1145 of the
Bankruptcy Code, and (ii)(A) the issuance of the Rights, (B) the issuance
of the shares of Existing Arch Common Stock, the shares of Arch Class B
Common Stock, if applicable, and, if a Rights Offering Adjustment shall not
have occurred, the Arch Warrants upon exercise of the Rights, (C) the
issuance to the Standby Purchaser of the shares of Existing Arch Common
Stock, the shares of Arch Class B Common Stock, if applicable, and, if a
Rights Offering Adjustment shall not have occurred, the Arch Warrants as
contemplated by Section 1 and Section 3 above and the Arch Warrants or Arch
Participation Warrants, as the case may be, as contemplated by Section 7
below, and (D) the issuance of Existing Arch Common Stock upon exercise of
the Arch Warrants or Arch Participation Warrants, as the case may be, or
conversion of Arch Class B Common Stock, if applicable, shall be covered by
the Registration Statement, the Registration Statement shall have been
declared effective and no stop order with respect thereto shall be in
effect;
11. Section 5(m) of the Standby Commitment Letter is hereby deleted.
12. Section 7. Section 7 of the Standby Commitment Letter is hereby
---------
amended in its entirety to read as follows:
Consideration for the Commitment. In consideration for the
--------------------------------
Commitment, on the Effective Date at the Closing the Standby Purchaser will
receive its pro rata share of either (a) if a Rights Offering Adjustment
shall not have occurred, Arch Warrants entitling the holders thereof to
purchase, in the aggregate, a number of shares of Existing Arch Common
Stock equal to 2.50% of the issued and outstanding shares of Existing Arch
Common Stock and, if applicable, Arch Class B Common Stock, computed on a
Fully Diluted Basis (as defined in the Plan) on the date the "Initial Buyer
Market Price" is determined in accordance with Schedule II to the Merger
Agreement giving effect to the Plan as if the Effective Date had occurred
on such date and assuming 21,067,110 shares of Existing Arch Common Stock
are issued and outstanding immediately prior thereto or (b) if a Rights
Offering Adjustment shall have occurred, Arch Participation Warrants
entitling the holders thereof to purchase, in the aggregate, a number of
shares of Existing Arch Common Stock equal to 2.50% of the issued and
outstanding shares of Existing Arch Common Stock and, if applicable, Arch
Class B Common Stock, computed on a Fully Diluted Basis on the Rights
Offering Adjustment Determination Date giving effect to the Plan as if the
Effective Date had occurred on such date and assuming 21,067,110 shares of
Existing Arch Common Stock are issued and outstanding immediately prior
thereto. Such Arch Warrants or Arch
<PAGE>
Arch Communications Group, Inc.
Mobile Media Communications, Inc.
Page 9
Participation Warrants, as the case may be, will be delivered to the
Standby Purchaser and the Other Standby Purchasers, in accordance with the
percentages specified in Column D of Annex I hereto.
-------
13. Section 9(a)(x). Section 9(a)(x) of the Standby Commitment Letter is
---------------
hereby amended in its entirety to read as follows:
(a)(x) The shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement and the shares of Existing Arch Common Stock, the shares of Arch
Class B Common Stock, if applicable, and either the Arch Warrants to be
issued and delivered as contemplated by Section 1 and Section 3 above and
the Arch Warrants to be issued as contemplated by Section 7 above or, if a
Rights Offering Adjustment shall have occurred, the Arch Participation
Warrants to be issued as contemplated by Section 7 above, in each case,
when so issued and distributed or delivered, as the case may be, and the
shares of Existing Arch Common Stock issued upon conversation of such
shares of Arch Class B Common Stock, if applicable, when so converted in
accordance with the Arch Charter Amendment, and either, if a Rights
Offering Adjustment shall not have occurred, the shares of Existing Arch
Common Stock issued upon exercise of such Arch Warrants, when issued, paid
for and delivered as provided in the Arch Warrant Agreement or, if a Rights
Offering Adjustment shall have occurred, the shares of Existing Arch Common
Stock issued upon exercise of Arch Participation Warrants, when issued,
paid for and delivered as provided in the Arch Participation Warrant
Agreement, will be duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights; and
14. Section 11. Section 11 of the Standby Commitment Letter is hereby
----------
amended to change the reference therein to "Exhibit D" to a reference to
"Exhibit D-1."
15. Schedule A to Annex I. Schedule A to Annex I to the Standby
---------------------
Commitment Letter is hereby amended to read in its entirety as Schedule A
----------
hereto.
16. Continuation of Standby Commitment Letter. Except as specifically
-----------------------------------------
amended hereby, the Standby Commitment Letter shall continue in full force and
effect and is hereby certified and confirmed in all respects.
17. Consent to Amendments. The Standby Purchaser hereby (a) consents to
---------------------
the amendments to the Other Standby Purchase Commitments to be effected by the
letter agreements attached as Exhibit C-1 hereto, which amendments shall be
-----------
entered into simultaneously herewith, (b) consents to (i) the First Amendment
dated as of September 3, 1998 to the Merger Agreement and each of the exhibits
attached thereto
<PAGE>
Arch Communications Group, Inc.
Mobile Media Communications, Inc.
Page 10
and (ii) the Second Amended Joint Plan of Reorganization dated as of September
4, 1998 and each of the exhibits attached thereto, and (c) agrees that the form
and substance thereof are reasonably satisfactory to the Standby Purchaser.
18. Governing Law. This letter agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard to
its principles of conflicts of law.
19. Counterparts. This letter agreement may be executed in
------------
counterparts which, taken together, shall constitute one and the same
instrument.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page
If the foregoing accurately reflects your understanding with respect to the
matters set forth herein, please confirm by executing and returning a copy of
this letter to the undersigned.
Very truly yours,
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Steven P. Swanson
-------------------------------
Name: Steven P. Swanson
Its: Authorized Representative
Address: 720 E. Wisconsin Avenue
Milwaukee, WI 53202
Attention: Securities Department
ACCEPTED AND AGREED TO:
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
-------------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page
Subject to entry of the Confirmation Order:
MOBILEMEDIA COMMUNICATIONS, INC.
By: /s/ Joseph A. Bondi
----------------------------------
Name: Joseph A. Bondi
Its: Chairman - Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman - Restructuring
With a copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, NY 10022
Attn: James D. Johnson
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
for its Group Annuity Separate Account
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
September 3, 1998
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Amendment to Commitment
-----------------------
Gentlemen:
Reference is made to the letter agreement, dated August 18, 1998 (the
"Standby Commitment Letter"), among Arch Communications Group, Inc., MobileMedia
Communications, Inc. and The Northwestern Mutual Life Insurance Company for its
Group Annuity Separate Account. Terms used herein with initial capital letters
that are not otherwise defined shall have the meanings ascribed to such terms in
the Standby Commitment Letter.
The parties hereto hereby agree as follows:
1. First Paragraph. The second sentence of the first paragraph of the
---------------
Standby Commitment Letter is hereby amended in its entirety to read as follows:
It is our understanding that in connection with the Reorganization, among
other things: (a) pursuant to the Agreement and Plan of Merger, dated as of
the date hereof (as amended by the First Amendment thereto dated as of
September 3, 1998 (the "Merger Agreement"), among Arch, a wholly owned
subsidiary of Arch ("Merger Sub"), Parent and MobileMedia, MobileMedia will
merge with and into Merger Sub, with Merger Sub continuing as the surviving
corporation and a wholly owned subsidiary of Arch; (b) pursuant to the
Merger Agreement, Arch will make available for distribution pursuant to a
plan of reorganization of the Debtors in the form attached as Exhibit A to
the Merger Agreement, with such amendments and modifications thereto as are
made in a manner consistent with clause (e) of Section 5 hereto (such plan
of reorganization being referred to herein as the "Plan"), (i) cash, (ii)
shares of its Common Stock, par value $.01 per share ("Existing Arch Common
Stock"), and
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
(iii) either (A) if a Rights Offering Adjustment (as defined in Schedule II
to the Merger Agreement) shall not have occurred, warrants entitling the
holders thereof to purchase shares of Existing Arch Common Stock ("Arch
Warrants"), with such Arch Warrants to be issued pursuant to, and to have
the terms set forth in, a warrant agreement in the form attached as Exhibit
B to the Merger Agreement (the "Arch Warrant Agreement") or (B) if a Rights
Offering Adjustment shall have occurred, warrants entitling the holders
thereof to purchase shares of Existing Arch Common Stock ("Arch
Participation Warrants"), with such Arch Participation Warrants to be
issued pursuant to, and to have the terms set forth in, a warrant agreement
in the form attached as Exhibit B-1 to the Merger Agreement (the "Arch
Participation Warrant Agreement"); (c) holders of unsecured non-priority
claims against the Debtors ("Unsecured Claims"), to the extent such
Unsecured Claims are Allowed (as defined in the Plan), will receive
pursuant to the Plan (i) shares of Existing Arch Common Stock and (ii)
rights to purchase ("Rights") for cash either (A) if a Rights Offering
Adjustment shall not have occurred, units ("Units") consisting of (x)
shares of Existing Arch Common Stock and (y) Arch Warrants or (B) if a
Rights Offering Adjustment shall have occurred, shares of Existing Arch
Common Stock ("Rights Shares"); (d) holders of claims arising under or
relating to the Credit Agreement, dated December 4, 1995, as amended, among
MobileMedia and the other parties thereto ("Secured Claims"), to the extent
such Secured Claims are Allowed, will receive pursuant to the Plan cash in
an amount equal to 100% of such claims; (e) all of the outstanding equity
interests in MobileMedia and Parent will be canceled without consideration
and Parent will be dissolved; and (f) the commitments under the DIP Loan
Agreement will terminate and all amounts owed under or in respect of the
DIP Loan Agreement will be paid in full in cash. Arch will conduct the
Stockholder Rights Offering, in which it will issue to holders of Buyer
Stock Stockholder Rights to acquire shares of Existing Arch Common Stock if
a Rights Offering Adjustment shall have occurred, and, in addition, if a
Rights Offering Adjustment shall have occurred, immediately following the
Combination, Arch will issue Arch Participation Warrants to the
stockholders of Arch to the extent any Stockholder Rights issued to such
Stockholder Rights Holder were not exercised.
2. Section 1(a). Section 1(a) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(a) to exercise any Rights distributed to it in respect of its Allowed
Unsecured Claims in accordance with the Plan and not thereafter sold or
transferred as permitted by Section 3 below to purchase either (i) if a
Rights Offering Adjustment shall not have occurred, Units or (ii) if a
Rights Offering Adjustment shall have occurred, Rights Shares, to the
extent that the aggregate purchase price payable upon such exercise, as
determined in accordance with
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
Schedule II to the Merger Agreement (the "Subscription Price"), does not
exceed the Rights Exercise Commitment Amount of the Standby Purchaser as
set forth in Annex I hereto;
-------
3. Section 1(b).Section 1(b) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(b) if (i) the Standby Purchaser sells or otherwise transfers any or
all of the (A) the Rights distributed to it in accordance with the Plan or
(B) Unsecured Claims held by it as of the date hereof in respect of which
Rights are to be distributed, in each case as permitted by Section 3 below,
and (ii) the Rights sold or transferred by the Standby Purchaser or the
Rights distributed in respect of Unsecured Claims held by it as of the date
hereof that are hereafter sold or transferred by the Standby Purchaser are
not exercised prior to the expiration thereof (at which time such Rights
will be void and will no longer be exercisable), to purchase for cash
(based upon the Subscription Price payable upon exercise of such Rights)
either (x) if a Rights Offering Adjustment shall not have occurred,
identical Units or (y) if a Rights Offering Adjustment shall have occurred,
Rights Shares underlying, in each case, such unexercised Rights, to the
extent that the aggregate purchase price therefor, together with the
aggregate Subscription Price payable upon exercise of Rights exercised as
contemplated by clause (a) above, does not exceed the Rights Exercise
Commitment Amount of the Standby Purchaser as set forth in Annex I hereto;
-------
and
4. Section 1(c). Section 1(c) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(c) if any Rights distributed in accordance with the Plan (other than
(i) Rights distributed to the Standby Purchaser or the other holders of
Unsecured Claims listed on Annex I hereto (the "Other Standby Purchasers")
-------
and retained by them (which Rights are referred to in Section 1(a) above
and Section 1(a) of each of the Other Standby Purchase Commitments (as
defined in Section 13(a) below)) or (ii) subject to Section 3(b) below,
Rights distributed in respect of Unsecured Claims held by the Standby
Purchaser or the Other Standby Purchasers as of the date hereof that are
hereafter sold or transferred by them (which Rights are referred to in
Sections 1(b) and 3 hereof and Sections 1(b) and 3 of each of the Other
Standby Purchase Commitments)) remain unexercised upon the expiration
thereof (at which time such Rights will be void and will no longer be
exercisable), to purchase for cash (based on the Subscription Price payable
upon exercise of such Rights ) pro rata in accordance with and up to the
Unexercised Rights Commitment Amount of the Standby Purchaser as set forth
in Annex I hereto either (x) if a Rights Offering Adjustment shall not have
-------
occurred, identical Units or (y) if a Rights
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
Offering Adjustment shall have occurred, Rights Shares, underlying, in each
case, such unexercised Rights.
5. Section 2(a). Section 2(a) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(a) Notwithstanding anything to the contrary herein contained, if the
purchases by the Standby Purchaser contemplated by Section 1 above would
cause the Standby Purchaser, the Other Standby Purchasers, and any other
persons or entities who, when taken together with any one or more of the
Standby Purchaser and the Other Standby Purchasers, would constitute a
"person" or "group" as used in Section 13(d) or Section 14(d) of the
Exchange Act or Rule 13d-3 or Rule 13d-5 promulgated thereunder, or any
"affiliate" as defined in Rule 405 promulgated under the Securities Act of
any of them (collectively, the "Standby Class B Holders"), in the
aggregate, to beneficially own on the effective date of the Plan (the
"Effective Date") shares representing more than 49.0% of the capital stock
of Arch generally entitled to vote in the election of directors or more
than 49.0% of the total voting power of the capital stock of Arch, Arch
will substitute shares of Class B Common Stock, par value $.01 per share,
of Arch ("Arch Class B Common Stock"), with such Arch Class B Common Stock
having the terms set forth in the form of Certificate of Amendment to
Certificate of Incorporation of Arch attached as Exhibit F to the Merger
Agreement (the "Arch Charter Amendment"), for shares of Existing Arch
Common Stock so purchased on a one-for-one basis such that on the Effective
Date the Standby Class B Holders, in the aggregate, will beneficially own
shares representing not more than 49.0% of the capital stock of Arch
generally entitled to vote in the election of directors and not more than
49.0% of the total voting power of the capital stock of Arch, all as
provided in the Plan. For purposes of this letter agreement, "beneficial
ownership" shall be determined as provided in Rule 13d-3 and Rule 13d-5
promulgated under the Exchange Act, except that a person or entity shall be
deemed to have "beneficial ownership" of all securities that such person or
entity has the right to acquire, whether such right is exercisable
immediately or only after the passage of time.
6. Section 3(b). Section 3(b) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(b) Notwithstanding the provisions of clause (Y) of the proviso in
Section 3(a) above, the Standby Purchaser may elect to sell or otherwise
transfer (i) any or all of the Rights distributed to it in accordance with
the Plan or (ii) Unsecured Claims in respect of which Rights are to be so
distributed, in either case without entering into a Tracking Agreement with
its transferee or transferees (any Rights so transferred and any Rights
distributed in respect of
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
Allowed Claims so transferred, together with any Rights so transferred and
any Rights distributed in respect of Allowed Claims so transferred by the
Other Standby Purchasers pursuant to Section 3(b) of the Other Standby
Purchase Commitments, being referred to herein collectively as "Untracked
Rights"). Any Rights that remain unexercised upon expiration thereof will
be deemed to be "Section 3(b) Rights" up to, but not exceeding, the amount
of Untracked Rights. The Section 3(b) Rights shall be exercised as follows
prior to the application of Section 1(c) above and Section 1(c) of the
Other Standby Purchase Commitments: (A) the Standby Purchaser and the Other
Standby Purchasers will first be given the opportunity to purchase for cash
(based on the Subscription Price payable upon exercise of such Rights)
either (x) if a Rights Offering Adjustment shall not have occurred, Units
or (y) if a Rights Offering Adjustment shall have occurred, Rights Shares,
underlying, in each case, a number of unexercised Rights up to the amount
of Section 3(b) Rights in accordance with the percentages set forth in
Column D of Annex I hereto and (B) to the extent such Units or Rights
-------
Shares, as the case may be, are not so purchased, the Standby Purchaser and
any Other Standby Purchasers that are responsible for the existence of the
Section 3(b) Rights will be required to purchase such Units or Rights
Shares, as the case may be, pro rata based on the number of Section 3(b)
Rights resulting from their respective transfers. Nothing in this Section
3(b) will in any way reduce the commitment of the Standby Purchaser
specified in Section 1(c) above or the Unexercised Rights Commitment Amount
as set forth in Annex I hereto.
-------
7. Section 4. Section 4 of the Standby Commitment Letter is hereby
---------
amended in its entirety to read as follows:
4. The Closing. (a) Notwithstanding anything to the contrary herein
-----------
contained or the terms of the Rights or the Plan, subject to the conditions
set forth herein, on the Effective Date the Standby Purchaser, in
satisfaction of the Commitment, will deliver at the Closing (i) the
aggregate Subscription Price payable upon exercise of any Rights exercised
by it and (ii) the purchase price payable in consideration of any shares of
Existing Arch Common Stock or, if applicable, Arch Class B Common Stock
and, if a Rights Offering Adjustment shall not have occurred, Arch Warrants
to be otherwise purchased by it pursuant to the Commitment; provided,
--------
however, that, if requested by the Standby Purchaser in writing at least
-------
two business days prior to the Effective Date, any cash to be distributed
to the Standby Purchaser in respect of Allowed Secured Claims pursuant to
the Plan will, prior to the distribution thereof pursuant to the Plan and
in accordance with the instructions included in such written request, be
first applied, on behalf of the Standby Purchaser, to the payment of such
amounts payable on the Effective Date as provided in this Section 4(a).
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
(b) Upon payment of the amounts payable as provided in Section 4(a),
on the Effective Date at the Closing Arch will deliver to the Standby
Purchaser (or its designees) certificates representing the shares of
Existing Arch Common Stock, shares of Arch Class B Common Stock, if
applicable, and, if a Rights Offering Adjustment shall not have occurred,
the Arch Warrants, in each case, (i) issuable upon exercise of any Rights
exercised by the Standby Purchaser or (ii) otherwise purchased by the
Standby Purchaser pursuant to the Commitment. At the Closing, Arch will
also deliver to the Standby Purchaser (or its designees) certificates
representing the Arch Warrants or Arch Participation Warrants, as the case
may be, contemplated by Section 7 below.
(c) (i) Arch will deliver to the Standby Purchaser two business days
after the expiration of the Stockholder Rights Offering a written notice
which shall (A) specify the amounts payable at the Closing by it in
satisfaction of the Commitment (without taking into account Section 4(e)
below), (B) specify the Maximum Reduction Number (as defined in Section
4(e) below, (C) specify the last date on which the notice referred to in
Section 4(c) (ii) below may be delivered, and (D) indicate the matters
required to be addressed in such notice.
(ii) Within 10 business days after its receipt of the notice
referred to in Section 4(c)(i) above, the Standby Purchaser will deliver to
Arch and MobileMedia a written notice which shall set forth the Elected
Reduction Number (as defined in Section 4(e) below) determined by the
Standby Purchaser in accordance with Section 4(e) below.
(d) (i) Arch will deliver to the Standby Purchaser at least five
business days prior to the Effective Date a written notice which shall
specify the date on which the Effective Date is to occur and the last date
on which the notice referred to in Section 4(d)(ii) below may be delivered.
(ii) At least two business days prior to the Effective Date, the
Standby Purchaser will deliver to Arch and MobileMedia a written notice
which shall set forth the number of shares of Existing Arch Common Stock
beneficially owned by it as of such date. During the period from the date
of such notice through the Effective Date, neither the Standby Purchaser
nor any affiliate thereof shall acquire beneficial ownership of, or any
rights to acquire, any additional shares of Existing Arch Common Stock or
any Unsecured Claim.
(e) If a Rights Offering Adjustment shall have occurred,
notwithstanding anything to the contrary herein contained, the Standby
Purchaser may elect to reduce the number of Rights Shares required to be
purchased by the Standby Purchaser in satisfaction of its Commitment by a
number (the "Elected Reduction Number") of Rights Shares equal to or less
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 7
than the product of (i) the number of shares of Existing Arch Common Stock
to be issued by Arch in the Stockholder Rights Offering and (ii) the
percentage in Column D of Annex I hereto specified opposite the Standby
-------
Purchaser's name (such product being referred to herein as the "Maximum
Reduction Number"). Subject to the immediately preceding sentence, the
Standby Purchaser shall determine the Elected Reduction Number in its sole
discretion.
8. Section 5(c). Section 5(c) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(c) there shall be effective under the Securities Act, a registration
statement (the "Shelf Registration Statement") covering the resale by the
Standby Purchaser of (i) all shares of Existing Arch Common Stock, all
shares of Arch Class B Common Stock, if applicable, and, if a Rights
Offering Adjustment shall not have occurred, all Arch Warrants received by
the Standby Purchaser as a result of the transactions contemplated by the
Plan (including those received upon the exercise of Rights and pursuant to
this letter agreement), (ii) if a Rights Offering Adjustment shall have
occurred, all Arch Participation Warrants received by the Standby Purchaser
pursuant to this letter agreement, and (iii) all shares of Existing Arch
Common Stock issuable upon conversion of any such shares of the Arch Class
B Common Stock or exercise of any such Arch Warrants or Arch Participation
Warrants, as the case may be (the securities referred to in the foregoing
clauses (i), (ii) and (iii) are referred to herein as the "Registrable
Securities");
9. Section 5(e). Section 5(e) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(e) any and all amendments or modifications to the Merger Agreement or
any exhibit or schedule thereto (including without limitation the Plan, the
Arch Charter Amendment, the Arch Warrant Agreement, the Arch Participation
Warrant Agreement and the Registration Rights Agreement) on or after the
date hereof and any consents or waivers delivered on or after the date
hereof by Arch or MobileMedia to the other under the Merger Agreement
(other than (i) subject to Section 15(a) below, consents under Section 4.5
of the Merger Agreement, (ii) waivers of Unilateral Conditions or (iii) any
amendment to the Merger Agreement solely to reduce the amount of the Buyer
Breakup Fee) shall have been in form and substance reasonably satisfactory
to the Standby Purchaser;
10. Section 5(j). Section 5(j) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 8
(j) (i) the shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement shall be so issued and distributed pursuant to an exemption from
registration under the Securities Act provided by Section 1145 of the
Bankruptcy Code, and (ii)(A) the issuance of the Rights, (B) the issuance
of the shares of Existing Arch Common Stock, the shares of Arch Class B
Common Stock, if applicable, and, if a Rights Offering Adjustment shall not
have occurred, the Arch Warrants upon exercise of the Rights, (C) the
issuance to the Standby Purchaser of the shares of Existing Arch Common
Stock, the shares of Arch Class B Common Stock, if applicable, and, if a
Rights Offering Adjustment shall not have occurred, the Arch Warrants as
contemplated by Section 1 and Section 3 above and the Arch Warrants or Arch
Participation Warrants, as the case may be, as contemplated by Section 7
below, and (D) the issuance of Existing Arch Common Stock upon exercise of
the Arch Warrants or Arch Participation Warrants, as the case may be, or
conversion of Arch Class B Common Stock, if applicable, shall be covered by
the Registration Statement, the Registration Statement shall have been
declared effective and no stop order with respect thereto shall be in
effect;
11. Section 5(m) of the Standby Commitment Letter is hereby deleted.
12. Section 7. Section 7 of the Standby Commitment Letter is hereby
---------
amended in its entirety to read as follows:
Consideration for the Commitment. In consideration for the
--------------------------------
Commitment, on the Effective Date at the Closing the Standby Purchaser will
receive its pro rata share of either (a) if a Rights Offering Adjustment
shall not have occurred, Arch Warrants entitling the holders thereof to
purchase, in the aggregate, a number of shares of Existing Arch Common
Stock equal to 2.50% of the issued and outstanding shares of Existing Arch
Common Stock and, if applicable, Arch Class B Common Stock, computed on a
Fully Diluted Basis (as defined in the Plan) on the date the "Initial Buyer
Market Price" is determined in accordance with Schedule II to the Merger
Agreement giving effect to the Plan as if the Effective Date had occurred
on such date and assuming 21,067,110 shares of Existing Arch Common Stock
are issued and outstanding immediately prior thereto or (b) if a Rights
Offering Adjustment shall have occurred, Arch Participation Warrants
entitling the holders thereof to purchase, in the aggregate, a number of
shares of Existing Arch Common Stock equal to 2.50% of the issued and
outstanding shares of Existing Arch Common Stock and, if applicable, Arch
Class B Common Stock, computed on a Fully Diluted Basis on the Rights
Offering Adjustment Determination Date giving effect to the Plan as if the
Effective Date had occurred on such date and assuming 21,067,110 shares of
Existing Arch Common Stock are issued and outstanding immediately prior
thereto. Such Arch Warrants or Arch
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 9
Participation Warrants, as the case may be, will be delivered to the
Standby Purchaser and the Other Standby Purchasers, in accordance with the
percentages specified in Column D of Annex I hereto.
-------
13. Section 9(a)(x). Section 9(a)(x) of the Standby Commitment Letter is
---------------
hereby amended in its entirety to read as follows:
(a)(x) The shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement and the shares of Existing Arch Common Stock, the shares of Arch
Class B Common Stock, if applicable, and either the Arch Warrants to be
issued and delivered as contemplated by Section 1 and Section 3 above and
the Arch Warrants to be issued as contemplated by Section 7 above or, if a
Rights Offering Adjustment shall have occurred, the Arch Participation
Warrants to be issued as contemplated by Section 7 above, in each case,
when so issued and distributed or delivered, as the case may be, and the
shares of Existing Arch Common Stock issued upon conversation of such
shares of Arch Class B Common Stock, if applicable, when so converted in
accordance with the Arch Charter Amendment, and either, if a Rights
Offering Adjustment shall not have occurred, the shares of Existing Arch
Common Stock issued upon exercise of such Arch Warrants, when issued, paid
for and delivered as provided in the Arch Warrant Agreement or, if a Rights
Offering Adjustment shall have occurred, the shares of Existing Arch Common
Stock issued upon exercise of Arch Participation Warrants, when issued,
paid for and delivered as provided in the Arch Participation Warrant
Agreement, will be duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights; and
14. Section 11. Section 11 of the Standby Commitment Letter is hereby
----------
amended to change the reference therein to "Exhibit D" to a reference to
"Exhibit D-1."
15. Schedule A to Annex I. Schedule A to Annex I to the Standby
---------------------
Commitment Letter is hereby amended to read in its entirety as Schedule A
----------
hereto.
16. Continuation of Standby Commitment Letter. Except as specifically
-----------------------------------------
amended hereby, the Standby Commitment Letter shall continue in full force and
effect and is hereby certified and confirmed in all respects.
17. Consent to Amendments. The Standby Purchaser hereby (a) consents to
---------------------
the amendments to the Other Standby Purchase Commitments to be effected by the
letter agreements attached as Exhibit C-1 hereto, which amendments shall be
-----------
entered into simultaneously herewith, (b) consents to (i) the First Amendment
dated as of September 3, 1998 to the Merger Agreement and each of the exhibits
attached thereto
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 10
and (ii) the Second Amended Joint Plan of Reorganization dated as of September
4, 1998 and each of the exhibits attached thereto, and (c) agrees that the form
and substance thereof are reasonably satisfactory to the Standby Purchaser.
18. Governing Law. This letter agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard to
its principles of conflicts of law.
19. Counterparts. This letter agreement may be executed in
------------
counterparts which, taken together, shall constitute one and the same
instrument.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 11
If the foregoing accurately reflects your understanding with respect to the
matters set forth herein, please confirm by executing and returning a copy of
this letter to the undersigned.
Very truly yours,
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
FOR ITS GROUP ANNUITY SEPARATE ACCOUNT
By: Northwestern Investment
Management Company
By: /s/ Steven P. Swanson
------------------------------------
Name: Steven P. Swanson
Its: Managing Director
Address: 720 E. Wisconsin Avenue
Milwaukee, WI 53202
Attention: Securities Department
ACCEPTED AND AGREED TO:
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
-------------------------------------
Name: J. Roy Pottle
Its: Executive Vice President
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 12
Subject to entry of the Confirmation Order:
MOBILEMEDIA COMMUNICATIONS, INC.
By: /s/ Joseph A. Bondi
------------------------------------------
Name: Joseph A. Bondi
Its: Chairman - Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman - Restructuring
With a copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, NY 10022
Attn: James D. Johnson
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
for the High Yield Bond Portfolio
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
September 3, 1998
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Amendment to Commitment
-----------------------
Gentlemen:
Reference is made to the letter agreement, dated August 18, 1998 (the
"Standby Commitment Letter"), among Arch Communications Group, Inc., MobileMedia
Communications, Inc. and Northwestern Mutual Series Fund, Inc. for the High
Yield Bond Portfolio. Terms used herein with initial capital letters that are
not otherwise defined shall have the meanings ascribed to such terms in the
Standby Commitment Letter.
The parties hereto hereby agree as follows:
1. First Paragraph. The second sentence of the first paragraph of the
---------------
Standby Commitment Letter is hereby amended in its entirety to read as follows:
It is our understanding that in connection with the Reorganization, among
other things: (a) pursuant to the Agreement and Plan of Merger, dated as of
the date hereof (as amended by the First Amendment thereto dated as of
September 3, 1998 (the "Merger Agreement"), among Arch, a wholly owned
subsidiary of Arch ("Merger Sub"), Parent and MobileMedia, MobileMedia will
merge with and into Merger Sub, with Merger Sub continuing as the surviving
corporation and a wholly owned subsidiary of Arch; (b) pursuant to the
Merger Agreement, Arch will make available for distribution pursuant to a
plan of reorganization of the Debtors in the form attached as Exhibit A to
the Merger Agreement, with such amendments and modifications thereto as are
made in a manner consistent with clause (e) of Section 5 hereto (such plan
of reorganization being referred to herein as the "Plan"), (i) cash, (ii)
shares of its Common Stock, par value $.01 per share ("Existing Arch Common
Stock"), and
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
(iii) either (A) if a Rights Offering Adjustment (as defined in Schedule II
to the Merger Agreement) shall not have occurred, warrants entitling the
holders thereof to purchase shares of Existing Arch Common Stock ("Arch
Warrants"), with such Arch Warrants to be issued pursuant to, and to have
the terms set forth in, a warrant agreement in the form attached as Exhibit
B to the Merger Agreement (the "Arch Warrant Agreement") or (B) if a Rights
Offering Adjustment shall have occurred, warrants entitling the holders
thereof to purchase shares of Existing Arch Common Stock ("Arch
Participation Warrants"), with such Arch Participation Warrants to be
issued pursuant to, and to have the terms set forth in, a warrant agreement
in the form attached as Exhibit B-1 to the Merger Agreement (the "Arch
Participation Warrant Agreement"); (c) holders of unsecured non-priority
claims against the Debtors ("Unsecured Claims"), to the extent such
Unsecured Claims are Allowed (as defined in the Plan), will receive
pursuant to the Plan (i) shares of Existing Arch Common Stock and (ii)
rights to purchase ("Rights") for cash either (A) if a Rights Offering
Adjustment shall not have occurred, units ("Units") consisting of (x)
shares of Existing Arch Common Stock and (y) Arch Warrants or (B) if a
Rights Offering Adjustment shall have occurred, shares of Existing Arch
Common Stock ("Rights Shares"); (d) holders of claims arising under or
relating to the Credit Agreement, dated December 4, 1995, as amended, among
MobileMedia and the other parties thereto ("Secured Claims"), to the extent
such Secured Claims are Allowed, will receive pursuant to the Plan cash in
an amount equal to 100% of such claims; (e) all of the outstanding equity
interests in MobileMedia and Parent will be canceled without consideration
and Parent will be dissolved; and (f) the commitments under the DIP Loan
Agreement will terminate and all amounts owed under or in respect of the
DIP Loan Agreement will be paid in full in cash. Arch will conduct the
Stockholder Rights Offering, in which it will issue to holders of Buyer
Stock Stockholder Rights to acquire shares of Existing Arch Common Stock if
a Rights Offering Adjustment shall have occurred, and, in addition, if a
Rights Offering Adjustment shall have occurred, immediately following the
Combination, Arch will issue Arch Participation Warrants to the
stockholders of Arch to the extent any Stockholder Rights issued to such
Stockholder Rights Holder were not exercised.
2. Section 1(a). Section 1(a) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(a) to exercise any Rights distributed to it in respect of its Allowed
Unsecured Claims in accordance with the Plan and not thereafter sold or
transferred as permitted by Section 3 below to purchase either (i) if a
Rights Offering Adjustment shall not have occurred, Units or (ii) if a
Rights Offering Adjustment shall have occurred, Rights Shares, to the
extent that the aggregate purchase price payable upon such exercise, as
determined in accordance with
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
Schedule II to the Merger Agreement (the "Subscription Price"), does not
exceed the Rights Exercise Commitment Amount of the Standby Purchaser as
set forth in Annex I hereto;
-------
3. Section 1(b).Section 1(b) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(b) if (i) the Standby Purchaser sells or otherwise transfers any or
all of the (A) the Rights distributed to it in accordance with the Plan or
(B) Unsecured Claims held by it as of the date hereof in respect of which
Rights are to be distributed, in each case as permitted by Section 3 below,
and (ii) the Rights sold or transferred by the Standby Purchaser or the
Rights distributed in respect of Unsecured Claims held by it as of the date
hereof that are hereafter sold or transferred by the Standby Purchaser are
not exercised prior to the expiration thereof (at which time such Rights
will be void and will no longer be exercisable), to purchase for cash
(based upon the Subscription Price payable upon exercise of such Rights)
either (x) if a Rights Offering Adjustment shall not have occurred,
identical Units or (y) if a Rights Offering Adjustment shall have occurred,
Rights Shares underlying, in each case, such unexercised Rights, to the
extent that the aggregate purchase price therefor, together with the
aggregate Subscription Price payable upon exercise of Rights exercised as
contemplated by clause (a) above, does not exceed the Rights Exercise
Commitment Amount of the Standby Purchaser as set forth in Annex I hereto;
-------
and
4. Section 1(c). Section 1(c) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(c) if any Rights distributed in accordance with the Plan (other than
(i) Rights distributed to the Standby Purchaser or the other holders of
Unsecured Claims listed on Annex I hereto (the "Other Standby Purchasers")
-------
and retained by them (which Rights are referred to in Section 1(a) above
and Section 1(a) of each of the Other Standby Purchase Commitments (as
defined in Section 13(a) below)) or (ii) subject to Section 3(b) below,
Rights distributed in respect of Unsecured Claims held by the Standby
Purchaser or the Other Standby Purchasers as of the date hereof that are
hereafter sold or transferred by them (which Rights are referred to in
Sections 1(b) and 3 hereof and Sections 1(b) and 3 of each of the Other
Standby Purchase Commitments)) remain unexercised upon the expiration
thereof (at which time such Rights will be void and will no longer be
exercisable), to purchase for cash (based on the Subscription Price payable
upon exercise of such Rights ) pro rata in accordance with and up to the
Unexercised Rights Commitment Amount of the Standby Purchaser as set forth
in Annex I hereto either (x) if a Rights Offering Adjustment shall not have
-------
occurred, identical Units or (y) if a Rights
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
Offering Adjustment shall have occurred, Rights Shares, underlying, in each
case, such unexercised Rights.
5. Section 2(a). Section 2(a) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(a) Notwithstanding anything to the contrary herein contained, if the
purchases by the Standby Purchaser contemplated by Section 1 above would
cause the Standby Purchaser, the Other Standby Purchasers, and any other
persons or entities who, when taken together with any one or more of the
Standby Purchaser and the Other Standby Purchasers, would constitute a
"person" or "group" as used in Section 13(d) or Section 14(d) of the
Exchange Act or Rule 13d-3 or Rule 13d-5 promulgated thereunder, or any
"affiliate" as defined in Rule 405 promulgated under the Securities Act of
any of them (collectively, the "Standby Class B Holders"), in the
aggregate, to beneficially own on the effective date of the Plan (the
"Effective Date") shares representing more than 49.0% of the capital stock
of Arch generally entitled to vote in the election of directors or more
than 49.0% of the total voting power of the capital stock of Arch, Arch
will substitute shares of Class B Common Stock, par value $.01 per share,
of Arch ("Arch Class B Common Stock"), with such Arch Class B Common Stock
having the terms set forth in the form of Certificate of Amendment to
Certificate of Incorporation of Arch attached as Exhibit F to the Merger
Agreement (the "Arch Charter Amendment"), for shares of Existing Arch
Common Stock so purchased on a one-for-one basis such that on the Effective
Date the Standby Class B Holders, in the aggregate, will beneficially own
shares representing not more than 49.0% of the capital stock of Arch
generally entitled to vote in the election of directors and not more than
49.0% of the total voting power of the capital stock of Arch, all as
provided in the Plan. For purposes of this letter agreement, "beneficial
ownership" shall be determined as provided in Rule 13d-3 and Rule 13d-5
promulgated under the Exchange Act, except that a person or entity shall be
deemed to have "beneficial ownership" of all securities that such person or
entity has the right to acquire, whether such right is exercisable
immediately or only after the passage of time.
6. Section 3(b). Section 3(b) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(b) Notwithstanding the provisions of clause (Y) of the proviso in
Section 3(a) above, the Standby Purchaser may elect to sell or otherwise
transfer (i) any or all of the Rights distributed to it in accordance with
the Plan or (ii) Unsecured Claims in respect of which Rights are to be so
distributed, in either case without entering into a Tracking Agreement with
its transferee or transferees (any Rights so transferred and any Rights
distributed in respect of
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
Allowed Claims so transferred, together with any Rights so transferred and
any Rights distributed in respect of Allowed Claims so transferred by the
Other Standby Purchasers pursuant to Section 3(b) of the Other Standby
Purchase Commitments, being referred to herein collectively as "Untracked
Rights"). Any Rights that remain unexercised upon expiration thereof will
be deemed to be "Section 3(b) Rights" up to, but not exceeding, the amount
of Untracked Rights. The Section 3(b) Rights shall be exercised as follows
prior to the application of Section 1(c) above and Section 1(c) of the
Other Standby Purchase Commitments: (A) the Standby Purchaser and the Other
Standby Purchasers will first be given the opportunity to purchase for cash
(based on the Subscription Price payable upon exercise of such Rights)
either (x) if a Rights Offering Adjustment shall not have occurred, Units
or (y) if a Rights Offering Adjustment shall have occurred, Rights Shares,
underlying, in each case, a number of unexercised Rights up to the amount
of Section 3(b) Rights in accordance with the percentages set forth in
Column D of Annex I hereto and (B) to the extent such Units or Rights
-------
Shares, as the case may be, are not so purchased, the Standby Purchaser and
any Other Standby Purchasers that are responsible for the existence of the
Section 3(b) Rights will be required to purchase such Units or Rights
Shares, as the case may be, pro rata based on the number of Section 3(b)
Rights resulting from their respective transfers. Nothing in this Section
3(b) will in any way reduce the commitment of the Standby Purchaser
specified in Section 1(c) above or the Unexercised Rights Commitment Amount
as set forth in Annex I hereto.
-------
7. Section 4. Section 4 of the Standby Commitment Letter is hereby
---------
amended in its entirety to read as follows:
4. The Closing. (a) Notwithstanding anything to the contrary herein
-----------
contained or the terms of the Rights or the Plan, subject to the conditions
set forth herein, on the Effective Date the Standby Purchaser, in
satisfaction of the Commitment, will deliver at the Closing (i) the
aggregate Subscription Price payable upon exercise of any Rights exercised
by it and (ii) the purchase price payable in consideration of any shares of
Existing Arch Common Stock or, if applicable, Arch Class B Common Stock
and, if a Rights Offering Adjustment shall not have occurred, Arch Warrants
to be otherwise purchased by it pursuant to the Commitment; provided,
--------
however, that, if requested by the Standby Purchaser in writing at least
-------
two business days prior to the Effective Date, any cash to be distributed
to the Standby Purchaser in respect of Allowed Secured Claims pursuant to
the Plan will, prior to the distribution thereof pursuant to the Plan and
in accordance with the instructions included in such written request, be
first applied, on behalf of the Standby Purchaser, to the payment of such
amounts payable on the Effective Date as provided in this Section 4(a).
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
(b) Upon payment of the amounts payable as provided in Section 4(a),
on the Effective Date at the Closing Arch will deliver to the Standby
Purchaser (or its designees) certificates representing the shares of
Existing Arch Common Stock, shares of Arch Class B Common Stock, if
applicable, and, if a Rights Offering Adjustment shall not have occurred,
the Arch Warrants, in each case, (i) issuable upon exercise of any Rights
exercised by the Standby Purchaser or (ii) otherwise purchased by the
Standby Purchaser pursuant to the Commitment. At the Closing, Arch will
also deliver to the Standby Purchaser (or its designees) certificates
representing the Arch Warrants or Arch Participation Warrants, as the case
may be, contemplated by Section 7 below.
(c) (i) Arch will deliver to the Standby Purchaser two business days
after the expiration of the Stockholder Rights Offering a written notice
which shall (A) specify the amounts payable at the Closing by it in
satisfaction of the Commitment (without taking into account Section 4(e)
below), (B) specify the Maximum Reduction Number (as defined in Section
4(e) below, (C) specify the last date on which the notice referred to in
Section 4(c) (ii) below may be delivered, and (D) indicate the matters
required to be addressed in such notice.
(ii) Within 10 business days after its receipt of the notice
referred to in Section 4(c)(i) above, the Standby Purchaser will deliver to
Arch and MobileMedia a written notice which shall set forth the Elected
Reduction Number (as defined in Section 4(e) below) determined by the
Standby Purchaser in accordance with Section 4(e) below.
(d) (i) Arch will deliver to the Standby Purchaser at least five
business days prior to the Effective Date a written notice which shall
specify the date on which the Effective Date is to occur and the last date
on which the notice referred to in Section 4(d)(ii) below may be delivered.
(ii) At least two business days prior to the Effective Date, the
Standby Purchaser will deliver to Arch and MobileMedia a written notice
which shall set forth the number of shares of Existing Arch Common Stock
beneficially owned by it as of such date. During the period from the date
of such notice through the Effective Date, neither the Standby Purchaser
nor any affiliate thereof shall acquire beneficial ownership of, or any
rights to acquire, any additional shares of Existing Arch Common Stock or
any Unsecured Claim.
(e) If a Rights Offering Adjustment shall have occurred,
notwithstanding anything to the contrary herein contained, the Standby
Purchaser may elect to reduce the number of Rights Shares required to be
purchased by the Standby Purchaser in satisfaction of its Commitment by a
number (the "Elected Reduction Number") of Rights Shares equal to or less
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 7
than the product of (i) the number of shares of Existing Arch Common Stock
to be issued by Arch in the Stockholder Rights Offering and (ii) the
percentage in Column D of Annex I hereto specified opposite the Standby
-------
Purchaser's name (such product being referred to herein as the "Maximum
Reduction Number"). Subject to the immediately preceding sentence, the
Standby Purchaser shall determine the Elected Reduction Number in its sole
discretion.
8. Section 5(c). Section 5(c) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(c) there shall be effective under the Securities Act, a registration
statement (the "Shelf Registration Statement") covering the resale by the
Standby Purchaser of (i) all shares of Existing Arch Common Stock, all
shares of Arch Class B Common Stock, if applicable, and, if a Rights
Offering Adjustment shall not have occurred, all Arch Warrants received by
the Standby Purchaser as a result of the transactions contemplated by the
Plan (including those received upon the exercise of Rights and pursuant to
this letter agreement), (ii) if a Rights Offering Adjustment shall have
occurred, all Arch Participation Warrants received by the Standby Purchaser
pursuant to this letter agreement, and (iii) all shares of Existing Arch
Common Stock issuable upon conversion of any such shares of the Arch Class
B Common Stock or exercise of any such Arch Warrants or Arch Participation
Warrants, as the case may be (the securities referred to in the foregoing
clauses (i), (ii) and (iii) are referred to herein as the "Registrable
Securities");
9. Section 5(e). Section 5(e) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(e) any and all amendments or modifications to the Merger Agreement or
any exhibit or schedule thereto (including without limitation the Plan, the
Arch Charter Amendment, the Arch Warrant Agreement, the Arch Participation
Warrant Agreement and the Registration Rights Agreement) on or after the
date hereof and any consents or waivers delivered on or after the date
hereof by Arch or MobileMedia to the other under the Merger Agreement
(other than (i) subject to Section 15(a) below, consents under Section 4.5
of the Merger Agreement, (ii) waivers of Unilateral Conditions or (iii) any
amendment to the Merger Agreement solely to reduce the amount of the Buyer
Breakup Fee) shall have been in form and substance reasonably satisfactory
to the Standby Purchaser;
10. Section 5(j). Section 5(j) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 8
(j) (i) the shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement shall be so issued and distributed pursuant to an exemption from
registration under the Securities Act provided by Section 1145 of the
Bankruptcy Code, and (ii)(A) the issuance of the Rights, (B) the issuance
of the shares of Existing Arch Common Stock, the shares of Arch Class B
Common Stock, if applicable, and, if a Rights Offering Adjustment shall not
have occurred, the Arch Warrants upon exercise of the Rights, (C) the
issuance to the Standby Purchaser of the shares of Existing Arch Common
Stock, the shares of Arch Class B Common Stock, if applicable, and, if a
Rights Offering Adjustment shall not have occurred, the Arch Warrants as
contemplated by Section 1 and Section 3 above and the Arch Warrants or Arch
Participation Warrants, as the case may be, as contemplated by Section 7
below, and (D) the issuance of Existing Arch Common Stock upon exercise of
the Arch Warrants or Arch Participation Warrants, as the case may be, or
conversion of Arch Class B Common Stock, if applicable, shall be covered by
the Registration Statement, the Registration Statement shall have been
declared effective and no stop order with respect thereto shall be in
effect;
11. Section 5(m) of the Standby Commitment Letter is hereby deleted.
12. Section 7. Section 7 of the Standby Commitment Letter is hereby
---------
amended in its entirety to read as follows:
Consideration for the Commitment. In consideration for the
--------------------------------
Commitment, on the Effective Date at the Closing the Standby Purchaser will
receive its pro rata share of either (a) if a Rights Offering Adjustment
shall not have occurred, Arch Warrants entitling the holders thereof to
purchase, in the aggregate, a number of shares of Existing Arch Common
Stock equal to 2.50% of the issued and outstanding shares of Existing Arch
Common Stock and, if applicable, Arch Class B Common Stock, computed on a
Fully Diluted Basis (as defined in the Plan) on the date the "Initial Buyer
Market Price" is determined in accordance with Schedule II to the Merger
Agreement giving effect to the Plan as if the Effective Date had occurred
on such date and assuming 21,067,110 shares of Existing Arch Common Stock
are issued and outstanding immediately prior thereto or (b) if a Rights
Offering Adjustment shall have occurred, Arch Participation Warrants
entitling the holders thereof to purchase, in the aggregate, a number of
shares of Existing Arch Common Stock equal to 2.50% of the issued and
outstanding shares of Existing Arch Common Stock and, if applicable, Arch
Class B Common Stock, computed on a Fully Diluted Basis on the Rights
Offering Adjustment Determination Date giving effect to the Plan as if the
Effective Date had occurred on such date and assuming 21,067,110 shares of
Existing Arch Common Stock are issued and outstanding immediately prior
thereto. Such Arch Warrants or Arch
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 9
Participation Warrants, as the case may be, will be delivered to the
Standby Purchaser and the Other Standby Purchasers, in accordance with the
percentages specified in Column D of
Annex I hereto.
-------
13. Section 9(a)(x). Section 9(a)(x) of the Standby Commitment Letter is
---------------
hereby amended in its entirety to read as follows:
(a)(x) The shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement and the shares of Existing Arch Common Stock, the shares of Arch
Class B Common Stock, if applicable, and either the Arch Warrants to be
issued and delivered as contemplated by Section 1 and Section 3 above and
the Arch Warrants to be issued as contemplated by Section 7 above or, if a
Rights Offering Adjustment shall have occurred, the Arch Participation
Warrants to be issued as contemplated by Section 7 above, in each case,
when so issued and distributed or delivered, as the case may be, and the
shares of Existing Arch Common Stock issued upon conversation of such
shares of Arch Class B Common Stock, if applicable, when so converted in
accordance with the Arch Charter Amendment, and either, if a Rights
Offering Adjustment shall not have occurred, the shares of Existing Arch
Common Stock issued upon exercise of such Arch Warrants, when issued, paid
for and delivered as provided in the Arch Warrant Agreement or, if a Rights
Offering Adjustment shall have occurred, the shares of Existing Arch Common
Stock issued upon exercise of Arch Participation Warrants, when issued,
paid for and delivered as provided in the Arch Participation Warrant
Agreement, will be duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights; and
14. Section 11. Section 11 of the Standby Commitment Letter is hereby
----------
amended to change the reference therein to "Exhibit D" to a reference to
"Exhibit D-1."
15. Schedule A to Annex I. Schedule A to Annex I to the Standby
---------------------
Commitment Letter is hereby amended to read in its entirety as Schedule A
----------
hereto.
16. Continuation of Standby Commitment Letter. Except as specifically
-----------------------------------------
amended hereby, the Standby Commitment Letter shall continue in full force and
effect and is hereby certified and confirmed in all respects.
17. Consent to Amendments. The Standby Purchaser hereby (a) consents to
---------------------
the amendments to the Other Standby Purchase Commitments to be effected by the
letter agreements attached as Exhibit C-1 hereto, which amendments shall be
-----------
entered into simultaneously herewith, (b) consents to (i) the First Amendment
dated as of September 3, 1998 to the Merger Agreement and each of the exhibits
attached thereto
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 10
and (ii) the Second Amended Joint Plan of Reorganization dated as of September
4, 1998 and each of the exhibits attached thereto, and (c) agrees that the form
and substance thereof are reasonably satisfactory to the Standby Purchaser.
18. Governing Law. This letter agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard to
its principles of conflicts of law.
19. Counterparts. This letter agreement may be executed in counterparts
------------
which, taken together, shall constitute one and the same instrument.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 11
If the foregoing accurately reflects your understanding with respect to the
matters set forth herein, please confirm by executing and returning a copy of
this letter to the undersigned.
Very truly yours,
NORTHWESTERN MUTUAL SERIES FUND, INC.
FOR THE HIGH YIELD BOND PORTFOLIO
By: /s/ Timothy S. Collins
---------------------------------
Name: Timothy S. Collins
Its: Vice President
Address: c/o The Northwestern Mutual Life
Insurance Company
720 E. Wisconsin Avenue
Milwaukee, WI 53202
Attention: Securities Department
ACCEPTED AND AGREED TO:
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
---------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 12
Subject to entry of the Confirmation Order:
MOBILEMEDIA COMMUNICATIONS, INC.
By: /s/ Joseph A. Bondi
---------------------------------
Name: Joseph A. Bondi
Its: Chairman - Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman - Restructuring
With a copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, NY 10022
Attn: James D. Johnson
<PAGE>
CREDIT SUISSE FIRST BOSTON CORPORATION
11 Madison Avenue, Fourth Floor
New York, New York 10010
September 3, 1998
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Amendment to Commitment
-----------------------
Gentlemen:
Reference is made to the letter agreement, dated August 18, 1998 (the
"Standby Commitment Letter"), among Arch Communications Group, Inc., MobileMedia
Communications, Inc. and Credit Suisse First Boston Corporation. Terms used
herein with initial capital letters that are not otherwise defined shall have
the meanings ascribed to such terms in the Standby Commitment Letter.
The parties hereto hereby agree as follows:
1. First Paragraph. The second sentence of the first paragraph of the
---------------
Standby Commitment Letter is hereby amended in its entirety to read as follows:
It is our understanding that in connection with the Reorganization, among
other things: (a) pursuant to the Agreement and Plan of Merger, dated as of
the date hereof (as amended by the First Amendment thereto dated as of
September 3, 1998 (the "Merger Agreement"), among Arch, a wholly owned
subsidiary of Arch ("Merger Sub"), Parent and MobileMedia, MobileMedia will
merge with and into Merger Sub, with Merger Sub continuing as the surviving
corporation and a wholly owned subsidiary of Arch; (b) pursuant to the
Merger Agreement, Arch will make available for distribution pursuant to a
plan of reorganization of the Debtors in the form attached as Exhibit A to
the Merger Agreement, with such amendments and modifications thereto as are
made in a manner consistent with clause (e) of Section 5 hereto (such plan
of reorganization being referred to herein as the "Plan"), (i) cash, (ii)
shares of its Common Stock, par value $.01 per share ("Existing Arch Common
Stock"), and (iii) either (A) if a Rights Offering Adjustment (as defined
in Schedule II to the
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
Merger Agreement) shall not have occurred, warrants entitling the holders
thereof to purchase shares of Existing Arch Common Stock ("Arch Warrants"),
with such Arch Warrants to be issued pursuant to, and to have the terms set
forth in, a warrant agreement in the form attached as Exhibit B to the
Merger Agreement (the "Arch Warrant Agreement") or (B) if a Rights Offering
Adjustment shall have occurred, warrants entitling the holders thereof to
purchase shares of Existing Arch Common Stock ("Arch Participation
Warrants"), with such Arch Participation Warrants to be issued pursuant to,
and to have the terms set forth in, a warrant agreement in the form
attached as Exhibit B-1 to the Merger Agreement (the "Arch Participation
Warrant Agreement"); (c) holders of unsecured non-priority claims against
the Debtors ("Unsecured Claims"), to the extent such Unsecured Claims are
Allowed (as defined in the Plan), will receive pursuant to the Plan (i)
shares of Existing Arch Common Stock and (ii) rights to purchase ("Rights")
for cash either (A) if a Rights Offering Adjustment shall not have
occurred, units ("Units") consisting of (x) shares of Existing Arch Common
Stock and (y) Arch Warrants or (B) if a Rights Offering Adjustment shall
have occurred, shares of Existing Arch Common Stock ("Rights Shares"); (d)
holders of claims arising under or relating to the Credit Agreement, dated
December 4, 1995, as amended, among MobileMedia and the other parties
thereto ("Secured Claims"), to the extent such Secured Claims are Allowed,
will receive pursuant to the Plan cash in an amount equal to 100% of such
claims; (e) all of the outstanding equity interests in MobileMedia and
Parent will be canceled without consideration and Parent will be dissolved;
and (f) the commitments under the DIP Loan Agreement will terminate and all
amounts owed under or in respect of the DIP Loan Agreement will be paid in
full in cash. Arch will conduct the Stockholder Rights Offering, in which
it will issue to holders of Buyer Stock Stockholder Rights to acquire
shares of Existing Arch Common Stock if a Rights Offering Adjustment shall
have occurred, and, in addition, if a Rights Offering Adjustment shall have
occurred, immediately following the Combination, Arch will issue Arch
Participation Warrants to the stockholders of Arch to the extent any
Stockholder Rights issued to such Stockholder Rights Holder were not
exercised.
2. Section 1(a). Section 1(a) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(a) to exercise any Rights distributed to it in respect of its Allowed
Unsecured Claims in accordance with the Plan and not thereafter sold or
transferred as permitted by Section 3 below to purchase either (i) if a
Rights Offering Adjustment shall not have occurred, Units or (ii) if a
Rights Offering Adjustment shall have occurred, Rights Shares, to the
extent that the aggregate purchase price payable upon such exercise, as
determined in accordance with Schedule II to the Merger Agreement (the
"Subscription Price"), does not
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
exceed the Rights Exercise Commitment Amount of the Standby Purchaser as
set forth in Annex I hereto;
-------
3. Section 1(b).Section 1(b) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(b) if (i) the Standby Purchaser sells or otherwise transfers any or
all of the (A) the Rights distributed to it in accordance with the Plan or
(B) Unsecured Claims held by it as of the date hereof in respect of which
Rights are to be distributed, in each case as permitted by Section 3 below,
and (ii) the Rights sold or transferred by the Standby Purchaser or the
Rights distributed in respect of Unsecured Claims held by it as of the date
hereof that are hereafter sold or transferred by the Standby Purchaser are
not exercised prior to the expiration thereof (at which time such Rights
will be void and will no longer be exercisable), to purchase for cash
(based upon the Subscription Price payable upon exercise of such Rights)
either (x) if a Rights Offering Adjustment shall not have occurred,
identical Units or (y) if a Rights Offering Adjustment shall have occurred,
Rights Shares underlying, in each case, such unexercised Rights, to the
extent that the aggregate purchase price therefor, together with the
aggregate Subscription Price payable upon exercise of Rights exercised as
contemplated by clause (a) above, does not exceed the Rights Exercise
Commitment Amount of the Standby Purchaser as set forth in Annex I hereto;
-------
and
4. Section 1(c). Section 1(c) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(c) if any Rights distributed in accordance with the Plan (other than
(i) Rights distributed to the Standby Purchaser or the other holders of
Unsecured Claims listed on Annex I hereto (the "Other Standby Purchasers")
-------
and retained by them (which Rights are referred to in Section 1(a) above
and Section 1(a) of each of the Other Standby Purchase Commitments (as
defined in Section 13(a) below)) or (ii) subject to Section 3(b) below,
Rights distributed in respect of Unsecured Claims held by the Standby
Purchaser or the Other Standby Purchasers as of the date hereof that are
hereafter sold or transferred by them (which Rights are referred to in
Sections 1(b) and 3 hereof and Sections 1(b) and 3 of each of the Other
Standby Purchase Commitments)) remain unexercised upon the expiration
thereof (at which time such Rights will be void and will no longer be
exercisable), to purchase for cash (based on the Subscription Price payable
upon exercise of such Rights ) pro rata in accordance with and up to the
Unexercised Rights Commitment Amount of the Standby Purchaser as set forth
in Annex I hereto either (x) if a Rights Offering Adjustment shall not have
-------
occurred, identical Units or (y) if a Rights
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
Offering Adjustment shall have occurred, Rights Shares, underlying, in each
case, such unexercised Rights.
5. Section 2(a). Section 2(a) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(a) Notwithstanding anything to the contrary herein contained, if the
purchases by the Standby Purchaser contemplated by Section 1 above would
cause the Standby Purchaser, the Other Standby Purchasers, and any other
persons or entities who, when taken together with any one or more of the
Standby Purchaser and the Other Standby Purchasers, would constitute a
"person" or "group" as used in Section 13(d) or Section 14(d) of the
Exchange Act or Rule 13d-3 or Rule 13d-5 promulgated thereunder, or any
"affiliate" as defined in Rule 405 promulgated under the Securities Act of
any of them (collectively, the "Standby Class B Holders"), in the
aggregate, to beneficially own on the effective date of the Plan (the
"Effective Date") shares representing more than 49.0% of the capital stock
of Arch generally entitled to vote in the election of directors or more
than 49.0% of the total voting power of the capital stock of Arch, Arch
will substitute shares of Class B Common Stock, par value $.01 per share,
of Arch ("Arch Class B Common Stock"), with such Arch Class B Common Stock
having the terms set forth in the form of Certificate of Amendment to
Certificate of Incorporation of Arch attached as Exhibit F to the Merger
Agreement (the "Arch Charter Amendment"), for shares of Existing Arch
Common Stock so purchased on a one-for-one basis such that on the Effective
Date the Standby Class B Holders, in the aggregate, will beneficially own
shares representing not more than 49.0% of the capital stock of Arch
generally entitled to vote in the election of directors and not more than
49.0% of the total voting power of the capital stock of Arch, all as
provided in the Plan. For purposes of this letter agreement, "beneficial
ownership" shall be determined as provided in Rule 13d-3 and Rule 13d-5
promulgated under the Exchange Act, except that a person or entity shall be
deemed to have "beneficial ownership" of all securities that such person or
entity has the right to acquire, whether such right is exercisable
immediately or only after the passage of time.
6. Section 3(b). Section 3(b) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(b) Notwithstanding the provisions of clause (Y) of the proviso in
Section 3(a) above, the Standby Purchaser may elect to sell or otherwise
transfer (i) any or all of the Rights distributed to it in accordance with
the Plan or (ii) Unsecured Claims in respect of which Rights are to be so
distributed, in either case without entering into a Tracking Agreement with
its transferee or transferees (any Rights so transferred and any Rights
distributed in respect of
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
Allowed Claims so transferred, together with any Rights so transferred and
any Rights distributed in respect of Allowed Claims so transferred by the
Other Standby Purchasers pursuant to Section 3(b) of the Other Standby
Purchase Commitments, being referred to herein collectively as "Untracked
Rights"). Any Rights that remain unexercised upon expiration thereof will
be deemed to be "Section 3(b) Rights" up to, but not exceeding, the amount
of Untracked Rights. The Section 3(b) Rights shall be exercised as follows
prior to the application of Section 1(c) above and Section 1(c) of the
Other Standby Purchase Commitments: (A) the Standby Purchaser and the Other
Standby Purchasers will first be given the opportunity to purchase for cash
(based on the Subscription Price payable upon exercise of such Rights)
either (x) if a Rights Offering Adjustment shall not have occurred, Units
or (y) if a Rights Offering Adjustment shall have occurred, Rights Shares,
underlying, in each case, a number of unexercised Rights up to the amount
of Section 3(b) Rights in accordance with the percentages set forth in
Column D of Annex I hereto and (B) to the extent such Units or Rights
-------
Shares, as the case may be, are not so purchased, the Standby Purchaser and
any Other Standby Purchasers that are responsible for the existence of the
Section 3(b) Rights will be required to purchase such Units or Rights
Shares, as the case may be, pro rata based on the number of Section 3(b)
Rights resulting from their respective transfers. Nothing in this Section
3(b) will in any way reduce the commitment of the Standby Purchaser
specified in Section 1(c) above or the Unexercised Rights Commitment Amount
as set forth in Annex I hereto.
-------
7. Section 4. Section 4 of the Standby Commitment Letter is hereby
---------
amended in its entirety to read as follows:
4. The Closing. (a) Notwithstanding anything to the contrary herein
-----------
contained or the terms of the Rights or the Plan, subject to the conditions
set forth herein, on the Effective Date the Standby Purchaser, in
satisfaction of the Commitment, will deliver at the Closing (i) the
aggregate Subscription Price payable upon exercise of any Rights exercised
by it and (ii) the purchase price payable in consideration of any shares of
Existing Arch Common Stock or, if applicable, Arch Class B Common Stock
and, if a Rights Offering Adjustment shall not have occurred, Arch Warrants
to be otherwise purchased by it pursuant to the Commitment; provided,
--------
however, that, if requested by the Standby Purchaser in writing at least
-------
two business days prior to the Effective Date, any cash to be distributed
to the Standby Purchaser in respect of Allowed Secured Claims pursuant to
the Plan will, prior to the distribution thereof pursuant to the Plan and
in accordance with the instructions included in such written request, be
first applied, on behalf of the Standby Purchaser, to the payment of such
amounts payable on the Effective Date as provided in this Section 4(a).
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
(b) Upon payment of the amounts payable as provided in Section 4(a),
on the Effective Date at the Closing Arch will deliver to the Standby
Purchaser (or its designees) certificates representing the shares of
Existing Arch Common Stock, shares of Arch Class B Common Stock, if
applicable, and, if a Rights Offering Adjustment shall not have occurred,
the Arch Warrants, in each case, (i) issuable upon exercise of any Rights
exercised by the Standby Purchaser or (ii) otherwise purchased by the
Standby Purchaser pursuant to the Commitment. At the Closing, Arch will
also deliver to the Standby Purchaser (or its designees) certificates
representing the Arch Warrants or Arch Participation Warrants, as the case
may be, contemplated by Section 7 below.
(c) (i) Arch will deliver to the Standby Purchaser two business days
after the expiration of the Stockholder Rights Offering a written notice
which shall (A) specify the amounts payable at the Closing by it in
satisfaction of the Commitment (without taking into account Section 4(e)
below), (B) specify the Maximum Reduction Number (as defined in Section
4(e) below, (C) specify the last date on which the notice referred to in
Section 4(c) (ii) below may be delivered, and (D) indicate the matters
required to be addressed in such notice.
(ii) Within 10 business days after its receipt of the notice
referred to in Section 4(c)(i) above, the Standby Purchaser will deliver to
Arch and MobileMedia a written notice which shall set forth the Elected
Reduction Number (as defined in Section 4(e) below) determined by the
Standby Purchaser in accordance with Section 4(e) below.
(d) (i) Arch will deliver to the Standby Purchaser at least five
business days prior to the Effective Date a written notice which shall
specify the date on which the Effective Date is to occur and the last date
on which the notice referred to in Section 4(d)(ii) below may be delivered.
(ii) At least two business days prior to the Effective Date, the
Standby Purchaser will deliver to Arch and MobileMedia a written notice
which shall set forth the number of shares of Existing Arch Common Stock
beneficially owned by it as of such date. During the period from the date
of such notice through the Effective Date, neither the Standby Purchaser
nor any affiliate thereof shall acquire beneficial ownership of, or any
rights to acquire, any additional shares of Existing Arch Common Stock or
any Unsecured Claim.
(e) If a Rights Offering Adjustment shall have occurred,
notwithstanding anything to the contrary herein contained, the Standby
Purchaser may elect to reduce the number of Rights Shares required to be
purchased by the Standby Purchaser in satisfaction of its Commitment by a
number (the "Elected Reduction Number") of Rights Shares equal to or less
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 7
than the product of (i) the number of shares of Existing Arch Common Stock
to be issued by Arch in the Stockholder Rights Offering and (ii) the
percentage in Column D of Annex I hereto specified opposite the Standby
-------
Purchaser's name (such product being referred to herein as the "Maximum
Reduction Number"). Subject to the immediately preceding sentence, the
Standby Purchaser shall determine the Elected Reduction Number in its sole
discretion.
8. Section 5(c). Section 5(c) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(c) there shall be effective under the Securities Act, a registration
statement (the "Shelf Registration Statement") covering the resale by the
Standby Purchaser of (i) all shares of Existing Arch Common Stock, all
shares of Arch Class B Common Stock, if applicable, and, if a Rights
Offering Adjustment shall not have occurred, all Arch Warrants received by
the Standby Purchaser as a result of the transactions contemplated by the
Plan (including those received upon the exercise of Rights and pursuant to
this letter agreement), (ii) if a Rights Offering Adjustment shall have
occurred, all Arch Participation Warrants received by the Standby Purchaser
pursuant to this letter agreement, and (iii) all shares of Existing Arch
Common Stock issuable upon conversion of any such shares of the Arch Class
B Common Stock or exercise of any such Arch Warrants or Arch Participation
Warrants, as the case may be (the securities referred to in the foregoing
clauses (i), (ii) and (iii) are referred to herein as the "Registrable
Securities");
9. Section 5(e). Section 5(e) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(e) any and all amendments or modifications to the Merger Agreement or
any exhibit or schedule thereto (including without limitation the Plan, the
Arch Charter Amendment, the Arch Warrant Agreement, the Arch Participation
Warrant Agreement and the Registration Rights Agreement) on or after the
date hereof and any consents or waivers delivered on or after the date
hereof by Arch or MobileMedia to the other under the Merger Agreement
(other than (i) subject to Section 15(a) below, consents under Section 4.5
of the Merger Agreement, (ii) waivers of Unilateral Conditions or (iii) any
amendment to the Merger Agreement solely to reduce the amount of the Buyer
Breakup Fee) shall have been in form and substance reasonably satisfactory
to the Standby Purchaser;
10. Section 5(j). Section 5(j) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 8
(j) (i) the shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement shall be so issued and distributed pursuant to an exemption from
registration under the Securities Act provided by Section 1145 of the
Bankruptcy Code, and (ii)(A) the issuance of the Rights, (B) the issuance
of the shares of Existing Arch Common Stock, the shares of Arch Class B
Common Stock, if applicable, and, if a Rights Offering Adjustment shall not
have occurred, the Arch Warrants upon exercise of the Rights, (C) the
issuance to the Standby Purchaser of the shares of Existing Arch Common
Stock, the shares of Arch Class B Common Stock, if applicable, and, if a
Rights Offering Adjustment shall not have occurred, the Arch Warrants as
contemplated by Section 1 and Section 3 above and the Arch Warrants or Arch
Participation Warrants, as the case may be, as contemplated by Section 7
below, and (D) the issuance of Existing Arch Common Stock upon exercise of
the Arch Warrants or Arch Participation Warrants, as the case may be, or
conversion of Arch Class B Common Stock, if applicable, shall be covered by
the Registration Statement, the Registration Statement shall have been
declared effective and no stop order with respect thereto shall be in
effect;
11. Section 5(m) of the Standby Commitment Letter is hereby deleted.
12. Section 7. Section 7 of the Standby Commitment Letter is hereby
---------
amended in its entirety to read as follows:
Consideration for the Commitment. In consideration for the
--------------------------------
Commitment, on the Effective Date at the Closing the Standby Purchaser will
receive its pro rata share of either (a) if a Rights Offering Adjustment
shall not have occurred, Arch Warrants entitling the holders thereof to
purchase, in the aggregate, a number of shares of Existing Arch Common
Stock equal to 2.50% of the issued and outstanding shares of Existing Arch
Common Stock and, if applicable, Arch Class B Common Stock, computed on a
Fully Diluted Basis (as defined in the Plan) on the date the "Initial Buyer
Market Price" is determined in accordance with Schedule II to the Merger
Agreement giving effect to the Plan as if the Effective Date had occurred
on such date and assuming 21,067,110 shares of Existing Arch Common Stock
are issued and outstanding immediately prior thereto or (b) if a Rights
Offering Adjustment shall have occurred, Arch Participation Warrants
entitling the holders thereof to purchase, in the aggregate, a number of
shares of Existing Arch Common Stock equal to 2.50% of the issued and
outstanding shares of Existing Arch Common Stock and, if applicable, Arch
Class B Common Stock, computed on a Fully Diluted Basis on the Rights
Offering Adjustment Determination Date giving effect to the Plan as if the
Effective Date had occurred on such date and assuming 21,067,110 shares of
Existing Arch Common Stock are issued and outstanding immediately prior
thereto. Such Arch Warrants or Arch
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 9
Participation Warrants, as the case may be, will be delivered to the
Standby Purchaser and the Other Standby Purchasers, in accordance with the
percentages specified in Column D of Annex I hereto.
-------
13. Section 9(a)(x). Section 9(a)(x) of the Standby Commitment Letter is
---------------
hereby amended in its entirety to read as follows:
(a)(x) The shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement and the shares of Existing Arch Common Stock, the shares of Arch
Class B Common Stock, if applicable, and either the Arch Warrants to be
issued and delivered as contemplated by Section 1 and Section 3 above and
the Arch Warrants to be issued as contemplated by Section 7 above or, if a
Rights Offering Adjustment shall have occurred, the Arch Participation
Warrants to be issued as contemplated by Section 7 above, in each case,
when so issued and distributed or delivered, as the case may be, and the
shares of Existing Arch Common Stock issued upon conversation of such
shares of Arch Class B Common Stock, if applicable, when so converted in
accordance with the Arch Charter Amendment, and either, if a Rights
Offering Adjustment shall not have occurred, the shares of Existing Arch
Common Stock issued upon exercise of such Arch Warrants, when issued, paid
for and delivered as provided in the Arch Warrant Agreement or, if a Rights
Offering Adjustment shall have occurred, the shares of Existing Arch Common
Stock issued upon exercise of Arch Participation Warrants, when issued,
paid for and delivered as provided in the Arch Participation Warrant
Agreement, will be duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights; and
14. Section 11. Section 11 of the Standby Commitment Letter is hereby
----------
amended to change the reference therein to "Exhibit D" to a reference to
"Exhibit D-1."
15. Schedule A to Annex I. Schedule A to Annex I to the Standby
---------------------
Commitment Letter is hereby amended to read in its entirety as Schedule A
----------
hereto.
16. Continuation of Standby Commitment Letter. Except as specifically
-----------------------------------------
amended hereby, the Standby Commitment Letter shall continue in full force and
effect and is hereby certified and confirmed in all respects.
17. Consent to Amendments. The Standby Purchaser hereby (a) consents to
---------------------
the amendments to the Other Standby Purchase Commitments to be effected by the
letter agreements attached as Exhibit C-1 hereto, which amendments shall be
-----------
entered into simultaneously herewith, (b) consents to (i) the First Amendment
dated as of September 3, 1998 to the Merger Agreement and each of the exhibits
attached thereto
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 10
and (ii) the Second Amended Joint Plan of Reorganization dated as of September
4, 1998 and each of the exhibits attached thereto, and (c) agrees that the form
and substance thereof are reasonably satisfactory to the Standby Purchaser.
18. Governing Law. This letter agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard to
its principles of conflicts of law.
19. Counterparts. This letter agreement may be executed in
------------
counterparts which, taken together, shall constitute one and the same
instrument.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 11
If the foregoing accurately reflects your understanding with respect to the
matters set forth herein, please confirm by executing and returning a copy of
this letter to the undersigned.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Alex Lagetko
---------------------------------
Name: Alex Lagetko
Its: Director
Address: 11 Madison Avenue
New York, NY 10010
Attention: David J. Matlin
Alex Lagetko
With a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attn: Michael J. Sage
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 12
ACCEPTED AND AGREED TO:
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
---------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
Subject to entry of the Confirmation Order:
MOBILEMEDIA COMMUNICATIONS, INC.
By: /s/ Joseph A. Bondi
---------------------------------
Name: Joseph A. Bondi
Its: Chairman - Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman - Restructuring
With a copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, NY 10022
Attn: James D. Johnson
<PAGE>
WHIPPOORWILL ASSOCIATES, INC.
11 Martine Avenue
White Plains, New York 10606
September 3, 1998
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Amendment to Commitment
-----------------------
Gentlemen:
Reference is made to the letter agreement, dated August 18, 1998 (the
"Standby Commitment Letter"), among Arch Communications Group, Inc., MobileMedia
Communications, Inc. and Whippoorwill Associates, Inc., as general partner of
and/or as agent for, each Whippoorwill Account. Terms used herein with initial
capital letters that are not otherwise defined shall have the meanings ascribed
to such terms in the Standby Commitment Letter.
The parties hereto hereby agree as follows:
1. First Paragraph. The second sentence of the first paragraph of the
---------------
Standby Commitment Letter is hereby amended in its entirety to read as follows:
It is our understanding that in connection with the Reorganization, among
other things: (a) pursuant to the Agreement and Plan of Merger, dated as of
the date hereof (as amended by the First Amendment thereto dated as of
September 3, 1998 (the "Merger Agreement"), among Arch, a wholly owned
subsidiary of Arch ("Merger Sub"), Parent and MobileMedia, MobileMedia will
merge with and into Merger Sub, with Merger Sub continuing as the surviving
corporation and a wholly owned subsidiary of Arch; (b) pursuant to the
Merger Agreement, Arch will make available for distribution pursuant to a
plan of reorganization of the Debtors in the form attached as Exhibit A to
the Merger Agreement, with such amendments and modifications thereto as are
made in a manner consistent with clause (e) of Section 5 hereto (such plan
of reorganization being referred to herein as the "Plan"), (i) cash, (ii)
shares of its Common Stock, par value $.01 per share ("Existing Arch Common
Stock"), and
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
(iii) either (A) if a Rights Offering Adjustment (as defined in Schedule II
to the Merger Agreement) shall not have occurred, warrants entitling the
holders thereof to purchase shares of Existing Arch Common Stock ("Arch
Warrants"), with such Arch Warrants to be issued pursuant to, and to have
the terms set forth in, a warrant agreement in the form attached as Exhibit
B to the Merger Agreement (the "Arch Warrant Agreement") or (B) if a Rights
Offering Adjustment shall have occurred, warrants entitling the holders
thereof to purchase shares of Existing Arch Common Stock ("Arch
Participation Warrants"), with such Arch Participation Warrants to be
issued pursuant to, and to have the terms set forth in, a warrant agreement
in the form attached as Exhibit B-1 to the Merger Agreement (the "Arch
Participation Warrant Agreement"); (c) holders of unsecured non-priority
claims against the Debtors ("Unsecured Claims"), to the extent such
Unsecured Claims are Allowed (as defined in the Plan), will receive
pursuant to the Plan (i) shares of Existing Arch Common Stock and (ii)
rights to purchase ("Rights") for cash either (A) if a Rights Offering
Adjustment shall not have occurred, units ("Units") consisting of (x)
shares of Existing Arch Common Stock and (y) Arch Warrants or (B) if a
Rights Offering Adjustment shall have occurred, shares of Existing Arch
Common Stock ("Rights Shares"); (d) holders of claims arising under or
relating to the Credit Agreement, dated December 4, 1995, as amended, among
MobileMedia and the other parties thereto ("Secured Claims"), to the extent
such Secured Claims are Allowed, will receive pursuant to the Plan cash in
an amount equal to 100% of such claims; (e) all of the outstanding equity
interests in MobileMedia and Parent will be canceled without consideration
and Parent will be dissolved; and (f) the commitments under the DIP Loan
Agreement will terminate and all amounts owed under or in respect of the
DIP Loan Agreement will be paid in full in cash. Arch will conduct the
Stockholder Rights Offering, in which it will issue to holders of Buyer
Stock Stockholder Rights to acquire shares of Existing Arch Common Stock if
a Rights Offering Adjustment shall have occurred, and, in addition, if a
Rights Offering Adjustment shall have occurred, immediately following the
Combination, Arch will issue Arch Participation Warrants to the
stockholders of Arch to the extent any Stockholder Rights issued to such
Stockholder Rights Holder were not exercised.
2. Section 1(a). Section 1(a) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(a) to exercise any Rights distributed to it in respect of its Allowed
Unsecured Claims in accordance with the Plan and not thereafter sold or
transferred as permitted by Section 3 below to purchase either (i) if a
Rights Offering Adjustment shall not have occurred, Units or (ii) if a
Rights Offering Adjustment shall have occurred, Rights Shares, to the
extent that the aggregate purchase price payable upon such exercise, as
determined in accordance with
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
Schedule II to the Merger Agreement (the "Subscription Price"), does not
exceed the Rights Exercise Commitment Amount of the Standby Purchaser as
set forth in Annex I hereto;
-------
3. Section 1(b).Section 1(b) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(b) if (i) the Standby Purchaser sells or otherwise transfers any or
all of the (A) the Rights distributed to it in accordance with the Plan or
(B) Unsecured Claims held by it as of the date hereof in respect of which
Rights are to be distributed, in each case as permitted by Section 3 below,
and (ii) the Rights sold or transferred by the Standby Purchaser or the
Rights distributed in respect of Unsecured Claims held by it as of the date
hereof that are hereafter sold or transferred by the Standby Purchaser are
not exercised prior to the expiration thereof (at which time such Rights
will be void and will no longer be exercisable), to purchase for cash
(based upon the Subscription Price payable upon exercise of such Rights)
either (x) if a Rights Offering Adjustment shall not have occurred,
identical Units or (y) if a Rights Offering Adjustment shall have occurred,
Rights Shares underlying, in each case, such unexercised Rights, to the
extent that the aggregate purchase price therefor, together with the
aggregate Subscription Price payable upon exercise of Rights exercised as
contemplated by clause (a) above, does not exceed the Rights Exercise
Commitment Amount of the Standby Purchaser as set forth in Annex I hereto;
-------
and
4. Section 1(c). Section 1(c) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(c) if any Rights distributed in accordance with the Plan (other than
(i) Rights distributed to the Standby Purchaser or the other holders of
Unsecured Claims listed on Annex I hereto (the "Other Standby Purchasers")
-------
and retained by them (which Rights are referred to in Section 1(a) above
and Section 1(a) of each of the Other Standby Purchase Commitments (as
defined in Section 13(a) below)) or (ii) subject to Section 3(b) below,
Rights distributed in respect of Unsecured Claims held by the Standby
Purchaser or the Other Standby Purchasers as of the date hereof that are
hereafter sold or transferred by them (which Rights are referred to in
Sections 1(b) and 3 hereof and Sections 1(b) and 3 of each of the Other
Standby Purchase Commitments)) remain unexercised upon the expiration
thereof (at which time such Rights will be void and will no longer be
exercisable), to purchase for cash (based on the Subscription Price payable
upon exercise of such Rights ) pro rata in accordance with and up to the
Unexercised Rights Commitment Amount of the Standby Purchaser as set forth
in Annex I hereto either (x) if a Rights Offering Adjustment shall not have
-------
occurred, identical Units or (y) if a Rights
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
Offering Adjustment shall have occurred, Rights Shares, underlying, in each
case, such unexercised Rights.
5. Section 2(a). Section 2(a) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(a) Notwithstanding anything to the contrary herein contained, if the
purchases by the Standby Purchaser contemplated by Section 1 above would
cause the Standby Purchaser, the Other Standby Purchasers, and any other
persons or entities who, when taken together with any one or more of the
Standby Purchaser and the Other Standby Purchasers, would constitute a
"person" or "group" as used in Section 13(d) or Section 14(d) of the
Exchange Act or Rule 13d-3 or Rule 13d-5 promulgated thereunder, or any
"affiliate" as defined in Rule 405 promulgated under the Securities Act of
any of them (collectively, the "Standby Class B Holders"), in the
aggregate, to beneficially own on the effective date of the Plan (the
"Effective Date") shares representing more than 49.0% of the capital stock
of Arch generally entitled to vote in the election of directors or more
than 49.0% of the total voting power of the capital stock of Arch, Arch
will substitute shares of Class B Common Stock, par value $.01 per share,
of Arch ("Arch Class B Common Stock"), with such Arch Class B Common Stock
having the terms set forth in the form of Certificate of Amendment to
Certificate of Incorporation of Arch attached as Exhibit F to the Merger
Agreement (the "Arch Charter Amendment"), for shares of Existing Arch
Common Stock so purchased on a one-for-one basis such that on the Effective
Date the Standby Class B Holders, in the aggregate, will beneficially own
shares representing not more than 49.0% of the capital stock of Arch
generally entitled to vote in the election of directors and not more than
49.0% of the total voting power of the capital stock of Arch, all as
provided in the Plan. For purposes of this letter agreement, "beneficial
ownership" shall be determined as provided in Rule 13d-3 and Rule 13d-5
promulgated under the Exchange Act, except that a person or entity shall be
deemed to have "beneficial ownership" of all securities that such person or
entity has the right to acquire, whether such right is exercisable
immediately or only after the passage of time.
6. Section 3(b). Section 3(b) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(b) Notwithstanding the provisions of clause (Y) of the proviso in
Section 3(a) above, the Standby Purchaser may elect to sell or otherwise
transfer (i) any or all of the Rights distributed to it in accordance with
the Plan or (ii) Unsecured Claims in respect of which Rights are to be so
distributed, in either case without entering into a Tracking Agreement with
its transferee or transferees (any Rights so transferred and any Rights
distributed in respect of Allowed Claims so transferred, together with any
Rights so transferred and any Rights distributed in respect of
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
Allowed Claims so transferred by the Other Standby Purchasers pursuant to
Section 3(b) of the Other Standby Purchase Commitments, being referred to
herein collectively as "Untracked Rights"). Any Rights that remain
unexercised upon expiration thereof will be deemed to be "Section 3(b)
Rights" up to, but not exceeding, the amount of Untracked Rights. The
Section 3(b) Rights shall be exercised as follows prior to the application
of Section 1(c) above and Section 1(c) of the Other Standby Purchase
Commitments: (A) the Standby Purchaser and the Other Standby Purchasers
will first be given the opportunity to purchase for cash (based on the
Subscription Price payable upon exercise of such Rights) either (x) if a
Rights Offering Adjustment shall not have occurred, Units or (y) if a
Rights Offering Adjustment shall have occurred, Rights Shares, underlying,
in each case, a number of unexercised Rights up to the amount of Section
3(b) Rights in accordance with the percentages set forth in Column D of
Annex I hereto and (B) to the extent such Units or Rights Shares, as the
-------
case may be, are not so purchased, the Standby Purchaser and any Other
Standby Purchasers that are responsible for the existence of the Section
3(b) Rights will be required to purchase such Units or Rights Shares, as
the case may be, pro rata based on the number of Section 3(b) Rights
resulting from their respective transfers. Nothing in this Section 3(b)
will in any way reduce the commitment of the Standby Purchaser specified in
Section 1(c) above or the Unexercised Rights Commitment Amount as set forth
in Annex I hereto.
-------
7. Section 4. Section 4 of the Standby Commitment Letter is hereby
---------
amended in its entirety to read as follows:
4. The Closing. (a) Notwithstanding anything to the contrary herein
-----------
contained or the terms of the Rights or the Plan, subject to the conditions
set forth herein, on the Effective Date the Standby Purchaser, in
satisfaction of the Commitment, will deliver at the Closing (i) the
aggregate Subscription Price payable upon exercise of any Rights exercised
by it and (ii) the purchase price payable in consideration of any shares of
Existing Arch Common Stock or, if applicable, Arch Class B Common Stock
and, if a Rights Offering Adjustment shall not have occurred, Arch Warrants
to be otherwise purchased by it pursuant to the Commitment; provided,
--------
however, that, if requested by the Standby Purchaser in writing at least
-------
two business days prior to the Effective Date, any cash to be distributed
to the Standby Purchaser in respect of Allowed Secured Claims pursuant to
the Plan will, prior to the distribution thereof pursuant to the Plan and
in accordance with the instructions included in such written request, be
first applied, on behalf of the Standby Purchaser, to the payment of such
amounts payable on the Effective Date as provided in this Section 4(a).
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
(b) Upon payment of the amounts payable as provided in Section 4(a),
on the Effective Date at the Closing Arch will deliver to the Standby
Purchaser (or its designees) certificates representing the shares of
Existing Arch Common Stock, shares of Arch Class B Common Stock, if
applicable, and, if a Rights Offering Adjustment shall not have occurred,
the Arch Warrants, in each case, (i) issuable upon exercise of any Rights
exercised by the Standby Purchaser or (ii) otherwise purchased by the
Standby Purchaser pursuant to the Commitment. At the Closing, Arch will
also deliver to the Standby Purchaser (or its designees) certificates
representing the Arch Warrants or Arch Participation Warrants, as the case
may be, contemplated by Section 7 below.
(c) (i) Arch will deliver to the Standby Purchaser two business days
after the expiration of the Stockholder Rights Offering a written notice
which shall (A) specify the amounts payable at the Closing by it in
satisfaction of the Commitment (without taking into account Section 4(e)
below), (B) specify the Maximum Reduction Number (as defined in Section
4(e) below, (C) specify the last date on which the notice referred to in
Section 4(c) (ii) below may be delivered, and (D) indicate the matters
required to be addressed in such notice.
(ii) Within 10 business days after its receipt of the notice
referred to in Section 4(c)(i) above, the Standby Purchaser will deliver to
Arch and MobileMedia a written notice which shall set forth the Elected
Reduction Number (as defined in Section 4(e) below) determined by the
Standby Purchaser in accordance with Section 4(e) below.
(d) (i) Arch will deliver to the Standby Purchaser at least five
business days prior to the Effective Date a written notice which shall
specify the date on which the Effective Date is to occur and the last date
on which the notice referred to in Section 4(d)(ii) below may be delivered.
(ii) At least two business days prior to the Effective Date, the
Standby Purchaser will deliver to Arch and MobileMedia a written notice
which shall set forth the number of shares of Existing Arch Common Stock
beneficially owned by it as of such date. During the period from the date
of such notice through the Effective Date, neither the Standby Purchaser
nor any affiliate thereof shall acquire beneficial ownership of, or any
rights to acquire, any additional shares of Existing Arch Common Stock or
any Unsecured Claim.
(e) If a Rights Offering Adjustment shall have occurred,
notwithstanding anything to the contrary herein contained, the Standby
Purchaser may elect to reduce the number of Rights Shares required to be
purchased by the Standby Purchaser in satisfaction of its Commitment by a
number (the "Elected Reduction Number") of Rights Shares equal to or less
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 7
than the product of (i) the number of shares of Existing Arch Common Stock
to be issued by Arch in the Stockholder Rights Offering and (ii) the
percentage in Column D of Annex I hereto specified opposite the Standby
-------
Purchaser's name (such product being referred to herein as the "Maximum
Reduction Number"). Subject to the immediately preceding sentence, the
Standby Purchaser shall determine the Elected Reduction Number in its sole
discretion.
8. Section 5(c). Section 5(c) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(c) there shall be effective under the Securities Act, a registration
statement (the "Shelf Registration Statement") covering the resale by the
Standby Purchaser of (i) all shares of Existing Arch Common Stock, all
shares of Arch Class B Common Stock, if applicable, and, if a Rights
Offering Adjustment shall not have occurred, all Arch Warrants received by
the Standby Purchaser as a result of the transactions contemplated by the
Plan (including those received upon the exercise of Rights and pursuant to
this letter agreement), (ii) if a Rights Offering Adjustment shall have
occurred, all Arch Participation Warrants received by the Standby Purchaser
pursuant to this letter agreement, and (iii) all shares of Existing Arch
Common Stock issuable upon conversion of any such shares of the Arch Class
B Common Stock or exercise of any such Arch Warrants or Arch Participation
Warrants, as the case may be (the securities referred to in the foregoing
clauses (i), (ii) and (iii) are referred to herein as the "Registrable
Securities");
9. Section 5(e). Section 5(e) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
(e) any and all amendments or modifications to the Merger Agreement or
any exhibit or schedule thereto (including without limitation the Plan, the
Arch Charter Amendment, the Arch Warrant Agreement, the Arch Participation
Warrant Agreement and the Registration Rights Agreement) on or after the
date hereof and any consents or waivers delivered on or after the date
hereof by Arch or MobileMedia to the other under the Merger Agreement
(other than (i) subject to Section 15(a) below, consents under Section 4.5
of the Merger Agreement, (ii) waivers of Unilateral Conditions or (iii) any
amendment to the Merger Agreement solely to reduce the amount of the Buyer
Breakup Fee) shall have been in form and substance reasonably satisfactory
to the Standby Purchaser;
10. Section 5(j). Section 5(j) of the Standby Commitment Letter is hereby
------------
amended in its entirety to read as follows:
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 8
(j) (i) the shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement shall be so issued and distributed pursuant to an exemption from
registration under the Securities Act provided by Section 1145 of the
Bankruptcy Code, and (ii)(A) the issuance of the Rights, (B) the issuance
of the shares of Existing Arch Common Stock, the shares of Arch Class B
Common Stock, if applicable, and, if a Rights Offering Adjustment shall not
have occurred, the Arch Warrants upon exercise of the Rights, (C) the
issuance to the Standby Purchaser of the shares of Existing Arch Common
Stock, the shares of Arch Class B Common Stock, if applicable, and, if a
Rights Offering Adjustment shall not have occurred, the Arch Warrants as
contemplated by Section 1 and Section 3 above and the Arch Warrants or Arch
Participation Warrants, as the case may be, as contemplated by Section 7
below, and (D) the issuance of Existing Arch Common Stock upon exercise of
the Arch Warrants or Arch Participation Warrants, as the case may be, or
conversion of Arch Class B Common Stock, if applicable, shall be covered by
the Registration Statement, the Registration Statement shall have been
declared effective and no stop order with respect thereto shall be in
effect;
11. Section 5(m) of the Standby Commitment Letter is hereby deleted.
12. Section 7. Section 7 of the Standby Commitment Letter is hereby
---------
amended in its entirety to read as follows:
Consideration for the Commitment. In consideration for the
--------------------------------
Commitment, on the Effective Date at the Closing the Standby Purchaser will
receive its pro rata share of either (a) if a Rights Offering Adjustment
shall not have occurred, Arch Warrants entitling the holders thereof to
purchase, in the aggregate, a number of shares of Existing Arch Common
Stock equal to 2.50% of the issued and outstanding shares of Existing Arch
Common Stock and, if applicable, Arch Class B Common Stock, computed on a
Fully Diluted Basis (as defined in the Plan) on the date the "Initial Buyer
Market Price" is determined in accordance with Schedule II to the Merger
Agreement giving effect to the Plan as if the Effective Date had occurred
on such date and assuming 21,067,110 shares of Existing Arch Common Stock
are issued and outstanding immediately prior thereto or (b) if a Rights
Offering Adjustment shall have occurred, Arch Participation Warrants
entitling the holders thereof to purchase, in the aggregate, a number of
shares of Existing Arch Common Stock equal to 2.50% of the issued and
outstanding shares of Existing Arch Common Stock and, if applicable, Arch
Class B Common Stock, computed on a Fully Diluted Basis on the Rights
Offering Adjustment Determination Date giving effect to the Plan as if the
Effective Date had occurred on such date and assuming 21,067,110 shares of
Existing Arch Common Stock are issued and outstanding immediately prior
thereto. Such Arch Warrants or Arch
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 9
Participation Warrants, as the case may be, will be delivered to the
Standby Purchaser and the Other Standby Purchasers, in accordance with the
percentages specified in Column D of Annex I hereto.
-------
13. Section 9(a)(x). Section 9(a)(x) of the Standby Commitment Letter is
---------------
hereby amended in its entirety to read as follows:
(a)(x) The shares of Existing Arch Common Stock to be issued and
distributed as contemplated by Section 1.3(e) and Section 1.6 of the Merger
Agreement and the shares of Existing Arch Common Stock, the shares of Arch
Class B Common Stock, if applicable, and either the Arch Warrants to be
issued and delivered as contemplated by Section 1 and Section 3 above and
the Arch Warrants to be issued as contemplated by Section 7 above or, if a
Rights Offering Adjustment shall have occurred, the Arch Participation
Warrants to be issued as contemplated by Section 7 above, in each case,
when so issued and distributed or delivered, as the case may be, and the
shares of Existing Arch Common Stock issued upon conversation of such
shares of Arch Class B Common Stock, if applicable, when so converted in
accordance with the Arch Charter Amendment, and either, if a Rights
Offering Adjustment shall not have occurred, the shares of Existing Arch
Common Stock issued upon exercise of such Arch Warrants, when issued, paid
for and delivered as provided in the Arch Warrant Agreement or, if a Rights
Offering Adjustment shall have occurred, the shares of Existing Arch Common
Stock issued upon exercise of Arch Participation Warrants, when issued,
paid for and delivered as provided in the Arch Participation Warrant
Agreement, will be duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights; and
14. Section 11. Section 11 of the Standby Commitment Letter is hereby
----------
amended to change the reference therein to "Exhibit D" to a reference to
"Exhibit D-1."
15. Schedule A to Annex I. Schedule A to Annex I to the Standby
---------------------
Commitment Letter is hereby amended to read in its entirety as Schedule A
----------
hereto.
16. Continuation of Standby Commitment Letter. Except as specifically
-----------------------------------------
amended hereby, the Standby Commitment Letter shall continue in full force and
effect and is hereby certified and confirmed in all respects.
17. Consent to Amendments. The Standby Purchaser hereby (a) consents to
---------------------
the amendments to the Other Standby Purchase Commitments to be effected by the
letter agreements attached as Exhibit C-1 hereto, which amendments shall be
-----------
entered into simultaneously herewith, (b) consents to (i) the First Amendment
dated as of September 3, 1998 to the Merger Agreement and each of the exhibits
attached thereto
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 10
and (ii) the Second Amended Joint Plan of Reorganization dated as of September
4, 1998 and each of the exhibits attached thereto, and (c) agrees that the form
and substance thereof are reasonably satisfactory to the Standby Purchaser.
18. Governing Law. This letter agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard to
its principles of conflicts of law.
19. Counterparts. This letter agreement may be executed in
------------
counterparts which, taken together, shall constitute one and the same
instrument.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 11
If the foregoing accurately reflects your understanding with respect to the
matters set forth herein, please confirm by executing and returning a copy of
this letter to the undersigned.
Very truly yours,
WHIPPOORWILL ASSOCIATES, INC.,
AS GENERAL PARTNER OF AND/OR AGENT FOR,
EACH WHIPPOORWILL ACCOUNT
By: /s/ David Strumwasser
---------------------------------
Name: David Strumwasser
Its: Managing Director
Address: 11 Martine Avenue
White Plains, NY 10606
Attn: David Strumwasser
ACCEPTED AND AGREED TO:
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
---------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 12
Subject to entry of the Confirmation Order:
MOBILEMEDIA COMMUNICATIONS, INC.
By: /s/ Joseph A. Bondi
-------------------------------
Name: Joseph A. Bondi
Its: Chairman - Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman - Restructuring
With a copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, NY 10022
Attn: James D. Johnson
<PAGE>
EXHIBIT 10.8
[Form for Standby Purchasers]
================================================================================
REGISTRATION RIGHTS AGREEMENT
AMONG
ARCH COMMUNICATIONS GROUP, INC.
AND
THE OTHER PERSONS
SIGNATORY HERETO
_________, 199__
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of __________, 199_ (the "Effective Date"), by and among (i) Arch
Communications Group, Inc. (the "Company"), (ii) W.R. Huff Asset Management Co.,
L.L.C. ("Huff"), (iii) Whippoorwill Associates, Inc. ("Whippoorwill"), (iv)
Credit Suisse First Boston Corporation ("CSFB"), and (v) The Northwestern Mutual
Life Insurance Company, The Northwestern Mutual Life Insurance Company for its
General Annuity Separate Account and Northwestern Mutual Series Fund, Inc. -
High Yield Bond Portfolio (collectively, "Northwestern"). (Huff, Whippoorwill,
CSFB and Northwestern are referred to herein collectively as the
"Stockholders.").
RECITALS
--------
A. A plan of reorganization under Chapter 11 of the United States
Bankruptcy Code for MobileMedia Communications, Inc. ("MobileMedia"),
MobileMedia Corporation, the sole stockholder of MobileMedia ("Parent"), and all
of MobileMedia's subsidiaries (the "Plan") was confirmed on _________, 199__ by
order of the United States Bankruptcy Court for the District of Delaware in Case
Nos. 97-174 (PJW) through and including 97-192 (PJW), and has become effective.
B. In connection with the Plan, the Company, a wholly owned subsidiary of
the Company ("Merger Sub"), Parent and MobileMedia entered into an Agreement and
Plan of Merger, dated as of August ___, 1998 (the "Merger Agreement"), pursuant
to which MobileMedia has been merged with and into Merger Sub, with Merger Sub
continuing as the surviving corporation and a wholly owned subsidiary of the
Company.
C. As a result of the Plan and the Merger Agreement and the transactions
contemplated thereby, each of the Stockholders has become the Beneficial Owner
(as defined below) of (i) shares of Common Stock, par value $.01 per share, of
the Company (the "Common Shares"), [(ii) shares of Class B Common Stock, par
value $.01 per share, of the Company, which shares are convertible into Common
Shares in accordance with their terms (the "Class B Common Shares")],/1/ and
(iii) warrants to purchase Common Shares (the "Warrants"), in each case as
indicated on Schedule I hereto.
----------
D. In accordance with the Plan and the Merger Agreement, the Company
desires to provide for the registration of the sale by the Stockholders of the
________________
/1/ To be included only if Class B Common Shares are actually issued on the
Effective Date.
<PAGE>
Registrable Securities (as defined below) from time to time, on the terms and
subject to conditions set forth below.
NOW, THEREFORE, the parties hereto hereby agree as follows:
I. DEFINITIONS
-----------
1.1 Definitions. For purposes of this Agreement, the following terms have
-----------
the following meanings:
(a) Adelphia Agreement: Registration Rights Agreement, dated as of
------------------
June 29, 1998, by and among the Company, Adelphia Communications Corporation and
Lisa-Gaye Shearing, as in effect on the date hereof.
(b) Advice: As defined in Section 6.3.
------
(c) Affiliate: As defined in Rule 12b-2 under the Exchange Act.
---------
(d) Agreement: As defined in the introductory paragraph hereof.
---------
(e) Beneficial Owner or Beneficial Ownership: As defined in Rule 13d-
----------------------------------------
3 under the Exchange Act.
[(f) Class B Common Shares: As defined in Recital C.]/2/
---------------------
(g) Common Shares: As defined in Recital C.
-------------
(h) Company: As defined in the introductory paragraph hereof.
-------
(i) CSFB: As defined in the introductory paragraph hereof.
----
(j) Demand Notice: As defined in Section 3.1.
-------------
(k) Demand Registration: As defined in Section 3.1.
-------------------
(l) Effective Date: As defined in the introductory paragraph hereof.
--------------
(m) Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
(n) Huff: As defined in the introductory paragraph hereof.
----
__________________
/2/ To be included only if Class B Common Shares are actually issued on the
Effective Date.
-2-
<PAGE>
(o) Indemnified Party: As defined in Section 7.3.
-----------------
(p) Indemnifying Party: As defined in Section 7.3.
------------------
(q) Losses: As defined in Section 7.1.
------
(r) Merger Agreement: As defined in Recital B.
----------------
(s) Merger Sub: As defined in Recital B.
----------
(t) MobileMedia: As defined in Recital A.
-----------
(u) NASDAQ: As defined in Section 6.1(l).
------
(v) Northwestern: As defined in the introductory paragraph hereof.
------------
(w) Notice: As defined in Section 3.2(d).
------
(x) Other Equity Securities: Any shares of capital stock of the
-----------------------
Company and any other securities issued by the Company in respect of any Owned
Common Shares [or Owned Class B Common Shares]./3/
(y) Other Stockholders: As defined in Section 3.2(e).
------------------
[(z) Owned Class B Common Shares: Class B Common Shares owned by a
---------------------------
Stockholder, whether acquired on or after the Effective Date, including without
limitation those that are acquired by a Stockholder on the Effective Date as
contemplated by the Plan and the Merger Agreement (including without limitation
pursuant to the Standby Purchase Commitment).]/3/
(aa) Owned Common Shares: Common Shares owned by a Stockholder,
-------------------
whether acquired before, on or after the Effective Date, including without
limitation those that are acquired by a Stockholder on the Effective Date as
contemplated by the Plan and the Merger Agreement (including without limitation
pursuant to the Standby Purchase Commitment).
(bb) Owned Warrants: Warrants owned by a Stockholder, whether
--------------
acquired on or after the Effective Date, including without limitation those that
are acquired by a Stockholder on the Effective Date as contemplated by the Plan
and the
_________________
/3/ To be included only if Class B Common Shares are actually issued on the
Effective Date.
-3-
<PAGE>
Merger Agreement (including without limitation pursuant to the Standby
Purchase Commitment).
(cc) Permitted Assignee: With respect to any Stockholder, means (i)
------------------
an Affiliate of such Stockholder and (ii) any Person who acquires, in a single
transaction, from such Stockholder either (A) Beneficial Ownership of at least
5.0% of the voting power of the Company's outstanding capital stock, calculated
as of immediately after such acquisition, or (B) all of the Common Shares with
respect to which such Stockholder has Beneficial Ownership, even if such Common
Shares constitute less than 5.0% of the voting power of the Company's
outstanding capital stock.
(dd) Person (or person): Any individual, corporation, general or
------------------
limited partnership, joint venture, trust or other entity or association,
including without limitation any governmental authority.
(ee) Piggyback Notice: As defined in Section 4.1.
----------------
(ff) Piggyback Registration: As defined in Section 4.1.
----------------------
(gg) Plan: As defined in Recital A.
----
(hh) Prospectus: The prospectus included in any Registration
----------
Statement (including without limitation a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, all other amendments and
supplements to such prospectus (including post-effective amendments), and all
exhibits and all material incorporated by reference or deemed to be incorporated
by reference in such prospectus.
(ii) Registrable Securities: The Owned Common Shares, [the Owned
----------------------
Class B Common Shares, the Common Shares issuable upon conversion of the Owned
Class B Common Shares,]/4/ the Owned Warrants, the Common Shares issuable upon
exercise of the Owned Warrants and the Other Equity Securities; provided,
--------
however, that as to any Registrable Securities, such securities will cease to
- -------
constitute "Registrable Securities" for purposes of this Agreement if and when
(i) a Registration Statement with respect to the sale of such securities has
been declared effective by the Commission and such securities have been sold
pursuant thereto in accordance with the intended plan and method of distribution
therefor set forth in the final Prospectus forming part of such Registration
Statement, (ii) such securities have been sold in
_________________
/4/ To be included only if Class B Common Shares are actually issued on the
Effective Date.
-4-
<PAGE>
satisfaction of all applicable resale provisions of Rule 144 under the
Securities Act, (iii) such securities have been transferred to any person or
entity other than a Permitted Assignee, or (iv) such securities may be freely
sold publicly without either (A) registration under the Securities Act or (B)
compliance with any restrictions (including without limitation restrictions as
to volume or manner of sale) under Rule 144 of the Securities Act.
(jj) Registration Expenses: As defined in Section 6.4.
---------------------
(kk) Registration Statement: Any registration statement of the
----------------------
Company under the Securities Act (including the Shelf Registration Statement)
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the related Prospectus, all amendments and supplements to
such registration statement (including post-effective amendments), and all
exhibits and all material incorporated by reference or deemed to be incorporated
by reference in such registration statement.
(ll) Rule 144: Rule 144 promulgated under the Securities Act, as such
--------
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
(mm) SEC: The Securities and Exchange Commission.
---
(nn) Securities Act: The Securities Act of 1933, as amended.
--------------
(oo) Shelf Registration Statement: As defined in Section 2.1.
----------------------------
(pp) Stockholder: As defined in the introductory paragraph hereof.
-----------
For all purposes hereof, the persons comprising Northwestern will be treated as
a single Stockholder and will be required to act jointly to exercise their
rights hereunder (with persons holding at least 85% of the aggregate number of
Registerable Securities then held by all such persons to control with respect to
any such exercise).
(qq) Underwritten Registration or Underwritten Offering: A
--------------------------------------------------
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
(rr) Warrants: As defined in Recital C.
--------
(ss) Whippoorwill: As defined in the introductory paragraph hereof.
------------
-5-
<PAGE>
II. SHELF REGISTRATION
------------------
2.1 General. On or before the date of this Agreement, there has become
-------
effective under the Securities Act a Registration Statement (No. 333-________)
relating to the resale, from time to time, of the Registrable Securities owned
by the Stockholders as of the Effective Date in accordance with the plan and
method of distribution set forth in the Prospectus included in such Registration
Statement (the "Shelf Registration Statement").
2.2 Effective Period. Subject to Section 5.1, the Company will use its
----------------
reasonable best efforts to keep the Shelf Registration Statement continuously
effective until the earliest of (a) March 1, 2003 (subject to extension as
provided in Section 5.1 and Section 6.3), (b) the date on which all Registrable
Securities covered by the Shelf Registration Statement have been sold thereunder
in accordance with the plan and method of distribution intended by the
Stockholders and disclosed in the Prospectus included in the Shelf Registration
Statement, and (c) the date on which all Registrable Securities covered by the
Shelf Registration Statement have otherwise ceased to be Registrable Securities.
III DEMAND REGISTRATION
-------------------
3.1 Demand Registration. (a) At any time and from time to time, each
-------------------
Stockholder will have the right by written notice delivered to the Company (a
"Demand Notice") to require the Company to register (a "Demand Registration"),
in accordance with the provisions of the Securities Act, all or any portion of
such Stockholder's Registrable Securities; provided, however, that (i) no Demand
-------- -------
Notice may be given prior to 90 days after the effective date of the immediately
preceding Demand Registration and (ii) no Demand Notice may be given unless
Registrable Securities having an aggregate offering price of at least $1.0
million are to be offered pursuant to such Demand Registration.
(b) The number of Demand Registrations pursuant to this Section 3.1
will not exceed two for Huff (including its Permitted Assignees), two for
Whippoorwill (including its Permitted Assignees), two for CSFB (including its
Permitted Assignees), and two for Northwestern (including its Permitted
Assignees); provided, however, that in determining the number of Demand
-------- -------
Registrations to which a Stockholder is entitled, there will be excluded any
Demand Registration in which any Registrable Securities requested by a
Stockholder to be registered under this Article III are excluded from such
Demand Registration pursuant to Section 3.3 hereof.
(c) Notwithstanding anything to the contrary herein contained, (i) the
Company will not be required to effect any Demand Registration pursuant to any
Registration Statement other than the Shelf Registration Statement at any time
when
-6-
<PAGE>
the Shelf Registration Statement is effective and may be used for the offering
or sale proposed to be effected pursuant to such Demand Registration and (ii)
the Company will not be required to effect any Demand Registration of an
offering or sale that can otherwise be effected in compliance with Rule 144.
(d) Notwithstanding anything to the contrary herein contained, a
registration will not count as a Demand Registration until it has become
effective (unless the requesting Stockholder withdraws from such registration
all its Registrable Securities and the Company has performed its obligations
hereunder (including without limitation under Section 3.2(c)) in all material
respects, in which case such registration will count as a Demand Registration
unless the requesting Stockholder pays all of the Registration Expenses in
connection with such withdrawn registration); provided that, if, after it has
-------- ----
become effective but prior to the distribution of all of the Registrable
Securities covered thereby, (i) the offering of Registrable Securities pursuant
to such registration is terminated by any stop order, injunction or other order
of the SEC or other governmental agency or court or (ii) such registration
otherwise is not maintained effective for the period required pursuant to
Section 3.2 hereof, such registration will be deemed not to have been effected
and will not count as a Demand Registration.
3.2 Filing and Effectiveness. (a) The Company will file a Registration
------------------------
Statement relating to any Demand Registration as soon as practicable (but no
later than 60 calendar days after the date on which the Company receives from
the Stockholder the Demand Notice relating to such Demand Registration) and will
use its best efforts to cause the same to be declared effective by the SEC as
soon as practicable (but no later than 120 calendar days after such date).
(b) All requests made pursuant to Section 3.1(a) will specify (i) the
number of Registrable Securities to be registered and (ii) the intended method
or methods of disposition thereof. Any offering of Registrable Securities
pursuant to a Demand Registration will be in the form of an Underwritten
Offering or such other lawful form as the Stockholder delivering the Demand
Notice may reasonably specify.
(c) The Company will use its reasonable best efforts to keep the
Registration Statement relating to any Demand Registration continuously
effective until the earliest of (i) the date on which all Registrable Securities
covered by such Registration Statement have been sold thereunder in accordance
with the plan and method of distribution disclosed in the Prospectus included on
such Registration Statement, (ii) the date on which all Registrable Securities
covered by such Registration Statement have otherwise ceased to be Registrable
Securities, and (iii) (x) in the case of an Underwritten Offering, 90 days from
the effective date of such Registration Statement or (y) in the case of an
offering that is not an Underwritten Offering, 180 days from the date of such
Registration Statement.
-7-
<PAGE>
(d) Within 10 business days after receipt of a Demand Notice, the
Company will send written notice thereof (the "Notice") to each Stockholder
(other than the Stockholder that delivered the Demand Notice). Subject to
Section 3.3 hereof, the Company will include in such registration all
Registrable Securities with respect to which the Company has received a written
request for inclusion therein within 10 business days after the receipt of the
Notice by any such other Stockholder.
(e) With respect to any Demand Registration, the Company may also
provide written notice to holders of its equity securities other than the
Stockholders who at the time have piggyback registration rights with respect
thereto ("Other Stockholders"), and will, subject to Section 3.3 hereof, permit
all such Other Stockholders who request to be included in the Demand
Registration to include any or all of their equity securities in such Demand
Registration on the same terms and conditions as the Registrable Securities.
3.3 Priority on Demand Registration. With respect to any Demand
-------------------------------
Registration, if the managing underwriter or underwriters of such Underwritten
Offering advise the Company and the selling Stockholder or Stockholders that the
total amount of Registrable Securities and equity securities of Other
Stockholders who have piggyback registration rights and who request to be
included in such Demand Registration as contemplated by Section 3.2(e) hereof
will in the aggregate materially and adversely affect the success of such
Underwritten Offering, then (subject to the rights of Other Stockholders having
rights under the Adelphia Agreement): (i) first, the amount of equity
securities of such Other Stockholders will be reduced to zero if necessary (pro
rata among such Other Stockholders on the basis of the amount of such equity
securities requested to be included therein by each such holder) and (ii)
second, the amount of Registrable Securities of all Stockholders who have
requested to have Registrable Securities included in the Demand Registration
will be reduced (pro rata among such Stockholders on the basis of the amount of
such Registrable Securities requested to be included therein by each such
Stockholder) so that, after such reduction, there will be included in such
Underwritten Offering the amount of securities that, in the opinion of such
managing underwriter or underwriters, can be sold without materially and
adversely affecting the success of such Underwritten Offering.
3.4 Postponement of Demand Registration. The Company will be entitled to
-----------------------------------
postpone by written notice to the Stockholders the filing period (or suspend the
effectiveness) of any Demand Registration for a reasonable period of time not in
excess of 90 calendar days, if the Board of Directors of the Company determines,
in the good faith exercise of its reasonable business judgment, that such
registration would (i) materially interfere with bona fide financing plans of
---- ----
the Company or (ii) require disclosure of information not otherwise required to
be disclosed, the disclosure of which could materially and adversely affect the
Company; provided, however, that the Company will not be entitled to exercise
-------- -------
its rights under this
-8-
<PAGE>
Section 3.4 more than twice in any 360-day period. If the Company postpones the
filing of a Registration Statement, it will promptly notify the selling
Stockholder or Stockholders in writing when the events or circumstances
permitting such postponement have ended.
3.5 Registration of Securities Other than Registrable Securities. Without
------------------------------------------------------------
the written consent of each Stockholder that then holds Registrable Securities,
the Company will not after the date hereof grant to any person the right to
require the Company to register, in accordance with the provisions of the
Securities Act, any securities of the Company, unless the rights so granted, if
exercised, would not violate the provisions of this Agreement.
IV. PIGGYBACK REGISTRATION
----------------------
4.1 Right to Piggyback. If at any time the Company proposes to file a
------------------
registration statement under the Securities Act with respect to an offering of
any class of equity securities (other than a registration statement (i) on Form
S-4, S-8 or any successor form thereto or (ii) filed solely in connection with
an offering made solely to employees of the Company), whether or not for its own
account, then the Company will give written notice (the "Piggyback Notice") of
such proposed filing to the Stockholders at least 30 calendar days before the
anticipated filing date. Such notice will offer the Stockholders the
opportunity to register such amount of Registrable Securities as each
Stockholder may request (a "Piggyback Registration"). Subject to Section 4.2
hereof, the Company will include in each such Piggyback Registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 15 calendar days after the receipt of the
Piggyback Notice. The Stockholders will be permitted to withdraw all or part of
the Registrable Securities from a Piggyback Registration at any time prior to
the third calendar day immediately preceding the effective date of such
Piggyback Registration.
4.2 Priority on Piggyback Registrations. The Company will cause the
-----------------------------------
managing underwriter or underwriters of a proposed Underwritten Offering to
permit the Stockholders that have requested Registrable Securities to be
included in the Piggyback Registration for such offering to include all such
Registrable Securities on the same terms and conditions as any similar
securities, if any, of the Company included therein. Notwithstanding the
foregoing, if the managing underwriter or underwriters of such Underwritten
Offering advises the Company and the selling Stockholder or Stockholders that
the total amount of securities that the Company, such Stockholders and any other
persons having rights to participate in such Piggyback Registration propose to
include in such offering is such as to materially and adversely affect the
success of such Underwritten Offering, then (subject to the rights of Other
Stockholders having rights under the Adelphia Agreement):
-9-
<PAGE>
(a) if such Piggyback Registration is a primary registration by the
Company for its own account, the Company will include in such Piggyback
Registration: (i) first, all securities to be offered by the Company and (ii)
second, up to the full amount of securities requested to be included in such
Piggyback Registration by the Stockholders and Other Stockholders having rights
to participate in such Piggyback Registration (allocated pro rata among such
Stockholders and Other Stockholders on the basis of the amount of securities
requested to be included therein by each such Stockholder or Other Stockholder)
so that the total amount of securities to be included in such Underwritten
Offering is the full amount that, in the opinion of such managing underwriter or
underwriters, can be sold without materially and adversely affecting the success
of such Underwritten Offering; and
(b) if such Piggyback Registration is an underwritten secondary
registration for the account of holders of securities of the Company other than
the Stockholders, the Company will include in such registration: (i) first, all
securities of the persons exercising "demand" registration rights requested to
be included therein (including without limitation the person who demands
registration and any persons who are entitled to participate in such Piggyback
Registration pursuant to the same agreement as the person demanding such
Piggyback Registration) and (ii) second, up to the full amount of securities
requested to be included in such Piggyback Registration by the Stockholders and
Other Stockholders having rights to participate in such Piggyback Registration
(allocated pro rata among such Stockholders and Other Stockholders on the basis
of the amount of securities requested to be included therein by each such
Stockholder or Other Stockholder) so that the total amount of securities to be
included in such Underwritten Offering is the full amount that, in the written
opinion of such managing underwriter or underwriters, can be sold without
materially and adversely affecting the success of such Underwritten Offering.
V. RESTRICTIONS ON SALE
--------------------
5.1 Restrictions on Sale by Stockholders. Each Stockholder whose
------------------------------------
Registrable Securities are covered by a Registration Statement filed pursuant to
Article II, Article III or Article IV hereof agrees that, if such Stockholder is
so requested (pursuant to a timely written notice) by the managing underwriter
or underwriters in any Underwritten Offering by the Company for its own account,
not to effect any public or private sale or distribution of any Registrable
Securities (except as part of such Underwritten Offering), including a sale
pursuant to Rule 144, during the 10 calendar day period prior to, and during the
90 calendar day period beginning on, the closing date of such Underwritten
Offering; provided, however, that the foregoing shall not apply to any
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Stockholder that is the Beneficial Owner of less than 4.0% of the outstanding
Common Shares. If a request is made pursuant to this Article V, the time period
during which the Shelf Registration Statement is required to remain continuously
effective pursuant to Section 2.2 will be extended by 100 calendar days or such
shorter period that will terminate when all Registrable
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Securities included therein have been sold thereunder in accordance with the
plan and method of distribution intended by the Stockholders and disclosed in
the Prospectus included therein or all Registrable Securities covered by the
Shelf Registration Statement have otherwise ceased to be Registrable Securities.
In the event of such a request, the Company may impose, during such period,
appropriate stop-transfer instructions with respect to the Registrable
Securities subject to such restrictions.
5.2 Restrictions on Sale by the Company and Others. The Company, if so
----------------------------------------------
requested (pursuant to a timely written notice) by the managing underwriter or
underwriters in any Underwritten Offering pursuant to a Demand Registration,
will not effect any registration of its equity securities (other than a
registration statement on Form S-4, S-8 or any successor forms thereto), or
effect any public or private sale or distribution of any of its securities
(other than in connection with a business combination or acquisition transaction
in which the recipients of its equity securities agree to a restriction no less
restrictive than those contained in this Section 5.2), including a sale pursuant
to Regulation D under the Securities Act, whether on its own behalf or at the
request of any holder or holders of its equity securities (other than pursuant
to and in accordance with this Agreement), from the date of a request to
register Registrable Securities pursuant to and in accordance with Article III
hereof in connection with such Underwritten Offering until 90 days after the
effective date of such Demand Registration. The Company will cause each holder
of its equity securities acquired from the Company at any time on or after the
date of this Agreement other than in a registered public offering or pursuant to
the Plan or the Merger Agreement (provided such acquisition involves an amount
of securities equal to at least 1% of such class of securities) to agree not to
effect any public or private sale or distribution of any such securities during
such period, including a sale pursuant to Rule 144.
VI. PROCEDURES AND EXPENSES
-----------------------
6.1 Registration Procedures. In connection with the Company's
-----------------------
registration obligations pursuant to Article II, Article III and Article IV
hereof, the Company will effect such registrations to permit the sale of
Registrable Securities by a Stockholder in accordance with the intended method
or methods of disposition thereof, and pursuant thereto the Company will as
promptly as reasonably practicable:
(a) Prepare and file with the SEC a Registration Statement or
Registration Statements on an appropriate form under the Securities Act
available for the sale of the Registrable Securities by the selling Stockholder
in accordance with the intended method or methods of distribution thereof;
provided, however, that the Company (i) will, before filing, furnish to the
- -------- -------
selling Stockholder, its counsel and the managing underwriter or underwriters,
if any, copies of the Registration Statement or Prospectus proposed to be filed,
which documents will be subject to the review of
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such Stockholder, its counsel and such underwriters, (ii) will provide such
Persons with a reasonable opportunity to review and comment on such Registration
Statement or Prospectus, and (iii) will not file any such Registration Statement
or Prospectus to which the selling Stockholder, its counsel or such underwriter,
if any, shall reasonably object within three business days after the receipt
thereof.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the applicable period
specified in Section 2.2 or Section 3.2; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provision then in force) under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the selling Stockholder set forth in such Registration
Statement as so amended, or in such Prospectus as so supplemented.
(c) Promptly notify the selling Stockholder, its counsel and the
managing underwriter or underwriters, if any, orally (with subsequent written
confirmation) (i) when a Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the SEC or any other federal or state governmental
authority for amendments or supplements to a Registration Statement or related
Prospectus or for additional information, (iii) of the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (v) of the occurrence of any event which makes any statement made in
such Registration Statement or Prospectus untrue in any material respect or
which requires the making of any changes in a Registration Statement or
Prospectus or other documents so that, (A) in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading and (B) in the case of the Prospectus, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (vi) of the Company's reasonable determination that a post-
effective amendment to a Registration Statement would be appropriate.
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(d) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, at the earliest practicable
date.
(e) If requested by the managing underwriter or underwriters, if any,
or the selling Stockholder, (i) promptly incorporate in a Prospectus supplement
or post-effective amendment such information as the managing underwriter or
underwriters, if any, and such selling Stockholder agree should be included
therein under applicable law and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment; provided, however, that
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the Company will not be required to take any actions under this Section 6.1(e)
that are not, in the opinion of counsel for the Company, in compliance with
applicable law.
(f) Furnish to the selling Stockholder, its counsel and each managing
underwriter, if any, at least one conformed copy of the Registration Statement
and any post-effective amendment thereto, including financial statements (but
excluding schedules, all documents incorporated or deemed incorporated therein
by reference and all exhibits).
(g) Deliver to the selling Stockholder, its counsel and the
underwriter or underwriters, if any, as many copies of the Prospectus relating
to such Registrable Securities (including each preliminary Prospectus) and any
amendment or supplement thereto as such persons may reasonably request and, by
such delivery, the Company will be deemed to have consented to the use of such
Prospectus or such amendment or supplement thereto by the selling Stockholder
and the underwriter or underwriters, if any, in connection with the offering and
sale of the Registrable Securities covered by such Prospectus or any amendment
or supplement thereto.
(h) Prior to any public offering of Registrable Securities, to
register or qualify, or cooperate with the selling Stockholder, the underwriter
or underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of, such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States as
the selling Stockholder or underwriter or underwriters reasonably request in
writing; keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be kept
effective and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the Registration Statement; provided, however, that the
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Company will not be required to (i) qualify generally to do business in any
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<PAGE>
jurisdiction in which it is not then so qualified or (ii) take any action that
would subject it to general service of process in any jurisdiction in which it
is not then so subject.
(i) Cooperate with the selling Stockholder and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold, which
certificates will not bear any restrictive legends; and cause such certificates
to be in such denominations and registered in such names as the managing
underwriters, if any, shall request at least two business days prior to any sale
of Registrable Securities to the underwriters.
(j) Cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities within the United States, including such as
may be required solely as a consequence of the nature of the selling
Stockholder's business.
(k) As promptly as practicable upon the occurrence of any event
contemplated by Section 6.1(c)(v) or 6.1(c)(vi) hereof, prepare a supplement or
post-effective amendment to each Registration Statement or a supplement to the
related Prospectus, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder,
such Prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(l) Use its best efforts to cause all Registrable Securities covered
by such Registration Statement to be (i) listed on each securities exchange, if
any, on which similar securities issued by the Company are then listed or (ii)
authorized to be quoted on The Nasdaq Stock Market ("NASDAQ") and on the Nasdaq
National Market of NASDAQ if the securities qualify to be so quoted; in each
case, if requested by the selling Stockholder or the managing underwriter or
underwriters, if any.
(m) Prior to the effective date of the first Demand Registration, (i)
engage an appropriate transfer agent and provide such transfer agent with
printed certificates for the Registrable Securities in a form eligible for
deposit with The Depository Trust Company and (ii) provide a CUSIP number for
the Registrable Securities.
(n) Enter into such agreements (including, in the event of an
Underwritten Offering, an underwriting agreement in form, scope and substance as
is customary in Underwritten Offerings) and take all such other actions in
connection therewith (including those reasonably requested by the selling
Stockholder or, in the event of an Underwritten Offering, those reasonably
requested by the managing
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<PAGE>
underwriter or underwriters) reasonably necessary or desirable to expedite or
facilitate the disposition of such Registrable Securities, and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the registration is an Underwritten Registration, (i) make such
representations and warranties to the selling Stockholder and the underwriter or
underwriters, if any, with respect to the business of the Company and its
subsidiaries, the Registration Statement or Prospectus, in each case, in form,
substance and scope as are customarily made by issuers to underwriters in
Underwritten Offerings and confirm the same if and when requested, (ii) obtain
opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to the
managing underwriter or underwriters, if any, and the selling Stockholder)
addressed to the selling Stockholder and the underwriter or underwriters, if
any, covering the matters customarily covered in opinions requested in
Underwritten Offerings and such other matters as may be reasonably requested by
the selling Stockholder and underwriter or underwriters, if any, including
without limitation the matters referred to in Section 6.1(n)(i) hereof, (iii)
use its best efforts to obtain "comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and financial
data is, or is required to be, included in the Registration Statement),
addressed to the selling Stockholder and each of the underwriter or
underwriters, if any, such letters to be in customary form and covering matters
of the type customarily covered in "comfort" letters in connection with
Underwritten Offerings, and (iv) deliver such documents and certificates as may
be reasonably requested by the selling Stockholder, its counsel or the managing
underwriter or underwriters, if any, to evidence the continued validity of the
representations and warranties of the Company and its subsidiaries made pursuant
to clause (i) above and to evidence compliance with any customary conditions
contained in the underwriting agreement or similar agreement entered into by the
Company. The foregoing actions will be taken in connection with each closing
under such underwriting or similar agreement as and to the extent required
thereunder.
(o) Make available for inspection by a representative of the selling
Stockholder, any underwriter, and any attorney or accountant retained by such
selling Stockholder or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the officers, directors and employees of the Company and its subsidiaries
to supply all information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with such Registration
Statement; provided, however, that any records, information or documents that
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are designated by the Company in writing as confidential at the time of delivery
of such records, information or documents will be kept confidential by such
persons unless (i) such records, information or documents are in the public
domain or otherwise publicly available (other than by reason of breach of this
confidentiality provision), (ii) disclosure of
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<PAGE>
such records, information or documents is required by court or administrative
order or is necessary to respond to inquires of regulatory authorities, or (iii)
disclosure of such records, information or documents, in the opinion of counsel
to such person, is otherwise required by law or regulation (including without
limitation pursuant to the requirements of the Securities Act or regulations
promulgated thereunder); provided, however, that, in the case of subsections
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(ii) and (iii) hereof, prior to making such disclosure the Stockholder will
advise and consult with the Company and its counsel as to such disclosure and
the nature and wording of such disclosure and will use its reasonable best
efforts to obtain confidential treatment therefor.
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to its security holders earning statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45
calendar days after the end of any 12-month period (or 90 calendar days after
the end of any 12-month period if such period is a fiscal year) (i) commencing
at the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts Underwritten Offering and (ii)
if not sold to underwriters in such an offering, commencing on the first day of
the first fiscal quarter of the Company, after the effective date of a
Registration Statement, which statements shall cover such 12-month period.
6.2. Information from Stockholder. (a) The Company may require each
----------------------------
selling Stockholder that has requested inclusion of its Registrable Securities
in any Registration Statement to furnish to the Company such information
regarding the Stockholder and its plan and method of distribution of such
Registrable Securities as the Company may, from time to time, reasonably request
in writing. The Company may refuse to proceed with the registration of such
selling Stockholder's Registrable Securities if such selling Stockholder
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
(b) Each selling Stockholder will as expeditiously as possible (i)
notify the Company of the occurrence of any event that makes any statement made
in a Registration Statement or Prospectus regarding such selling Stockholder
untrue in any material respect or that requires the making of any changes in a
Registration Statement or Prospectus so that, in such regard, (A) in the case of
a Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (B) in the case of a
Prospectus, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading and (ii) provide the Company with such information as may
be required to enable the Company to
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<PAGE>
prepare a supplement or post-effective amendment to any such Registration
Statement or a supplement to such Prospectus as contemplated by Section 6.1(k).
(c) With respect to any Registration Statement for an Underwritten
Offering, the inclusion of a Stockholder's Registrable Securities therein will
be conditioned upon such Stockholder's participation in such Underwritten
Offering and the execution and delivery by such Stockholder of an underwriting
agreement in form, scope and substance as is customary in Underwritten
Offerings.
6.3. Suspension of Disposition. Each selling Stockholder will be deemed to
-------------------------
have agreed that, upon receipt of any notice from the Company of the occurrence
of any event of the kind described in Section 6.1(c)(ii), 6.1(c)(iii),
6.1(c)(iv), 6.1(c)(v) or 6.1(c)(vi) hereof, such Stockholder will discontinue
disposition of Registrable Securities covered by a Registration Statement or
Prospectus until such Stockholder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 6.1(k) hereof or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed and has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus. In the event the Company shall give any such
notice, the time period prescribed in Section 3.2(c) hereof will be extended by
the number of days during the time period from the date of the giving of such
notice to the date when such selling Stockholder shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 6.1(k)
hereof or (y) the Advice and any such additional or supplemental filings
referred to above.
6.4. Registration Expenses. (a) All fees and expenses incurred by the
---------------------
Company in complying with Articles II, III, IV and VI hereof ("Registration
Expenses") will be borne by the Company. Such fees and expenses will include,
without limitation, (i) all registration and filing fees (including without
limitation fees and expenses (x) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. and (y) of compliance
with securities or blue sky laws (including without limitation reasonable fees
and disbursements of counsel for the underwriters and selling Stockholder in
connection with blue sky qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the managing underwriter or
underwriters, if any, or the Selling Stockholder may designate)), (ii) printing
expenses (including without limitation the expenses of printing certificates for
securities in a form eligible for deposit with The Depository Trust Company and
of printing prospectuses if the printing of prospectuses is requested by the
selling Stockholder), (iii) messenger, telephone and delivery expenses, (iv)
reasonable fees and disbursements of counsel for the Company, (v) reasonable
fees and disbursements of one counsel for all selling Stockholders collectively
(which counsel, in the case of a Demand Registration, will be selected by the
Stockholder that delivers the Demand Notice relating to the Registration
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<PAGE>
Statement for which Registration Expenses are being incurred and, in all other
cases, will be selected by Stockholders holding a majority of the Registrable
Securities sought to be included in the Registration Statement), (vi) reasonable
fees and disbursements of all independent certified public accountants referred
to in Section 6.1(n)(iii) hereof (including the expenses of any special audit
and "comfort" letters required by or incident to such performance), (vii)
reasonable fees and expenses of any "qualified independent underwriter" or other
independent appraiser participating in an offering pursuant to Section 2720(c)
of the Conduct Rules of the National Association of Securities Dealers, Inc.,
and (viii) reasonable fees and expenses of all other persons retained by the
Company. In addition, the Company will pay its internal expenses (including
without limitation all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, and the
fees and expenses incurred in connection with the listing of the securities to
be registered on each securities exchange, if any, on which similar securities
issued by the Company are then listed or the quotation of such securities on the
NASDAQ.
(b) Notwithstanding anything to the contrary herein contained, all
underwriting fees, discounts, selling commissions and stock transfer taxes
applicable to the sale of Registrable Securities will be borne by the
Stockholder owning such Registrable Securities.
(c) Notwithstanding anything to the contrary herein contained, each
selling Stockholder may have its own separate counsel in connection with the
registration of any of its Registrable Securities, which counsel may participate
therein to the full extent provided herein; provided, however, that all fees and
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expenses of such separate counsel will be paid for by such selling Stockholder.
6.5. Selection of Underwriter. The investment banker or investment bankers
------------------------
and manager or managers that will manage any Demand Registration offering will
be jointly selected by the Company and the selling Stockholder that gave the
original Demand Notice in connection with such Demand Registration.
VII. INDEMNIFICATION
---------------
7.1. Indemnification by the Company. The Company will indemnify and hold
------------------------------
harmless, to the fullest extent permitted by law, each Stockholder owning
Registrable Securities registered pursuant to this Agreement, its officers,
directors, trustees, agents and employees, each person who controls such
Stockholder (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and the officers, directors, trustees, agents and
employees of any such controlling person, from and against all losses, claims,
damages, liabilities, costs (including without limitation the costs of
investigation and attorneys' fees) and expenses (collectively, "Losses"), as
incurred, arising out of or
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based upon any untrue or alleged untrue statement of a material fact contained
in any Registration Statement, Prospectus or preliminary prospectus, or arising
out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are based solely upon
information furnished in writing to the Company by or on behalf of such
Stockholder expressly for use therein; provided, however, that the Company will
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not be liable to any Stockholder to the extent that any such Losses arise out of
or are based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any preliminary prospectus if either (i) (A) such
Stockholder failed to send or deliver a copy of the Prospectus with or prior to
the delivery of written confirmation of the sale by such Stockholder of a
Registrable Security to the person asserting the claim from which such Losses
arise and (B) the Prospectus would have completely corrected such untrue
statement or alleged untrue statement or such omission or alleged omission, or
(ii) such untrue statement or alleged untrue statement or such omission or
alleged omission is completely corrected in an amendment or supplement to the
Prospectus previously furnished by or on behalf of the Company with copies of
the Prospectus as so amended or supplemented, and such Stockholder thereafter
failed to deliver such Prospectus as so amended or supplemented prior to or
concurrently with the sale of a Registrable Security to the person asserting the
claim from which such Losses arise.
7.2. Indemnification by Stockholders. Each Stockholder will indemnify and
-------------------------------
hold harmless, to the fullest extent permitted by law, the Company, its
officers, directors, agents and employees, each person who controls the Company
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act), and the directors, officers, agents and employees of any such
controlling person, from and against all Losses, as incurred, arising out of or
based upon any untrue statement of a material fact contained in any Registration
Statement, Prospectus or preliminary prospectus, or arising out of or based upon
any omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading, to the extent, but only to the
extent, that such untrue statement or omission was made in reliance upon and in
conformity with information so furnished in writing by or on behalf of such
Stockholder to the Company expressly for use in such Registration Statement,
Prospectus or preliminary prospectus. In no event will the liability of any
Stockholder hereunder be greater in amount than the dollar amount of the
proceeds received by such Stockholder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
7.3. Conduct of Indemnification Proceedings. If any person shall become
--------------------------------------
entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party
will give prompt notice to the party from which such indemnity is sought (the
"Indemnifying Party") of any claim or of the commencement of any action or
proceeding with respect to which such Indemnified Party seeks indemnification or
contribution pursuant hereto; provided, however, that the failure to so notify
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the
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<PAGE>
Indemnifying Party will not relieve the Indemnifying Party from any obligation
or liability except to the extent that the Indemnifying Party has been
prejudiced materially by such failure. If such an action or proceeding is
brought against the Indemnified Party, the Indemnifying Party will be entitled
to participate therein and, to the extent it may elect by written notice
delivered to the Indemnified Party promptly after receiving the notice referred
to in the immediately preceding sentence, to assume the defense thereof with
counsel reasonably satisfactory to the Indemnified Party. Notwithstanding the
foregoing, the Indemnified Party will have the right to employ its own counsel
in any such case, but the fees and expenses of such counsel will be at the
expense of the Indemnified Party unless (i) the employment of such counsel shall
have been authorized in writing by the Indemnifying Party, (ii) the Indemnifying
Party shall not have employed counsel (reasonably satisfactory to the
Indemnified Party) to take charge of such action or proceeding within a
reasonable time after notice of commencement thereof, or (iii) the Indemnified
Party reasonably shall have concluded that there may be defenses available to it
which are different from or additional to those available to the Indemnifying
Party which, if the Indemnifying Party and the Indemnified Party were to be
represented by the same counsel, could result in a conflict of interest for such
counsel or materially prejudice the prosecution of defenses available to the
Indemnified Party. If any of the events specified in clause (i), (ii) or (iii)
of the immediately preceding sentence are applicable, then the fees and expenses
of separate counsel for the Indemnified Party shall be borne by the Indemnifying
Party. If, in any case, the Indemnified Party employs separate counsel, the
Indemnifying Party will not have the right to direct the defense of such action
or proceeding on behalf of the Indemnified Party. All fees and expenses required
to be paid to the Indemnified Party pursuant to this Section 7 will be paid
periodically during the course of the investigation or defense, as and when
reasonably itemized bills therefor are delivered to the Indemnifying Party in
respect of any particular Loss that is incurred. Notwithstanding anything to the
contrary contained in this Section 7.3, an Indemnifying Party will not be liable
for the settlement of any action or proceeding effected without its prior
written consent. The Indemnifying Party will not consent to entry of any
judgment or enter into any settlement or otherwise seek to terminate any action
or proceeding in which any Indemnified Party is or could be a party and as to
which indemnification or contribution could be sought by such Indemnified Party
under this Article VII, unless such judgment, settlement or other termination
provides solely for the payment of money and includes as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release, in form and substance satisfactory to the Indemnified Party, from all
liability in respect of such claim or litigation for which such Indemnified
Party would be entitled to indemnification hereunder.
7.4. Contribution, Etc. (a) If the indemnification provided for in this
-----------------
Article VII is unavailable to an Indemnified Party under Section 7.1 or 7.2
hereof in respect of any Losses or is insufficient to hold such Indemnified
Party harmless, then each applicable Indemnifying Party, in lieu of indemnifying
such Indemnified Party,
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<PAGE>
will, jointly and severally, contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party or
Indemnifying Parties, on the one hand, and such Indemnified Party, on the other
hand, in connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The relative
fault of such Indemnifying Party or Indemnifying Parties, on the one hand, and
such Indemnified Party, on the other hand, will be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or related to information supplied by,
such Indemnifying Party or Indemnifying Parties or such Indemnified Party, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses will be deemed to include any legal
or other fees or expenses incurred by such party in connection with any action
or proceeding.
(b) The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 7.4 were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding anything contained in this Section 7.4 to the contrary, an
Indemnifying Party that is a selling Stockholder will not be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities were sold by such selling Stockholder to the public
exceeds the amount of any damages which such selling Stockholder 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) will be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(c) The provisions of this Article VII will survive indefinitely,
notwithstanding any transfer of the Registrable Securities by any Stockholder.
VIII. RULE 144
--------
The Company will file all reports required to be filed by it under the
Securities Act and the Exchange Act, and will cooperate with any Stockholder
(including without limitation by making such representations as any such
Stockholder may reasonably request), all to the extent required from time to
time to enable such Stockholder to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemptions
provided by Rule 144. Upon the request of any Stockholder, the Company will
deliver to such Stockholder a written statement as to whether it has complied
with such filing requirements.
-21-
<PAGE>
IX. MISCELLANEOUS
-------------
9.1. Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given or made by
delivery in person, by courier service, by facsimile transmission or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
9.1):
(a) If to the Company:
Arch Communications Group, Inc.
1800 West Park Drive, Suite 250
Westborough, MA 01581
Attention: J. Roy Pottle
Fax No.: (508) 366-0846
with a copy to:
Hale and Dorr L.L.P.
60 State Street
Boston, MA 02109
Attention: David A. Westenberg
Fax No.: (617) 526-5000
(b) If to a Stockholder, to the following respective addresses
thereof:
(i) Huff: (iii) CSFB:
---- ----
W.R. Huff Asset Credit Suisse First
Management Co., L.L.C. Boston Corporation
67 Park Place, 9th Floor 11 Madison Avenue
Morristown, New Jersey 07960 New York, New York 10010
Attention: ________________ Attention: David J. Matlin
Fax No.: (___) ___-____ Alex Lagetko
Fax No.: (212) 325-8290
with a copy to: with a copy to:
______________________ Cadwalader, Wickersham & Taft
______________________ 100 Maiden Lane
______________________ New York, New York 10038
Attention: _____________ Attention: Michael J. Sage
Fax No.: (___) ___-____ Fax No.: (212) 504-6666
-22-
<PAGE>
(ii) Whippoorwill: (iv) Northwestern:
------------ ------------
Whippoorwill Associates, Inc. The Northwestern Mutual Life
11 Martine Avenue Insurance Company
White Plains, New York 10606 720 E. Wisconsin Avenue
Attention: _____________ Milwaukee, Wisconsin 53202
Fax No.: (___) ___-____ Attention: Securities Department
Fax No.: (414) 299-7124
with a copy to: with a copy to:
______________________ The Northwestern Mutual Life
______________________ Insurance Company
______________________ 720 E. Wisconsin Avenue
______________________ Milwaukee, Wisconsin 53202
Attention: _____________ Attention: Law Department
Fax No.: (___) ___-____ Fax No.: (414) 299-7016
All such notices and communications will be deemed to have been delivered or
given: upon delivery, if personally delivered; one business day after being
dispatched, if dispatched by same-day or next-day courier guaranteeing timely
delivery; when receipt acknowledged, if sent by facsimile transmission; and five
business days after being deposited in the mail, if mailed.
9.2. Assignment. Neither this Agreement nor the rights and obligations
----------
hereunder may be assigned by operation of law or otherwise (except that this
Agreement and rights and obligations hereunder may be assigned by any
Stockholder to a Permitted Assignee thereof, whereupon such Permitted Assignee
shall be deemed to be a Stockholder and a party hereto for all purposes of this
Agreement). Notwithstanding the foregoing, nothing herein contained shall
restrict the right of any Stockholder to transfer securities of the Company held
by it.
9.3. No Third-Party Beneficiaries. This Agreement will be binding upon and
----------------------------
inure solely to the benefit of the parties hereto and their respective
successors and permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other person any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
9.4. Entire Agreement. This Agreement constitutes the entire agreement of
----------------
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and undertakings, both written and oral, among the parties with
respect to the subject matter hereof.
-23-
<PAGE>
9.5. No Inconsistent Agreements. Except for the Adelphia Agreement, the
--------------------------
Company does not have, as of the Effective Date, and will not, on or after the
Effective Date, enter into, any agreement with respect to its securities which
is inconsistent with the rights granted to the Stockholders in this Agreement or
otherwise conflicts with the provisions hereof.
9.6. Amendment and Waiver. This Agreement may not be amended or modified
--------------------
or any provision hereof waived except by an instrument in writing signed by or
on behalf of each party. Notwithstanding anything contained herein to the
contrary, a waiver that does not adversely affect all of the parties hereto may
be executed by only the adversely affected party or parties.
9.7. Headings. The descriptive headings contained in this Agreement are
--------
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.8. Certain Interpretative Matters and Definitions. Unless the context
----------------------------------------------
otherwise requires, (i) all references to Articles, Sections, or Schedules are
to Articles, Sections, or Schedules of this Agreement, (ii) each term defined in
this Agreement has the meaning assigned to it, (iii) all uses of "herein,"
"hereto," "hereof" and words similar thereto in this Agreement refer to this
Agreement in its entirety, and not solely to the Article, Section, or provision
in which it appears, (iv) "or" is disjunctive but not necessarily exclusive, and
(v) words in the singular include the plural and vice versa.
---- -----
9.9. Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced under any law or public policy,
all other terms and provisions of this Agreement will nevertheless remain in
full force and effect. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner.
9.10. Governing Law. This Agreement will be governed by, and construed in
-------------
accordance with, the laws of the State of Delaware applicable to contracts
executed in and to be performed entirely within that state.
9.11. Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties will be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
9.12. Attorneys' Fees. In any action or proceeding brought to enforce any
---------------
provision of this Agreement, or where any provision hereof is validly asserted
as a
-24-
<PAGE>
defense, the successful party will be entitled to recover reasonable attorneys'
fees in addition to its costs and expenses and any other available remedy.
9.13. Further Assurances. The parties hereto will do such further acts and
------------------
things necessary to ensure that the terms of this Agreement are carried out and
observed.
9.14. Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed will be deemed to be an original but all of which
together will constitute one and the same agreement.
-25-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first written above.
ARCH COMMUNICATIONS GROUP, INC.
By: _____________________________
Name: ____________________________
Title: ___________________________
W.R. HUFF ASSET MANAGEMENT CO., L.L.C.
By: _____________________________
Name: ____________________________
Title: ___________________________
WHIPPOORWILL ASSOCIATES, INC.
By: _____________________________
Name: ____________________________
Title: ___________________________
CREDIT SUISSE FIRST BOSTON CORPORATION
By: _____________________________
Name: ____________________________
Title: ___________________________
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: _____________________________
Name: ____________________________
Its Authorized Representative
-26-
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY FOR
ITS GROUP ANNUITY SEPARATE ACCOUNT
By: NORTHWESTERN INVESTMENT
MANAGEMENT COMPANY
By: _____________________________
Name: ____________________________
Title: ___________________________
NORTHWESTERN MUTUAL SERIES FUND, INC. FOR THE HIGH
YIELD BOND PORTFOLIO
By: _____________________________
Name: ____________________________
Title: ___________________________
-27-
<PAGE>
SCHEDULE I
----------
INITIAL OWNERSHIP
-----------------
<TABLE>
<CAPTION>
[Number of
Number of Class B
Common Common Number of
Stockholder Shares Shares]/5/ Warrants
----------- --------- ---------- ---------
<S> <C> <C> <C>
W.R. Huff Asset Management Co., L.L.C.
Whippoorwill Associates, Inc. ...................
Credit Suisse First Boston Corporation ..........
The Northwestern Mutual Life Insurance
Company .........................................
The Northwestern Mutual Life Insurance
Company for its Group Annuity Separate
Account .........................................
Northwestern Mutual Series Fund, Inc. for the
High Yield Bond Portfolio .......................
</TABLE>
______________________
/5/ To be included only if Class B Common Shares are actually issued on the
Effective Date
<PAGE>
EXHIBIT 10.9
[Form for 10% Holders other than Standby Purchasers]
================================================================================
REGISTRATION RIGHTS AGREEMENT
AMONG
ARCH COMMUNICATIONS GROUP, INC.
AND
THE OTHER PERSONS
SIGNATORY HERETO
_________, 199__
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of ________, 199_ (the "Effective Date"), by and among Arch
Communications Group, Inc. (the "Company") and each of the other persons
signatory hereto (collectively, the "Stockholders").
RECITALS
--------
A. A plan of reorganization under Chapter 11 of the United States
Bankruptcy Code for MobileMedia Communications, Inc. ("MobileMedia"),
MobileMedia Corporation, the sole stockholder of MobileMedia ("Parent"), and all
of MobileMedia's subsidiaries (the "Plan") was confirmed on ________, 199_ by
order of the United States Bankruptcy Court for the District of Delaware in Case
Nos. 97-174 (PJW) through and including 97-192 (PJW), and has become effective.
B. In connection with the Plan, the Company, a wholly owned subsidiary of
the Company ("Merger Sub"), Parent and MobileMedia entered into an Agreement and
Plan of Merger, dated as of August __, 1998 (the "Merger Agreement"), pursuant
to which MobileMedia has been merged with and into Merger Sub, with Merger Sub
continuing as the surviving corporation and a wholly owned subsidiary of the
Company.
C. As a result of the Plan and the Merger Agreement and the transactions
contemplated thereby, each of the Stockholders has become the Beneficial Owner
(as defined below) of at least 10% of the outstanding shares of Common Stock,
par value $.01 per share, of the Company (the "Common Shares").
D. In accordance with the Plan and the Merger Agreement, the Company
desires to provide for the registration of the sale by the Stockholders of the
Registrable Securities (as defined below) from time to time, on the terms and
subject to conditions set forth below.
NOW, THEREFORE, the parties hereto hereby agree as follows:
I. DEFINITIONS
-----------
1.1 Definitions. For purposes of this Agreement, the following terms have
-----------
the following meanings:
(a) Adelphia Agreement: Registration Rights Agreement, dated as of
------------------
June 29, 1998, by and among the Company, Adelphia Communications Corporation and
Lisa-Gaye Shearing, as in effect on the date hereof.
(b) Advice: As defined in Section 6.3.
------
<PAGE>
(c) Affiliate: As defined in Rule 12b-2 under the Exchange Act.
---------
(d) Agreement: As defined in the introductory paragraph hereof.
---------
(e) Beneficial Owner or Beneficial Ownership: As defined in Rule 13d-
----------------------------------------
3 under the Exchange Act.
(f) Common Shares: As defined in Recital C.
-------------
(g) Company: As defined in the introductory paragraph hereof.
-------
(h) Demand Notice: As defined in Section 3.1.
-------------
(i) Demand Registration: As defined in Section 3.1.
-------------------
(j) Effective Date: As defined in the introductory paragraph hereof.
--------------
(k) Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
(l) Indemnified Party: As defined in Section 7.3.
-----------------
(m) Indemnifying Party: As defined in Section 7.3.
------------------
(n) Losses: As defined in Section 7.1.
------
(o) Merger Agreement: As defined in Recital B.
----------------
(p) Merger Sub: As defined in Recital B.
----------
(q) MobileMedia: As defined in Recital A.
-----------
(r) NASDAQ: As defined in Section 6.1(l).
------
(s) Notice: As defined in Section 3.2(d).
------
(t) Other Equity Securities: Any shares of capital stock of the
-----------------------
Company and any other securities issued by the Company in respect of any Owned
Common Shares.
(u) Other Stockholders: As defined in Section 3.2(e).
------------------
(v) Owned Common Shares: Common Shares owned by a Stockholder,
-------------------
whether acquired before, on or after the Effective Date, including without
limitation those that are acquired by a Stockholder on the Effective Date as
contemplated by the Plan and the Merger Agreement.
-2-
<PAGE>
[(w) Owned Warrants: Warrants owned by a Stockholder, whether
--------------
acquired on or after the Effective Date, including without limitation those that
are acquired by a Stockholder on the Effective Date as contemplated by the Plan
and the Merger Agreement.]/1/
(x) Permitted Assignee: With respect to any Stockholder, means (i)
------------------
an Affiliate of such Stockholder and (ii) any Person who acquires, in a single
transaction, from such Stockholder either (A) Beneficial Ownership of at least
5.0% of the voting power of the Company's outstanding capital stock, calculated
as of immediately after such acquisition, or (B) all of the Common Shares with
respect to which such Stockholder has Beneficial Ownership, even if such Common
Shares constitute less than 5.0% of the voting power of the Company's
outstanding capital stock.
(y) Person (or person): Any individual, corporation, general or
------------------
limited partnership, joint venture, trust or other entity or association,
including without limitation any governmental authority.
(z) Piggyback Notice: As defined in Section 4.1.
----------------
(aa) Piggyback Registration: As defined in Section 4.1.
----------------------
(bb) Plan: As defined in Recital A.
----
(cc) Prospectus: The prospectus included in any Registration
----------
Statement (including without limitation a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, all other amendments and
supplements to such prospectus (including post-effective amendments), and all
exhibits and all material incorporated by reference or deemed to be incorporated
by reference in such prospectus.
(dd) Registrable Securities: The Owned Common Shares, [the Owned
----------------------
Warrants, the Common Shares issuable upon exercise of the Owned Warrants]** and
the Other Equity Securities; provided, however, that as to any Registrable
-------- -------
Securities, such securities will cease to constitute "Registrable Securities"
for purposes of this Agreement if and when (i) a Registration Statement with
respect to the sale of such securities has been declared effective by the
Commission and such securities have been sold pursuant thereto in accordance
with the intended plan and method of distribution therefor set forth in the
final Prospectus forming part of such Registration Statement, (ii) such
securities have been sold in satisfaction of all
______________________
/*/ To be included only if Buyer Warrants (as defined in the Merger Agreement)
are issued as contemplated by the Plan and Merger Agreement.
/**/ To be included only if Buyer Warrants are issued as contemplated by the
Plan and Merger Agreement.
-3-
<PAGE>
applicable resale provisions of Rule 144 under the Securities Act, (iii) such
securities have been transferred to any person or entity other than a Permitted
Assignee, or (iv) such securities may be freely sold publicly without either (A)
registration under the Securities Act or (B) compliance with any restrictions
(including without limitation restrictions as to volume or manner of sale) under
Rule 144 of the Securities Act.
(ee) Registration Expenses: As defined in Section 6.4.
---------------------
(ff) Registration Statement: Any registration statement of the
----------------------
Company under the Securities Act (including the Shelf Registration Statement)
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the related Prospectus, all amendments and supplements to
such registration statement (including post-effective amendments), and all
exhibits and all material incorporated by reference or deemed to be incorporated
by reference in such registration statement.
(gg) Rule 144: Rule 144 promulgated under the Securities Act, as
--------
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
(hh) SEC: The Securities and Exchange Commission.
---
(ii) Securities Act: The Securities Act of 1933, as amended.
--------------
(jj) Shelf Notice: As defined in Section 2.1.
------------
(kk) Shelf Registration Statement: As defined in Section 2.1.
----------------------------
(ll) Stockholder: As defined in the introductory paragraph hereof.
-----------
(mm) Underwritten Registration or Underwritten Offering: A
--------------------------------------------------
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
[(nn) Warrants: Warrants to purchase Common Shares issued pursuant to
--------
the Warrant Agreement, dated as of the date hereof, between the Company and the
Bank of New York, as Rights Agent.]*
II. SHELF REGISTRATION
------------------
2.1 General. (a) At any time after the Effective Date and prior to
-------
September 1, 2002, any Stockholder may by written notice delivered to the
Company (the "Shelf Notice") require the Company to file as soon as practicable
(but no later than 60
______________________
/*/ To be included only if Buyer Warrants are issued as contemplated by the Plan
and Merger Agreement.
-4-
<PAGE>
calendar days after the date the Shelf Notice is delivered), and to use its
reasonable best efforts to cause to be declared effective by the SEC as soon as
practicable (but no later than 120 days after such date), a Registration
Statement relating to the resale, from time to time, of the Registrable
Securities beneficially owned by such Stockholder and the other Stockholders
electing to participate therein as provided in Section 2.1(b) hereof in
accordance with the plan and method of distribution set forth in the Prospectus
included in such Registration Statement (the "Shelf Registration Statement");
(b) Within 10 business days after receipt of a Shelf Notice pursuant
to Section 2.1(a) hereof, the Company will deliver written notice thereof to
each Stockholder (other than the Stockholder that delivered the Shelf Notice).
Each such Stockholder may elect to participate in the Shelf Registration
Statement by delivering to the Company a written request to so participate
within 10 business days after the receipt of the notice from the Company by any
such Stockholder.
(c) Notwithstanding anything to the contrary herein contained, no
Stockholder may request the Shelf Registration Statement or participate in the
Shelf Registration Statement unless, at the time thereof, (i) such Stockholder
beneficially owns at least 5.0% of the voting power of the Company's then-
outstanding capital stock or (ii) certifies in writing to the Company that such
Stockholder may be deemed to be an affiliate of the Company under the Securities
Act.
2.2 Effective Period. Subject to Section 5.1, The Company will use its
----------------
reasonable best efforts to keep the Shelf Registration Statement continuously
effective until the earliest of (a) March 1, 2003 (subject to extension as
provided in Section 5.1 and Section 6.3), (b) the date on which all Registrable
Securities covered by the Shelf Registration Statement have been sold thereunder
in accordance with the plan and method of distribution intended by the
Stockholders and disclosed in the Prospectus included in the Shelf Registration
Statement, and (c) the date on which all Registrable Securities covered by the
Shelf Registration Statement have otherwise ceased to be Registrable Securities.
III DEMAND REGISTRATION
-------------------
3.1 Demand Registration. (a) At any time and from time to time, each
-------------------
Stockholder will have the right by written notice delivered to the Company (a
"Demand Notice") to require the Company to register (a "Demand Registration"),
in accordance with the provisions of the Securities Act, all or any portion of
such Stockholder's Registrable Securities; provided, however, that (i) no Demand
-------- -------
Notice may be given prior to 90 days after the effective date of the immediately
preceding Demand Registration and (ii) no Demand Notice may be given unless
Registrable Securities having an aggregate offering price of at least $1.0
million are to be offered pursuant to such Demand Registration.
(b) The number of Demand Registrations pursuant to this Section 3.1
will not exceed two for each Stockholder (including its Permitted Assignees);
-5-
<PAGE>
provided, however, that in determining the number of Demand Registrations to
- -------- -------
which a Stockholder is entitled, there will be excluded any Demand Registration
in which any Registrable Securities requested by a Stockholder to be registered
under this Article III are excluded from such Demand Registration pursuant to
Section 3.3 hereof.
(c) Notwithstanding anything to the contrary set forth in this
Agreement, no Stockholder may send a Demand Notice or participate in a Demand
Registration unless, at the time thereof, (a) such Stockholder beneficially owns
at least 5.0% of the voting power of the Company's then-outstanding capital
stock or (b) certifies in writing to the Company that such Stockholder may be
deemed to be an affiliate of the Company under the Securities Act.
(d) Notwithstanding anything to the contrary herein contained, (i)
the Company will not be required to effect any Demand Registration pursuant to
any Registration Statement other than the Shelf Registration Statement at any
time when the Shelf Registration Statement is effective and may be used for the
offering or sale proposed to be covered by such Demand Registration and (ii) the
Company will not be required to effect any Demand Registration of an offering or
sale that can otherwise be effected in compliance with Rule 144.
(e) Notwithstanding anything to the contrary herein contained, a
registration will not count as a Demand Registration until it has become
effective (unless the requesting Stockholder withdraws from such registration
all its Registrable Securities and the Company has performed its obligations
hereunder (including without limitation under Section 3.2(c)) in all material
respects, in which case such registration will count as a Demand Registration
unless the requesting Stockholder pays all of the Registration Expenses in
connection with such withdrawn registration); provided, however, that, if, after
-------- -------
it has become effective but prior to the distribution of all of the Registrable
Securities covered thereby, (i) the offering of Registrable Securities pursuant
to such registration is terminated by any stop order, injunction, or other order
of the SEC or other governmental agency or court or (ii) such registration
otherwise is not maintained effective for the period required pursuant to
Section 3.2 hereof, such registration will be deemed not to have been effected
and will not count as a Demand Registration.
3.2 Filing and Effectiveness. (a) The Company will file a Registration
------------------------
Statement relating to any Demand Registration as soon as practicable (but no
later than 60 calendar days after the date on which the Company receives from
the Stockholder the Demand Notice relating to such Demand Registration) and will
use its best efforts to cause the same to be declared effective by the SEC as
soon as practicable (but no later than 120 calendar days after such date).
(b) All requests made pursuant to Section 3.1(a) will specify (i) the
number of Registrable Securities to be registered and (ii) the intended method
or methods of disposition thereof. Any offering of Registrable Securities
pursuant to a Demand Registration will be in the form of an Underwritten
Offering or such other
-6-
<PAGE>
lawful form as the Stockholder delivering the Demand Notice may reasonably
specify.
(c) The Company will use its reasonable best efforts to keep the
Registration Statement relating to any Demand Registration continuously
effective until the earliest of (i) the date on which all Registrable Securities
covered by such Registration Statement have been sold thereunder in accordance
with the plan and method of distribution disclosed in the Prospectus included on
such Registration Statement, (ii) the date on which all Registrable Securities
covered by such Registration Statement have otherwise ceased to be Registrable
Securities, and (iii) (x) in the case of an Underwritten Offering, 90 days from
the effective date of such Registration Statement or (y) in the case of an
offering that is not an Underwritten Offering, 180 days from the effective date
of such Registration Statement.
(d) Within 10 business days after receipt of a Demand Notice, the
Company will send written notice thereof (the "Notice") to each Stockholder
(other than the Stockholder that delivered the Demand Notice). Subject to
Section 3.3 hereof, the Company will include in such registration all
Registrable Securities with respect to which the Company has received a written
request for inclusion therein within 10 business days after the receipt of the
Notice by any such other Stockholder.
(e) With respect to any Demand Registration, the Company may also
provide written notice to holders of its equity securities other than the
Stockholders who at the time have piggyback registration rights with respect
thereto ("Other Stockholders"), and will, subject to Section 3.3 hereof, permit
all such Other Stockholders who request to be included in the Demand
Registration to include any or all of their equity securities in such Demand
Registration on the same terms and conditions as the Registrable Securities.
3.3 Priority on Demand Registration. With respect to any Demand
-------------------------------
Registration relating to an Underwritten Offering, if the managing underwriter
or underwriters of such Underwritten Offering advise the Company and the selling
Stockholder or Stockholders that the total amount of Registrable Securities and
equity securities of Other Stockholders who have piggyback registration rights
and who request to be included in such Demand Registration as contemplated by
Section 3.2(e) hereof will in the aggregate materially and adversely affect the
success of such Underwritten Offering, then (subject to the rights of Other
Stockholders having rights under the Adelphia Agreement): (i) first, the amount
of equity securities of such Other Stockholders will be reduced to zero if
necessary (pro rata among such Other Stockholders on the basis of the amount of
such equity securities requested to be included therein by each such holder),
and (ii) second, the amount of Registrable Securities of all Stockholders who
have requested to have Registrable Securities included in the Demand
Registration will be reduced to zero if necessary (pro rata among such
Stockholders on the basis of the amount of such Registrable Securities requested
to be included therein by each such Stockholder) so that, after such reduction,
there will be included in such Underwritten Offering the amount of securities
that, in the opinion of such managing underwriter or underwriters, can be
-7-
<PAGE>
sold without materially and adversely affecting the success of such Underwritten
Offering.
3.4 Postponement of Demand Registration. The Company will be entitled to
-----------------------------------
postpone by written notice the Stockholders the filing period (or suspend the
effectiveness) of any Demand Registration for a reasonable period of time not in
excess of 90 calendar days, if the Board of Directors of the Company determines,
in the good faith exercise of its reasonable business judgment, that such
registration would (i) materially interfere with bona fide financing plans of
---- ----
the Company or (ii) require disclosure of information not otherwise required to
be disclosed, the disclosure of which could materially and adversely affect the
Company; provided, however, that the Company will not be entitled to exercise
-------- -------
its rights under this Section 3.4 more than twice in any 360-day period. If the
Company postpones the filing of a Registration Statement, it will promptly
notify the selling Stockholder or Stockholders in writing when the events or
circumstances permitting such postponement have ended.
3.5 Registration of Securities Other than Registrable Securities. Without
------------------------------------------------------------
the written consent of each Stockholder that then holds Registrable Securities,
the Company will not after the date hereof grant to any person the right to
require the Company to register, in accordance with the provisions of the
Securities Act, any securities of the Company, unless the rights so granted, if
exercised, would not violate the provisions of this Agreement.
IV. PIGGYBACK REGISTRATION
----------------------
4.1 Right to Piggyback. If at any time the Company proposes to file a
------------------
registration statement under the Securities Act with respect to an offering of
any class of equity securities (other than a registration statement (i) on Form
S-4, S-8 or any successor form thereto or (ii) filed solely in connection with
an offering made solely to employees of the Company), whether or not for its own
account, then the Company will give written notice (the "Piggyback Notice") of
such proposed filing to the Stockholders at least 30 calendar days before the
anticipated filing date. Such notice will offer the Stockholders the
opportunity to register such amount of Registrable Securities as each
Stockholder may request (a "Piggyback Registration"). Subject to Section 4.2
hereof, the Company will include in each such Piggyback Registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within 15 calendar days after the receipt of the
Piggyback Notice. The Stockholders will be permitted to withdraw all or part of
the Registrable Securities from a Piggyback Registration at any time prior to
the third calendar day immediately preceding the effective date of such
Piggyback Registration.
4.2 Priority on Piggyback Registrations. The Company will cause the
-----------------------------------
managing underwriter or underwriters of a proposed underwritten offering to
permit the Stockholders that have requested Registrable Securities to be
included in the Piggyback Registration for such offering to include all such
Registrable Securities on
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<PAGE>
the same terms and conditions as any similar securities, if any, of the Company
included therein. Notwithstanding the foregoing, if the managing underwriter or
underwriters of such Underwritten Offering advises the Company and the selling
Stockholder or Stockholders that the total amount of securities that the
Company, such Stockholders and any Other Stockholders propose to include in such
offering is such as to materially and adversely affect the success of such
Underwritten Offering, then (subject to the rights of Other Stockholders having
rights under the Adelphia Agreement):
(a) if such Piggyback Registration is a primary registration by the
Company for its own account, the Company will include in such Piggyback
Registration: (i) first, all securities to be offered by the Company, and (ii)
second, up to the full amount of securities requested to be included in such
Piggyback Registration by the Stockholders and Other Stockholders having rights
to participate in such Piggyback Registration (allocated pro rata among such
Stockholders and Other Stockholders on the basis of the amount of securities
requested to be included therein by each such Stockholder or Other Stockholder),
so that the total amount of securities to be included in such Underwritten
Offering is the full amount that, in the opinion of such managing underwriter or
underwriters, can be sold without materially and adversely affecting the success
of such Underwritten Offering; and
(b) if such Piggyback Registration is an underwritten secondary
registration for the account of holders of securities of the Company other than
the Stockholders, the Company will include in such registration: (i) first, all
securities of the persons exercising "demand" registration rights requested to
be included therein (including without limitation the person who demands
registration and any persons who are entitled to participate in such Piggyback
Registration pursuant to the same agreement as the person demanding such
Piggyback Registration), and (ii) second, up to the full number of securities
requested to be included in such Piggyback Registration by the Stockholders and
Other Stockholders having rights to participate in such Piggyback Registration
(allocated pro rata among such Stockholders and Other Stockholders on the basis
of the amount of securities requested to be included therein by each such
Stockholder or Other Stockholder) so that the total amount of securities to be
included in such Underwritten Offering is the full amount that, in the written
opinion of such managing underwriter or underwriters, can be sold without
materially and adversely affecting the success of such Underwritten Offering.
V. RESTRICTIONS ON SALE
--------------------
5.1 Restrictions on Sale by Stockholders. Each Stockholder whose
------------------------------------
Registrable Securities are covered by a Registration Statement filed pursuant to
Article II, Article III or Article IV hereof agrees that, if such Stockholder is
so requested (pursuant to a timely written notice) by the managing underwriter
or underwriters in any Underwritten Offering by the Company for its own account,
not to effect any public or private sale or distribution of any Registrable
Securities (except as part of such Underwritten Offering), including a sale
pursuant to Rule 144, during the 10 calendar day period prior to, and during the
90 calendar day period beginning
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<PAGE>
on, the closing date of such Underwritten Offering; provided, however, that the
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foregoing shall not apply to any Stockholder that is the Beneficial Owner of
less than 4.0% of the outstanding Common Shares. If a request is made pursuant
to this Article V, the time period during which the Shelf Registration Statement
is required to remain continuously effective pursuant to Section 2.2 will be
extended by 100 calendar days or such shorter period that will terminate when
all Registrable Securities included therein have been sold thereunder in
accordance with the plan and method of distribution intended by the Stockholders
and described in the Prospectus included therein or all Registrable Securities
covered by the Shelf Registration Statement have otherwise ceased to be
Registrable Securities. In the event of such a request, the Company may impose,
during such period, appropriate stop-transfer instructions with respect to the
Registrable Securities subject to such restrictions.
5.2 Restrictions on Sale by the Company and Others. The Company, if so
----------------------------------------------
requested (pursuant to a timely written notice) by the managing underwriter or
underwriters in any Underwritten Offering pursuant to a Demand Registration,
will not effect any registration of its equity securities (other than a
registration statement on Form S-4, S-8 or any successor forms thereto), or
effect any public or private sale or distribution of any of its securities
(other than in connection with a business combination or acquisition transaction
in which the recipients of its equity securities agree to restrictions no less
restrictive than those contained in this Section 5.2), including a sale pursuant
to Regulation D under the Securities Act, whether on its own behalf or, at the
request of any holder or holders of such securities (other than pursuant to and
in accordance with this Agreement), from the date of a request to register
Registrable Securities pursuant to and in accordance with Article III hereof in
connection with such Underwritten Offering until 90 days after the effective
date of such Demand Registration. The Company will cause each holder of its
equity securities acquired from the Company at any time on or after the date of
this Agreement other than in a registered public offering or pursuant to the
Plan or the Merger Agreement (provided such acquisition includes an amount of
securities equal to at least 1% of such class of securities) to agree not to
effect any public or private sale or distribution of any such securities during
such period, including a sale pursuant to Rule 144.
VI. PROCEDURES AND EXPENSES
-----------------------
6.1 Registration Procedures. In connection with the Company's
-----------------------
registration obligations pursuant to Article II, Article III and Article IV
hereof, the Company will effect such registrations to permit the sale of
Registrable Securities by a Stockholder in accordance with the intended method
or methods of disposition thereof, and pursuant thereto the Company will as
promptly as reasonably practicable:
(a) Prepare and file with the SEC a Registration Statement or
Registration Statements on an appropriate form under the Securities Act
available for the sale of the Registrable Securities by the selling Stockholder
in accordance with the intended method or methods of distribution thereof;
provided, however, that the Company (i) will, before filing, furnish to the
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selling Stockholder, its counsel and the
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managing underwriter or underwriters, if any, copies of the Registration
Statement or Prospectus proposed to be filed, which documents will be subject to
the review of such Stockholder, its counsel and such underwriters, (ii) will
provide such Persons with a reasonable opportunity to review and comment on such
Registration Statement or Prospectus, and (iii) will not file any such
Registration Statement or Prospectus to which the selling Stockholder, its
counsel or such underwriter, if any, shall reasonably object within three
business days after the receipt thereof.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the applicable period
specified in Section 2.2 or Section 3.2; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provision then in force) under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended methods
of disposition by the selling Stockholder set forth in such Registration
Statement as so amended, or in such Prospectus as so supplemented.
(c) Promptly notify the selling Stockholder, its counsel and the
managing underwriter or underwriters, if any, orally (with subsequent written
confirmation) (i) when a Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the SEC or any other federal or state governmental
authority for amendments or supplements to a Registration Statement or related
Prospectus or for additional information, (iii) of the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (v) of the occurrence of any event which makes any statement made in
such Registration Statement or Prospectus untrue in any material respect or
which requires the making of any changes in a Registration Statement or
Prospectus or other documents so that, (A) in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading and (B) in the case of the Prospectus, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (vi) of the Company's reasonable determination that a post-
effective amendment to a Registration Statement would be appropriate.
(d) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
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<PAGE>
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, at the earliest practicable
date.
(e) If requested by the managing underwriter or underwriters, if any,
or the selling Stockholder, (i) promptly incorporate in a Prospectus supplement
or post-effective amendment such information as the managing underwriter or
underwriters, if any, and such selling Stockholder agree should be included
therein under applicable law and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment; provided, however, that
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the Company will not be required to take any actions under this Section 6.1(e)
that are not, in the opinion of counsel for the Company, in compliance with
applicable law.
(f) Furnish to the selling Stockholder, its counsel and each managing
underwriter, if any, at least one conformed copy of the Registration Statement
and any post-effective amendment thereto, including financial statements (but
excluding schedules, all documents incorporated or deemed incorporated therein
by reference and all exhibits).
. (g) Deliver to the selling Stockholder, its counsel and the
underwriter or underwriters, if any, as many copies of the Prospectus relating
to such Registrable Securities (including each preliminary Prospectus) and any
amendment or supplement thereto as such persons may reasonably request and, by
such delivery, the Company will be deemed to have consented to the use of such
Prospectus or such amendment or supplement thereto by the selling Stockholder
and the underwriter or underwriters, if any, in connection with the offering and
sale of the Registrable Securities covered by such Prospectus or any amendment
or supplement thereto.
(h) Prior to any public offering of Registrable Securities, to
register or qualify, or cooperate with the selling Stockholder, the underwriter
or underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of, such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States as
the selling Stockholder or underwriter or underwriters reasonably request in
writing; keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be kept
effective and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the Registration Statement; provided, however, that the
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Company will not be required to (i) qualify generally to do business in any
jurisdiction in which it is not then so qualified or (ii) take any action that
would subject it to general service of process in any jurisdiction in which it
is not then so subject.
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<PAGE>
(i) Cooperate with the selling Stockholder and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold, which
certificates will not bear any restrictive legends; and cause such certificates
to be in such denominations and registered in such names as the managing
underwriters, if any, shall request at least two business days prior to any sale
of Registrable Securities to the underwriters.
(j) Cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities within the United States, including such as
may be required solely as a consequence of the nature of the selling
Stockholder's business.
(k) As promptly as practicable upon the occurrence of any event
contemplated by Section 6.1(c)(v) or 6.1(c)(vi) hereof, prepare a supplement or
post-effective amendment to each Registration Statement or a supplement to the
related Prospectus, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder,
such Prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(l) Use its best efforts to cause all Registrable Securities covered
by such Registration Statement to be (i) listed on each securities exchange, if
any, on which similar securities issued by the Company are then listed or (ii)
authorized to be quoted on The Nasdaq Stock Market ("NASDAQ") and on the Nasdaq
National Market of NASDAQ if the securities qualify to be so quoted; in each
case, if requested by the selling Stockholder or the managing underwriter or
underwriters, if any.
(m) Prior to the effective date of the first Demand Registration, (i)
engage an appropriate transfer agent and provide such transfer agent with
printed certificates for the Registrable Securities in a form eligible for
deposit with The Depository Trust Company and (ii) provide a CUSIP number for
the Registrable Securities.
(n) Enter into such agreements (including, in the event of an
Underwritten Offering, an underwriting agreement in form, scope and substance as
is customary in Underwritten Offerings) and take all such other actions in
connection therewith (including those reasonably requested by the selling
Stockholder or, in the event of an Underwritten Offering, those reasonably
requested by the managing underwriter or underwriters) reasonably necessary or
desirable to expedite or facilitate the disposition of such Registrable
Securities, and in such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an Underwritten
Registration, (i) make such representations and warranties to the selling
Stockholder and the underwriter or underwriters, if any, with respect to the
business of the Company and its subsidiaries, the Registration Statement or
Prospectus, in each case, in form, substance and scope as are
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<PAGE>
customarily made by issuers to underwriters in Underwritten Offerings and
confirm the same if and when requested, (ii) obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing underwriter or
underwriters, if any, and the selling Stockholder) addressed to the selling
Stockholder and the underwriter or underwriters, if any, covering the matters
customarily covered in opinions requested in Underwritten Offerings and such
other matters as may be reasonably requested by the selling Stockholder and
underwriter or underwriters, if any, including without limitation the matters
referred to in Section 6.1(n)(i) hereof, (iii) use its best efforts to obtain
"comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other certified public
accountants of any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data is, or is required to
be, included in the Registration Statement), addressed to the selling
Stockholder and each of the underwriter or underwriters, if any, such letters to
be in customary form and covering matters of the type customarily covered in
"comfort" letters in connection with Underwritten Offerings, and (iv) deliver
such documents and certificates as may be reasonably requested by the selling
Stockholder, its counsel or the managing underwriter or underwriters, if any, to
evidence the continued validity of the representations and warranties of the
Company and its subsidiaries made pursuant to clause (i) above and to evidence
compliance with any customary conditions contained in the underwriting agreement
or similar agreement entered into by the Company. The foregoing actions will be
taken in connection with each closing under such underwriting or similar
agreement as and to the extent required thereunder.
(o) Make available for inspection by a representative of the selling
Stockholder, any underwriter, and any attorney or accountant retained by such
selling Stockholder or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the officers, directors and employees of the Company and its subsidiaries
to supply all information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with such Registration
Statement; provided, however, that any records, information or documents that
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are designated by the Company in writing as confidential at the time of delivery
of such records, information or documents will be kept confidential by such
persons unless (i) such records, information or documents are in the public
domain or otherwise publicly available (other than by reason of breach of this
confidentiality provision), (ii) disclosure of such records, information or
documents is required by court or administrative order or is necessary to
respond to inquires of regulatory authorities, or (iii) disclosure of such
records, information or documents, in the opinion of counsel to such person, is
otherwise required by law or regulation (including without limitation pursuant
to the requirements of the Securities Act); provided, however, that, in the case
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of subsections (ii) and (iii) hereof prior to making such disclosure the
Stockholder will advise and consult with the Company and its counsel as to such
disclosure and the nature and wording of such disclosure and will use its
reasonable best efforts to obtain confidential treatment therefor.
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<PAGE>
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to its security holders earning statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45
calendar days after the end of any 12-month period (or 90 calendar days after
the end of any 12-month period if such period is a fiscal year) (i) commencing
at the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts Underwritten Offering and (ii)
if not sold to underwriters in such an offering, commencing on the first day of
the first fiscal quarter of the Company, after the effective date of a
Registration Statement, which statements shall cover such 12-month period.
6.2 Information from Stockholder. (a) The Company may require each
----------------------------
selling Stockholder that has requested inclusion of its Registrable Securities
in any Registration Statement to furnish to the Company such information
regarding the Stockholder and its plan and method of distribution of such
Registrable Securities as the Company may, from time to time, reasonably request
in writing. The Company may refuse to proceed with the registration of such
selling Stockholder's Registrable Securities if such selling Stockholder
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
(b) Each selling Stockholder will as expeditiously as possible (i)
notify the Company of the occurrence of any event that makes any statement made
in a Registration Statement or Prospectus regarding such selling Stockholder
untrue in any material respect or that requires the making of any changes in a
Registration Statement or Prospectus so that, in such regard, (A) in the case of
a Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (B) in the case of a
Prospectus, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading and (ii) provide the Company with such information as may
be required to enable the Company to prepare a supplement or post-effective
amendment to any such Registration Statement or a supplement to such Prospectus
as contemplated by Section 6.1(k).
(c) With respect to any Registration Statement for an Underwritten
Offering, the inclusion of a Stockholder's Registrable Securities therein will
be conditioned upon such Stockholder's participation in such Underwritten
Offering and the execution and delivery by such Stockholder of an underwriting
agreement in form, scope and substance as is customary in Underwritten
Offerings.
6.3 Suspension of Disposition. Each selling Stockholder will be deemed to
-------------------------
have agreed that, upon receipt of any notice from the Company of the occurrence
of any event of the kind described in Section 6.1(c)(ii), 6.1(c)(iii),
6.1(c)(iv), 6.1(c)(v) or 6.1(c)(vi) hereof, such Stockholder will discontinue
disposition of Registrable Securities covered by a Registration Statement or
Prospectus until such Stockholder's
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<PAGE>
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 6.1(k) hereof or until it is advised in writing (the "Advice") by the
Company that the use of the applicable Prospectus may be resumed and has
received copies of any additional or supplemental filings that are incorporated
or deemed to be incorporated by reference in such Prospectus. In the event the
Company shall give any such notice, the time period prescribed in Section 3.2(c)
hereof will be extended by the number of days during the time period from the
date of the giving of such notice to the date when such selling Stockholder
shall have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 6.1(k) hereof or (y) the Advice and any such additional
or supplemental filings referred to above.
6.4 Registration Expenses. (a) All fees and expenses incurred by the
---------------------
Company in complying with Articles II, III, IV and VI hereof ("Registration
Expenses") will be borne by the Company. Such fees and expenses will include,
without limitation, (i) all registration and filing fees (including without
limitation fees and expenses (x) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. and (y) of compliance
with securities or blue sky laws (including without limitation reasonable fees
and disbursements of counsel for the underwriters and selling Stockholder in
connection with blue sky qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the managing underwriter or
underwriters, if any, or the Selling Stockholder may designate)), (ii) printing
expenses (including without limitation the expenses of printing certificates for
securities in a form eligible for deposit with The Depository Trust Company and
of printing prospectuses if the printing of prospectuses is requested by the
selling Stockholder), (iii) messenger, telephone and delivery expenses, (iv)
reasonable fees and disbursements of counsel for the Company, (v) reasonable
fees and disbursements of one counsel for all selling Stockholders collectively
(which counsel, in the case of a Demand Registration, will be selected by the
Stockholder that delivers the Demand Notice relating to the Registration
Statement for which Registration Expenses are being incurred and, in all other
cases, will be selected by Stockholders holding a majority of the Registrable
Securities sought to be included in the Registration Statement), (vi) reasonable
fees and disbursements of all independent certified public accountants referred
to in Section 6.1(n)(iii) hereof (including the expenses of any special audit
and "comfort" letters required by or incident to such performance), (vii)
reasonable fees and expenses of any "qualified independent underwriter" or other
independent appraiser participating in an offering pursuant to Section 2720(c)
of the Conduct Rules of the National Association of Securities Dealers, Inc.,
and (viii) reasonable fees and expenses of all other persons retained by the
Company. In addition, the Company will pay its internal expenses (including
without limitation all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, and the
fees and expenses incurred in connection with the listing of the securities to
be registered on each securities exchange, if any, on which similar securities
issued by the Company are then listed or the quotation of such securities on the
NASDAQ.
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<PAGE>
(b) Notwithstanding anything to the contrary herein contained, all
underwriting fees, discounts, selling commissions and stock transfer taxes
applicable to the sale of Registrable Securities will be borne by the
Stockholder owning such Registrable Securities.
(c) Notwithstanding anything to the contrary herein contained, each selling
Stockholder may have its own separate counsel in connection with the
registration of any of its Registrable Securities, which counsel may participate
therein to the full extent provided herein; provided, however, that all fees and
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expenses of such separate counsel will be paid for by such selling Stockholder.
6.5 Selection of Underwriter. The investment banker or investment bankers
------------------------
and manager or managers that will manage any Demand Registration offering will
be jointly selected by the Company and the selling Stockholder that gave the
original Demand Notice in connection with such Demand Registration.
VII INDEMNIFICATION
---------------
7.1 Indemnification by the Company. The Company will indemnify and hold
------------------------------
harmless, to the fullest extent permitted by law, each Stockholder owning
Registrable Securities registered pursuant to this Agreement, its officers,
directors, trustees, agents and employees, each person who controls such
Stockholder (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and the officers, directors, trustees, agents and
employees of any such controlling person, from and against all losses, claims,
damages, liabilities, costs (including without limitation the costs of
investigation and attorneys' fees) and expenses (collectively, "Losses"), as
incurred, arising out of or based upon any untrue or alleged untrue statement of
a material fact contained in any Registration Statement, Prospectus or
preliminary prospectus, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are based solely upon information furnished in writing to the Company by or
on behalf of such Stockholder expressly for use therein; provided, however, that
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the Company will not be liable to any Stockholder to the extent that any such
Losses arise out of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any preliminary prospectus if
either (i) (A) such Stockholder failed to send or deliver a copy of the
Prospectus with or prior to the delivery of written confirmation of the sale by
such Stockholder of a Registrable Security to the person asserting the claim
from which such Losses arise and (B) the Prospectus would have completely
corrected such untrue statement or alleged untrue statement or such omission or
alleged omission, or (ii) such untrue statement or alleged untrue statement or
such omission or alleged omission is completely corrected in an amendment or
supplement to the Prospectus previously furnished by or on behalf of the Company
with copies of the Prospectus as so amended or supplemented, and such
Stockholder thereafter failed to deliver such Prospectus as so amended or
supplemented prior to or concurrently with the sale of a Registrable Security to
the person asserting the claim from which such Losses arise.
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<PAGE>
7.2 Indemnification by Stockholders. Each Stockholder will indemnify and
-------------------------------
hold harmless, to the fullest extent permitted by law, the Company, its
officers, directors, agents and employees, each person who controls the Company
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act), and the directors, officers, agents and employees of any such
controlling person, from and against all Losses, as incurred, arising out of or
based upon any untrue statement of a material fact contained in any Registration
Statement, Prospectus or preliminary prospectus, or arising out of or based upon
any omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading, to the extent, but only to the
extent, that such untrue statement or omission was made in reliance upon and in
conformity with information so furnished in writing by or on behalf of such
Stockholder to the Company expressly for use in such Registration Statement,
Prospectus or preliminary prospectus. In no event will the liability of any
Stockholder hereunder be greater in amount than the dollar amount of the
proceeds received by such Stockholder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
7.3 Conduct of Indemnification Proceedings. If any person shall become
--------------------------------------
entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party
will give prompt notice to the party from which such indemnity is sought (the
"Indemnifying Party") of any claim or of the commencement of any action or
proceeding with respect to which such Indemnified Party seeks indemnification or
contribution pursuant hereto; provided, however, that the failure to so notify
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the Indemnifying Party will not relieve the Indemnifying Party from any
obligation or liability except to the extent that the Indemnifying Party has
been prejudiced materially by such failure. If such an action or proceeding is
brought against the Indemnified Party, the Indemnifying Party will be entitled
to participate therein and, to the extent it may elect by written notice
delivered to the Indemnified Party promptly after receiving the notice referred
to in the immediately preceding sentence, to assume the defense thereof with
counsel reasonably satisfactory to the Indemnified Party. Notwithstanding the
foregoing, the Indemnified Party will have the right to employ its own counsel
in any such case, but the fees and expenses of such counsel will be at the
expense of the Indemnified Party unless (i) the employment of such counsel shall
have been authorized in writing by the Indemnifying Party, (ii) the Indemnifying
Party shall not have employed counsel (reasonably satisfactory to the
Indemnified Party) to take charge of such action or proceeding within a
reasonable time after notice of commencement thereof, or (iii) the Indemnified
Party reasonably shall have concluded that there may be defenses available to
it which are different from or additional to those available to the Indemnifying
Party which, if the Indemnifying Party and the Indemnified Party were to be
represented by the same counsel, could result in a conflict of interest for such
counsel or materially prejudice the prosecution of defenses available to the
Indemnified Party. If any of the events specified in clause (i), (ii) or (iii)
of the immediately preceding sentence are applicable, then the fees and expenses
of separate counsel for the Indemnified Party will be borne by the Indemnifying
Party. If, in any case, the Indemnified Party employs separate counsel, the
Indemnifying Party will not have the right to direct the defense of such action
or proceeding on behalf of the Indemnified Party. All fees and
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<PAGE>
expenses required to be paid to the Indemnified Party pursuant to this Section 7
will be paid periodically during the course of the investigation or defense, as
and when reasonably itemized bills therefor are delivered to the Indemnifying
Party in respect of any particular Loss that is incurred. Notwithstanding
anything to the contrary contained in this Section 7.3, an Indemnifying Party
will not be liable for the settlement of any action or proceeding effected
without its prior written consent. The Indemnifying Party will not consent to
entry of any judgment or enter into any settlement or otherwise seek to
terminate any action or proceeding in which any Indemnified Party is or could be
a party and as to which indemnification or contribution could be sought by such
Indemnified Party under this Article VII, unless such judgment, settlement or
other termination provides solely for the payment of money and includes as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release, in form and substance satisfactory to the
Indemnified Party, from all liability in respect of such claim or litigation for
which such Indemnified Party would be entitled to indemnification hereunder.
7.4 Contribution, Etc. (a) If the indemnification provided for in this
-----------------
Article VII is unavailable to an Indemnified Party under Section 7.1 or 7.2
hereof in respect of any Losses or is insufficient to hold such Indemnified
Party harmless, then each applicable Indemnifying Party, in lieu of indemnifying
such Indemnified Party, will, jointly and severally, contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party or Indemnifying Parties, on the one hand, and such Indemnified Party, on
the other hand, in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party or Indemnifying Parties, on the
one hand, and such Indemnified Party, on the other hand, will be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or related to
information supplied by, such Indemnifying Party or Indemnifying Parties or such
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses will
be deemed to include any legal or other fees or expenses incurred by such party
in connection with any action or proceeding.
(b) The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 7.4 were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding anything contained in this Section 7.4 to the contrary, an
Indemnifying Party that is a selling Stockholder will not be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities were sold by such selling Stockholder to the public
exceeds the amount of any damages which such selling Stockholder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of
-19-
<PAGE>
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(c) The provisions of this Article VII will survive indefinitely,
notwithstanding any transfer of the Registrable Securities by any Stockholder.
VII RULE 144
--------
The Company will file all reports required to be filed by it under the
Securities Act and the Exchange Act, and will cooperate with any Stockholder
(including without limitation by making such representations as any such
Stockholder may reasonably request), all to the extent required from time to
time to enable such Stockholder to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemptions
provided by Rule 144. Upon the request of any Stockholder, the Company will
deliver to such Stockholder a written statement as to whether it has complied
with such filing requirements.
IX. MISCELLANEOUS
-------------
9.1 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given or made by
delivery in person, by courier service, by facsimile transmission or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
9.1):
(a) If to the Company:
Arch Communications Group, Inc.
1800 West Park Drive, Suite 250
Westborough, MA 01581
Attention: J. Roy Pottle
Fax No.: (508) 366-0846
with a copy to:
Hale and Dorr L.L.P.
60 State Street
Boston, MA 02109
Attention: David A. Westenberg
Fax No.: (617) 526-5000
-20-
<PAGE>
(b) If to a Stockholder, to the following respective addresses
thereof:
______________________ _________________________
______________________ _________________________
______________________ _________________________
Attention: __________ Attention: _____________
Fax No.: (___) ___-___ Fax No.: (___) ___-_____
with a copy to: with a copy to:
______________________ _________________________
______________________ _________________________
______________________ _________________________
Attention: __________ Attention: _____________
Fax No.: (___) ___-__ Fax No.: (___) ___-_____
All such notices and communications will be deemed to have been delivered or
given: upon delivery, if personally delivered; one business day after being
dispatched, if dispatched by same-day or next-day courier guaranteeing timely
delivery; when receipt acknowledged, if sent by facsimile transmission; and five
business days after being deposited in the mail, if mailed.
9.2 Assignment. Neither this Agreement nor the rights and obligations
----------
hereunder may be assigned by operation of law or otherwise (except that this
Agreement and rights and obligations hereunder may be assigned by any
Stockholder to a Permitted Assignee thereof, whereupon such Permitted Assignee
shall be deemed to be a Stockholder and a party hereto for all purposes of this
Agreement). Notwithstanding the foregoing, nothing herein contained shall
restrict the right of any Stockholder to transfer securities of the Company held
by it.
9.3 No Third-Party Beneficiaries. This Agreement will be binding upon and
----------------------------
inure solely to the benefit of the parties hereto and their respective
successors and permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other person any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
9.4 Entire Agreement. This Agreement constitutes the entire agreement of
----------------
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and undertakings, both written and oral, among the parties with
respect to the subject matter hereof.
9.5 No Inconsistent Agreements. Except for the Adelphia Agreement, the
--------------------------
Company does not have, as of the Effective Date, and will not, on or after the
Effective Date, enter into, any agreement with respect to its securities which
is inconsistent with the rights granted to the Stockholders in this Agreement or
otherwise conflicts with the provisions hereof.
-21-
<PAGE>
9.6 Amendment and Waiver. This Agreement may not be amended or modified
--------------------
or any provision hereof waived except by an instrument in writing signed by or
on behalf of each party. Notwithstanding anything contained herein to the
contrary, a waiver that does not adversely affect all of the parties hereto may
be executed by only the adversely affected party or parties.
9.7 Headings. The descriptive headings contained in this Agreement are
--------
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.8 Certain Interpretative Matters and Definitions. Unless the context
----------------------------------------------
otherwise requires, (i) all references to Articles, Sections, or Schedules are
to Articles, Sections, or Schedules of this Agreement, (ii) each term defined in
this Agreement has the meaning assigned to it, (iii) all uses of "herein,"
"hereto," "hereof" and words similar thereto in this Agreement refer to this
Agreement in its entirety, and not solely to the Article, Section, or provision
in which it appears, (iv) "or" is disjunctive but not necessarily exclusive, and
(v) words in the singular include the plural and vice versa.
---- -----
9.9 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced under any law or public policy,
all other terms and provisions of this Agreement will nevertheless remain in
full force and effect. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner.
9.10 Governing Law. This Agreement will be governed by, and construed in
-------------
accordance with, the laws of the State of Delaware applicable to contracts
executed in and to be performed entirely within that state.
9.11 Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties will be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
9.12 Attorneys' Fees. In any action or proceeding brought to enforce any
---------------
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the successful party will be entitled to recover reasonable
attorneys' fees in addition to its costs and expenses and any other available
remedy.
9.13 Further Assurances. The parties hereto will do such further acts and
------------------
things necessary to ensure that the terms of this Agreement are carried out and
observed.
9.14 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of
-22-
<PAGE>
which when executed will be deemed to be an original but all of which
together will constitute one and the same agreement.
-23-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first written above.
ARCH COMMUNICATIONS GROUP, INC.
By: ____________________________
Name: ___________________________
Title: __________________________
[STOCKHOLDER]
By: ____________________________
Name: ___________________________
Title: __________________________
[STOCKHOLDER]
By: ____________________________
Name: ___________________________
Title: __________________________
-24-
<PAGE>
EXHIBIT 10.11
AMENDMENT NO. 2 TO RIGHTS AGREEMENT
This Amendment No. 2 dated August , 1998 hereby amends the Rights
Agreement dated as of October 13, 1995 (the "Agreement"), between Arch
Communications Group, Inc., a Delaware corporation (the "Company"), and The Bank
of New York, a national banking association, as Rights Agent (the "Rights
Agent").
W I T N E S S E T H:
WHEREAS, no Person has become an Acquiring Person as such terms are defined
in the Agreement; and
WHEREAS, the Company has directed the Rights Agent to enter into this
Amendment No. 2 pursuant to Section 27 of the Agreement;
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein, the parties hereby agree as follows:
1. Section 1(ii) of the Agreement is hereby deleted in its entirety and the
following substituted in lieu thereof:
(ii) "Exempted Person" shall mean: (A) Sandler Capital Partners IV,
L.P. and Sandler Capital Partners IV FTE, L.P. (collectively,
"Sandler"), unless and until the earlier of (I) such time as Sandler,
together with its Affiliates, directly or indirectly, becomes the
Beneficial Owner of more than 22% of the Common Stock then outstanding
(or such greater percentage as may result solely from the acquisition
of shares of the Company's Series C Convertible Preferred Stock or
shares of Common Stock issued to effect the payment of dividends,
conversion or redemption thereof) (the "Sandler Exempt Threshold") or
(II) the Effective Time (as defined below), in which event Sandler
immediately shall cease to be an Exempted Person; (B) W. R. Huff Asset
Management Co., L.L.C., together with its Affiliates (collectively,
"Huff"), unless and until such time as Huff, directly or indirectly,
becomes the Beneficial Owner of Common Stock in excess of the Huff
Exempt Threshold (as defined below), in which event Huff immediately
shall cease to be an Exempted Person; (C) Credit Suisse First Boston
Corporation, together with its Affiliates (collectively, "CS First
Boston"), unless and until such time as CS First Boston, directly or
indirectly, becomes the Beneficial Owner of Common Stock in excess of
the CS First Boston Exempt Threshold (as
<PAGE>
defined below), in which event CS First Boston immediately shall cease
to be an Exempted Person; and (D) Whippoorwill Associates, Inc.,
together with its Affiliates, including, without limitation, any
accounts and investment funds managed by it or its Affiliates
(collectively, "Whippoorwill"), unless and until such time as
Whippoorwill, directly or indirectly, becomes the Beneficial Owner of
Common Stock in excess of the Whippoorwill Exempt Threshold (as
defined below), in which case Whippoorwill immediately shall cease to
be an Exempted Person. For purposes of this Agreement, the Huff Exempt
Threshold shall mean the lesser of (I) 28% of the Common Stock then
outstanding or (II) a percentage of the Common Stock then outstanding
equal to (x) that percentage of shares of Common Stock directly or
indirectly Beneficially Owned by Huff immediately after the Effective
Time plus (y) 5%; the CS First Boston Exempt Threshold shall mean the
lesser of (I) 22% of the Common Stock then outstanding or (II) a
percentage of the Common Stock then outstanding equal to (x) that
percentage of shares of Common Stock directly or indirectly
Beneficially Owned by CS First Boston immediately after the Effective
Time plus (y) 5%; and the Whippoorwill Exempt Threshold shall mean the
lesser of (I) 23% of the Common Stock then outstanding or (II) a
percentage of the Common Stock then outstanding equal to (x) that
percentage of shares of Common Stock directly or indirectly
Beneficially Owned by Whippoorwill immediately after the Effective
Time plus (y) 5%. The Sandler Exempt Threshold, the Huff Exempt
Threshold, the CS First Boston Exempt Threshold and the Whippoorwill
Exempt Threshold are collectively referred to herein as the "Exempt
Threshold." For purposes of this Section 1(ii), none of Huff, CS First
Boston or Whippoorwill shall be deemed the Beneficial Owner of any
shares of Common Stock that are Beneficially Owned by any other Person
solely as a result of any such Person's execution and performance of
any Standby Purchase Commitment (as such term is defined in the Plan
and Agreement of Merger between the Company, Farm Team Corp., a
wholly-owned Subsidiary of the Company, MobileMedia Corporation and
MobileMedia Communications, Inc., dated as of August 18, 1998) (the
"Merger Agreement"). For purposes of this Agreement the Effective Time
shall have the meaning ascribed to such term in the Merger Agreement.
-2-
<PAGE>
2. Section 11(a)(ii) of the Agreement is hereby deleted and the following
substituted in lieu thereof:
(a)(ii)Subject to Section 24 of this Agreement, in the event that any
Person shall become an Acquiring Person, unless the event causing the
15% threshold (or, in the case of an Exempted Person, the applicable
Exempt Threshold) to be crossed is a transaction set forth in Section
13(a) hereof, or is a Permitted Offer, then, promptly following the
first occurrence of such event, proper provisions shall be made so
that each holder of a Right (except as provided below and in Section
7(e) hereof) shall thereafter have the right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the
terms of this Agreement, in lieu of a number of one one-thousandths of
a share of Preferred Stock, such number of shares of Common Stock of
the Company that equals the result obtained by (x) multiplying the
then current Purchase Price by the then number of one one-thousandths
of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii)
Event, and (y) dividing that product (which, following such first
occurrence, shall thereafter be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement) by 50% of the
current market price (determined pursuant to Section 11(d) hereof) per
share of Common Stock on the date of such occurrence (such number of
shares, the "Adjustment Shares").
3. Section 29 of the Agreement is hereby amended by adding the following at
the end thereof:
With respect to any action to be taken by the Board of Directors of
the Company to (i) redeem the Rights pursuant to Section 23, (ii)
ordering the exchange of any Rights pursuant to Section 24 or (iii)
amending the definition of "Acquiring Person" in Section 1(a) or
"Exempt Threshold" in Section 1(ii) to increase the number of shares
of Common Stock that may be Beneficially Owned by a Person without
becoming an Acquiring Person, such action must be taken by the
affirmative vote of directors equal to (x) a majority of the directors
then in office, plus (y) one.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 to be duly
executed and their respective corporate seals to be hereunto affixed and
attested as of the day and year first written above.
ARCH COMMUNICATIONS GROUP, INC.
Attest:
/s/ J. Roy Pottle By: /s/ C.E. Baker, Jr.
- ------------------------------ ---------------------------------
Name: J. Roy Pottle Name: C.E. Baker, Jr.
Title: Executive Vice President Title: Chairman of the Board and
and Chief Financial Chief Executive Officer
Officer
Seal
THE BANK OF NEW YORK
Attest:
/s/ Leslie A. Debrent By: /s/ Karol Mantz
- ------------------------------ ---------------------------------
Name: Leslie A. Debrent Name: Karol Mantz
Title: Vice President Title: Vice President
Seal
-4-
<PAGE>
EXHIBIT 10.12
AMENDMENT NO. 3 TO RIGHTS AGREEMENT
This Amendment No. 3 dated September 3, 1998 hereby amends the Rights
Agreement originally dated as of October 13, 1995, as amended on June 29, 1998
and August 18, 1998 (the "Agreement"), between Arch Communications Group, Inc.,
a Delaware corporation (the "Company"), and The Bank of New York, a national
banking association, as Rights Agent (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, no Person has become an Acquiring Person as such terms are defined
in the Agreement; and
WHEREAS, the Company has directed the Rights Agent to enter into this
Amendment No. 3 pursuant to Section 27 of the Agreement;
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein, the parties hereby agree as follows:
1. Section 1(ii) of the Agreement is hereby deleted in its entirety and the
following substituted in lieu thereof:
(ii) "Exempted Person" shall mean: (A) Sandler Capital Partners IV,
L.P. and Sandler Capital Partners IV FTE, L.P. (collectively,
"Sandler"), unless and until the earlier of (I) such time as Sandler,
together with its Affiliates, directly or indirectly, becomes the
Beneficial Owner of more than 22.0% of the Common Stock then
outstanding (or such greater percentage as may result solely from the
acquisition of shares of the Company's Series C Convertible Preferred
Stock or shares of Common Stock issued to effect the payment of
dividends, conversion or redemption thereof) (the "Sandler Exempt
Threshold") or (II) the Effective Time (as defined below), in which
event Sandler immediately shall cease to be an Exempted Person; (B) W.
R. Huff Asset Management Co., L.L.C., together with its Affiliates
(collectively, "Huff"), unless and until such time as Huff, directly
or indirectly, becomes the Beneficial Owner of Common Stock in excess
of the Huff Exempt Threshold (as defined below), in which event Huff
immediately shall cease to be an Exempted Person; (C) Credit Suisse
First Boston Corporation, together with its Affiliates (collectively,
"CS First Boston"), unless and until such time as CS First Boston,
directly or indirectly, becomes the Beneficial Owner of Common
<PAGE>
Stock in excess of the CS First Boston Exempt Threshold (as defined
below), in which event CS First Boston immediately shall cease to be
an Exempted Person; (D) Whippoorwill Associates, Inc., together with
its Affiliates, including, without limitation, any accounts and
investment funds managed by it or its Affiliates (collectively,
"Whippoorwill"), unless and until such time as Whippoorwill, directly
or indirectly, becomes the Beneficial Owner of Common Stock in excess
of the Whippoorwill Exempt Threshold (as defined below), in which case
Whippoorwill immediately shall cease to be an Exempted Person; and (E)
The Northwestern Mutual Life Insurance Company, together with its
Affiliates (collectively, "Northwestern Mutual"), unless and until
such time as Northwestern Mutual, directly or indirectly, becomes the
Beneficial Owner of Common Stock in excess of the Northwestern Mutual
Exempt Threshold (as defined below), in which event Northwestern
Mutual immediately shall cease to be an Exempted Person. For purposes
of this Agreement, the Huff Exempt Threshold shall mean the lesser of
(I) 33.0% of the Common Stock then outstanding or (II) a percentage of
the Common Stock then outstanding equal to (x) that percentage of
shares of Common Stock directly or indirectly Beneficially Owned by
Huff immediately after the Effective Time plus (y) 5.0%; the CS First
Boston Exempt Threshold shall mean the lesser of (I) 26.0% of the
Common Stock then outstanding or (II) a percentage of the Common Stock
then outstanding equal to (x) that percentage of shares of Common
Stock directly or indirectly Beneficially Owned by CS First Boston
immediately after the Effective Time plus (y) 5.0%; the Whippoorwill
Exempt Threshold shall mean the lesser of (I) 27.0% of the Common
Stock then outstanding or (II) a percentage of the Common Stock then
outstanding equal to (x) that percentage of shares of Common Stock
directly or indirectly Beneficially Owned by Whippoorwill immediately
after the Effective Time plus (y) 5.0%; and the Northwestern Mutual
Exempt Threshold shall mean the lesser of (I) 15.5% of the Common
Stock then outstanding or (II) a percentage of the Common Stock then
outstanding equal to (x) that percentage of shares of Common Stock
directly or indirectly Beneficially Owned by Northwestern Mutual
immediately after the Effective Time plus (y) 5.0%. The Sandler Exempt
Threshold, the Huff Exempt Threshold, the CS First Boston Exempt
Threshold, the Whippoorwill Exempt Threshold and the Northwestern
Mutual Exempt Threshold are collectively referred to herein as the
"Exempt Threshold." For purposes of this Section 1(ii), none of
-2-
<PAGE>
Huff, CS First Boston, Whippoorwill or Northwestern Mutual shall be
deemed the Beneficial Owner of any shares of Common Stock that are
Beneficially Owned by any other Person solely as a result of any such
Person's execution and performance of any Standby Purchase Commitment
(as such term is defined in the Plan and Agreement of Merger between
the Company, Farm Team Corp., a wholly-owned Subsidiary of the
Company, MobileMedia Corporation and MobileMedia Communications, Inc.,
dated as of August 18, 1998) (as it may be amended from time to time,
the "Merger Agreement") and Common Stock shall be deemed to include
shares of Common Stock issuable upon conversion of shares of the
Company's Series C Convertible Preferred Stock, $.01 par value per
share. For purposes of this Agreement the Effective Time shall have
the meaning ascribed to such term in the Merger Agreement.
2. Section 11(a)(ii) of the Agreement is hereby deleted and the following
substituted in lieu thereof:
(a)(ii)Subject to Section 24 of this Agreement, in the event that any
Person shall become an Acquiring Person, unless the event causing the
15.0% threshold (or, in the case of an Exempted Person, the applicable
Exempt Threshold) to be crossed is a transaction set forth in Section
13(a) hereof, or is a Permitted Offer, then, promptly following the
first occurrence of such event, proper provisions shall be made so
that each holder of a Right (except as provided below and in Section
7(e) hereof) shall thereafter have the right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the
terms of this Agreement, in lieu of a number of one one-thousandths of
a share of Preferred Stock, such number of shares of Common Stock of
the Company that equals the result obtained by (x) multiplying the
then current Purchase Price by the then number of one one-thousandths
of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii)
Event, and (y) dividing that product (which, following such first
occurrence, shall thereafter be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement) by 50.0% of the
current market price (determined pursuant to Section 11(d) hereof) per
share of Common Stock on the date of such occurrence (such number of
shares, the "Adjustment Shares").
3. Section 29 of the Agreement is hereby amended by adding the following at
the end thereof:
-3-
<PAGE>
With respect to any action to be taken by the Board of Directors of
the Company to (i) redeem the Rights pursuant to Section 23, (ii)
ordering the exchange of any Rights pursuant to Section 24 or (iii)
amending the definition of "Acquiring Person" in Section 1(a) or
"Exempt Threshold" in Section 1(ii) to increase the number of shares
of Common Stock that may be Beneficially Owned by a Person without
becoming an Acquiring Person, such action must be taken by the
affirmative vote of directors equal to (x) a majority of the directors
then in office, plus (y) one.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment No. 3 to be duly
executed and their respective corporate seals to be hereunto affixed and
attested as of the day and year first written above.
ARCH COMMUNICATIONS GROUP, INC.
Attest:
/s/ J. Roy Pottle By: /s/ C.E. Baker, Jr.
- ----------------------------------- ---------------------------------
Name: J. Roy Pottle Name: C.E. Baker, Jr.
Title: Executive Vice President Title: Chairman of the Board and
and Chief Financial Officer Chief Executive Officer
Seal
THE BANK OF NEW YORK
Attest:
/s/ Virginia Barazotti By: /s/ Leslie A. Debrent
- ----------------------------------- ---------------------------------
Name: Virginia Barazotti Name: Leslie A. Debrent
Title: Assistant Vice President Title: Vice President
Seal
-5-
<PAGE>
EXHIBIT 10.14
--------------
[Form for Buyer Warrants]
================================================================================
WARRANT AGREEMENT
BETWEEN
ARCH COMMUNICATIONS
GROUP, INC.
AND
THE BANK OF NEW YORK
_________, 199__
================================================================================
<PAGE>
WARRANT AGREEMENT
-----------------
This WARRANT AGREEMENT, dated as of ___________, 199__ (the "Agreement"),
is made and entered into by and between Arch Communications Group, Inc., a
Delaware corporation (the "Company"), and The Bank of New York, a
_______________________, as warrant agent (the "Warrant Agent").
RECITALS
--------
WHEREAS, a plan of reorganization under Chapter 11 of the United States
Bankruptcy Code for MobileMedia Communications, Inc. ("MobileMedia"),
MobileMedia Corporation, the sole stockholder of MobileMedia ("Parent"), and all
of MobileMedia's subsidiaries (the "Plan") was confirmed on ________, 199_ by
order of the United States Bankruptcy Court for the District of Delaware in Case
Nos. 97-174 (PJW) through and including 97-192 (PJW), and has become effective;
WHEREAS, in connection with the Plan, the Company, a wholly owned
subsidiary of the Company ("Merger Sub"), Parent and MobileMedia entered into an
Agreement and Plan of Merger, dated as of August ___, 1998 (the "Merger
Agreement"), pursuant to which MobileMedia has been merged with and into Merger
Sub, with Merger Sub continuing as the surviving corporation and a wholly owned
subsidiary of the Company;
WHEREAS, the Plan and the Merger Agreement provide for the execution and
delivery of this Agreement by the Company and the issuance of warrants (the
"Warrants"), each Warrant initially representing the right to purchase one share
of Common Stock (as defined in Section 4.1(h)), on the terms and subject to the
conditions herein set forth; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance of Warrant Certificates (as defined in Section 1.2) and other matters
as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
the parties hereto hereby agree as follows:
1. Issuance of Warrants; Form of Warrants.
--------------------------------------
1.1. Issuance of Warrants. On the terms and subject to the conditions set
--------------------
forth in the Plan and the Merger Agreement, the Company will issue and deliver:
(a) an aggregate of ______________ Warrants issuable upon the proper exercise of
Rights (as defined in the Plan) or as contemplated by the Standby Purchase
Commitments (as defined in the Plan) in respect of unexercised Rights, (b) an
aggregate of __________
<PAGE>
Warrants as contemplated by the Standby Purchase Commitments as consideration
for the commitments set forth therein, and (c) an aggregate of __________
Warrants pursuant to the Buyer Distribution (as defined in the Merger Agreement)
as provided in Section 1.7(a) of the Merger Agreement. The shares of Common
Stock purchasable upon exercise of the Warrants are hereinafter referred to as
the "Warrant Shares." The purchase price per Warrant Share payable upon the
exercise of a Warrant (the "Warrant Price") will initially be $8.19. The Warrant
Price and the number and kind of Warrant Shares purchasable upon exercise of the
Warrants are subject to adjustment pursuant to the provisions of Section 4.
1.2. Form of Warrants. Each Warrant, including without limitation any
----------------
Warrants that may be issued upon partial exercise, replacement, or transfer of
Warrants, will be evidenced by, and subject to the terms of, a Warrant
certificate (including the Form of Exercise Notice and Form of Assignment to be
printed on the reverse thereof, a "Warrant Certificate") in substantially the
form of Exhibit A, with such changes, marks of identification or designation,
and such legends, summaries, or endorsements printed thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto. Notwithstanding the foregoing,
Warrant Certificates evidencing Warrants issued as contemplated by clause (a) or
clause (b) of the first sentence of Section 1.1 will not bear restrictive
legends.
1.3. Countersignature of Warrants. The Warrant Certificates will be
----------------------------
executed on behalf of the Company by the manual or facsimile signature of its
Chairman of the Board, President, or any Vice President, and attested by its
Secretary or any Assistant Secretary. The Warrant Certificates will be manually
countersigned by the Warrant Agent and will not be valid for any purpose unless
so countersigned. In case any officer of the Company who has signed any of the
Warrant Certificates ceases to be such officer of the Company before
countersignature by the Warrant Agent and issuance and delivery by the Company,
such Warrant Certificates, nevertheless, may be countersigned by the Warrant
Agent, and issued and delivered by the Company with the same force and effect as
though the person who signed such Warrant Certificates had not ceased to be such
officer of the Company; and any Warrant Certificate may be signed on behalf of
the Company by any person who, at the actual date of the execution of such
Warrant Certificate, is a proper officer of the Company to sign such Warrant
Certificate, although on any other date such person was not such an officer.
Warrant Certificates will be dated the date of countersignature by the Warrant
Agent.
1.4 Registration of Warrants. The Warrant Agent, on behalf of the
------------------------
Company, will keep or cause to be kept, at the principal office of the Warrant
Agent designated for such purpose, books for registration and transfer of the
Warrant Certificates issued hereunder by the Company. Such books will show the
names and addresses
-2-
<PAGE>
of the respective holders of the Warrant Certificates, the number of Warrants
evidenced on its face by each of the Warrant Certificates, and the date of each
of the Warrant Certificates. The Company and the Warrant Agent will be entitled
to treat the registered holder of any Warrant Certificate (the "Holder") as the
sole owner of the Warrants represented by such Warrant Certificate for all
purposes and will not be bound to recognize any equitable or other claim or
interest in such Warrants on the part of any other person. Neither the Company
nor the Warrant Agent will be liable for any registration of transfer of any
Warrants that are registered or to be registered in the name of a fiduciary or
the nominee of a fiduciary.
2. Transfer and Exchange of Warrants.
---------------------------------
2.1. Transfer and Exchange. Any Warrant Certificate may, except to the
---------------------
extent otherwise prohibited pursuant to this Agreement, be transferred, split
up, combined, or exchanged for another Warrant Certificate or Warrant
Certificates entitling the Holder thereof to purchase a like aggregate number of
Warrant Shares as the Warrant Certificate or Warrant Certificates surrendered
then entitled such Holder (or former Holder in the case of a transfer) to
purchase. Any Holder desiring to transfer, split up, combine, or exchange any
such Warrant Certificate will make such request in writing delivered to the
Warrant Agent, and will surrender the Warrant Certificate or Warrant
Certificates to be transferred, split up, combined, or exchanged, with the Form
of Assignment duly executed by the Holder thereof, at the principal office of
the Warrant Agent designated for such purpose. Thereupon or as promptly as
practicable thereafter, the Company will prepare, execute, and deliver to the
Warrant Agent, and the Warrant Agent will countersign and deliver, a Warrant
Certificate or Warrant Certificates, as the case may be, as so requested.
Neither the Company nor the Warrant Agent will be required to issue or deliver
any Warrant Certificates in connection with any transfer, split up, combination,
or exchange of Warrants or Warrant Certificates unless and until the person or
persons requesting the issuance or delivery thereof has paid to the Warrant
Agent the amount of any tax or governmental charge that may be payable in
connection with such transfer, split up, combination, or exchange or has
established to the satisfaction of the Warrant Agent that any tax or
governmental charge has been paid. Holders will not be required to pay any
other charge in connection with the transfer, split up, combination, or exchange
of Warrants.
2.2. Lost, Stolen, and Mutilated Warrant Certificates. Upon receipt by
------------------------------------------------
the Company and the Warrant Agent of evidence reasonably satisfactory to them of
the loss, theft, destruction, or mutilation of a Warrant Certificate, and, in
case of loss, theft, or destruction, of indemnity or security reasonably
satisfactory to them, and reimbursement to the Company and the Warrant Agent of
all reasonable expenses incidental thereto, and upon surrender to the Warrant
Agent and cancellation of the Warrant Certificate if mutilated, the Company will
prepare, execute, and deliver a new Warrant Certificate of like tenor to the
Warrant Agent and the Warrant Agent
-3-
<PAGE>
will countersign and deliver such new Warrant Certificate to the Holder in lieu
of the Warrant Certificate so lost, stolen, destroyed, or mutilated.
2.3. Payment of Taxes. The Company will pay all documentary or stamp
----------------
taxes, if any, attributable to the initial issuance of the Warrants and the
initial issuance of the Warrant Shares upon the exercise of Warrants; provided,
--------
however, that the Company's obligations in this regard will in all events be
- -------
conditioned upon the Holder cooperating with the Company and the Warrant Agent
in any reasonable arrangement designed to minimize or eliminate any such taxes.
Neither the Company nor the Warrant Agent will be required to pay any tax or
governmental charge that may be payable in connection with any transfer, split
up, combination, or exchange of Warrants or Warrant Certificates, and the
Company will not be required to issue or deliver such Warrant Certificates
unless or until the person or persons requesting the issuance thereof has paid
to the Company the amount of such tax or governmental charge or has established
to the satisfaction of the Company that such tax or governmental charge has been
paid.
2.4. Cancellation and Destruction of Warrant Certificates. All Warrant
----------------------------------------------------
Certificates surrendered for the purpose of exercise, transfer, split up,
combination, or exchange will, if surrendered to the Company, be delivered to
the Warrant Agent for cancellation or in canceled form, or, if surrendered to
the Warrant Agent, will be canceled by it, and no Warrant Certificates will be
issued in lieu thereof except as expressly permitted by this Agreement. The
Company will deliver to the Warrant Agent for cancellation and retirement, and
the Warrant Agent will so cancel and retire, any other Warrant Certificate
purchased or acquired by the Company otherwise than upon the exercise thereof.
The Warrant Agent will deliver all canceled Warrant Certificates to the Company,
or will, at the written request of the Company, destroy such canceled Warrant
Certificates, and in such case will deliver a certificate of destruction thereof
to the Company.
3. Duration and Exercise of Warrants.
---------------------------------
3.1. Duration and Exercise of Warrants. (a) Warrants may be exercised by
---------------------------------
the Holder thereof, in whole or in part, at any time and from time to time after
the date hereof and prior to 5:00 p.m., New York City time, on September 1, 2001
(the "Expiration Date"); provided that Holders shall be able to exercise their
--------
Warrants only if (i) (A) the Warrant Shares Registration Statement (as defined
in Section 10) is then in effect and the Company has delivered to each person
exercising a Warrant a current prospectus meeting the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or (B) the exercise
of such Warrants is exempt from the registration requirements of the Securities
Act, and (ii) the Warrant Shares are qualified for sale or exempt from
qualification under the applicable securities laws of the states in which the
Holder of the Warrants to be exercised, and, if applicable, the persons to whom
it is proposed that the Warrant Shares be issued on exercise of the
-4-
<PAGE>
Warrants, reside. The Holder of Warrants may exercise them by delivering to the
Warrant Agent, at its principal office designated for such purpose, the
following:
(i) the Warrant Certificate or Warrant Certificates representing
the Warrants to be exercised, with the Form of Exercise Notice duly
completed and executed by the Holder thereof; and
(ii) cash, a certified or bank cashier's check payable to the order
of the Company, or a wire transfer of immediately available funds to an
account designated by the Warrant Agent, in each case in an amount equal to
the product of (A) the number of Warrant Shares purchasable upon the
exercise of the Warrants designated for exercise in the Form of Exercise
Notice and (B) the Warrant Price.
(b) Subject to Section 2.3 hereof, as promptly as practicable after an
exercise of Warrants in accordance with Section 3.1(a), and in any event within
10 Business Days (as defined in Section 3.2) after such exercise, the Warrant
Agent will (i) requisition from any transfer agent for the Common Stock (or make
available, if the Warrant Agent is the transfer agent) certificates representing
the number of Warrant Shares to be purchased (and the Company hereby irrevocably
authorizes and directs its transfer agent to comply with all such requests),
(ii) after receipt of such certificates, cause the same to be delivered to or
upon the order of the Holder exercising such Warrants, registered in such name
or names as may be designated by such Holder, (iii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of the
issuance of fractional Warrant Shares in accordance with the provisions of
Section 5, and (iv) when appropriate, after receipt, deliver such cash to or
upon the order of the Holder exercising such Warrants.
(c) If the number of Warrants represented by a Warrant Certificate are not
exercised in full, the Company will prepare, execute, and deliver to the Warrant
Agent a new Warrant Certificate evidencing Warrants equivalent to such Warrants
remaining unexercised and the Warrant Agent will countersign and deliver such
new Warrant Certificate to or upon the order of the Holder exercising such
Warrants, registered in such name or names as may be designated by such Holder.
(d) The Company will take all such action as may be necessary to ensure
that all Warrant Shares delivered upon exercise of Warrants, at the time of
delivery of the certificates for such Warrant Shares, will (subject to payment
of the Warrant Price) be duly and validly authorized and issued, fully paid, and
nonassessable and, if shares of Common Stock are then listed on any national
securities exchange (as defined in the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) or qualified for quotation on The Nasdaq Stock
Market, will be duly listed or qualified for quotation thereon, as the case may
be.
-5-
<PAGE>
(e) In the event that the Company is obligated to pay cash in lieu of
fractional Warrant Shares pursuant to Section 5 in connection with any exercise
of Warrants, it will make all arrangements necessary so that such cash is
available for distribution by the Warrant Agent, if and when appropriate.
(f) The Company will pay all expenses, taxes, and other charges payable
in connection with the preparation, issuance, and delivery of certificates
representing Warrant Shares or Warrant Certificates representing unexercised
Warrants in connection with any exercise of Warrants in accordance with Section
3.1(a), except that, if any such certificates representing Warrant Shares or any
such Warrant Certificates are to be registered in a name or names other than
that of the Holder at the time of any such exercise of Warrants, funds
sufficient to pay all transfer or similar taxes payable as a result of such
transfer shall be paid by the Holder at the time of such exercise or promptly
upon receipt of a written request of the Company for payment thereof. In
connection with any exercise of Warrants in accordance with Section 3.1(a), the
Warrants will be deemed to have been exercised, any certificate representing
Warrant Shares or any Warrant Certificate issued on account thereof will be
deemed to have been issued, and the person in whose name any such certificate or
Warrant Certificate is issued will be deemed for all purposes to have become a
Holder of record of the Warrant Shares or Warrants, as the case may be,
represented thereby as of the date of such exercise.
3.2. Certain Definitions. For purposes of this Agreement, (a) the term
-------------------
"Business Day" means any day other than a Saturday, Sunday, or a day on which
banking institutions in the state of New York are authorized or obligated by law
or executive order to close and (b) the term "Trading Day" means any day on
which shares of Common Stock are traded on the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading
or, if shares of Common Stock are not so listed or admitted to trading, in the
over-the-counter market.
4. Adjustments of Warrant Price and Warrant Shares. The Warrant Price and
-----------------------------------------------
the number and kind of Warrant Shares purchasable upon exercise of the Warrants
will be subject to adjustment from time to time upon the occurrence of certain
events as provided in this Section 4.
4.1. Mechanical Adjustments. The Warrant Price and the number and kind of
----------------------
Warrant Shares purchasable upon exercise of a Warrant will be subject to
adjustment as follows:
(a) Subject to Section 4.1(e), if the Company (i) pays a dividend or
otherwise distributes to holders of its Common Stock, as such, shares of
its capital stock (whether Common Stock or capital stock of any other
class), (ii) subdivides its outstanding shares of Common Stock into a
greater number of
-6-
<PAGE>
shares of Common Stock, (iii) combines its outstanding shares of Common
Stock into a smaller number of shares of Common Stock, or (iv) issues any
shares of its capital stock in a reclassification of its outstanding shares
of Common Stock (including any such reclassification in connection with a
consolidation, merger, or other business combination transaction in which
the Company is the continuing or surviving corporation), then the number
and kind of Warrant Shares purchasable upon exercise of each Warrant
immediately prior thereto will be adjusted so that the Holder of each
Warrant will be entitled to receive (A) in the case of a dividend or
distribution, the sum of (1) the number of Warrant Shares that, if such
Warrant had been exercised immediately prior to such adjustment, such
Holder would have received upon such exercise and (2) the number and kind
of additional shares of capital stock that such Holder would have been
entitled to receive as a result of such dividend or distribution by virtue
of its ownership of such Warrant Shares, (B) in the case of a subdivision
or combination, the number of Warrant Shares that, if such Warrant had been
exercised immediately prior to such adjustment, such Holder would have
received upon such exercise, adjusted to give effect to such subdivision or
combination as if such Warrant Shares had been subject thereto, or (C) in
the case of an issuance in a reclassification, the sum of (1) the number of
Warrant Shares that, if such Warrant had been exercised immediately prior
to such adjustment, such Holder would have received upon such exercise and
retained after giving effect to such reclassification as if such Warrants
Shares had been subject thereto and (2) the number and kind of additional
shares of capital stock that such Holder would have been entitled to
receive as a result of such reclassification as if such Warrant Shares had
been subject thereto. An adjustment made pursuant to this paragraph (a)
will become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution in the case of a dividend or distribution and will become
effective immediately after the effective date of such subdivision,
combination, or reclassification in the case of a subdivision, combination,
or reclassification. If, after an adjustment, a Holder of a Warrant upon
exercise of it may receive shares of two or more classes of capital stock
of the Company, the Company shall determine the allocation of the adjusted
Warrant Price between the classes of capital stock. After such allocation,
the exercise privilege and the Warrant Price of each class of capital stock
shall thereafter be subject to adjustments as nearly equivalent as may be
practicable to the adjustments provided for Common Stock in this Section 4.
Such adjustments shall be made successively whenever any event listed above
shall occur.
(b) Subject to Section 4.1(e), if the Company distributes to holders
of its Common Stock, as such, (i) evidences of indebtedness or assets
(excluding regular cash dividends or cash distributions payable out of
consolidated retained earnings) of the Company or any corporation or other
legal entity a
-7-
<PAGE>
majority of the voting equity securities or equity interests of which are
owned, directly or indirectly, by the Company (a "Subsidiary"), (ii) shares
of capital stock of any Subsidiary, (iii) securities convertible into or
exchangeable for capital stock of the Company (including Common Stock or
capital stock of any other class) or any Subsidiary, or (iv) any rights,
options, or warrants to purchase any of the foregoing (excluding those
described in Section 4.1(c)), then the number of Warrant Shares thereafter
purchasable upon exercise of each Warrant will be adjusted to the number
that results from multiplying the number of Warrant Shares purchasable upon
the exercise of each Warrant immediately prior to such adjustment by a
fraction, the numerator of which will be the Current Market Price per share
(as defined in Section 4.1(d)) of Common Stock on the record date for such
distribution, and the denominator of which will be such Current Market
Price per share of Common Stock less the fair value (as determined in good
faith by the Board of Directors of the Company, whose determination will be
conclusive if based on the financial advice of a nationally recognized
investment banking firm) of the portion of the evidences of indebtedness,
assets, securities, or rights, options, or warrants so distributed on
account of one share of Common Stock. Such adjustment will be made whenever
any such distribution is made, and will become effective immediately after
the record date for the determination of stockholders entitled to receive
such distribution. Except as provided in Section 4.1(h), no further
adjustments of the number of Warrant Shares will be made upon the actual
issue of shares of Common Stock upon conversion or exchange of such
securities convertible or exchangeable for shares of Common Stock or upon
exercise of such rights, warrants, or options for shares of Common Stock.
(c) Subject to Section 4.1(e), if the Company issues rights, options,
or warrants to holders of the outstanding shares of Common Stock, as such,
entitling the holders of such rights, options, or warrants (for a period
expiring within 60 calendar days after the record date mentioned below) to
subscribe for or purchase shares of Common Stock at a price per share that
is lower on the record date mentioned below than the Current Market Price
per share of Common Stock on such record date, then the number of Warrant
Shares thereafter purchasable upon the exercise of each Warrant will be
adjusted to the number that results from multiplying the number of Warrant
Shares purchasable upon exercise of each Warrant immediately prior to such
adjustment by a fraction (not to be less than one), the numerator of which
will be the number of shares of Common Stock outstanding on such record
date plus the number of additional shares of Common Stock offered by such
rights, options, or warrants for subscription or purchase and the
denominator of which will be the number of shares of Common Stock
outstanding on such record date plus the number of shares of Common Stock
which the aggregate subscription or purchase price of the total number of
shares of Common Stock
-8-
<PAGE>
so offered would purchase at the Current Market Price per share of Common
Stock on such record date. Such adjustment will be made whenever such
rights, options, or warrants are issued, and will become effective
immediately after the record date for the determination of stockholders
entitled to receive such rights, options, or warrants. In case such
subscription or purchase price may be paid in a consideration part or all
of which is in a form other than cash, the fair value of such consideration
will be as determined by the Board of Directors of the Company, whose
determination will be conclusive if based on the financial advice of a
nationally recognized investment banking firm. Except as provided in
Section 4.1(h), no further adjustments of the number of Warrant Shares will
be made upon the actual issue of shares of Common Stock upon exercise of
such rights, options, or warrants.
(d) For purposes of this Agreement, the "Current Market Price" per
share of Common Stock on any date will be the average of the daily Closing
Prices (as defined below in this Section 4.1(d)) for 30 consecutive Trading
Days commencing 45 Trading Days before the date of such computation. The
closing price for each day (the "Closing Price") will be the last reported
sales price regular way or, in case no such reported sale takes place on
such day, the average of the closing bid and asked prices regular way for
such day, in each case on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to trading or, if
not so listed or admitted to trading, the average of the closing bid and
asked prices of the shares of Common Stock in the over-the-counter market
as reported by The Nasdaq Stock Market or any comparable system, or if not
so reported by any such organization on such day, the average of the bid
and asked prices furnished by a professional market maker selected by the
Board of Directors of the Company. In the absence of one or more such
quotations, the Board of Directors of the Company will determine the
Current Market Price in good faith on the basis of such quotations or other
relevant information as it considers appropriate.
(e) No adjustment in the number of Warrant Shares purchasable upon the
exercise of a Warrant will be required unless such adjustment would require
an increase or decrease in the number of Warrant Shares purchasable upon
the hypothetical exercise of a Warrant of at least 1%; provided, however,
-------- -------
that any adjustments which by reason of this paragraph (e) are not required
to be made currently will be carried forward and made at the time and
together with the next subsequent adjustment which, together with any
adjustments so carried forward, would require an increase or decrease in
the number of Warrant Shares purchasable upon the hypothetical exercise of
a Warrant of 1% or more. All calculations with respect to the number of
Warrant Shares will be made to the nearest one-thousandth of a share and
all calculations with respect to the Warrant Price will be to the nearest
whole cent. No adjustment in the
-9-
<PAGE>
number of Warrant Shares purchasable upon the exercise of a Warrant will be
made under paragraph (b) or (c) of this Section 4.1 if the Company issues
or distributes to each Holder the shares, rights, options, warrants,
convertible or exchangeable securities, evidences of indebtedness, assets,
or other securities referred to in the applicable paragraph that such
Holder would have been entitled to receive had the Warrants been exercised
prior to the happening of such event on the record date with respect
thereto (provided that, in any case in which such Holder would have been so
--------
entitled to receive a fractional interest in any such securities or assets,
the Company may distribute to such Holder in lieu of such fractional
interest cash in an amount equal to the fair value of such fractional
interest as determined in good faith by the Board of Directors of the
Company). No adjustment in the number of Warrant Shares will be made for a
change in the par value of the shares of Common Stock.
(f) Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant is adjusted as herein provided, the Warrant Price
will be adjusted by multiplying the Warrant Price in effect immediately
prior to such adjustment by a fraction, the numerator of which will be the
number of Warrant Shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment, and the denominator of which will be
the number of Warrant Shares so purchasable immediately thereafter.
(g) For the purpose of this Agreement, the term "Common Stock" means
(i) the class of shares designated as the Common Stock of the Company as of
the date of this Agreement, (ii) all shares of any class or classes
(however designated) of the Company, now or hereafter authorized, the
holders of which have the right, without limitation as to amount, either to
all or to a part of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference, and the holders of which are ordinarily entitled to
vote generally in the election of directors of the Company, or (iii) any
other class of shares resulting from successive changes or
reclassifications of such shares consisting solely of changes in par value,
or from par value to no par value, or from no par value to par value. In
the event that at any time, as a result of an adjustment made pursuant to
Section 4.1(a), the Warrants become exercisable to purchase Warrant Shares
other than shares of Common Stock, thereafter the number of such other
shares so purchasable upon exercise of each Warrant and the Warrant Price
payable in respect of such other shares upon the exercise of each Warrant
will be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the
Warrant Shares and the Warrant Price contained in this Section 4.1.
(h) Upon the expiration of any rights, options, warrants, or
conversion or exchange privileges, if any thereof have not been exercised,
the
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<PAGE>
Warrant Price and the number of Warrant Shares purchasable upon the
exercise of each Warrant will, upon such expiration, be readjusted and will
thereafter be such as it would have been had it been originally adjusted
(or had the original adjustment not been required, as the case may be) as
if (i) the only shares of Common Stock so issued were the shares of Common
Stock, if any, actually issued or sold upon the exercise of such rights,
options, warrants, or conversion or exchange rights and (ii) such shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise, conversion, or exchange plus
the aggregate consideration, if any, actually received by the Company for
the issuance, sale, or grant of all such rights, options, warrants, or
conversion or exchange rights whether or not exercised; provided, however,
-------- -------
that no such readjustment will have the effect of increasing the Warrant
Price or decreasing the number of Warrant Shares purchasable upon the
exercise of each Warrant by an amount in excess of the amount of the
adjustment initially made in respect of the issuance, sale, or grant of
such rights, options, warrants, or conversion or exchange privileges.
4.2. Notice of Adjustment. Whenever the Warrant Price or the number or
--------------------
kind of Warrant Shares purchasable upon exercise of the Warrants is adjusted
pursuant to any of the provisions of this Agreement, the Company will promptly
give notice to the Holders of such adjustment or adjustments, together with a
certificate of a firm of independent public accountants selected by the Company
(who may be the regular accountants employed by the Company) setting forth the
adjustments in the Warrant Price and the number or kind of Warrant Shares
purchasable upon exercise of each Warrant, and also setting forth a brief
statement of the facts requiring such adjustments and the computations upon
which such adjustments are based. Such certificate will be conclusive evidence
of the correctness of such adjustments.
4.3. No Adjustment for Dividends. Except as provided in Section 4.1, no
---------------------------
adjustment or payment in respect of any dividends will be made at any time.
4.4 Voluntary Reduction. The Company from time to time may reduce the
-------------------
Warrant Price by any amount for any period of time, if the period is at least 20
calendar days and if the reduction is irrevocable during the period; provided
--------
that in no event may the Warrant Price be less than the par value of the Common
Stock. Whenever the Warrant Price is so reduced, the Company will mail to
Holders a notice of the reduction at least 15 calendar days before the date the
reduced Warrant Price takes effect. Such notice will state the reduced Warrant
Price and the period during which it will be in effect. Failure to mail the
notice or any defect therein will not affect the legality or validity of the
reduction. A reduction of the Warrant Price does not change or adjust the
Warrant Price otherwise in effect for purposes of Section 4.1.
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<PAGE>
4.5. Preservation of Purchase Rights Upon Merger, Consolidation, Etc. In
----------------------------------------------------------------
case of any consolidation, merger, or other business combination transaction in
which the Company is not the continuing or surviving corporation, or in case of
any sale, transfer, or lease to another corporation of all or substantially all
the property of the Company, the Company and such successor or purchasing
corporation, as the case may be, will execute an agreement providing that each
Holder will have the right thereafter, upon payment of an amount equal to the
amount payable upon the exercise of a Warrant immediately prior thereto, to
purchase upon exercise of each Warrant the kind and amount of securities or
property that it would have owned or have been entitled to receive after giving
effect to such consolidation, merger, sale, transfer, or lease on account of the
Warrant Shares that would have been purchasable upon the exercise of such
Warrant had such Warrant been exercised immediately prior thereto (provided
--------
that, to the extent that such Holder would have been so entitled to receive cash
on account of such Warrant Shares, such Holder may elect in connection with the
exercise of a Warrant in accordance with Section 3.1 to reduce the amount of
cash that it would be entitled to receive upon such exercise in exchange for a
corresponding reduction in the amount payable upon such exercise); provided,
--------
however, that no adjustment in respect of dividends, interest, or other income
- -------
on or from such shares or other securities or property will be made during the
term of a Warrant or upon the exercise of a Warrant. Such agreement will
provide for adjustments that will be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 4. The provisions of this
Section 4.5 will similarly apply to successive consolidations, mergers, sales,
transfers, or leases.
4.6. Warrant Certificates. Whether or not any adjustments in the Warrant
--------------------
Price or the number or kind of Warrant Shares purchasable upon the exercise of
the Warrants has been made, Warrant Certificates theretofore or thereafter
issued may continue to express the same Warrant Price and number and kind of
Warrant Shares as are stated in the Warrant Certificate initially issued.
5. Fractional Interests. Neither the Company nor the Warrant Agent will
--------------------
be required to issue fractional Warrant Shares or fractional interests in any
other securities upon the exercise of the Warrants. If any fraction of a
Warrant Share or other security would, except for the provisions of this Section
5, be issuable upon the exercise of the Warrants, the Company will pay an amount
(computed to the nearest cent) in cash (a) in lieu of a fractional Warrant
Share, equal to the Current Market Price for one share of Common Stock, as
defined in Section 4.1(d), on the Trading Day immediately preceding the date on
which the Warrants are presented for exercise, multiplied by such fraction of a
Warrant Share or (b) in lieu of a fractional interest in any other security,
equal to the fair value of such fractional interest, determined in a manner as
similar as possible, taking into account the difference in the fractional
interest being valued, to the calculation described in the foregoing clause (a).
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<PAGE>
6. Warrant Agent Matters.
---------------------
6.1. Appointment of Warrant Agent. The Company hereby appoints the
----------------------------
Warrant Agent to act as warrant agent in accordance with the terms and
conditions hereof, and the Warrant Agent hereby accepts such appointment.
6.2. Concerning the Warrant Agent. (a) The Company will pay to the
----------------------------
Warrant Agent reasonable compensation for all services rendered by it hereunder
and will reimburse the Warrant Agent for its reasonable expenses and counsel
fees and other disbursements incurred in the administration and execution of
this Agreement and the exercise and performance of its duties hereunder. The
Company will indemnify the Warrant Agent for, and hold it harmless against, any
loss, liability, suit, action, proceeding, or expense, incurred without
negligence, bad faith, or willful misconduct on the part of the Warrant Agent,
for anything done or omitted by the Warrant Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability arising therefrom, directly
or indirectly.
(b) The Warrant Agent will incur no liability to the Company or to any
Holder for or in respect of any action taken, suffered, or omitted by it in
connection with its administration of this Agreement in reliance upon any
Warrant Certificate or certificate evidencing Common Stock or other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed, and, where necessary, verified or acknowledged, by the proper
person or persons.
6.3. Merger or Consolidation or Change of Name of Warrant Agent. (a) Any
---------------------------------------------------- -----
corporation into which the Warrant Agent or any successor Warrant Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Warrant Agent or any successor Warrant
Agent is a party, or any corporation succeeding to the corporate trust business
of the Warrant Agent or any successor Warrant Agent, will be the successor to
the Warrant Agent under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
--------
such corporation would be eligible for appointment as a successor Warrant Agent
under the provisions of Section 6.5. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, and in case
at that time any of the Warrant Certificates shall have been countersigned but
not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent; and in case at that time any of
the Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor to the Warrant
Agent; and in all such cases such Warrant Certificates
-13-
<PAGE>
shall have the full force and effect provided in the Warrant Certificates and in
this Agreement.
(b) In case at any time the name of the Warrant Agent shall be changed
and at such time any of the Warrant Certificates shall have been countersigned
but not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
6.4. Duties of Warrant Agent. The Warrant Agent undertakes the duties and
-----------------------
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the Holders, by their acceptance of Warrant
Certificates, will be bound:
(a) The Warrant Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel will be full and
complete authorization and protection to the Warrant Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Warrant Agent deems it necessary or desirable that any fact or matter be proved
or established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by any one of the Chairman of the Board, the President,
or any Vice President of the Company and delivered to the Warrant Agent; and
such certificate will be full authorization to the Warrant Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Warrant Agent's duties will be determined solely by the
provisions hereof. The Warrant Agent will not be liable for anything that it may
do or refrain from doing in connection with this Agreement except for its own
negligence, bad faith, or willful misconduct; provided, however, that the
-------- -------
Warrant Agent shall not be liable for any indirect, special, punitive or
consequential damages.
(d) The Warrant Agent will not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Warrant
Certificates or be required to verify the same, but all such statements and
recitals are and will be deemed to have been made by the Company only.
-14-
<PAGE>
(e) The Warrant Agent will not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution and delivery hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant Certificate (except the due
countersignature thereof by the Warrant Agent); nor will it be responsible for
any breach by the Company of any covenant or condition contained in this
Agreement or in any Warrant Certificate; nor will it be responsible for any
adjustment required under the provisions of Section 4 hereof or responsible for
the manner, method, or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Warrants evidenced by Warrant Certificates after actual
notice of any such adjustment); nor will it by any act hereunder be deemed to
make any representation or warranty as to the authorization or reservation of
any shares of stock or other securities to be issued pursuant to this Agreement
or any Warrant Certificate or as to whether any shares of stock or other
securities will, when issued, be validly authorized and issued, fully paid, and
nonassessable.
(f) The Company will perform, execute, acknowledge, and deliver or cause to
be performed, executed, acknowledged, and delivered all such further and other
acts, instruments, and assurances as may reasonably be required by the Warrant
Agent for the carrying out or performing by the Warrant Agent of the provisions
of this Agreement.
(g) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, or any Vice President of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and it will not be liable for any action taken or suffered to
be taken by it in good faith in accordance with instructions of any such
officer.
(h) The Warrant Agent and any stockholder, director, officer, or employee
of the Warrant Agent may buy, sell, or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Warrant Agent
under this Agreement. Nothing herein will preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Warrant Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Warrant Agent will not be answerable or
accountable for any act, default, neglect, or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect, or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof. The Warrant Agent will not be under any duty
or
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<PAGE>
responsibility to insure compliance with any applicable federal or state
securities laws in connection with the issuance, transfer, or exchange of
Warrant Certificates.
6.5. Change of Warrant Agent. The Warrant Agent or any successor Warrant
-----------------------
Agent may resign and be discharged from its duties under this Agreement upon 30
calendar days' notice in writing mailed to the Company and to each transfer
agent of the Common Stock by registered or certified mail, and to the Holders by
first-class mail. The Company may remove the Warrant Agent or any successor
Warrant Agent upon 30 calendar days' notice in writing, mailed to the Warrant
Agent or successor Warrant Agent, as the case may be, and to each transfer agent
of the Common Stock by registered or certified mail, and to the Holders by
first-class mail. If the Warrant Agent resigns or is removed or otherwise
becomes incapable of acting, the Company will appoint a successor to the Warrant
Agent. If the Company fails to make such appointment within a period of 30
calendar days after giving notice of such removal or after it has been notified
in writing of such resignation or incapacity by the resigning or incapacitated
Warrant Agent or by any Holder (who will, with such notice, submit his Warrant
Certificate for inspection by the Company), then any Holder may apply to any
court of competent jurisdiction for the appointment of a successor Warrant
Agent. Pending appointment of a successor to such Warrant Agent, either by the
Company or by such a court, the duties of the Warrant Agent will be carried out
by the Company. Any successor Warrant Agent, whether appointed by the Company
or by such a court, will be a corporation organized and doing business under the
laws of the United States or of the State of New York (or of any other state of
the United States so long as such corporation is authorized to do business as a
banking institution in the State of New York), in good standing, having a
principal office in the State of New York, which is authorized under such laws
to exercise corporate trust powers and is subject to supervision or examination
by federal or state authority and which has at the time of its appointment as
Warrant Agent a combined capital and surplus of at least $50 million. After
appointment, the successor Warrant Agent will be vested with the same powers,
rights, duties, and responsibilities as if it had been originally named as
Warrant Agent without further act or deed; but the predecessor Warrant Agent
will deliver and transfer to the successor Warrant Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act, or deed necessary for the purpose. Not later than the
effective date of any such appointment, the Company will file notice thereof in
writing with the predecessor Warrant Agent and each transfer agent of the Common
Stock, and mail by first class mail a notice thereof to each Holder. Failure to
give any notice provided for in this Section 6.5, however, or any defect
therein, will not affect the legality or validity of the resignation or removal
of the Warrant Agent or the appointment of the successor Warrant Agent, as the
case may be.
7.1. No Rights as a Stockholder; Notices to Holders. Nothing contained in
----------------------------------------------
this Agreement or in the Warrant Certificate will be construed as conferring
upon the
-16-
<PAGE>
Holders or their transferees the right to vote, or to receive dividends, or to
consent or to receive notice as a stockholder in respect of any meeting of
stockholders for the election of directors of the Company or any other matter,
or any rights whatsoever as a stockholder of the Company; provided, however,
-------- -------
that if, at any time prior to the Expiration Date and prior to the exercise of
all of the Warrants, any of the following events occur:
(a) The Company declares any dividend payable in any securities upon
its shares of Common Stock or makes any distribution (other than a regular
cash dividend payable out of consolidated retained earnings) to the holders
of its shares of Common Stock;
(b) The Company offers to the holders of its Common Stock any shares
of capital stock of the Company or any Subsidiary or securities convertible
into or exchangeable for shares of capital stock of the Company or any
Subsidiary or any option, right, or warrant to subscribe for or purchase
any thereof;
(c) The Company distributes to the holders of its Common Stock
evidences of indebtedness or assets (including any cash dividend which
would result in an adjustment under Section 4.1) of the Company or any
Subsidiary;
(d) Any reclassification of the Common Stock, any consolidation of the
Company with or merger of the Company into another corporation, any sale,
transfer, or lease to another corporation of all or substantially all the
property of the Company, or any proposal of the Company to effect any of
the foregoing transactions that has been publicly announced by the Company;
or
(e) Any proposal by the Company to effect a dissolution, liquidation,
or winding up of the Company that has been publicly announced by the
Company;
then in any one or more of such events the Company will give notice of such
event to the Holders, as provided in Section 12 hereof, such giving of notice to
be completed at least 10 business days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, or subscription rights or
at least 20 business days prior to the date fixed as a record date or the date
of closing the transfer books for the determination of stockholders entitled to
vote on such proposed reclassification, consolidation, merger, sale, transfer,
or lease, dissolution, liquidation, or winding up. Such notice will specify
such record date or the date of closing the transfer books, as the case may be,
for such event. Failure to mail or receive such notice or any defect therein or
in the mailing thereof will not affect the validity of any action taken in
connection with such event.
-17-
<PAGE>
7.2. Reports to Holders. The Company will deliver to the Warrant Agent,
------------------
within 15 calendar days after it files them with the Securities and Exchange
Commission (the "SEC"), copies of its annual report and of the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) that the Company is required
to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. To the
extent any such information, documents, or other reports are required to be sent
by the Company to the holders of outstanding Common Stock, the Company will
simultaneously send copies thereof to the Holders of Warrants. The Warrant
Agent will provide to any Holder promptly upon request a copy of any document
delivered to the Warrant Agent by the Company pursuant to this Section 7.2.
7.3. Agreements Respecting Warrants. The Company will not enter into any
------------------------------
agreement or instrument which would preclude the exercise of the Warrants as
herein provided.
8. Agreement of Warrant Holders. Every Holder by accepting a Warrant
----------------------------
Certificate consents and agrees with the Company and the Warrant Agent and with
every other Holder that:
(a) The Warrant Certificates are transferable only in accordance with the
terms of this Agreement and only on the registry books of the Warrant Agent if
surrendered at the principal office of the Warrant Agent designated for such
purpose, duly endorsed or accompanied by a proper instrument of transfer, and
otherwise in compliance with Section 2;
(b) The Company and the Warrant Agent may deem and treat the person in
whose name the Warrant Certificate is registered as the absolute owner thereof
and of the Warrants evidenced thereby (notwithstanding any notations of
ownership or writing on the Warrant Certificate made by anyone other than the
Company or the Warrant Agent) for all purposes whatsoever, and neither the
Company nor the Warrant Agent will be affected by any notice to the contrary;
(c) Such Holder expressly waives any right to receive any fractional
Warrants and any fractional securities upon exercise or exchange of a Warrant;
and
(d) Notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Warrant Agent will have any liability to any Holder or other
person as a result of its inability to perform any of its obligations under this
Agreement by reason of any preliminary or permanent injunction or other order,
decree, or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory, or administrative agency or commission, or any
statute, rule, regulation, or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining performance of such
obligation; provided,
--------
-18-
<PAGE>
however, that the Company will use reasonable efforts to have any such order,
- -------
decree, or ruling lifted or otherwise overturned as soon as possible.
9. Reservation of Common Stock. The Company will, for so long as Warrants
---------------------------
remain outstanding, reserve and keep available, solely for issuance and delivery
upon the exercise of Warrants, a number of shares of Common Stock (or, if
applicable, other securities) sufficient to provide for the exercise of all
outstanding Warrants. The transfer agent for the Common Stock (or, if
applicable, other securities) will be irrevocably authorized and directed at all
times until the exercise or expiration of the Warrants to reserve such number of
authorized shares of Common Stock (or, if applicable, other securities) as
necessary for such purpose. The Company will keep copies of this Agreement on
file with the transfer agent and will supply the transfer agent with duly
executed stock certificates for such purpose.
10. Listing and Registration. (a) The [Warrants and the]/1/ Warrant
------------------------
Shares have been listed for trading on the Nasdaq National Market, and the
Company will use its reasonable best efforts to maintain such listing. [In
addition, the Company will use its reasonable best efforts to secure and
maintain the listing of the Warrants on the Nasdaq National Market.]/1/
(b) The Warrants issued as contemplated by clauses (a) and (b) of the first
sentence of Section 1.1 have been registered for public distribution under the
Securities Act pursuant to a registration statement (No. 333-___________) filed
by the Company with the SEC. The Warrant Shares have been registered for public
distribution upon exercise of the Warrants under the Securities Act pursuant to
registration statement (No. 333-________________) (together with any amendments
thereto, the "Warrant Shares Registration Statement") filed by the Company with
the SEC. Subject to Black Out Periods (as defined below in this Section 10(b)),
the Company will use its reasonable best efforts to keep the Warrant Shares
Registration Statement continuously effective under the Securities Act until the
expiration or exercise of all Warrants in order to permit the prospectus
included therein to be lawfully delivered by the Company to the Holders
exercising such Warrants and by Holders of such Warrants to prospective
purchasers of such Warrants. Notwithstanding the foregoing, the Company shall
not be required to amend or supplement the Warrant Shares Registration
Statement, any related prospectus or any document incorporated therein by
reference for a period (a "Black Out Period"), beginning on the date the Company
gives notice (the "Black Out Notice") to the Warrant Agent and the Holders that
such a period has commenced and ending on the earlier of (i) the date the
information responsible for the Black Out Period is
_________________
/1/The language in this section is bracketed because the language to be included
in the definitive agreement depends upon whether the Warrants will have been
listed as of the date of the definitive agreement.
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<PAGE>
disclosed to the public and (ii) 60 calendar days after any such Black Out
Notice is given, in the event that (A) an event occurs and is continuing as a
result of which the Warrant Shares Registration Statement, any related
prospectus, or any document incorporated therein by reference as then amended or
supplemented would, in the Company's good faith judgment, contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, and (B) (1) the Company determines in its good faith
judgment that the disclosure of such event at such time would have a material
adverse effect on the business, operations, or prospects of the Company or (2)
the disclosure otherwise relates to a material business transaction, including
without limitation any bona fide financing plan, that has not yet been publicly
---- ----
disclosed; provided, however, that (x) no Black Out Period may be in effect
-------- -------
during the six months immediately prior to the Expiration Date, (y) there shall
be no more than two Black Out Periods during any period of 180 consecutive
calendar days, and (z) there shall be no more than three Black Out Periods
during the term of the Warrants.
(c) The Company will cause any amendment or supplement to the Warrant
Shares Registration Statement or the related prospectus, as of the effective
date of the Warrant Shares Registration Statement, amendment, or supplement, (i)
to comply in all material respects with the applicable requirements of the
Securities Act and the rules and regulations of the SEC and (ii) not to contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(d) The Company will give prompt written notice to the Warrant Agent and
the Holders of (i) the effectiveness of any post-effective amendment to the
Warrant Shares Registration Statement, (ii) the issuance by the SEC of any stop
order suspending the effectiveness of the Warrant Shares Registration Statement
or the initiation or threatening of any proceedings for that purpose, (iii) the
receipt by the Company or its legal counsel of any notification with respect to
the suspension of the qualification of the Warrant Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (iv) the happening of any event that requires the Company to make
changes in the Warrant Shares Registration Statement or the related prospectus
in order to make the statements therein not misleading, and (v) the commencement
and termination of any Black Out Period.
(e) The Company will use its reasonable best efforts to prevent the
issuance or obtain the withdrawal at the earliest possible time of any order
suspending the effectiveness of the Warrant Shares Registration Statement.
(f) Upon the occurrence of any event contemplated by Section 10(d)(iv)
hereof or, if any such event occurs during a Black Out Period, upon the
termination
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<PAGE>
of such Black Out Period, the Company will promptly prepare and file a post-
effective amendment to the Warrant Shares Registration Statement or a supplement
to the related prospectus or file any other required document so that, as
thereafter delivered to Holders of Warrants, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading and will contain the current information required by
the Securities Act.
(g) The Company will comply with all applicable rules and regulations of
the SEC and will make generally available to its securities holders (or
otherwise provide in accordance with Section 11(a) of the Securities Act) an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days (plus any extension permitted by Rule 12b-25 under
the Exchange Act after the end of a 12-month period (or 90 days, if such period
is a fiscal year (plus any extension permitted by Rule 12b-25 under the Exchange
Act)) beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of the Registration Statement, which
statement shall cover such 12-month period.
(h) The Company will register or qualify or cooperate with the Holders in
connection with the registration or qualification of the Warrant Shares for
offer and sale by the Company upon exercise of the Warrants under the securities
or blue sky laws of such state of the United States as any Holder reasonably
requests and do any and all other acts or things necessary or advisable to
enable such offer and sale in such jurisdictions; provided that the Company
--------
shall not be required to (i) qualify to do business in any jurisdiction in which
it is not then so qualified or (ii) take any action which would subject it to
general service of process or to taxation in any jurisdiction in which it is not
then so subject.
(i) The Company will bear all expenses incurred by it in connection with
the performance of its obligations under this Section 10.
(j) The Company acknowledges and agrees that any remedy at law for breach
of any provision of this Section 10 will be inadequate and that, in addition to
any other remedies that the Holders may have, the Holders will be entitled to
the remedy of specific performance to ensure the Company performs its
obligations under this Section 10. The election of any one or more remedies by
the Holders hereunder will not constitute a waiver of the right to pursue other
available remedies.
11. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to the Warrant Agent that:
(a) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware and has all
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<PAGE>
requisite corporate power and authority to execute, deliver, and perform
its obligations hereunder and to consummate the transactions contemplated
hereby;
(b) The execution, delivery, and performance of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company;
(c) The execution, delivery, and performance of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby in accordance with the terms hereof do not and will not
conflict with, violate, or constitute a breach of any material contract,
agreement, or instrument by which the Company is bound or any judgment,
order, decree, law, statute, rule, regulation, or other judicial or
governmental restriction to which the Company is subject;
(d) This Agreement constitutes the legal, valid, and binding
obligation of the Company, enforceable against the Company in accordance
with its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting creditors' rights generally; and
(e) The Warrants, when issued and delivered to the initial Holders as
provided in this Agreement, and the Warrant Shares issued upon exercise of
the Warrants, when issued, paid for, and delivered as provided in this
Agreement, will be duly and validly issued and outstanding, fully paid, and
nonassessable.
12. Notices. All notices, requests, waivers, releases, consents, and
-------
other communications required or permitted by this Agreement (collectively,
"Notices") must be in writing. Except as expressly otherwise provided herein
with respect to manner of delivery, notices will be deemed sufficiently given
for all purposes when delivered in person, when dispatched by telegram or
electronic facsimile transmission, when sent by first-class mail, postage
prepaid, or upon confirmation of receipt when dispatched by a nationally
recognized overnight courier service to the appropriate party as follows: (a)
if to a Holder, at the address of such Holder as shown in the registry books
maintained by the Warrant Agent; (b) if to the Company, at The Bank of New York,
601 Barclay Street, 12W, New York, New York 10286, Telecopy No. (___) ___-____
(marked for the attention of the Chief Financial Officer and the General
Counsel), or at such other address as the Company may have furnished to the
Holders and the Warrant Agent in writing; and (c) if to the Warrant Agent, at
_________, ________, ________ _____, Telecopy No. (___) ___-____ (marked
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<PAGE>
for the attention of _______________) or at such other address as the Warrant
Agent may have furnished to the Company and the Holders in writing.
13. Amendment and Waiver. No failure or delay of the Holder in exercising
--------------------
any power or right hereunder (other than a failure to exercise Warrants in
accordance with the provisions hereof) will operate as a waiver thereof, nor
will any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No notice or demand on the Company in any case will entitle the
Company to any other or future notice or demand in similar or other
circumstances. Subject to the last sentence of this Section 13, (a) if the
Company so directs, the Company and the Warrant Agent will supplement or amend
this Agreement without the approval of any Holders in order to cure any
ambiguity or correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Warrant Agent may deem necessary or desirable and which shall not in any
way adversely affect the interests of the Holders of Warrants or the Warrant
Agent and (b) the Company and the Warrant Agent may from time to time supplement
or amend this Agreement, with the consent of Holders of at least 50% of the
Warrants then outstanding, for any other purpose. Notwithstanding anything in
this Agreement to the contrary, no supplement or amendment which increases the
Warrant Price, decreases the period of time remaining during which the Warrants
may be exercised, or changes in a manner adverse to Holders the number of
Warrant Shares purchasable upon the exercise of Warrants will be made without
the consent of all Holders. Any such amendment, modification, or waiver
effected pursuant to and in accordance with the provisions of this Section 13
will be binding upon all Holders and upon each future Holder, the Company, and
the Warrant Agent. In the event of any such amendment, modification, or waiver,
the Company will give prompt notice thereof to all Holders and, if appropriate,
notation thereof will be made on all Warrant Certificates thereafter surrendered
for registration of transfer or exchange.
14. Successors and Assigns. This Agreement will be binding upon and inure
----------------------
to the benefit of the Company, the Warrant Agent, and their respective
successors and assigns, and, subject to Sections 1.4 and 8(b), all Holders.
15. Rights of the Parties. Except as provided in Section 14, nothing
---------------------
expressed or implied in this Agreement is intended or will be construed to
confer upon or give any person or entity other than the Company, the Warrant
Agent, and the Holders any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby. This Agreement will be for
the sole and exclusive benefit of the Company, the Warrant Agent, and the
Holders. All rights of action in respect of this Agreement are vested in the
Holders, and any Holder without the consent of the
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<PAGE>
Warrant Agent or any other Holder may, on such Holder's own behalf and for such
Holder's own benefit, enforce such Holder's rights hereunder, including the
right to exercise, exchange, or surrender for transfer such Holder's Warrant
Certificates in accordance with the provisions hereof.
16. Titles and Headings. Titles and headings to Sections herein are
-------------------
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
17. Certain Interpretive Matters and Definitions. Unless the context
--------------------------------------------
otherwise requires, (a) all references to Sections or Exhibits are to Sections
or Exhibits of or to this Agreement, (b) each term defined in this Agreement has
the meaning assigned to it, (c) "or" is disjunctive but not necessarily
exclusive, and (d) words in the singular include the plural and vice versa. All
---- -----
references to "$" or dollar amounts are to lawful currency of the United States
of America.
18. Entire Agreement. This Agreement, together with its Exhibits,
----------------
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof, and there are no agreements among the parties hereto
with respect thereto except as expressly set forth herein.
19. Severability. In case any provision contained in this Agreement is
------------
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions will not in any way be affected or impaired thereby.
The Company and the Warrant Agent will endeavor in good faith to replace the
invalid, illegal, or unenforceable provisions with valid, legal, and enforceable
provisions the economic effect of which comes as close as possible to that of
the invalid, illegal, or unenforceable provisions.
20. Governing Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the State of New York, without giving effect to the
principles of conflict of laws thereof.
21. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which so executed will be deemed to be an original; such
counterparts will together constitute but one agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the date first above written.
ARCH COMMUNICATIONS
GROUP, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
THE BANK OF NEW YORK
By: _____________________________
Name: ___________________________
Title: __________________________
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<PAGE>
EXHIBIT A
---------
FORM OF WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS SET FORTH IN THE WARRANT AGREEMENT (AS HEREINAFTER DEFINED), A COPY
OF WHICH WILL BE MADE AVAILABLE BY THE ISSUER UPON REQUEST. THE TRANSFER OR
EXCHANGE OF THESE WARRANTS MUST BE REGISTERED IN ACCORDANCE WITH THE WARRANT
AGREEMENT.
NO. _______ WARRANTS _____________
VOID AT 5:00 P.M., NEW YORK CITY TIME
ON SEPTEMBER 1, 2001
Arch Communications Group, Inc. Warrant Certificate
THIS CERTIFIES THAT for value received, __________, or its registered
assigns (the "Holder"), is the owner of the number of Warrants set forth above
that initially entitle it to purchase from Arch Communications Group, Inc., a
Delaware corporation (the "Company"), at any time and from time to time prior to
5:00 p.m., New York City time, on September 1, 2001 (the "Expiration Date"), a
like number of fully paid and nonassessable shares of the Common Stock, par
value $.01 per share, of the Company (the "Common Stock") at an initial purchase
price of $8.19 per share (the "Warrant Price"), subject to adjustment as
provided in the Warrant Agreement. No Warrant may be exercised at or after 5:00
p.m., New York City time, on the Expiration Date, and to the extent not
exercised by such time, such Warrant shall become void. The shares of Common
Stock purchasable upon exercise of the Warrants are hereinafter referred to as
the "Warrant Shares." On the terms and subject to the conditions set forth in
the Warrant Agreement, the Warrants may be exercised by surrendering to the
Warrant Agent (as hereinafter defined) this Warrant Certificate, with the Form
of Exercise Notice on the reverse side hereof duly executed, together with cash,
a certified or bank cashier's check payable to the order of the Company, or a
wire transfer of immediately available funds to an account designated by the
Warrant Agent, in each case in an amount of lawful currency of the United States
of America equal to the product of (a) the number of Warrant Shares purchasable
upon the exercise of the Warrants designated for exercise in the Form of
Exercise Notice and (b) the Warrant Price.
A-1
<PAGE>
The number and kind of Warrant Shares that may be purchased upon exercise
of the Warrants evidenced by this Warrant Certificate are the number as of the
date of the original issue of such Warrants, based on the shares of Common Stock
of the Company as constituted at such date. As provided in the Warrant
Agreement, the Warrant Price and the number and kind of Warrant Shares
purchasable upon exercise of the Warrants are subject to adjustment.
This Warrant Certificate and the Warrants it represents are subject to, and
entitled to the benefits of, all of the terms, provisions, and conditions of the
Warrant Agreement, dated as of _____________, 199__ (the "Warrant Agreement"),
by and between the Company and The Bank of New York, a _________ corporation
(the "Warrant Agent"), which Warrant Agreement is hereby incorporated herein by
reference and made a part hereof and to which Warrant Agreement reference is
hereby made for a full description of the rights, limitation of rights,
obligations, and duties hereunder of the Company and the Holder. A copy of the
Warrant Agreement will be made available to the Holders by the Company upon
request of the Holders.
Subject to the provisions set forth in the Warrant Agreement or in this
Certificate, this Warrant Certificate, with or without other Warrant
Certificates, may be transferred, split up, combined, or exchanged for another
Warrant Certificate or Warrant Certificates, entitling the Holder to purchase a
like aggregate number of Warrant Shares as the Warrant Certificate or Warrant
Certificates surrendered entitled such Holder (or former Holder in the case of a
transfer) to purchase, upon presentation and surrender hereof at the principal
office of the Warrant Agent designated for such purpose, with the Form of
Assignment (if appropriate) and the related Certificate duly executed.
The Company will not be required to issue fractional Warrant Shares or
other fractional interests in securities upon the exercise of any Warrants
evidenced by this Warrant Certificate, but in lieu thereof a cash payment will
be made, as provided in the Warrant Agreement.
Nothing contained in the Warrant Agreement or in this Warrant Certificate
will be construed as conferring upon the Holder of this Warrant Certificate the
right to vote, or to receive dividends, or to consent or (except as provided in
the Warrant Agreement) to receive notice in respect of any meeting of
stockholders for the election of directors of the Company or any other matter,
or any rights whatsoever as a stockholder of the Company.
This Warrant Certificate will not be valid or obligatory for any purpose
until it has been countersigned by the Warrant Agent. This Warrant Certificate
will be governed and construed in accordance with the laws of the State of New
York.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
executed on this ____ day of __________, ____, by its corporate officers duly
authorized.
Attest: ARCH COMMUNICATIONS GROUP, INC.
___________________________________ By: __________________________________
[Name, title] [Name, title]
Dated: ______________
Countersigned:
THE BANK OF NEW YORK
By:_________________________________
[Authorized Signature]
[Title]
A-3
<PAGE>
Form of Reverse Side of Warrant Certificate
FORM OF ASSIGNMENT
------------------
(To be executed if the Holder desires to transfer Warrants)
FOR VALUE RECEIVED, __________________________________________________
_____________hereby sells, assigns, and transfers unto _________________________
________________________________________________________________________________
(Please print name and address of transferee)
- --------------------------------------------------------
________________________________________________________________________________
______________________this Warrant Certificate, together with all right, title,
and interest therein, and does hereby irrevocably constitute and appoint
_______________________ Attorney, to transfer the within Warrant Certificate on
the books of the within-named Company, with full power of substitution.
Dated: ____________________
________________________________________
____________ Signature
Signature Guaranteed:
A-4
<PAGE>
FORM OF EXERCISE NOTICE
-----------------------
(To be executed if the Holder desires to exercise Warrants)
TO ARCH COMMUNICATIONS GROUP, INC.:
The undersigned hereby irrevocably elects to exercise __________
Warrants evidenced by this Warrant Certificate to purchase the Warrant Shares
issuable upon the exercise of such Warrants and requests that certificates for
such Warrant Shares be issued in the name of:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Please insert social security or
other identifying number:_______________________________________________________
If such number of Warrants is not all the Warrants evidenced by this Warrant
Certificate, a new Warrant Certificate for the balance remaining of such
Warrants will be registered in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Please insert social security
or other identifying number:____________________________________________________
Dated: __________________
________________________________________
Signature
Signature Guaranteed:
A-5
<PAGE>
NOTICE
------
Signatures on the foregoing Form of Assignment and Form of Exercise
Notice and in the related Warrant Certificates must correspond to the name as
written upon the face of this Warrant Certificate in every particular, without
alternation or enlargement or any change whatsoever.
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
A-6
<PAGE>
[Form for Buyer Participation Warrants]
================================================================================
WARRANT AGREEMENT
BETWEEN
ARCH COMMUNICATIONS
GROUP, INC.
AND
THE BANK OF NEW YORK
_________, 199__
================================================================================
<PAGE>
WARRANT AGREEMENT
-----------------
This WARRANT AGREEMENT, dated as of ___________, 199__ (the "Agreement"),
is made and entered into by and between Arch Communications Group, Inc., a
Delaware corporation (the "Company"), and The Bank of New York, a
_______________________, as warrant agent (the "Warrant Agent").
RECITALS
--------
WHEREAS, a plan of reorganization under Chapter 11 of the United States
Bankruptcy Code for MobileMedia Communications, Inc. ("MobileMedia"),
MobileMedia Corporation, the sole stockholder of MobileMedia ("Parent"), and all
of MobileMedia's subsidiaries (the "Plan") was confirmed on ________, 199_ by
order of the United States Bankruptcy Court for the District of Delaware in Case
Nos. 97-174 (PJW) through and including 97-192 (PJW), and has become effective;
WHEREAS, in connection with the Plan, the Company, a wholly owned
subsidiary of the Company ("Merger Sub"), Parent and MobileMedia entered into an
Agreement and Plan of Merger, dated as of August ___, 1998 (the "Merger
Agreement"), pursuant to which MobileMedia has been merged with and into Merger
Sub, with Merger Sub continuing as the surviving corporation and a wholly owned
subsidiary of the Company;
WHEREAS, the Plan and the Merger Agreement provide for the execution and
delivery of this Agreement by the Company and the issuance of warrants (the
"Warrants"), each Warrant initially representing the right to purchase one share
of Common Stock (as defined in Section 4.1(h)), on the terms and subject to the
conditions herein set forth; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance of Warrant Certificates (as defined in Section 1.2) and other matters
as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
the parties hereto hereby agree as follows:
1. Issuance of Warrants; Form of Warrants.
--------------------------------------
1.1. Issuance of Warrants. On the terms and subject to the conditions set
--------------------
forth in the Plan and the Merger Agreement, the Company will issue and deliver:
(a) an aggregate of __________ Warrants as contemplated by the Standby Purchase
Commitments (as defined in the Plan) as consideration for the commitments set
forth therein and (b) an aggregate of __________ Warrants pursuant to the Buyer
<PAGE>
Distribution (as defined in the Merger Agreement) as provided in Section 1.7(b)
of the Merger Agreement. The shares of Common Stock purchasable upon exercise
of the Warrants are hereinafter referred to as the "Warrant Shares." The
purchase price per Warrant Share payable upon the exercise of a Warrant (the
"Warrant Price") will initially be $____. The Warrant Price and the number
and kind of Warrant Shares purchasable upon exercise of the Warrants are subject
to adjustment pursuant to the provisions of Section 4.
1.2. Form of Warrants. Each Warrant, including without limitation any
----------------
Warrants that may be issued upon partial exercise, replacement, or transfer of
Warrants, will be evidenced by, and subject to the terms of, a Warrant
certificate (including the Form of Exercise Notice and Form of Assignment to be
printed on the reverse thereof, a "Warrant Certificate") in substantially the
form of Exhibit A, with such changes, marks of identification or designation,
and such legends, summaries, or endorsements printed thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto. Notwithstanding the foregoing,
Warrant Certificates evidencing Warrants issued as contemplated by clause (a) or
clause (b) of the first sentence of Section 1.1 will not bear restrictive
legends.
1.3. Countersignature of Warrants. The Warrant Certificates will be
----------------------------
executed on behalf of the Company by the manual or facsimile signature of its
Chairman of the Board, President, or any Vice President, and attested by its
Secretary or any Assistant Secretary. The Warrant Certificates will be manually
countersigned by the Warrant Agent and will not be valid for any purpose unless
so countersigned. In case any officer of the Company who has signed any of the
Warrant Certificates ceases to be such officer of the Company before
countersignature by the Warrant Agent and issuance and delivery by the Company,
such Warrant Certificates, nevertheless, may be countersigned by the Warrant
Agent, and issued and delivered by the Company with the same force and effect as
though the person who signed such Warrant Certificates had not ceased to be such
officer of the Company; and any Warrant Certificate may be signed on behalf of
the Company by any person who, at the actual date of the execution of such
Warrant Certificate, is a proper officer of the Company to sign such Warrant
Certificate, although on any other date such person was not such an officer.
Warrant Certificates will be dated the date of countersignature by the Warrant
Agent.
1.4 Registration of Warrants. The Warrant Agent, on behalf of the
------------------------
Company, will keep or cause to be kept, at the principal office of the Warrant
Agent designated for such purpose, books for registration and transfer of the
Warrant Certificates
- ---------------------------
/*/To be determined as provided in Schedule II to the Merger Agreement.
-2-
<PAGE>
issued hereunder by the Company. Such books will show the names and addresses of
the respective holders of the Warrant Certificates, the number of Warrants
evidenced on its face by each of the Warrant Certificates, and the date of each
of the Warrant Certificates. The Company and the Warrant Agent will be entitled
to treat the registered holder of any Warrant Certificate (the "Holder") as the
sole owner of the Warrants represented by such Warrant Certificate for all
purposes and will not be bound to recognize any equitable or other claim or
interest in such Warrants on the part of any other person. Neither the Company
nor the Warrant Agent will be liable for any registration of transfer of any
Warrants that are registered or to be registered in the name of a fiduciary or
the nominee of a fiduciary.
2. Transfer and Exchange of Warrants.
---------------------------------
2.1. Transfer and Exchange. Any Warrant Certificate may, except to the
---------------------
extent otherwise prohibited pursuant to this Agreement, be transferred, split
up, combined, or exchanged for another Warrant Certificate or Warrant
Certificates entitling the Holder thereof to purchase a like aggregate number of
Warrant Shares as the Warrant Certificate or Warrant Certificates surrendered
then entitled such Holder (or former Holder in the case of a transfer) to
purchase. Any Holder desiring to transfer, split up, combine, or exchange any
such Warrant Certificate will make such request in writing delivered to the
Warrant Agent, and will surrender the Warrant Certificate or Warrant
Certificates to be transferred, split up, combined, or exchanged, with the Form
of Assignment duly executed by the Holder thereof, at the principal office of
the Warrant Agent designated for such purpose. Thereupon or as promptly as
practicable thereafter, the Company will prepare, execute, and deliver to the
Warrant Agent, and the Warrant Agent will countersign and deliver, a Warrant
Certificate or Warrant Certificates, as the case may be, as so requested.
Neither the Company nor the Warrant Agent will be required to issue or deliver
any Warrant Certificates in connection with any transfer, split up, combination,
or exchange of Warrants or Warrant Certificates unless and until the person or
persons requesting the issuance or delivery thereof has paid to the Warrant
Agent the amount of any tax or governmental charge that may be payable in
connection with such transfer, split up, combination, or exchange or has
established to the satisfaction of the Warrant Agent that any tax or
governmental charge has been paid. Holders will not be required to pay any
other charge in connection with the transfer, split up, combination, or exchange
of Warrants.
2.2. Lost, Stolen, and Mutilated Warrant Certificates. Upon receipt by
------------------------------------------------
the Company and the Warrant Agent of evidence reasonably satisfactory to them of
the loss, theft, destruction, or mutilation of a Warrant Certificate, and, in
case of loss, theft, or destruction, of indemnity or security reasonably
satisfactory to them, and reimbursement to the Company and the Warrant Agent of
all reasonable expenses incidental thereto, and upon surrender to the Warrant
Agent and cancellation of the Warrant Certificate if mutilated, the Company will
prepare, execute, and deliver a
-3-
<PAGE>
new Warrant Certificate of like tenor to the Warrant Agent and the Warrant Agent
will countersign and deliver such new Warrant Certificate to the Holder in lieu
of the Warrant Certificate so lost, stolen, destroyed, or mutilated.
2.3. Payment of Taxes. The Company will pay all documentary or stamp
----------------
taxes, if any, attributable to the initial issuance of the Warrants and the
initial issuance of the Warrant Shares upon the exercise of Warrants; provided,
--------
however, that the Company's obligations in this regard will in all events be
- -------
conditioned upon the Holder cooperating with the Company and the Warrant Agent
in any reasonable arrangement designed to minimize or eliminate any such taxes.
Neither the Company nor the Warrant Agent will be required to pay any tax or
governmental charge that may be payable in connection with any transfer, split
up, combination, or exchange of Warrants or Warrant Certificates, and the
Company will not be required to issue or deliver such Warrant Certificates
unless or until the person or persons requesting the issuance thereof has paid
to the Company the amount of such tax or governmental charge or has established
to the satisfaction of the Company that such tax or governmental charge has been
paid.
2.4. Cancellation and Destruction of Warrant Certificates. All Warrant
----------------------------------------------------
Certificates surrendered for the purpose of exercise, transfer, split up,
combination, or exchange will, if surrendered to the Company, be delivered to
the Warrant Agent for cancellation or in canceled form, or, if surrendered to
the Warrant Agent, will be canceled by it, and no Warrant Certificates will be
issued in lieu thereof except as expressly permitted by this Agreement. The
Company will deliver to the Warrant Agent for cancellation and retirement, and
the Warrant Agent will so cancel and retire, any other Warrant Certificate
purchased or acquired by the Company otherwise than upon the exercise thereof.
The Warrant Agent will deliver all canceled Warrant Certificates to the Company,
or will, at the written request of the Company, destroy such canceled Warrant
Certificates, and in such case will deliver a certificate of destruction thereof
to the Company.
3. Duration and Exercise of Warrants.
---------------------------------
3.1. Duration and Exercise of Warrants. (a) Warrants may be exercised by
---------------------------------
the Holder thereof, in whole or in part, at any time and from time to time after
the date hereof and prior to 5:00 p.m., New York City time, on September 1, 2001
(the "Expiration Date"); provided that Holders shall be able to exercise their
--------
Warrants only if (i) (A) the Warrant Shares Registration Statement (as defined
in Section 10) is then in effect and the Company has delivered to each person
exercising a Warrant a current prospectus meeting the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or (B) the exercise
of such Warrants is exempt from the registration requirements of the Securities
Act, and (ii) the Warrant Shares are qualified for sale or exempt from
qualification under the applicable securities laws of the states in which the
Holder of the Warrants to be exercised, and, if applicable, the
-4-
<PAGE>
persons to whom it is proposed that the Warrant Shares be issued on exercise of
the Warrants, reside. The Holder of Warrants may exercise them by delivering to
the Warrant Agent, at its principal office designated for such purpose, the
following:
(i) the Warrant Certificate or Warrant Certificates representing
the Warrants to be exercised, with the Form of Exercise Notice duly
completed and executed by the Holder thereof; and
(ii) cash, a certified or bank cashier's check payable to the order
of the Company, or a wire transfer of immediately available funds to an
account designated by the Warrant Agent, in each case in an amount equal to
the product of (A) the number of Warrant Shares purchasable upon the
exercise of the Warrants designated for exercise in the Form of Exercise
Notice and (B) the Warrant Price.
(b) Subject to Section 2.3 hereof, as promptly as practicable after an
exercise of Warrants in accordance with Section 3.1(a), and in any event within
10 Business Days (as defined in Section 3.2) after such exercise, the Warrant
Agent will (i) requisition from any transfer agent for the Common Stock (or make
available, if the Warrant Agent is the transfer agent) certificates representing
the number of Warrant Shares to be purchased (and the Company hereby irrevocably
authorizes and directs its transfer agent to comply with all such requests),
(ii) after receipt of such certificates, cause the same to be delivered to or
upon the order of the Holder exercising such Warrants, registered in such name
or names as may be designated by such Holder, (iii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of the
issuance of fractional Warrant Shares in accordance with the provisions of
Section 5, and (iv) when appropriate, after receipt, deliver such cash to or
upon the order of the Holder exercising such Warrants.
(c) If the number of Warrants represented by a Warrant Certificate are not
exercised in full, the Company will prepare, execute, and deliver to the Warrant
Agent a new Warrant Certificate evidencing Warrants equivalent to such Warrants
remaining unexercised and the Warrant Agent will countersign and deliver such
new Warrant Certificate to or upon the order of the Holder exercising such
Warrants, registered in such name or names as may be designated by such Holder.
(d) The Company will take all such action as may be necessary to ensure
that all Warrant Shares delivered upon exercise of Warrants, at the time of
delivery of the certificates for such Warrant Shares, will (subject to payment
of the Warrant Price) be duly and validly authorized and issued, fully paid, and
nonassessable and, if shares of Common Stock are then listed on any national
securities exchange (as defined in the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) or qualified for quotation on The Nasdaq Stock
Market, will be duly listed or qualified for quotation thereon, as the case may
be.
-5-
<PAGE>
(e) In the event that the Company is obligated to pay cash in lieu of
fractional Warrant Shares pursuant to Section 5 in connection with any exercise
of Warrants, it will make all arrangements necessary so that such cash is
available for distribution by the Warrant Agent, if and when appropriate.
(f) The Company will pay all expenses, taxes, and other charges payable in
connection with the preparation, issuance, and delivery of certificates
representing Warrant Shares or Warrant Certificates representing unexercised
Warrants in connection with any exercise of Warrants in accordance with Section
3.1(a), except that, if any such certificates representing Warrant Shares or any
such Warrant Certificates are to be registered in a name or names other than
that of the Holder at the time of any such exercise of Warrants, funds
sufficient to pay all transfer or similar taxes payable as a result of such
transfer shall be paid by the Holder at the time of such exercise or promptly
upon receipt of a written request of the Company for payment thereof. In
connection with any exercise of Warrants in accordance with Section 3.1(a), the
Warrants will be deemed to have been exercised, any certificate representing
Warrant Shares or any Warrant Certificate issued on account thereof will be
deemed to have been issued, and the person in whose name any such certificate or
Warrant Certificate is issued will be deemed for all purposes to have become a
Holder of record of the Warrant Shares or Warrants, as the case may be,
represented thereby as of the date of such exercise.
3.2. Certain Definitions. For purposes of this Agreement, (a) the term
-------------------
"Business Day" means any day other than a Saturday, Sunday, or a day on which
banking institutions in the state of New York are authorized or obligated by law
or executive order to close and (b) the term "Trading Day" means any day on
which shares of Common Stock are traded on the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading
or, if shares of Common Stock are not so listed or admitted to trading, in the
over-the-counter market.
4. Adjustments of Warrant Price and Warrant Shares. The Warrant Price and
-----------------------------------------------
the number and kind of Warrant Shares purchasable upon exercise of the Warrants
will be subject to adjustment from time to time upon the occurrence of certain
events as provided in this Section 4.
4.1. Mechanical Adjustments. The Warrant Price and the number and kind of
----------------------
Warrant Shares purchasable upon exercise of a Warrant will be subject to
adjustment as follows:
(a) Subject to Section 4.1(e), if the Company (i) pays a dividend or
otherwise distributes to holders of its Common Stock, as such, shares of
its capital stock (whether Common Stock or capital stock of any other
class), (ii) subdivides its outstanding shares of Common Stock into a
greater number of
-6-
<PAGE>
shares of Common Stock, (iii) combines its outstanding shares of Common
Stock into a smaller number of shares of Common Stock, or (iv) issues any
shares of its capital stock in a reclassification of its outstanding shares
of Common Stock (including any such reclassification in connection with a
consolidation, merger, or other business combination transaction in which
the Company is the continuing or surviving corporation), then the number
and kind of Warrant Shares purchasable upon exercise of each Warrant
immediately prior thereto will be adjusted so that the Holder of each
Warrant will be entitled to receive (A) in the case of a dividend or
distribution, the sum of (1) the number of Warrant Shares that, if such
Warrant had been exercised immediately prior to such adjustment, such
Holder would have received upon such exercise and (2) the number and kind
of additional shares of capital stock that such Holder would have been
entitled to receive as a result of such dividend or distribution by virtue
of its ownership of such Warrant Shares, (B) in the case of a subdivision
or combination, the number of Warrant Shares that, if such Warrant had been
exercised immediately prior to such adjustment, such Holder would have
received upon such exercise, adjusted to give effect to such subdivision or
combination as if such Warrant Shares had been subject thereto, or (C) in
the case of an issuance in a reclassification, the sum of (1) the number of
Warrant Shares that, if such Warrant had been exercised immediately prior
to such adjustment, such Holder would have received upon such exercise and
retained after giving effect to such reclassification as if such Warrants
Shares had been subject thereto and (2) the number and kind of additional
shares of capital stock that such Holder would have been entitled to
receive as a result of such reclassification as if such Warrant Shares had
been subject thereto. An adjustment made pursuant to this paragraph (a)
will become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution in the case of a dividend or distribution and will become
effective immediately after the effective date of such subdivision,
combination, or reclassification in the case of a subdivision, combination,
or reclassification. If, after an adjustment, a Holder of a Warrant upon
exercise of it may receive shares of two or more classes of capital stock
of the Company, the Company shall determine the allocation of the adjusted
Warrant Price between the classes of capital stock. After such allocation,
the exercise privilege and the Warrant Price of each class of capital stock
shall thereafter be subject to adjustments as nearly equivalent as may be
practicable to the adjustments provided for Common Stock in this Section 4.
Such adjustments shall be made successively whenever any event listed above
shall occur.
(b) Subject to Section 4.1(e), if the Company distributes to holders
of its Common Stock, as such, (i) evidences of indebtedness or assets
(excluding regular cash dividends or cash distributions payable out of
consolidated retained earnings) of the Company or any corporation or other
legal entity a
-7-
<PAGE>
majority of the voting equity securities or equity interests of which are
owned, directly or indirectly, by the Company (a "Subsidiary"), (ii) shares
of capital stock of any Subsidiary, (iii) securities convertible into or
exchangeable for capital stock of the Company (including Common Stock or
capital stock of any other class) or any Subsidiary, or (iv) any rights,
options, or warrants to purchase any of the foregoing (excluding those
described in Section 4.1(c)), then the number of Warrant Shares thereafter
purchasable upon exercise of each Warrant will be adjusted to the number
that results from multiplying the number of Warrant Shares purchasable upon
the exercise of each Warrant immediately prior to such adjustment by a
fraction, the numerator of which will be the Current Market Price per share
(as defined in Section 4.1(d)) of Common Stock on the record date for such
distribution, and the denominator of which will be such Current Market
Price per share of Common Stock less the fair value (as determined in good
faith by the Board of Directors of the Company, whose determination will be
conclusive if based on the financial advice of a nationally recognized
investment banking firm) of the portion of the evidences of indebtedness,
assets, securities, or rights, options, or warrants so distributed on
account of one share of Common Stock. Such adjustment will be made whenever
any such distribution is made, and will become effective immediately after
the record date for the determination of stockholders entitled to receive
such distribution. Except as provided in Section 4.1(h), no further
adjustments of the number of Warrant Shares will be made upon the actual
issue of shares of Common Stock upon conversion or exchange of such
securities convertible or exchangeable for shares of Common Stock or upon
exercise of such rights, warrants, or options for shares of Common Stock.
(c) Subject to Section 4.1(e), if the Company issues rights, options,
or warrants to holders of the outstanding shares of Common Stock, as such,
entitling the holders of such rights, options, or warrants (for a period
expiring within 60 calendar days after the record date mentioned below) to
subscribe for or purchase shares of Common Stock at a price per share that
is lower on the record date mentioned below than the Current Market Price
per share of Common Stock on such record date, then the number of Warrant
Shares thereafter purchasable upon the exercise of each Warrant will be
adjusted to the number that results from multiplying the number of Warrant
Shares purchasable upon exercise of each Warrant immediately prior to such
adjustment by a fraction (not to be less than one), the numerator of which
will be the number of shares of Common Stock outstanding on such record
date plus the number of additional shares of Common Stock offered by such
rights, options, or warrants for subscription or purchase and the
denominator of which will be the number of shares of Common Stock
outstanding on such record date plus the number of shares of Common Stock
which the aggregate subscription or purchase price of the total number of
shares of Common Stock
-8-
<PAGE>
so offered would purchase at the Current Market Price per share of Common
Stock on such record date. Such adjustment will be made whenever such
rights, options, or warrants are issued, and will become effective
immediately after the record date for the determination of stockholders
entitled to receive such rights, options, or warrants. In case such
subscription or purchase price may be paid in a consideration part or all
of which is in a form other than cash, the fair value of such consideration
will be as determined by the Board of Directors of the Company, whose
determination will be conclusive if based on the financial advice of a
nationally recognized investment banking firm. Except as provided in
Section 4.1(h), no further adjustments of the number of Warrant Shares will
be made upon the actual issue of shares of Common Stock upon exercise of
such rights, options, or warrants.
(d) For purposes of this Agreement, the "Current Market Price" per
share of Common Stock on any date will be the average of the daily Closing
Prices (as defined below in this Section 4.1(d)) for 30 consecutive Trading
Days commencing 45 Trading Days before the date of such computation. The
closing price for each day (the "Closing Price") will be the last reported
sales price regular way or, in case no such reported sale takes place on
such day, the average of the closing bid and asked prices regular way for
such day, in each case on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to trading or, if
not so listed or admitted to trading, the average of the closing bid and
asked prices of the shares of Common Stock in the over-the-counter market
as reported by The Nasdaq Stock Market or any comparable system, or if not
so reported by any such organization on such day, the average of the bid
and asked prices furnished by a professional market maker selected by the
Board of Directors of the Company. In the absence of one or more such
quotations, the Board of Directors of the Company will determine the
Current Market Price in good faith on the basis of such quotations or other
relevant information as it considers appropriate.
(e) No adjustment in the number of Warrant Shares purchasable upon the
exercise of a Warrant will be required unless such adjustment would require
an increase or decrease in the number of Warrant Shares purchasable upon
the hypothetical exercise of a Warrant of at least 1%; provided, however,
-------- -------
that any adjustments which by reason of this paragraph (e) are not required
to be made currently will be carried forward and made at the time and
together with the next subsequent adjustment which, together with any
adjustments so carried forward, would require an increase or decrease in
the number of Warrant Shares purchasable upon the hypothetical exercise of
a Warrant of 1% or more. All calculations with respect to the number of
Warrant Shares will be made to the nearest one-thousandth of a share and
all calculations with respect to the Warrant Price will be to the nearest
whole cent. No adjustment in the
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<PAGE>
number of Warrant Shares purchasable upon the exercise of a Warrant will be
made under paragraph (b) or (c) of this Section 4.1 if the Company issues
or distributes to each Holder the shares, rights, options, warrants,
convertible or exchangeable securities, evidences of indebtedness, assets,
or other securities referred to in the applicable paragraph that such
Holder would have been entitled to receive had the Warrants been exercised
prior to the happening of such event on the record date with respect
thereto (provided that, in any case in which such Holder would have been so
--------
entitled to receive a fractional interest in any such securities or assets,
the Company may distribute to such Holder in lieu of such fractional
interest cash in an amount equal to the fair value of such fractional
interest as determined in good faith by the Board of Directors of the
Company). No adjustment in the number of Warrant Shares will be made for a
change in the par value of the shares of Common Stock.
(f) Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant is adjusted as herein provided, the Warrant Price
will be adjusted by multiplying the Warrant Price in effect immediately
prior to such adjustment by a fraction, the numerator of which will be the
number of Warrant Shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment, and the denominator of which will be
the number of Warrant Shares so purchasable immediately thereafter.
(g) For the purpose of this Agreement, the term "Common Stock" means
(i) the class of shares designated as the Common Stock of the Company as of
the date of this Agreement, (ii) all shares of any class or classes
(however designated) of the Company, now or hereafter authorized, the
holders of which have the right, without limitation as to amount, either to
all or to a part of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference, and the holders of which are ordinarily entitled to
vote generally in the election of directors of the Company, or (iii) any
other class of shares resulting from successive changes or
reclassifications of such shares consisting solely of changes in par value,
or from par value to no par value, or from no par value to par value. In
the event that at any time, as a result of an adjustment made pursuant to
Section 4.1(a), the Warrants become exercisable to purchase Warrant Shares
other than shares of Common Stock, thereafter the number of such other
shares so purchasable upon exercise of each Warrant and the Warrant Price
payable in respect of such other shares upon the exercise of each Warrant
will be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the
Warrant Shares and the Warrant Price contained in this Section 4.1.
(h) Upon the expiration of any rights, options, warrants, or
conversion or exchange privileges, if any thereof have not been exercised,
the
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<PAGE>
Warrant Price and the number of Warrant Shares purchasable upon the
exercise of each Warrant will, upon such expiration, be readjusted and will
thereafter be such as it would have been had it been originally adjusted
(or had the original adjustment not been required, as the case may be) as
if (i) the only shares of Common Stock so issued were the shares of Common
Stock, if any, actually issued or sold upon the exercise of such rights,
options, warrants, or conversion or exchange rights and (ii) such shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise, conversion, or exchange plus
the aggregate consideration, if any, actually received by the Company for
the issuance, sale, or grant of all such rights, options, warrants, or
conversion or exchange rights whether or not exercised; provided, however,
-------- -------
that no such readjustment will have the effect of increasing the Warrant
Price or decreasing the number of Warrant Shares purchasable upon the
exercise of each Warrant by an amount in excess of the amount of the
adjustment initially made in respect of the issuance, sale, or grant of
such rights, options, warrants, or conversion or exchange privileges.
4.2. Notice of Adjustment. Whenever the Warrant Price or the number or
--------------------
kind of Warrant Shares purchasable upon exercise of the Warrants is adjusted
pursuant to any of the provisions of this Agreement, the Company will promptly
give notice to the Holders of such adjustment or adjustments, together with a
certificate of a firm of independent public accountants selected by the Company
(who may be the regular accountants employed by the Company) setting forth the
adjustments in the Warrant Price and the number or kind of Warrant Shares
purchasable upon exercise of each Warrant, and also setting forth a brief
statement of the facts requiring such adjustments and the computations upon
which such adjustments are based. Such certificate will be conclusive evidence
of the correctness of such adjustments.
4.3. No Adjustment for Dividends. Except as provided in Section 4.1, no
---------------------------
adjustment or payment in respect of any dividends will be made at any time.
4.4 Voluntary Reduction. The Company from time to time may reduce the
-------------------
Warrant Price by any amount for any period of time, if the period is at least 20
calendar days and if the reduction is irrevocable during the period; provided
--------
that in no event may the Warrant Price be less than the par value of the Common
Stock. Whenever the Warrant Price is so reduced, the Company will mail to
Holders a notice of the reduction at least 15 calendar days before the date the
reduced Warrant Price takes effect. Such notice will state the reduced Warrant
Price and the period during which it will be in effect. Failure to mail the
notice or any defect therein will not affect the legality or validity of the
reduction. A reduction of the Warrant Price does not change or adjust the
Warrant Price otherwise in effect for purposes of Section 4.1.
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<PAGE>
4.5. Preservation of Purchase Rights Upon Merger, Consolidation, Etc. In
----------------------------------------------------------------
case of any consolidation, merger, or other business combination transaction in
which the Company is not the continuing or surviving corporation, or in case of
any sale, transfer, or lease to another corporation of all or substantially all
the property of the Company, the Company and such successor or purchasing
corporation, as the case may be, will execute an agreement providing that each
Holder will have the right thereafter, upon payment of an amount equal to the
amount payable upon the exercise of a Warrant immediately prior thereto, to
purchase upon exercise of each Warrant the kind and amount of securities or
property that it would have owned or have been entitled to receive after giving
effect to such consolidation, merger, sale, transfer, or lease on account of the
Warrant Shares that would have been purchasable upon the exercise of such
Warrant had such Warrant been exercised immediately prior thereto (provided
--------
that, to the extent that such Holder would have been so entitled to receive cash
on account of such Warrant Shares, such Holder may elect in connection with the
exercise of a Warrant in accordance with Section 3.1 to reduce the amount of
cash that it would be entitled to receive upon such exercise in exchange for a
corresponding reduction in the amount payable upon such exercise); provided,
--------
however, that no adjustment in respect of dividends, interest, or other income
- -------
on or from such shares or other securities or property will be made during the
term of a Warrant or upon the exercise of a Warrant. Such agreement will
provide for adjustments that will be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 4. The provisions of this
Section 4.5 will similarly apply to successive consolidations, mergers, sales,
transfers, or leases.
4.6. Warrant Certificates. Whether or not any adjustments in the Warrant
--------------------
Price or the number or kind of Warrant Shares purchasable upon the exercise of
the Warrants has been made, Warrant Certificates theretofore or thereafter
issued may continue to express the same Warrant Price and number and kind of
Warrant Shares as are stated in the Warrant Certificate initially issued.
5. Fractional Interests. Neither the Company nor the Warrant Agent will
--------------------
be required to issue fractional Warrant Shares or fractional interests in any
other securities upon the exercise of the Warrants. If any fraction of a
Warrant Share or other security would, except for the provisions of this Section
5, be issuable upon the exercise of the Warrants, the Company will pay an amount
(computed to the nearest cent) in cash (a) in lieu of a fractional Warrant
Share, equal to the Current Market Price for one share of Common Stock, as
defined in Section 4.1(d), on the Trading Day immediately preceding the date on
which the Warrants are presented for exercise, multiplied by such fraction of a
Warrant Share or (b) in lieu of a fractional interest in any other security,
equal to the fair value of such fractional interest, determined in a manner as
similar as possible, taking into account the difference in the fractional
interest being valued, to the calculation described in the foregoing clause (a).
-12-
<PAGE>
6. Warrant Agent Matters.
---------------------
6.1. Appointment of Warrant Agent. The Company hereby appoints the
----------------------------
Warrant Agent to act as warrant agent in accordance with the terms and
conditions hereof, and the Warrant Agent hereby accepts such appointment.
6.2. Concerning the Warrant Agent. (a) The Company will pay to the
----------------------------
Warrant Agent reasonable compensation for all services rendered by it hereunder
and will reimburse the Warrant Agent for its reasonable expenses and counsel
fees and other disbursements incurred in the administration and execution of
this Agreement and the exercise and performance of its duties hereunder. The
Company will indemnify the Warrant Agent for, and hold it harmless against, any
loss, liability, suit, action, proceeding, or expense, incurred without
negligence, bad faith, or willful misconduct on the part of the Warrant Agent,
for anything done or omitted by the Warrant Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability arising therefrom, directly
or indirectly.
(b) The Warrant Agent will incur no liability to the Company or to any
Holder for or in respect of any action taken, suffered, or omitted by it in
connection with its administration of this Agreement in reliance upon any
Warrant Certificate or certificate evidencing Common Stock or other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed, and, where necessary, verified or acknowledged, by the proper
person or persons.
6.3. Merger or Consolidation or Change of Name of Warrant Agent. (a) Any
---------------------------------------------------- -----
corporation into which the Warrant Agent or any successor Warrant Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Warrant Agent or any successor Warrant
Agent is a party, or any corporation succeeding to the corporate trust business
of the Warrant Agent or any successor Warrant Agent, will be the successor to
the Warrant Agent under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
--------
such corporation would be eligible for appointment as a successor Warrant Agent
under the provisions of Section 6.5. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, and in case
at that time any of the Warrant Certificates shall have been countersigned but
not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent; and in case at that time any of
the Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor to the Warrant
Agent; and in all such cases such Warrant Certificates
-13-
<PAGE>
shall have the full force and effect provided in the Warrant Certificates and in
this Agreement.
(b) In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
6.4. Duties of Warrant Agent. The Warrant Agent undertakes the duties and
-----------------------
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the Holders, by their acceptance of Warrant
Certificates, will be bound:
(a) The Warrant Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel will be full and
complete authorization and protection to the Warrant Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Warrant Agent deems it necessary or desirable that any fact or matter be proved
or established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by any one of the Chairman of the Board, the President,
or any Vice President of the Company and delivered to the Warrant Agent; and
such certificate will be full authorization to the Warrant Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Warrant Agent's duties will be determined solely by the provisions
hereof. The Warrant Agent will not be liable for anything that it may do or
refrain from doing in connection with this Agreement except for its own
negligence, bad faith, or willful misconduct; provided, however, that the
-------- -------
Warrant Agent shall not be liable for any indirect, special, punitive or
consequential damages.
(d) The Warrant Agent will not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Warrant
Certificates or be required to verify the same, but all such statements and
recitals are and will be deemed to have been made by the Company only.
-14-
<PAGE>
(e) The Warrant Agent will not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution and delivery hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant Certificate (except the due
countersignature thereof by the Warrant Agent); nor will it be responsible for
any breach by the Company of any covenant or condition contained in this
Agreement or in any Warrant Certificate; nor will it be responsible for any
adjustment required under the provisions of Section 4 hereof or responsible for
the manner, method, or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Warrants evidenced by Warrant Certificates after actual
notice of any such adjustment); nor will it by any act hereunder be deemed to
make any representation or warranty as to the authorization or reservation of
any shares of stock or other securities to be issued pursuant to this Agreement
or any Warrant Certificate or as to whether any shares of stock or other
securities will, when issued, be validly authorized and issued, fully paid, and
nonassessable.
(f) The Company will perform, execute, acknowledge, and deliver or cause to
be performed, executed, acknowledged, and delivered all such further and other
acts, instruments, and assurances as may reasonably be required by the Warrant
Agent for the carrying out or performing by the Warrant Agent of the provisions
of this Agreement.
(g) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, or any Vice President of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and it will not be liable for any action taken or suffered to
be taken by it in good faith in accordance with instructions of any such
officer.
(h) The Warrant Agent and any stockholder, director, officer, or employee
of the Warrant Agent may buy, sell, or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Warrant Agent
under this Agreement. Nothing herein will preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Warrant Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Warrant Agent will not be answerable or
accountable for any act, default, neglect, or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect, or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof. The Warrant Agent will not be under any duty
or
-15-
<PAGE>
responsibility to insure compliance with any applicable federal or state
securities laws in connection with the issuance, transfer, or exchange of
Warrant Certificates.
6.5. Change of Warrant Agent. The Warrant Agent or any successor Warrant
-----------------------
Agent may resign and be discharged from its duties under this Agreement upon 30
calendar days' notice in writing mailed to the Company and to each transfer
agent of the Common Stock by registered or certified mail, and to the Holders by
first-class mail. The Company may remove the Warrant Agent or any successor
Warrant Agent upon 30 calendar days' notice in writing, mailed to the Warrant
Agent or successor Warrant Agent, as the case may be, and to each transfer agent
of the Common Stock by registered or certified mail, and to the Holders by
first-class mail. If the Warrant Agent resigns or is removed or otherwise
becomes incapable of acting, the Company will appoint a successor to the Warrant
Agent. If the Company fails to make such appointment within a period of 30
calendar days after giving notice of such removal or after it has been notified
in writing of such resignation or incapacity by the resigning or incapacitated
Warrant Agent or by any Holder (who will, with such notice, submit his Warrant
Certificate for inspection by the Company), then any Holder may apply to any
court of competent jurisdiction for the appointment of a successor Warrant
Agent. Pending appointment of a successor to such Warrant Agent, either by the
Company or by such a court, the duties of the Warrant Agent will be carried out
by the Company. Any successor Warrant Agent, whether appointed by the Company
or by such a court, will be a corporation organized and doing business under the
laws of the United States or of the State of New York (or of any other state of
the United States so long as such corporation is authorized to do business as a
banking institution in the State of New York), in good standing, having a
principal office in the State of New York, which is authorized under such laws
to exercise corporate trust powers and is subject to supervision or examination
by federal or state authority and which has at the time of its appointment as
Warrant Agent a combined capital and surplus of at least $50 million. After
appointment, the successor Warrant Agent will be vested with the same powers,
rights, duties, and responsibilities as if it had been originally named as
Warrant Agent without further act or deed; but the predecessor Warrant Agent
will deliver and transfer to the successor Warrant Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act, or deed necessary for the purpose. Not later than the
effective date of any such appointment, the Company will file notice thereof in
writing with the predecessor Warrant Agent and each transfer agent of the Common
Stock, and mail by first class mail a notice thereof to each Holder. Failure to
give any notice provided for in this Section 6.5, however, or any defect
therein, will not affect the legality or validity of the resignation or removal
of the Warrant Agent or the appointment of the successor Warrant Agent, as the
case may be.
7.1 No Rights as a Stockholder; Notices to Holders. Nothing contained in
----------------------------------------------
this Agreement or in the Warrant Certificate will be construed as conferring
upon the
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<PAGE>
Holders or their transferees the right to vote, or to receive dividends, or to
consent or to receive notice as a stockholder in respect of any meeting of
stockholders for the election of directors of the Company or any other matter,
or any rights whatsoever as a stockholder of the Company; provided, however,
-------- -------
that if, at any time prior to the Expiration Date and prior to the exercise of
all of the Warrants, any of the following events occur:
(a) The Company declares any dividend payable in any securities upon
its shares of Common Stock or makes any distribution (other than a regular
cash dividend payable out of consolidated retained earnings) to the holders
of its shares of Common Stock;
(b) The Company offers to the holders of its Common Stock any shares
of capital stock of the Company or any Subsidiary or securities convertible
into or exchangeable for shares of capital stock of the Company or any
Subsidiary or any option, right, or warrant to subscribe for or purchase
any thereof;
(c) The Company distributes to the holders of its Common Stock
evidences of indebtedness or assets (including any cash dividend which
would result in an adjustment under Section 4.1) of the Company or any
Subsidiary;
(d) Any reclassification of the Common Stock, any consolidation of the
Company with or merger of the Company into another corporation, any sale,
transfer, or lease to another corporation of all or substantially all the
property of the Company, or any proposal of the Company to effect any of
the foregoing transactions that has been publicly announced by the Company;
or
(e) Any proposal by the Company to effect a dissolution, liquidation,
or winding up of the Company that has been publicly announced by the
Company;
then in any one or more of such events the Company will give notice of such
event to the Holders, as provided in Section 12 hereof, such giving of notice to
be completed at least 10 business days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, or subscription rights or
at least 20 business days prior to the date fixed as a record date or the date
of closing the transfer books for the determination of stockholders entitled to
vote on such proposed reclassification, consolidation, merger, sale, transfer,
or lease, dissolution, liquidation, or winding up. Such notice will specify
such record date or the date of closing the transfer books, as the case may be,
for such event. Failure to mail or receive such notice or any defect therein or
in the mailing thereof will not affect the validity of any action taken in
connection with such event.
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<PAGE>
7.2. Reports to Holders. The Company will deliver to the Warrant Agent,
------------------
within 15 calendar days after it files them with the Securities and Exchange
Commission (the "SEC"), copies of its annual report and of the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) that the Company is required
to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. To
the extent any such information, documents, or other reports are required to be
sent by the Company to the holders of outstanding Common Stock, the Company will
simultaneously send copies thereof to the Holders of Warrants. The Warrant
Agent will provide to any Holder promptly upon request a copy of any document
delivered to the Warrant Agent by the Company pursuant to this Section 7.2.
7.3. Agreements Respecting Warrants. The Company will not enter into any
------------------------------
agreement or instrument which would preclude the exercise of the Warrants as
herein provided.
8. Agreement of Warrant Holders. Every Holder by accepting a Warrant
----------------------------
Certificate consents and agrees with the Company and the Warrant Agent and with
every other Holder that:
(a) The Warrant Certificates are transferable only in accordance with the
terms of this Agreement and only on the registry books of the Warrant Agent if
surrendered at the principal office of the Warrant Agent designated for such
purpose, duly endorsed or accompanied by a proper instrument of transfer, and
otherwise in compliance with Section 2;
(b) The Company and the Warrant Agent may deem and treat the person in
whose name the Warrant Certificate is registered as the absolute owner thereof
and of the Warrants evidenced thereby (notwithstanding any notations of
ownership or writing on the Warrant Certificate made by anyone other than the
Company or the Warrant Agent) for all purposes whatsoever, and neither the
Company nor the Warrant Agent will be affected by any notice to the contrary;
(c) Such Holder expressly waives any right to receive any fractional
Warrants and any fractional securities upon exercise or exchange of a Warrant;
and
(d) Notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Warrant Agent will have any liability to any Holder or other
person as a result of its inability to perform any of its obligations under this
Agreement by reason of any preliminary or permanent injunction or other order,
decree, or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory, or administrative agency or commission, or any
statute, rule, regulation, or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining performance of such
obligation; provided,
--------
-18-
<PAGE>
however, that the Company will use reasonable efforts to have any such order,
- -------
decree, or ruling lifted or otherwise overturned as soon as possible.
9. Reservation of Common Stock. The Company will, for so long as Warrants
---------------------------
remain outstanding, reserve and keep available, solely for issuance and delivery
upon the exercise of Warrants, a number of shares of Common Stock (or, if
applicable, other securities) sufficient to provide for the exercise of all
outstanding Warrants. The transfer agent for the Common Stock (or, if
applicable, other securities) will be irrevocably authorized and directed at all
times until the exercise or expiration of the Warrants to reserve such number of
authorized shares of Common Stock (or, if applicable, other securities) as
necessary for such purpose. The Company will keep copies of this Agreement on
file with the transfer agent and will supply the transfer agent with duly
executed stock certificates for such purpose.
10. Listing and Registration. (a) The [Warrants and the]/**/ Warrant
------------------------
Shares have been listed for trading on the Nasdaq National Market, and the
Company will use its reasonable best efforts to maintain such listing. [In
addition, the Company will use its reasonable best efforts to secure and
maintain the listing of the Warrants on the Nasdaq National Market.]*
(b) The Warrants issued as contemplated by clauses (a) and (b) of the first
sentence of Section 1.1 have been registered for public distribution under the
Securities Act pursuant to a registration statement (No. 333-___________) filed
by the Company with the SEC. The Warrant Shares have been registered for public
distribution upon exercise of the Warrants under the Securities Act pursuant to
registration statement (No. 333-________________) (together with any amendments
thereto, the "Warrant Shares Registration Statement") filed by the Company with
the SEC. Subject to Black Out Periods (as defined below in this Section 10(b)),
the Company will use its reasonable best efforts to keep the Warrant Shares
Registration Statement continuously effective under the Securities Act until the
expiration or exercise of all Warrants in order to permit the prospectus
included therein to be lawfully delivered by the Company to the Holders
exercising such Warrants and by Holders of such Warrants to prospective
purchasers of such Warrants. Notwithstanding the foregoing, the Company shall
not be required to amend or supplement the Warrant Shares Registration
Statement, any related prospectus or any document incorporated therein by
reference for a period (a "Black Out Period"), beginning on the date the Company
gives notice (the "Black Out Notice") to the Warrant Agent and the Holders that
such a period has commenced and ending on the earlier of (i) the date the
information responsible for the Black Out Period is
__________________________
/*/The language in this section is bracketed because the language to be
included in the definitive agreement depends upon whether the Warrants will have
been listed as of the date of the definitive agreement.
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<PAGE>
disclosed to the public and (ii) 60 calendar days after any such Black Out
Notice is given, in the event that (A) an event occurs and is continuing as a
result of which the Warrant Shares Registration Statement, any related
prospectus, or any document incorporated therein by reference as then amended or
supplemented would, in the Company's good faith judgment, contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, and (B) (1) the Company determines in its good faith
judgment that the disclosure of such event at such time would have a material
adverse effect on the business, operations, or prospects of the Company or (2)
the disclosure otherwise relates to a material business transaction, including
without limitation any bona fide financing plan, that has not yet been publicly
---- ----
disclosed; provided, however, that (x) no Black Out Period may be in effect
-------- ------
during the six months immediately prior to the Expiration Date, (y) there shall
be no more than two Black Out Periods during any period of 180 consecutive
calendar days, and (z) there shall be no more than three Black Out Periods
during the term of the Warrants.
(c) The Company will cause any amendment or supplement to the Warrant
Shares Registration Statement or the related prospectus, as of the effective
date of the Warrant Shares Registration Statement, amendment, or supplement, (i)
to comply in all material respects with the applicable requirements of the
Securities Act and the rules and regulations of the SEC and (ii) not to contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(d) The Company will give prompt written notice to the Warrant Agent and
the Holders of (i) the effectiveness of any post-effective amendment to the
Warrant Shares Registration Statement, (ii) the issuance by the SEC of any stop
order suspending the effectiveness of the Warrant Shares Registration Statement
or the initiation or threatening of any proceedings for that purpose, (iii) the
receipt by the Company or its legal counsel of any notification with respect to
the suspension of the qualification of the Warrant Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, (iv) the happening of any event that requires the Company to make
changes in the Warrant Shares Registration Statement or the related prospectus
in order to make the statements therein not misleading, and (v) the commencement
and termination of any Black Out Period.
(e) The Company will use its reasonable best efforts to prevent the
issuance or obtain the withdrawal at the earliest possible time of any order
suspending the effectiveness of the Warrant Shares Registration Statement.
(f) Upon the occurrence of any event contemplated by Section 10(d)(iv)
hereof or, if any such event occurs during a Black Out Period, upon the
termination
-20-
<PAGE>
of such Black Out Period, the Company will promptly prepare and file a post-
effective amendment to the Warrant Shares Registration Statement or a supplement
to the related prospectus or file any other required document so that, as
thereafter delivered to Holders of Warrants, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading and will contain the current information required by
the Securities Act.
(g) The Company will comply with all applicable rules and regulations of
the SEC and will make generally available to its securities holders (or
otherwise provide in accordance with Section 11(a) of the Securities Act) an
earnings statement satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days (plus any extension permitted by Rule 12b-25 under
the Exchange Act after the end of a 12-month period (or 90 days, if such period
is a fiscal year (plus any extension permitted by Rule 12b-25 under the Exchange
Act)) beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of the Registration Statement, which
statement shall cover such 12-month period.
(h) The Company will register or qualify or cooperate with the Holders in
connection with the registration or qualification of the Warrant Shares for
offer and sale by the Company upon exercise of the Warrants under the securities
or blue sky laws of such state of the United States as any Holder reasonably
requests and do any and all other acts or things necessary or advisable to
enable such offer and sale in such jurisdictions; provided that the Company
--------
shall not be required to (i) qualify to do business in any jurisdiction in which
it is not then so qualified or (ii) take any action which would subject it to
general service of process or to taxation in any jurisdiction in which it is not
then so subject.
(i) The Company will bear all expenses incurred by it in connection with
the performance of its obligations under this Section 10.
(j) The Company acknowledges and agrees that any remedy at law for breach
of any provision of this Section 10 will be inadequate and that, in addition to
any other remedies that the Holders may have, the Holders will be entitled to
the remedy of specific performance to ensure the Company performs its
obligations under this Section 10. The election of any one or more remedies by
the Holders hereunder will not constitute a waiver of the right to pursue other
available remedies.
11. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to the Warrant Agent that:
(a) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware and has all
-21-
<PAGE>
requisite corporate power and authority to execute, deliver, and perform
its obligations hereunder and to consummate the transactions contemplated
hereby;
(b) The execution, delivery, and performance of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company;
(c) The execution, delivery, and performance of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby in accordance with the terms hereof do not and will not
conflict with, violate, or constitute a breach of any material contract,
agreement, or instrument by which the Company is bound or any judgment,
order, decree, law, statute, rule, regulation, or other judicial or
governmental restriction to which the Company is subject;
(d) This Agreement constitutes the legal, valid, and binding
obligation of the Company, enforceable against the Company in accordance
with its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting creditors' rights generally; and
(e) The Warrants, when issued and delivered to the initial Holders as
provided in this Agreement, and the Warrant Shares issued upon exercise of
the Warrants, when issued, paid for, and delivered as provided in this
Agreement, will be duly and validly issued and outstanding, fully paid, and
nonassessable.
12. Notices. All notices, requests, waivers, releases, consents, and
-------
other communications required or permitted by this Agreement (collectively,
"Notices") must be in writing. Except as expressly otherwise provided herein
with respect to manner of delivery, notices will be deemed sufficiently given
for all purposes when delivered in person, when dispatched by telegram or
electronic facsimile transmission, when sent by first-class mail, postage
prepaid, or upon confirmation of receipt when dispatched by a nationally
recognized overnight courier service to the appropriate party as follows: (a)
if to a Holder, at the address of such Holder as shown in the registry books
maintained by the Warrant Agent; (b) if to the Company, at The Bank of New York,
601 Barclay Street, 12W, New York, New York 10286, Telecopy No. (___) ___-____
(marked for the attention of the Chief Financial Officer and the General
Counsel), or at such other address as the Company may have furnished to the
Holders and the Warrant Agent in writing; and (c) if to the Warrant Agent, at
_________, ________, ________ _____, Telecopy No. (___) ___-____ (marked
-22-
<PAGE>
for the attention of _______________) or at such other address as the Warrant
Agent may have furnished to the Company and the Holders in writing.
13. Amendment and Waiver. No failure or delay of the Holder in exercising
--------------------
any power or right hereunder (other than a failure to exercise Warrants in
accordance with the provisions hereof) will operate as a waiver thereof, nor
will any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No notice or demand on the Company in any case will entitle the
Company to any other or future notice or demand in similar or other
circumstances. Subject to the last sentence of this Section 13, (a) if the
Company so directs, the Company and the Warrant Agent will supplement or amend
this Agreement without the approval of any Holders in order to cure any
ambiguity or correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Warrant Agent may deem necessary or desirable and which shall not in any
way adversely affect the interests of the Holders of Warrants or the Warrant
Agent and (b) the Company and the Warrant Agent may from time to time supplement
or amend this Agreement, with the consent of Holders of at least 50% of the
Warrants then outstanding, for any other purpose. Notwithstanding anything in
this Agreement to the contrary, no supplement or amendment which increases the
Warrant Price, decreases the period of time remaining during which the Warrants
may be exercised, or changes in a manner adverse to Holders the number of
Warrant Shares purchasable upon the exercise of Warrants will be made without
the consent of all Holders. Any such amendment, modification, or waiver
effected pursuant to and in accordance with the provisions of this Section 13
will be binding upon all Holders and upon each future Holder, the Company, and
the Warrant Agent. In the event of any such amendment, modification, or waiver,
the Company will give prompt notice thereof to all Holders and, if appropriate,
notation thereof will be made on all Warrant Certificates thereafter surrendered
for registration of transfer or exchange.
14. Successors and Assigns. This Agreement will be binding upon and inure
----------------------
to the benefit of the Company, the Warrant Agent, and their respective
successors and assigns, and, subject to Sections 1.4 and 8(b), all Holders.
15. Rights of the Parties. Except as provided in Section 14, nothing
---------------------
expressed or implied in this Agreement is intended or will be construed to
confer upon or give any person or entity other than the Company, the Warrant
Agent, and the Holders any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby. This Agreement will be for
the sole and exclusive benefit of the Company, the Warrant Agent, and the
Holders. All rights of action in respect of this Agreement are vested in the
Holders, and any Holder without the consent of the
-23-
<PAGE>
Warrant Agent or any other Holder may, on such Holder's own behalf and for such
Holder's own benefit, enforce such Holder's rights hereunder, including the
right to exercise, exchange, or surrender for transfer such Holder's Warrant
Certificates in accordance with the provisions hereof.
16. Titles and Headings. Titles and headings to Sections herein are
-------------------
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
17. Certain Interpretive Matters and Definitions. Unless the context
--------------------------------------------
otherwise requires, (a) all references to Sections or Exhibits are to Sections
or Exhibits of or to this Agreement, (b) each term defined in this Agreement has
the meaning assigned to it, (c) "or" is disjunctive but not necessarily
exclusive, and (d) words in the singular include the plural and vice versa. All
---- -----
references to "$" or dollar amounts are to lawful currency of the United States
of America.
18. Entire Agreement. This Agreement, together with its Exhibits,
----------------
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof, and there are no agreements among the parties hereto
with respect thereto except as expressly set forth herein.
19. Severability. In case any provision contained in this Agreement is
------------
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions will not in any way be affected or impaired thereby.
The Company and the Warrant Agent will endeavor in good faith to replace the
invalid, illegal, or unenforceable provisions with valid, legal, and enforceable
provisions the economic effect of which comes as close as possible to that of
the invalid, illegal, or unenforceable provisions.
20. Governing Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the State of New York, without giving effect to the
principles of conflict of laws thereof.
21. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which so executed will be deemed to be an original; such
counterparts will together constitute but one agreement.
-24-
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the date first above written.
ARCH COMMUNICATIONS
GROUP, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
THE BANK OF NEW YORK
By:_____________________________________
Name:___________________________________
Title:__________________________________
-25-
<PAGE>
EXHIBIT A
---------
FORM OF WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS SET FORTH IN THE WARRANT AGREEMENT (AS HEREINAFTER DEFINED), A COPY
OF WHICH WILL BE MADE AVAILABLE BY THE ISSUER UPON REQUEST. THE TRANSFER OR
EXCHANGE OF THESE WARRANTS MUST BE REGISTERED IN ACCORDANCE WITH THE WARRANT
AGREEMENT.
WARRANTS _____________
NO. _______
VOID AT 5:00 P.M., NEW YORK CITY TIME
ON SEPTEMBER 1, 2001
Arch Communications Group, Inc. Warrant Certificate
THIS CERTIFIES THAT for value received, __________, or its registered
assigns (the "Holder"), is the owner of the number of Warrants set forth above
that initially entitle it to purchase from Arch Communications Group, Inc., a
Delaware corporation (the "Company"), at any time and from time to time prior to
5:00 p.m., New York City time, on September 1, 2001 (the "Expiration Date"), a
like number of fully paid and nonassessable shares of the Common Stock, par
value $.01 per share, of the Company (the "Common Stock") at an initial purchase
price of $____/***/ per share (the "Warrant Price"), subject to adjustment as
provided in the Warrant Agreement. No Warrant may be exercised at or after 5:00
p.m., New York City time, on the Expiration Date, and to the extent not
exercised by such time, such Warrant shall become void. The shares of Common
Stock purchasable upon exercise of the Warrants are hereinafter referred to as
the "Warrant Shares." On the terms and subject to the conditions set forth in
the Warrant Agreement, the Warrants may be exercised by surrendering to the
Warrant Agent (as hereinafter defined) this Warrant Certificate, with the Form
of Exercise Notice on the reverse side hereof duly executed, together with cash,
a certified or bank cashier's check payable to the order of the Company, or a
wire transfer of immediately available funds to an account designated by the
Warrant Agent, in each case in an amount of lawful currency of the United States
of America equal to the product of (a) the number of Warrant Shares purchasable
upon the exercise of the Warrants designated for exercise in the Form of
Exercise Notice and (b) the Warrant Price.
_____________________________
/*/ To be determined as provided in Schedule II to the Merger Agreement.
A-1
<PAGE>
Shares purchaseable upon the exercise of the Warrants designated for execise in
the Form of Exercise Notice and (b) the Warrant Price.
The number and kind of Warrant Shares that may be purchased upon exercise
of the Warrants evidenced by this Warrant Certificate are the number as of the
date of the original issue of such Warrants, based on the shares of Common Stock
of the Company as constituted at such date. As provided in the Warrant
Agreement, the Warrant Price and the number and kind of Warrant Shares
purchasable upon exercise of the Warrants are subject to adjustment.
This Warrant Certificate and the Warrants it represents are subject to, and
entitled to the benefits of, all of the terms, provisions, and conditions of the
Warrant Agreement, dated as of _____________, 199__ (the "Warrant Agreement"),
by and between the Company and The Bank of New York, a _________ corporation
(the "Warrant Agent"), which Warrant Agreement is hereby incorporated herein by
reference and made a part hereof and to which Warrant Agreement reference is
hereby made for a full description of the rights, limitation of rights,
obligations, and duties hereunder of the Company and the Holder. A copy of the
Warrant Agreement will be made available to the Holders by the Company upon
request of the Holders.
Subject to the provisions set forth in the Warrant Agreement or in this
Certificate, this Warrant Certificate, with or without other Warrant
Certificates, may be transferred, split up, combined, or exchanged for another
Warrant Certificate or Warrant Certificates, entitling the Holder to purchase a
like aggregate number of Warrant Shares as the Warrant Certificate or Warrant
Certificates surrendered entitled such Holder (or former Holder in the case of a
transfer) to purchase, upon presentation and surrender hereof at the principal
office of the Warrant Agent designated for such purpose, with the Form of
Assignment (if appropriate) and the related Certificate duly executed.
The Company will not be required to issue fractional Warrant Shares or
other fractional interests in securities upon the exercise of any Warrants
evidenced by this Warrant Certificate, but in lieu thereof a cash payment will
be made, as provided in the Warrant Agreement.
Nothing contained in the Warrant Agreement or in this Warrant Certificate
will be construed as conferring upon the Holder of this Warrant Certificate the
right to vote, or to receive dividends, or to consent or (except as provided in
the Warrant Agreement) to receive notice in respect of any meeting of
stockholders for the election of directors of the Company or any other matter,
or any rights whatsoever as a stockholder of the Company.
A-2
<PAGE>
This Warrant Certificate will not be valid or obligatory for any purpose
until it has been countersigned by the Warrant Agent. This Warrant Certificate
will be governed and construed in accordance with the laws of the State of New
York.
A-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
executed on this ____ day of __________, ____, by its corporate officers duly
authorized.
Attest: ARCH COMMUNICATIONS GROUP, INC.
______________________________ By:______________________________
[Name, title] [Name, title]
Dated: ______________
Countersigned:
THE BANK OF NEW YORK
By:___________________________
[Authorized Signature]
[Title]
A-4
<PAGE>
Form of Reverse Side of Warrant Certificate
FORM OF ASSIGNMENT
------------------
(To be executed if the Holder desires to transfer Warrants)
FOR VALUE RECEIVED,__________________________________________________
___________hereby sells, assigns, and transfers unto___________________________
________________________________________________________________________________
(Please print name and address of transferee)
_____________________________________________
________________________________________________________________________________
_________________this Warrant Certificate, together with all right, title, and
interest therein, and does hereby irrevocably constitute and appoint
_______________________ Attorney, to transfer the within Warrant Certificate on
the books of the within-named Company, with full power of substitution.
Dated: ______________________________
_____________________________________
_______________ Signature
Signature Guaranteed:
A-5
<PAGE>
FORM OF EXERCISE NOTICE
-----------------------
(To be executed if the Holder desires to exercise Warrants)
TO ARCH COMMUNICATIONS GROUP, INC.:
The undersigned hereby irrevocably elects to exercise __________
Warrants evidenced by this Warrant Certificate to purchase the Warrant Shares
issuable upon the exercise of such Warrants and requests that certificates for
such Warrant Shares be issued in the name of:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Please insert social security or
other identifying number:_______________________________________________________
If such number of Warrants is not all the Warrants evidenced by this Warrant
Certificate, a new Warrant Certificate for the balance remaining of such
Warrants will be registered in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Please insert social security
or other identifying number:____________________________________________________
Dated: _____________________
Signature___________________________________
Signature Guaranteed:
A-6
<PAGE>
NOTICE
------
Signatures on the foregoing Form of Assignment and Form of Exercise
Notice and in the related Warrant Certificates must correspond to the name as
written upon the face of this Warrant Certificate in every particular, without
alternation or enlargement or any change whatsoever.
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
A-7
<PAGE>
EXHIBIT 10.15
THE BANK OF NEW YORK
BNY CAPITAL MARKETS, INC.
TORONTO DOMINION (TEXAS), INC.
TD SECURITIES (USA) INC.
ROYAL BANK OF CANADA
BARCLAYS BANK PLC
August 18, 1998
Arch Paging, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
Attention: J. Roy Pottle,
Chief Financial Officer
COMMITMENT LETTER
-----------------
Gentlemen/Ladies:
Reference is made to (i) the Second Amended and Restated Credit Agreement
(Tranche A and Tranche C Facilities), dated as of June 29, 1998, by and among
Arch Paging, Inc. (the "Borrower"), the lenders party thereto, The Bank of New
York ("BNY"), Royal Bank of Canada ("RBC"), and Toronto Dominion (Texas), Inc.
("TD"), as Managing Agents, RBC, as Documentation Agent, TD, as Syndication
Agent, and BNY, as Administrative Agent and (ii) the Second Amended and Restated
Credit Agreement (Tranche B Facility), dated as of June 29, 1998, by and among
the Borrower, the lenders party thereto, BNY, RBC, and TD, as Managing Agents,
RBC, as Documentation Agent,
-1-
<PAGE>
TD, as Syndication Agent, and BNY, as Administrative Agent (collectively, the
"Existing Credit Agreements").
Based upon recent discussions among BNY, its affiliate, BNY Capital
Markets, Inc. ("BNY Capital Markets"), TD and its affiliate, TD Securities (USA)
Inc. ("TD Securities"), RBC and Barclays Bank PLC ("Barclays" and, collectively,
with BNY, BNY Capital Markets, TD, TD Securities and RBC, the "Credit Parties"),
and you, and relying upon the information which you have previously provided to
one or more of the Credit Parties, each of the Credit Parties is pleased to
confirm its willingness to seek the approval of the Lenders party to the
Existing Credit Agreements (the "Existing Lenders") for, and (to the extent
indicated below) participate in a proposed $200,000,000 increase (the "Increase
Facility") to the revolving credit and term loan facilities established under
the Existing Credit Agreements for the purpose of enabling you to acquire (the
"MobileMedia Acquisition") MobileMedia Communications, Inc. and its subsidiaries
(collectively, "MobileMedia"), subject to the conditions set forth in this
Commitment Letter. The Increase Facility would be provided pursuant to an
amendment to the Existing Credit Agreements and related documentation
(collectively, the "Amendments") which would contain provisions customary for
facilities of this size, type and purpose, including, without limitation, the
terms and conditions set forth on the Summary of Principal Terms and Conditions
for an Amendment to the Existing Credit Agreements attached hereto (the "Term
Sheet"). This Commitment Letter, the fee letter, dated the date hereof from BNY,
TD, RBC and Barclays (the "Underwriting Fee Letter") and the separate fee
letters from (i) BNY and BNY Capital Markets to the Borrower (the "BNY Fee
Letter") and (ii) TD and TD Securities to the Borrower (the "TD Fee Letter" and,
together with the Underwriting Fee Letter and the BNY Fee Letter, the "Fee
Letters"), and the Term Sheet are sometimes hereinafter referred to collectively
as the "Commitment Documents".
BNY, TD, RBC and Barclays is each willing to participate in the Increase
Facility to the extent of $50,000,000 each (pro rata among Tranche A, Tranche B
and Tranche C) for a total Increase Facility of $200,000,000 in the aggregate.
-2-
<PAGE>
The Borrower requested that BNY Capital Markets, TD Securities, RBC and Barclays
be co-arrangers of the Increase Facility (collectively, the "Co-Arrangers") and
that the Co-Arrangers syndicate the balance of the Increase Facility, and each
of the Co-Arrangers is pleased to confirm its willingness to do so.
The Credit Parties' willingness to seek the approval of the Existing Lenders and
(to the extent indicated above) participate in the Increase Facility, and the
willingness of the Co-Arrangers to arrange the Increase Facility, are subject to
(i) the negotiation and execution of the Amendments that are satisfactory in
form and substance to each of the Credit Parties, the Borrower, all of the
Existing Lenders and any new participating lenders, and their respective
counsel, (ii) the absence of any material adverse change in the condition
(financial or otherwise), business, assets, properties, prospects, operations,
performance or current capital structure of Arch Communications Group, Inc. (the
"Parent") or any of its subsidiaries or MobileMedia or any of its subsidiaries
from that described to the Credit Parties in the information previously
delivered to the Credit Parties, (iii) verification by the Credit Parties of the
information you have previously provided to the Credit Parties, and (iv) the
absence of any material adverse change in the financial markets and in the
market for senior or subordinated debt financing.
By executing this Commitment Letter, you agree to indemnify and hold harmless
each of the Credit Parties, individually and in each of their respective
capacities as set forth above, each of the participating lenders (including BNY,
TD, RBC and Barclays), and each of their respective officers, directors,
employees, affiliates, agents and controlling persons (each, an "Indemnified
Party") from and against any and all losses, claims, damages and liabilities to
which any such Indemnified Party may become subject arising out of or in
connection with any claim, litigation, investigation or proceeding relating to
the Commitment Documents, the Increase Facility (including the use of the
proceeds thereof), or any related transaction, whether or not any Indemnified
Party is a party thereto, and to reimburse each Indemnified Party upon demand
for all legal and other expenses incurred in connection with investigating or
defending any of the foregoing; provided that the foregoing indemnity will not,
as to any Indemnified Party, apply to losses, claims, damages, liabilities or
related expenses to the extent arising from the willful misconduct or gross
negligence of such Indemnified Party.
-3-
<PAGE>
By executing this Commitment Letter, you (i) agree that you will not make
any claim against any Indemnified Party for any special, indirect or
consequential damages in respect of any breach or wrongful conduct (whether the
claim therefor is based on contract, tort or duty imposed by law) in connection
with, arising out of or in any way related to the transactions contemplated and
the relationship established by the Commitment Documents, or any act, omission
or event occurring in connection therewith, and (ii) waive, release and agree
not to sue upon any such claim for any such damages, whether or not accrued and
whether or not known or suspected, to exist in your favor.
You acknowledge that (i) BNY and BNY Capital Markets may have shared, and
may in the future share, Confidential Information (as defined in the Existing
Credit Agreements) with each other and with their other affiliates, (ii) TD and
TD Securities may have shared, and may in the future share, Confidential
Information with each other and with their other affiliates, (iii) RBC may have
shared, and may in the future share Confidential Information with its
affiliates, and (iv) Barclays may have shared, and may in the future share
Confidential Information with its affiliates. By executing this Commitment
Letter, you consent and agree to such sharing to the extent such sharing is
permitted by Section 11.12 of each of the Existing Credit Agreements.
You agree that the Commitment Documents are for your confidential use only
and will not, without the prior consent of each of the Credit Parties, be
disclosed by you or any of your representatives to any person other than your
accountants, attorneys and other advisors, and then only in connection with the
transactions contemplated hereby and only on a confidential basis, except that,
following your acceptance of the Commitment Documents, you may make such
disclosures of the terms and conditions of the Commitment Letter and the Term
Sheet (but not any of the Fee Letters) as you deem necessary to MobileMedia, the
Bankruptcy Court (as defined in the Term Sheet), the appropriate creditors'
committees and their respective accountants, attorneys and other advisors, and
you may make such disclosures of the terms and conditions of the Commitment
Documents as you are required by law to make.
-4-
<PAGE>
The Commitment Documents shall not be assignable by you and may not be
amended or any provision thereof waived or modified except by a document in
writing signed by you and each of the Credit Parties.
You hereby knowingly, voluntarily and intentionally waive any right you may
have to a trial by jury in respect of any litigation arising out of, under or in
connection with the Commitment Documents or the transactions contemplated
thereby.
The Commitment Documents set forth the entire understanding of the parties
hereto as to the scope of the obligations of the parties thereto and supersedes
all prior agreements, representations and understandings, if any, relating to
the subject matter thereof.
The Commitment Documents shall be governed by, and construed in accordance
with, the laws of the State of New York.
The Commitment Documents shall automatically expire if not accepted by you
on or before 5:00 P.M. (New York City time) on August 20, 1998. Please indicate
your acceptance of the Commitment Documents and your agreement to the terms
thereof by signing the enclosed copy of this Commitment Letter and returning it
to BNY and by signing each of the Fee Letters and returning them as set forth in
each thereof. By so doing, you will be deemed to have agreed as follows:
A. You shall be bound by the terms hereof;
B. You (1) will provide sufficient information, in form and substance
acceptable to each of the Credit Parties, for the preparation of an
information package describing the Borrower and the Parent, their
respective subsidiaries and the Increase Facility, (2) consent to the
establishment by the Co-Arrangers of a syndicate of, and the distribution
by the Co-Arrangers (on a confidential basis) of the aforesaid information
package and other information to, interested lenders, and
-5-
<PAGE>
(3) will (and will cause your management to) take an active role in the
syndication process (including, without limitation, attending bank meetings
and holding yourselves available to answer questions during the syndication
process);
C. You will not, prior to the date of closing of the Increase
Facility, syndicate or privately place any debt or credit facilities which,
in the reasonable opinion of any of the Co-Arrangers might have a
detrimental effect on the syndication of the Increase Facility, except for
the Additional Arch Debt as contemplated by the Term Sheet;
D. You agree to pay all fees and expenses incurred by each of the
Credit Parties in connection with the syndication of, and the negotiation
and preparation of the Commitment Documents and the documentation relating
to, the Increase Facility (including, without limitation, costs and
expenses in connection with the Credit Parties' due diligence
investigations and fees and expenses of BNY's and BNY Capital Markets'
counsel) whether or not such documentation is finalized or the syndication
is completed and whether or not the Increase Facility is extended or other
financial accommodations are made, and regardless of the reasons for which
such documentation is not finalized or the syndication is not completed or
the Increase Facility is not extended or other financial accommodations are
not made; and
E. You will fully cooperate with the Credit Parties in connection with
the transactions contemplated hereby.
Even if accepted in accordance with the provisions of the previous
paragraph, the obligations of the Credit Parties under this Commitment Letter
shall expire and terminate automatically, without further act or condition and
regardless of cause or circumstance, if documentation satisfactory in form and
substance to each of the Credit Parties, the Parent, Arch Communications, Inc.,
the Borrower, all of the Existing Lenders and other
-6-
<PAGE>
participating lenders, and their respective counsel is not executed on or before
March 31, 1999.
[Signature Pages Follow]
-7-
<PAGE>
ARCH PAGING, INC.
COMMITMENT LETTER
THE BANK OF NEW YORK
By: /s/
Name:
Title: Vice President
BNY CAPITAL MARKETS, INC.
By: /s/
Name:
Title: Managing Director
-8-
<PAGE>
ARCH PAGING, INC.
COMMITMENT LETTER
ROYAL BANK OF CANADA
By: /s/
Name:
Title: Senior Manager
-9-
<PAGE>
ARCH PAGING, INC.
COMMITMENT LETTER
BARCLAYS BANK PLC
By: /s/ Daniele Lacovone
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Name: Daniele Lacovone
Title: Associate Director
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ARCH PAGING, INC.
COMMITMENT LETTER
Accepted and agreed:
ARCH PAGING, INC.
By: /s/ J. Roy Pottle
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Name: J. Roy Pottle
Title: Executive Vice President and
Chief Financial Officer
Date: August __, 1998
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EXHIBIT 10.16
THE BEAR STEARNS COMPANIES INC. TD SECURITIES (USA) INC.
245 PARK AVENUE 31 WEST 52/ND/ STREET
NEW YORK, NEW YORK 10167 NEW YORK, NEW YORK 10019-6101
TELEPHONE (212) 272-2000 TELEPHONE (212) 827-7573
FACSIMILE (212) 272-3092 FACSIMILE (212) 581-5795
THE BANK OF NEW YORK ROYAL BANK OF CANADA
ONE WALL STREET ONE LIBERTY PLAZA, 5/TH/ FLOOR
NEW YORK, NEW YORK 10286 NEW YORK, NEW YORK 10006-1404
TELEPHONE (212) 635-4697 TELEPHONE (212) 428-6550
FACSIMILE (212) 635-6365 FACSIMILE (212) 428-6460
August 20, 1998
CONFIDENTIAL
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Arch Communications Group, Inc.
Arch Communications, Inc.
1800 West Park Drive, Suite 250
Westborough, Massachusetts 01581
Attention: J. Roy Pottle
Executive Vice President and
Chief Financial Officer
BRIDGE COMMITMENT LETTER
Ladies and Gentlemen:
Arch Communications Group, Inc., a Delaware corporation ("PARENT"), has
advised The Bear Stearns Companies Inc. ("BEAR STEARNS"), TD Securities (USA)
Inc., as arranger for Toronto-Dominion (Texas), Inc. ("TD"), The Bank of New
York ("BNY") and Royal Bank of Canada ("RBC") (Bear Stearns, TD, BNY and RBC,
together with their assigns, collectively, the "LENDERS") that Parent, through
Farm Team Corp., a wholly-owned subsidiary of Parent ("MERGERCO"), intends to
acquire MobileMedia Communications, Inc. (the "TARGET") via a merger (the
"ACQUISITION") pursuant to an Agreement and Plan of Merger by and among Parent,
MergerCo and the Target (the "ACQUISITION AGREEMENT"). Parent has further
informed the Lenders that in order to: (a) accomplish the Acquisition, (b)
repay existing secured claims, unsecured claims, pre-petition priority claims
and administrative claims against the Target and repay certain of the Target's
and its subsidiaries' existing debt concurrently with the Acquisition
(collectively, the "REFINANCING"), and (c) pay
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certain fees and expenses associated with the Acquisition and the Refinancing,
(i) Arch Paging, Inc., a Delaware corporation and an indirect subsidiary of
Parent ("PAGING"), expects to borrow up to approximately $275 million under an
existing $400 million secured bank facility which will be increased to $600
million or more (the "BANK FINANCING"), (ii) Parent expects to issue equity
consisting of (A) approximately 48.5 to 57.4 million shares of Parent's common
stock to the Target's stakeholders, a portion of which will be purchased for an
aggregate amount of $217 million in cash pursuant to a rights offering by the
Target's unsecured creditors, which rights offering will be "backstopped" in its
entirety by standby purchase commitments by four major unsecured creditors but
will be subject to proration depending upon subscription by the other unsecured
creditors of the Target, (B) warrants to purchase approximately 5% of Parent's
fully-diluted common stock to the Target's stakeholders and (C) warrants to
purchase approximately 7% of Parent's fully-diluted common stock to existing
stockholders of Parent (collectively, the "EQUITY FINANCING"), and (iii) Arch
Communications, Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent (the "COMPANY") expects to issue at least $120 million of senior
unsecured debt securities via a private placement pursuant to Rule 144A (the
"PERMANENT DEBT FINANCING").
Parent, the Company, Bear, Stearns & Co. Inc., as sole lead placement agent
("BS & CO."), TD Securities (USA) Inc. ("TD SECURITIES"), BNY Capital Markets,
Inc. ("BNY CAPITAL") and RBC Dominion Securities Corporation ("RBC DOMINION"),
as co-placement agents (BS & Co., TD Securities, BNY Capital and RBC Dominion,
collectively, the "PLACEMENT AGENTS") have entered into an engagement letter of
even date herewith (the "ENGAGEMENT LETTER") pursuant to which the Placement
Agents were exclusively engaged to provide certain services, including assisting
Parent and/or one or more of its subsidiaries in their efforts to structure and
obtain any and all debt financing (other than the Bank Financing) and/or equity
financing (other than the Equity Financing) required in connection with the
Acquisition and the Refinancing, including, without limitation, the Permanent
Debt Financing (including, but not limited to, any Permanent Debt Financing used
to refinance any Bridge Financing or Exchange Notes (each as defined below))
(collectively, the "PERMANENT FINANCING"). The Acquisition, together with the
Refinancing, the Permanent Financing, the Bridge Financing (hereinafter
defined), the issuance of the Exchange Notes (hereinafter defined), the Equity
Financing and the Bank Financing are sometimes hereinafter collectively referred
to as the "TRANSACTIONS."
Accordingly, in reliance on the description of the Transactions set forth
above, and subject to the terms and conditions set forth in this letter and in
the summary of principal terms and conditions attached as Annex 1 and Annex 2
hereto and hereby made a part hereof as though fully set forth herein (together
with this letter, this "COMMITMENT LETTER"), the parties hereto agree as
follows:
1. BRIDGE FINANCING COMMITMENT. In the event that the placement of the
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Permanent Debt Financing cannot be consummated by the date on which the
Acquisition is to be consummated for any reason other than a breach or default
by Parent, MergerCo or the Target in connection with any documents executed with
respect to the Acquisition or by
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Parent or the Company under any executed underwriting or purchase agreement with
respect to the Permanent Debt Financing or the documents governing the Bank
Financing, each of the Lenders hereby commits, severally and not jointly, that
it will make senior increasing rate exchangeable loans (the "BRIDGE LOANS") to
the Company in amounts not to exceed its individual commitment as set forth
beneath its signature hereto, on the date on which the Acquisition is
consummated (the "BRIDGE FINANCING"). The aggregate principal amount of all such
commitments shall be $120 million (the "AGGREGATE COMMITMENT"). The Bridge Loans
will mature 180 days from their date of issuance but, subject to the terms
outlined in Annex 1 hereto, shall be exchanged for increasing rate exchange
notes of the Company having the terms set forth on Annex 2 hereto (the "EXCHANGE
NOTES"). The Aggregate Commitment is personal to the Company, may be enforced
solely by the Company and may not be assigned to or enforced by any other person
or entity.
2. BRIDGE FINANCING DOCUMENTATION. The Bridge Loans shall be evidenced
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by bridge notes and made pursuant to, and governed by, a definitive bridge loan
agreement (the "BRIDGE LOAN AGREEMENT"), and the Exchange Notes will be issued
into escrow on the closing date pursuant to the terms of an indenture with a
trustee selected by the Company and reasonably acceptable to each of the
Lenders, in each case prepared by Skadden, Arps, Slate, Meagher & Flom LLP,
counsel to the Lenders ("SKADDEN ARPS"), and covering the matters referred to in
this Commitment Letter and such other matters as the Lenders may request
(collectively, the "BRIDGE FINANCING DOCUMENTS"). The Bridge Financing
Documents must be finalized not less than five (5) business days prior to
funding.
3. CONDITIONS PRECEDENT. The several obligations of the Lenders under
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this Commitment Letter to make any Bridge Loans are subject to (a) the execution
and delivery of the Bridge Financing Documents in form reasonably satisfactory
to each of the Lenders in its sole discretion, (b) the prior or contemporaneous
fulfillment of the conditions precedent set forth in Annex 1 hereto, (c) receipt
by the Lenders not less than five (5) business days prior to the proposed
funding date of copies of all definitive documents governing the Bank Financing,
which documents and Bank Financing shall be satisfactory to each of the Lenders,
and (d) receipt by the Lenders of not less than ten (10) business days' prior
written notice of the targeted funding date under the Bridge Financing Documents
and not less than three (3) business days' prior written notice of the actual
funding date (which cannot be earlier than two (2) business days prior to
original targeted funding date).
4. SYNDICATION.
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A. Bear Stearns may offer to assign all or part of its or the
Lenders' Aggregate Commitment to The Mayer Fund I (the "FUND"), a bridge lending
fund managed by one of Bear Stearns' affiliates and in which it participates as
an investor through a separate affiliate. In the event that all or any portion
of the Aggregate Commitment is assigned to and accepted by the Fund, the Company
hereby acknowledges that the Fund is a Delaware business trust whose Certificate
of Trust is on file with the Secretary of State of the State of Delaware, and,
subject to the next two sentences, all persons dealing with the Fund
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must look solely to the assets of the Fund for the enforcement of any claims.
The Fund is a series trust and each commitment to extend credit to or to
purchase securities of any other person which is issued or assumed by the Fund
will be allocated to a separate series in which some or all of the Fund's
beneficial owners may participate. To the extent any person seeks to enforce
such a commitment (or any rights arising out of any such commitment or any
investment made pursuant thereto), such person must look solely to the assets of
the applicable series of the Fund for the enforcement of any claims. None of the
manager, trustee, beneficial owners or other agents or officers of the Fund or
of the foregoing shall have any personal liability in connection with the
business of the Fund or for obligations entered into on behalf of the Fund or
any series thereof.
B. In addition, the Lenders may syndicate all or any portion of the
Aggregate Commitment to any Permitted Assignee (as hereinafter defined).
Moreover, (A) the Fund may, to the extent required or permitted under its
governing documents, assign all or any portion of its assumed commitment or
Bridge Loans to its investors who participate in funding the assigned commitment
or Bridge Loans and/or their affiliates, (B) any Permitted Assignee (as
hereinafter defined) or the Fund may assign all or any portion of its assumed
commitment and Bridge Loans to any other Permitted Assignee, and (C) the Lenders
may pledge their assumed commitments and Bridge Loans to any Federal Reserve
Bank; provided that any partial assignment shall be in a minimum amount of at
least $1.0 million (which minimum amount shall not be applicable to any
distribution by the Fund to its applicable beneficial owners of any unfunded
commitment made by the Fund). As used herein, "PERMITTED ASSIGNEE" means (i)
any "qualified institutional buyer" (as defined in Rule 144A), (ii) any
"accredited investor" (as defined in Section 2(15) of the Securities Act of
1933, as amended) with assets (owned or under management) of at least $50
million or (iii) with the consent of the Company (which consent shall not be
unreasonably withheld), any other accredited investor.
C. Any assignment of all or any portion of the Aggregate Commitment
in accordance herewith shall relieve the assigning Lender of its obligations to
make Bridge Loans in the amount so assigned. Any assignment made to any person
not described in sections 4(a) or 4(b) shall, unless each of the Company and the
Lenders gives their prior written consent thereto, be null and void ab initio.
Nothing herein shall be deemed to restrict the sale or assignment of Exchange
Notes in any manner that is permitted by applicable law.
D. From and after the closing, each of the Lenders shall have the
right to assign or sell participations in its Bridge Loans and Exchange Notes to
other accredited investors in accordance with applicable law.
E. Parent and the Company will, and will cause each of their
respective subsidiaries to, cooperate with the Lenders in connection with any
syndication of all or any portion of the Aggregate Commitment, including
providing such assistance as is specified in section 6 but with such changes as
are required to take into account the type of financing.
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5. LIMITATION ON OTHER ACQUISITIONS AND SECURITIES ISSUANCES. Until (i)
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the date on which the Aggregate Commitment expires or is terminated without
funding or (ii) if the Bridge Loans are funded, the date on which all
outstanding Bridge Loans are paid in full (through the issuance of Exchange
Notes or otherwise), Parent and the Company will not, and will not permit their
subsidiaries or any person acting for any of them, to: (A) unless otherwise
provided in the Engagement Letter, syndicate, offer or issue, or attempt to
syndicate, offer or issue, any debt (other than the Bank Financing), any equity
(other than the Equity Financing) or any other security intended to replace the
Bridge Financing, (B) engage in any discussions concerning the syndication,
offering or issuance of any such debt or other security other than confidential
discussions with the Placement Agents as to possible alternatives for repayment
of the Bridge Financing, or (C) make any acquisition of the stock or any
significant portion of the assets of any person or entity other than (1) the
Acquisition, (2) short-term investments in marketable securities made for cash
management purposes and (3) acquisitions of inventory and equipment in the
ordinary course of business; provided, however, that from the date of acceptance
of this Commitment Letter to the date the Bridge Loans are funded, Parent, the
Company and their respective subsidiaries collectively may make acquisitions
which do not exceed $15 million in the aggregate.
6. COOPERATION. Parent and the Company will, and will cause each of
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their respective subsidiaries to, cooperate, and will use their best efforts to
cause the Target and each of its subsidiaries and affiliates to cooperate, with
the Placement Agents in the offering and sale of the Permanent Financing,
including, without limitation:
A. upon request of the Placement Agents, making requested members of
senior management and representatives of Parent, the Company and their
respective subsidiaries available to participate in information meetings with
potential purchasers at such times and places as the Placement Agents may
reasonably request,
B. providing to the Placement Agents not later than the earlier to
occur of (x) the 30th day prior to February 28, 1999 and (y) the 30th day prior
to the targeted funding date of the Acquisition, (i) a draft indenture and a
preliminary offering memorandum to be distributed at the direction of the
Placement Agents to potential purchasers, containing all relevant information
about the Transactions and the Company, the Target and their respective
subsidiaries and affiliates and any other matters which the Placement Agents may
deem necessary to a successful offering or which the Placement Agents, Parent or
the Company may consider necessary or appropriate for accurate, complete and
adequate disclosure, (ii) management's projections for the Company after giving
pro forma effect to the Transactions and (iii) such other information as may be
requested by any rating agency or by the Placement Agents or their counsel;
provided, however, that if the Aggregate Commitment is extended pursuant to
section 9(d) hereof, Parent and the Company will again provide the documents and
information specified in clauses (i) through (iii) of this section 6(b) not
later than the earlier to occur of (A) the 30th day prior to June 30, 1999 and
(B) the 30th day prior to the targeted funding date of the Acquisition,
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C. commencing a "road show" with respect to the Permanent Financing
(each, a "ROAD SHOW") as soon after delivery of the aforesaid preliminary
offering memorandum as is reasonably feasible, and
D. meeting with rating agencies and providing them with such
information as they may reasonably request.
7. INDEMNIFICATION; EXPENSES. Whether or not the Bridge Financing is
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consummated, Parent and the Company, on behalf of themselves and their
respective subsidiaries, hereby agree jointly and severally: (a) upon demand,
to reimburse the Lenders for all reasonable legal fees and disbursements of
Skadden Arps, counsel to Bear Stearns, and all of the Lenders' travel and other
out-of-pocket expenses, in each case incurred in connection with this Commitment
Letter, the Fee Letter of even date herewith by and among the Lenders, Parent
and the Company (the "FEE LETTER"), the Transactions or otherwise arising out of
the Lenders' commitment hereunder and (b) to defend, indemnify and hold harmless
the Lenders and each of the other Indemnified Persons identified and as set
forth in the indemnification provisions attached as Exhibit A hereto (the
"INDEMNIFICATION PROVISIONS") and hereby made a part hereof as though fully set
forth at length herein. The obligations of Parent, the Company and their
respective subsidiaries under this section shall survive expiration or
termination of this Commitment Letter.
8. FEES. Parent and the Company agree jointly and severally that they
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shall pay each of the fees described in the Fee Letter on the dates specified
therein. The obligations of Parent and the Company under this section 8 shall
survive expiration or termination of this Commitment Letter.
9. EXPIRATION; EXTENSION; TERMINATION.
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A. The Aggregate Commitment will expire upon the occurrence of any
of the following, without further act or condition:
I. upon the earlier to occur of (A) 24 hours after the
execution of the Acquisition Agreement and (B) 5:00 p.m. (New York time) on
August 20, 1998, unless prior to such time: (1) Parent and the Company have
accepted this Commitment Letter and the Fee Letter and Bear Stearns shall have
received signed copies hereof and thereof, (2) Parent and the Company have
accepted the Engagement Letter and BS & Co. shall have received signed copies
thereof, and (3) Parent and/or the Company has paid to Bear Stearns, for the
account of the Lenders, the commitment fee described in the Fee Letter;
II. upon the issuance of a Take-Out Securities Notice pursuant
to section 4 ("Securities Demand") of the Fee Letter;
III. at 5:00 p.m. (New York time) on February 28, 1999, unless
prior to that time the Bridge Financing Documents have been agreed to and
executed, all conditions
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required to be met hereunder or thereunder for the funding of the Bridge Loans
have been satisfied or waived in writing by each of the Lenders in its sole
discretion, and the Bridge Loans have been funded;
IV. upon funding of the Permanent Debt Financing, in escrow or
otherwise;
V. upon the termination or expiration of the Acquisition
Agreement; and
VI. upon the termination of the Engagement Letter by Parent
and/or the Company.
B. The Aggregate Commitment may be terminated prior to its
expiration pursuant to section 9(a) above:
I. by the Company at any time upon payment of all fees,
expenses and other amounts then payable under this Commitment Letter, the Fee
Letter and the Engagement Letter; and
II. by any Lender, if any breach or default occurs in the
performance of any of the obligations of Parent, the Company or any of their
respective subsidiaries set forth in this Commitment Letter, the Fee Letter, the
Engagement Letter or any other agreement or legal obligation enforceable by the
Lenders, the Placement Agents or any of their respective affiliates.
C. Neither termination nor expiration of this Commitment Letter,
placement of the Permanent Debt Financing nor funding of the Bridge Financing
shall affect: (i) the obligations of Parent and the Company to pay any fees and
other compensation to the extent earned by the Lenders pursuant to the Fee
Letter referenced in section 8 hereof up to or after the date of termination,
expiration or completion, as the case may be, (ii) the obligations of Parent and
the Company to reimburse expenses incurred by the Lenders up to the date of
termination, expiration or completion, as the case may be and/or (iii) the
effectiveness of the Indemnification Provisions, which shall remain operative
and in full force and effect.
D. Notwithstanding section 9(a)(iii) above, Parent and the Company
may extend the expiration of the Aggregate Commitment to June 30, 1999 if (A)
all fees have been paid as required by the Fee Letter and (B) after the
completion of a Road Show, the Placement Agents advise that a Take-Out
Securities Notice will not be delivered at such time; provided, however, that if
a Road Show is completed prior to October 1, 1998 and such Road Show does not
result in the delivery of a Take-Out Securities Notice, Parent and the Company
will be required to commence an additional Road Show (and provide, as necessary,
updates of the information provided pursuant to section 6(b) hereof) to extend
the expiration
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of the Aggregate Commitment, unless such requirement is waived by the Placement
Agents.
10. DISCLOSURE.
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A. This Commitment Letter, the Fee Letter, the Engagement Letter and
each subsequent communication relating to the Transactions, are being delivered
to you on the understanding that neither they, nor their substance, shall be
disclosed by Parent or the Company to any third person except (i) to those who
have a need to know and are in a confidential relationship to Parent or the
Company (such as Parent's or the Company's directors, officers, advisors and
legal counsel), (ii) to those who have a need to know and are in a confidential
relationship to the Target (such as the Target's directors and officers, the
Official Committee of Unsecured Creditors appointed by the United States Trustee
for the District of Delaware on February 10, 1997 (the "Committee"), the
steering committee for the Target's pre-petition senior secured lenders (the
"Steering Committee"), and advisors and legal counsel for the Target, the
Committee and the Steering Committee) or (iii) when disclosure is consented to
by the Lenders in writing.
B. The Lenders may freely discuss the Transactions contemplated
hereby and any other potential Transactions with any and all of their affiliates
(including, without limitation, the Placement Agents), any prospective lender or
participant and the Fund, and may freely disclose to any such affiliate,
prospective lender or participant and the Fund, and permit any such affiliate,
prospective lender or participant and the Fund, from time to time, to use for
any lawful purpose, any and all information at any time provided to the Lenders
or the Placement Agents by or on behalf of Parent, the Company or any of their
subsidiaries or affiliates; provided that prior to disclosing any confidential
information to any party not already subject to confidentiality undertakings,
the disclosing party shall obtain a confidentiality undertaking in accordance
with its current syndication practices.
11. MISCELLANEOUS. The following provisions shall be applicable both to
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this Commitment Letter and to the Fee Letter:
A. GOVERNING LAW; CONSENT TO JURISDICTION. The validity and
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interpretation of this Commitment Letter and the Fee Letter shall be governed
by, and construed and enforced in accordance with, the laws of the State of New
York including, without limitation, Sections 5-1401 and 5-1402 of the New York
General Obligations Law and New York Civil Practice Laws and Rules 327(b).
Parent and the Company, on behalf of themselves and their respective
subsidiaries and affiliates, hereby irrevocably submit to the non-exclusive
jurisdiction of any court of the State of New York or the United States District
Court for the Southern District of the State of New York for the purpose of any
suit, action or other proceeding arising out of this Commitment Letter, the Fee
Letter or any of the agreements or Transactions contemplated hereby, which is
brought by or against Parent, the Company or any of their respective
subsidiaries or affiliates and (a) hereby irrevocably agree that all claims in
respect of any such suit, action or proceeding may be heard and determined in
any such court and (b) hereby agree not to commence any action, suit or
proceeding
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relating to this Commitment Letter, the Fee Letter, any such other agreements or
the Transactions, other than in such court except to the extent mandated by
applicable law. Each of Parent and the Company, on behalf of itself and its
subsidiaries and affiliates, hereby waives and agrees not to assert in any such
suit, action or proceeding, in each case to the fullest extent permitted by law,
any claim that (i) it is not personally subject to the jurisdiction of any such
court, (ii) it is immune from process (whether through service or notice, with
respect to any of them or any property of any of them), or (iii) any such suit,
action or proceeding is brought in an inconvenient forum.
B. WAIVER OF TRIAL BY JURY. EACH OF PARENT AND THE COMPANY, ON
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BEHALF OF ITSELF AND ITS SUBSIDIARIES AND AFFILIATES AND ITS AND THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS, HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVES, AND EACH OF THE LENDERS, ON BEHALF OF ITSELF AND ITS SUCCESSORS AND
ASSIGNS, HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM OR COUNTERCLAIM BASED UPON,
ARISING OUT OF OR IN CONNECTION WITH THIS COMMITMENT LETTER, THE FEE LETTER OR
THE OTHER AGREEMENTS AND TRANSACTIONS DESCRIBED OR CONTEMPLATED HEREIN OR
THEREIN. EACH OF PARENT AND THE COMPANY HEREBY CERTIFIES THAT NO REPRESENTATIVE
OR AGENT OF THE LENDERS HAS REPRESENTED EXPRESSLY OR OTHERWISE THAT SUCH PARTY
WOULD NOT SEEK TO ENFORCE THE PROVISIONS OF THIS WAIVER. FURTHER, EACH OF
PARENT AND THE COMPANY, ON BEHALF OF ITSELF AND ITS SUBSIDIARIES AND AFFILIATES,
ACKNOWLEDGES THAT THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS COMMITMENT
LETTER BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS PARAGRAPH.
C. SEVERABILITY. If it is found in a final judgment by a court of
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competent jurisdiction (not subject to further appeal) that any term or
provision hereof is invalid or unenforceable: (a) the remaining terms and
provisions hereof shall be unimpaired and shall remain in full force and effect
and (b) the invalid or unenforceable provision or term shall be replaced by a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of such invalid or unenforceable term or provision.
D. COMPLETE AGREEMENT; WAIVERS AND OTHER CHANGES TO BE IN WRITING.
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This Commitment Letter, the Engagement Letter and the Fee Letter embody the
entire agreement and understanding of the parties hereto with respect to the
subject matter hereof and thereof and supersede any and all prior agreements and
understandings relating to the matters provided for herein and therein. No
alteration, waiver, amendment or supplement of or to this Commitment Letter or
the Fee Letter shall be binding or effective unless the same is set forth in a
writing signed by a duly authorized representative of each party hereto or
thereto.
E. POWER, AUTHORITY AND BINDING EFFECT. Each of the parties hereto
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represents and warrants to each of the other parties hereto that (a) it has all
requisite power and authority to enter into this Commitment Letter and the Fee
Letter and (b) each of this Commitment Letter and the Fee Letter has been duly
and validly authorized by all necessary corporate action on the part of such
party, has been duly executed and delivered by such party and constitutes a
legally valid and binding agreement of such party, enforceable against it in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally or by general
principles of equity.
F. NO RIGHTS OR LIABILITY. Neither this Commitment Letter nor the
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Fee Letter creates, nor shall either of them be construed as creating, any
rights enforceable by a person or entity not a party hereto, except as provided
in the Indemnification Provisions. Each of Parent and the Company acknowledges
and agrees that (a) none of the Lenders, nor any other accredited investor who
assumes a portion of the Aggregate Commitment or becomes the holder of any
Bridge Loans (collectively, the "HOLDERS"), is, nor shall be construed as, a
fiduciary or agent of Parent, the Company or any of their respective
subsidiaries or affiliates, the Target, the seller(s) of the Target or any of
their respective subsidiaries or affiliates or any other person or entity, nor
shall the Holders have any duties or liabilities to any such persons' or
entities' equity holders, creditors, claimants or other interest holders by
virtue of this Commitment Letter, the Fee Letter or the retention of the Lenders
hereunder, all of which are hereby expressly waived, and neither the Lenders nor
the Placement Agents have been retained to advise or have advised Parent, the
Company or any of their respective subsidiaries or affiliates regarding the
wisdom, prudence or advisability of entering into or consummating the
Acquisition and the Refinancing, (b) none of the Holders shall have any
liability (including, without limitation, liability for any losses, claims,
damages, obligations, penalties, judgments, awards, liabilities, costs, expenses
or disbursements resulting from any negligent act or omission of any of the
Holders) (whether direct or indirect, in contract, tort or otherwise) to Parent,
the Company or any of their respective subsidiaries or affiliates, the Target or
any of its subsidiaries or affiliates or any other person or entity (including,
without limitation, their respective equity holders, creditors, claimants and
other interest holders) for or in connection with (i) the engagement of the
Lenders pursuant hereto, or (ii) this Commitment Letter, the Fee Letter or any
of the Transactions, except that a claim in contract for actual direct damages
directly and proximately caused by a breach of any contractual obligation
expressly set forth in any written agreement signed by the party against which
enforcement of such claim is sought shall not be impaired hereby, and (c) the
Lenders were induced to enter into this Commitment Letter and the Fee Letter by,
inter alia, the provisions of this Section 11.
G. NO LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE
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DAMAGES. No party hereto liable for any damages hereunder to any other party
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shall ever be liable for any special, indirect or consequential damages or, to
the fullest extent that a claim for punitive damages may lawfully be waived, for
any punitive damages, on any claim (whether founded in contract, tort, legal
duty or any other theory of liability) arising from or related in any manner to
this Commitment Letter or the negotiation, execution, administration,
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performance, breach or enforcement of this Commitment Letter, the Fee Letter,
the Engagement Letter, the Bridge Financing Documents or the instruments and
agreements evidencing, governing or relating to the other financing Transactions
contemplated hereby or any amendment thereto or the funding of the Bridge Loans
or the consummation of, or any failure to consummate, any of the Transactions or
any act, omission, breach or wrongful conduct in any manner related thereto.
H. RELIANCE ON INFORMATION. In undertaking and performing their
-----------------------
several obligations under this Commitment Letter, the Lenders are relying and
will continue to rely: (a) without independent verification thereof, on the
accuracy and completeness of all financial and other information furnished by or
on behalf of Parent, the Company or any of their respective subsidiaries or
affiliates, the seller(s) of the Target, the Target or any of their respective
subsidiaries or affiliates and (b) on each of the representations, warranties,
covenants and legal waivers by or on behalf of Parent, the Company or their
respective subsidiaries or affiliates set forth in this Commitment Letter. Each
of Parent and the Company represents and warrants to each of the Lenders that
all financial and other information which it has provided to the Lenders in
connection with this Commitment Letter and the Transactions contemplated hereby
does not and will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
I. COUNTERPARTS. For the convenience of the parties, any number of
------------
counterparts of this Commitment Letter may be executed by the parties hereto.
Each such counterpart shall be, and shall be deemed to be, an original
instrument, but all such counterparts taken together shall constitute one and
the same agreement.
J. TIME OF ESSENCE. Time shall be of the essence whenever and
----------------
wherever a date or period of time is prescribed or referred to in this
Commitment Letter.
[signature page follows]
11
<PAGE>
This Commitment Letter may only be accepted by (i) signing this Commitment
Letter in the space provided below and returning it to the undersigned, along
with a signed copy of the Fee Letter, (ii) signing the Engagement Letter and
returning it to BS & Co. and (iii) paying the commitment fee referred to in the
Fee Letter, in each of the foregoing cases, for receipt by Bear Stearns or BS &
Co., as applicable, within 24 hours after execution of the Acquisition Agreement
and in any event by not later than 5:00 p.m. (New York time) on August 19, 1998.
Very truly yours,
THE BEAR STEARNS COMPANIES INC.
By: /s/ Michael L. Offen
---------------------------------
Michael L. Offen
Senior Managing Director
Commitment: $50,000,000
TD SECURITIES (USA) INC., AS ARRANGER FOR
TORONTO-DOMINION (TEXAS), INC.
By: /s/ Gordon A. Pace
---------------------------------
Name: Gordon A. Pace
Title: Managing Director
Commitment: $35,000,000
THE BANK OF NEW YORK
By: /s/
---------------------------------
Name:
Title:
Commitment: $25,000,000
12
<PAGE>
ROYAL BANK OF CANADA
By: /s/
---------------------------------
Name:
Title:
Commitment: $10,000,000
AGREED TO AND ACCEPTED AS OF
_______________, 1998:
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
---------------------------------
Name: J. Roy Pottle
Title: Executive Vice President and
Chief Financial Officer
ARCH COMMUNICATIONS, INC.
By: /s/ J. Roy Pottle
---------------------------------
Name: J. Roy Pottle
Title: Executive Vice President and
Chief Financial Officer
13
<PAGE>
EXHIBIT A
INDEMNIFICATION PROVISIONS
Capitalized terms used and not otherwise defined herein are used with the
meanings attributed thereto in the Bridge Commitment Letter dated August 20,
1998 (the "COMMITMENT LETTER") from The Bear Stearns Companies Inc. ("BEAR
STEARNS"), TD Securities (USA) Inc., as arranger for Toronto-Dominion (Texas),
Inc. ("TD"), The Bank of New York ("BNY") and Royal Bank of Canada ("RBC") (Bear
Stearns, TD, BNY and RBC, collectively, the "LENDERS") to Arch Communications
Group, Inc. ("PARENT") and Arch Communications, Inc. (the "COMPANY") of which
these Indemnification Provisions form an integral part.
To the fullest extent permitted by applicable law, Parent and the Company, on
behalf of themselves and their respective subsidiaries, agree, jointly and
severally, to indemnify and hold harmless each of the Lenders and the affiliated
entities (including, without limitation, the Fund), directors, officers,
employees, legal counsel, agents and controlling persons (within the meaning of
the federal securities laws) of each of the Lenders and Holders (all of the
foregoing, collectively, the "INDEMNIFIED PERSONS"), from and against any and
all losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, costs, expenses and disbursements and any and all actions, suits,
proceedings and investigations in respect thereof and any and all legal or other
costs, expenses and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise (including, without limitation, the costs,
expenses and disbursements, as and when incurred, of investigating, preparing or
defending any such action, proceeding or investigation (whether or not in
connection with litigation in which any of the Indemnified Persons is a party
thereto and including, without limitation, any and all losses, claims, damages,
obligations, penalties, judgments, awards, liabilities, costs, expenses and
disbursements, resulting from any negligent act or omission of any of the
Indemnified Persons), directly or indirectly caused by, relating to, based upon,
arising out of or in connection with (i) the Transactions, (ii) the Commitment
Letter or Fee Letter, or (iii) any untrue statement or alleged untrue statement
of a material fact contained in, or omissions or alleged omissions from any
filing with any governmental agency or court or similar statements or omissions
in or from any information furnished by Parent, the Company, the Target or any
of their respective subsidiaries to any of the Indemnified Persons or any other
person in connection with the Transactions, provided, however, with respect to
any particular Indemnified Person, such indemnity agreement shall not apply to
any portion of any such loss, claim, damage, obligation, penalty, judgment,
award, liability, cost, expense or disbursement to the extent it is found in a
final judgment by a court of competent jurisdiction (not subject to further
appeal) to have resulted primarily and directly from the gross negligence or
willful misconduct of such Indemnified Persons.
These Indemnification Provisions shall be in addition to any liability which
Parent, the Company or their respective subsidiaries may have to the Indemnified
Persons.
If any action, suit, proceeding or investigation is commenced, as to which
any of the Indemnified Persons proposes to demand indemnification, it shall
notify Parent and the
A-1
<PAGE>
Company with reasonable promptness; provided, however, that any failure by any
of the Indemnified Persons to so notify Parent and the Company shall not relieve
Parent, the Company and their respective subsidiaries from their obligations
hereunder. The Lenders, on behalf of the Indemnified Persons, shall have the
right to retain counsel of their choice to represent the Indemnified Persons,
and Parent, the Company and their respective subsidiaries shall, jointly and
severally, pay the fees, expenses and disbursements of such counsel; and such
counsel shall, to the extent consistent with its professional responsibilities,
cooperate with Parent, the Company and any counsel designated by Parent and the
Company. Parent and the Company, on behalf of themselves and their respective
subsidiaries, shall be jointly and severally liable for any settlement of any
claim against any of the Indemnified Persons made with the written consent of
Parent and the Company, which consent shall not be unreasonably withheld.
Without the prior written consent of the Lenders, Parent and the Company shall
not settle or compromise any claim, or permit a default or consent to the entry
of any judgment in respect thereof, unless such settlement, compromise or
consent includes, as an unconditional term thereof, the giving by the claimant
to each of the Indemnified Persons of an unconditional and irrevocable release
from all liability in respect of such claim.
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these Indemnification Provisions is made but is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification in such case,
then Parent, the Company and their respective subsidiaries, on the one hand, and
the Indemnified Persons, on the other hand, shall contribute to the losses,
claims, damages, obligations, penalties, judgments, awards, liabilities, costs,
expenses and disbursements to which the Indemnified Persons may be subject in
accordance with the relative benefits received by Parent, the Company and their
respective subsidiaries, on the one hand, and the Indemnified Persons, on the
other hand, and also the relative fault of Parent, the Company and their
respective subsidiaries, on the one hand, and the Indemnified Persons, on the
other hand, in connection with the statements, acts or omissions which resulted
in such losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, costs, expenses and disbursements and the relevant equitable
considerations shall also be considered. No person found liable for a
fraudulent misrepresentation shall be entitled to contribution from any other
person who is not also found liable for such fraudulent misrepresentation.
Notwithstanding the foregoing, none of the Indemnified Persons shall be
obligated to contribute any amount hereunder that exceeds the amount of fees
previously received by such Indemnified Person pursuant to the Commitment Letter
and the Fee Letter.
Neither expiration or termination of the Aggregate Commitment nor funding or
repayment of any of the Bridge Financing shall affect these Indemnification
Provisions which shall then remain operative and in full force and effect.
A-2
<PAGE>
ANNEX 1
SUMMARY OF TERMS AND CONDITIONS OF BRIDGE LOANS
The several Commitments of the Lenders to make the Bridge Loans are subject
expressly to the negotiation, execution and delivery of definitive
documentation, including, without limitation, the Bridge Financing Documents,
which will contain the terms, conditions and other provisions set forth herein
and such other representations, warranties, covenants, events of default and
other provisions as are customary for financings of this kind. Capitalized
terms used and not otherwise defined herein have the meanings set forth in the
Bridge Commitment Letter to which this Summary of Terms and Conditions is
attached and of which it forms an integral part.
BORROWER: Arch Communications, Inc. (the "COMPANY").
LENDERS: Bear Stearns, TD, BNY and RBC, and such
other parties from whom the Lenders accept
commitments to provide a portion of the
Bridge Financing.
LOANS: $120 million in aggregate principal amount
of unsecured Exchangeable Senior
Increasing Rate Loans (the "BRIDGE
LOANS").
USE OF PROCEEDS: To consummate the Acquisition and the
Refinancing and to pay fees and reasonable
expenses associated with the Transactions.
1-1
<PAGE>
MATURITY: 180 days from the Closing Date (as defined below)
(the "MATURITY DATE"). If, upon the Maturity Date,
any Bridge Loan has not been previously repaid in
full, and provided (a) no de fault or event of
default under certain provisions of the Bridge
Loan Agreement to be agreed upon (but which, in
any event, will include payment defaults or events
of default on the Bridge Loans and the Bank
Financing) has occurred and is continuing with
respect to the Bridge Loans, (b) no bankruptcy
defaults have occurred with respect to Parent, the
Company or any of their respective subsidiaries,
and (c) there is no outstanding acceleration
notice for any debt of Parent, the Company or any
of their respective subsidiaries, each Bridge Loan
shall be automatically exchanged (such date, the
"EXCHANGE DATE") for an increasing rate exchange
note (each, an "EXCHANGE NOTE") due December 2006.
The initial date of issuance of the Bridge Loans
is hereinafter referred to as the "CLOSING DATE."
The Exchange Notes will be issued pursuant to an
Indenture that will be attached as an exhibit to
the Bridge Loan Agreement and will have the terms
summarized on Annex 2 to the Commitment Letter.
The Exchange Notes will be delivered into escrow
on the Closing Date for delivery on the Exchange
Date.
1-2
<PAGE>
INTEREST: The Bridge Loans will initially bear interest at a
rate per annum equal to the sum of (a) the 3-month
London interbank offered rate, adjusted for
reserves ("LIBOR") calculated on the basis of the
actual number of days elapsed in a year of 360
days, plus (b) a spread (the "SPREAD") of 550
basis points. If the Bridge Loans are not repaid
in whole within three months following the Closing
Date, the Spread will increase by 50 basis points
at the end of such three-month period and shall
increase by an additional 50 basis points at the
end of each three-month period thereafter;
provided, however, that the interest rate
applicable to the Bridge Loans and the Exchange
Notes shall not (i) (except as provided in the
next paragraph) exceed 18% per annum, or (ii)
exceed the maximum rate permitted by applicable
law; and, provided, further, that the Company
shall have the option to capitalize any interest
in excess of 15% per annum on the Bridge Loans,
and pay any interest in excess of 15% per annum on
the Exchange Notes through the issuance of
additional Exchange Notes.
Notwithstanding the foregoing, after the
occurrence and during the continuance of an Event
of Default, interest will accrue on the Bridge
Loans at the then-applicable rate plus 200 basis
points per annum.
Interest will be payable quarterly in arrears and
on the date of any prepayment or repayment of the
Bridge Loans.
RANKING: The obligations of the Company under the Bridge
Loans will be senior obligations and will rank (a)
pari passu with all other unsubordinated
indebtedness of the Company and (b) senior to any
subordinated indebtedness of the Company.
GUARANTEES: None.
SECURITY: None.
1-3
<PAGE>
OPTIONAL REPAYMENT: The Bridge Loans may be prepaid, in whole or in
part, at the option of the Company at any time
upon five business days' written notice at a price
equal to 100% of the principal amount thereof plus
accrued interest to the date of redemption and any
LIBOR breakage costs.
MANDATORY REPAYMENTS: The net proceeds from any of the following
(collectively, "NET PROCEEDS") will be used to
repay the Bridge Loans or reduce the Aggregate
Commitment, in each case at 100% of the principal
amount of the Bridge Loans repaid plus accrued and
unpaid interest to the date of the repayment and
any LIBOR breakage costs: (i) any direct or
indirect public offering or private placement of
any debt or equity securities after the Closing
Date by Parent, the Company or any of their
respective subsidiaries including, without
limitation, the Permanent Financing, and (ii)
subject to prior mandatory prepayments of the Bank
Financing, any future asset sales by Parent, the
Company or any of their respective subsidiaries.
CHANGE OF CONTROL: Upon the occurrence of a Change of Control (to be
defined in a manner consistent with Parent's and
the Company's existing indentures), the Company
shall prepay the Bridge Loans at a price of 101%
of principal amount, plus accrued and unpaid
interest through the date of the prepayment.
PAYMENTS: Payments by the Company will be made by wire
transfer of immediately available funds, without
deduction for taxes.
TRANSFERABILITY AND Each of the Lenders will have the absolute and
PARTICIPATIONS: unconditional right to grant participations in its
commitment under the Commitment Letter and its
Bridge Loans. Except (i) as provided in Section 4
of the Commitment Letter, and (ii) for pledging
all or any portion of its rights under the Bridge
Loan Agreement in favor of any Federal Reserve
Bank, none of the Lenders will have any right to
transfer or assign all or any portion of its
commitment or its Bridge Loans without the prior
written consent of the Company (not to be
unreasonably withheld or delayed).
1-4
<PAGE>
EXPENSES AND All reasonable out-of-pocket costs and expenses of
INDEMNIFICATION: the Lenders (including, without limitation,
reasonable expenses incurred in connection with
the due diligence of the Lenders, the reasonable
legal fees and disbursements of Skadden Arps,
counsel to the Lenders, and auditing and
accounting fees and expenses), associated with the
preparation, execution, delivery and
administration of the Bridge Financing Documents
are to be paid jointly and severally by Parent and
the Company. All reasonable out-of-pocket expenses
of each of the Lenders incurred in connection with
the waiver, amendment and/or enforcement of the
Bridge Financing Documents (including, without
limitation, legal, auditing and accounting fees
and reasonable expenses) are to be paid jointly
and severally by Parent and the Company.
Parent and the Company, on behalf of themselves
and their respective subsidiaries, will jointly
and severally indemnify and hold harmless the
Lenders and each of the other Indemnified Parties
in connection with the Bridge Financing Documents
and the Transactions on terms substantially
identical to, and, in any event, no less favorable
than, the Indemnification Provisions set forth in
Exhibit A to the Commitment Letter.
MODIFICATION OF THE BRIDGE Modification of the Bridge Loan Agreement may be
LOANS: made with consent of the Lenders holding greater
than 50% of the aggregate principal amount of the
Bridge Loans then outstanding, except that,
without the consent of the Lenders holding 100% of
the Bridge Loans, no modification or change may
extend the maturity of any Bridge Loans or time of
payment of any interest on the Bridge Loans,
reduce the rate of interest or the principal
amount of any Bridge Loans, alter the mandatory
prepayment provisions of the Bridge Loan Agreement
or reduce the percentage of Lenders necessary to
modify or change the Bridge Loan Agreement.
1-5
<PAGE>
COST AND YIELD PROTECTION: The Lenders shall receive cost and yield
protection customary for facilities and
transactions of this type, including, but not
limited to, compensation in respect of deposit
breakage losses, taxes (including but not limited
to gross-up provisions for withholding taxes
imposed by any governmental authority), changes in
capital requirements, guidelines or policies or
their interpretation or application, illegality,
change in circumstances, reserves and other
provisions deemed necessary by the Lenders to
provide customary protection for U.S. and non-U.S.
financial institutions, subject to standard
exceptions and exclusions. If any of the Lenders
requests reimbursement by the Company for any of
the foregoing matters (other than deposit breakage
losses), the Company may require such Lender to
transfer and assign its Bridge Loans (at par plus
accrued and unpaid interest and fees (if any)
through the date of transfer and LIBOR breakage
costs, if applicable) to a Permitted Assignee
selected by the Company and acceptable to the non-
assigning Lenders.
CONDITIONS PRECEDENT: The several obligations of the Lenders to make, or
cause one of their respective affiliates to make,
their respective Bridge Loans will be subject to
closing conditions deemed appropriate by the
Lenders for financings of this kind generally and
for this transaction in particular, including,
without limitation, the following closing
conditions:
1-6
<PAGE>
1. Concurrent Transactions. The Acquisition shall
-----------------------
have been consummated in accordance with the
Acquisition Agreement and the Amended Plan (as
defined in the Acquisition Agreement), which shall
be confirmed by the Confirmation Order (as defined
in the Acquisition Agreement), each of which shall
be satisfactory in form and substance to the
Required Lenders (as defined below), without any
amendment, modification or waiver of any of the
terms or conditions thereof without the prior
written consent of the Required Lenders. In
addition, (i) the Bank Financing, the Equity
Financing, and any other funding requirements
shall be in place on terms acceptable to the
Required Lenders and in the amounts described in
the first paragraph of the Commitment Letter and
otherwise on terms customary for similar types of
financings, (ii) all conditions precedent to the
advances or commitments thereunder shall have been
satisfied or, with the consent of each of the
Required Lenders, waived, (iii) there shall be
unused availability under the Bank Financing of
not less than $70 million and (iv) Paging shall
have evidenced its ability as of the Closing Date
to meet all conditions to borrowing the full $70
million of unused availability as of that date.
All necessary consents of the provider(s) of the
Bank Financing shall have been obtained, and the
documentation evidencing such Bank Financing shall
have been amended and/or the provisions thereof
waived to allow the making and mandatory
prepayment of the Bridge Loans, the issuance of
the Exchange Notes and the Permanent Financing,
without any mandatory prepayment thereunder, as
well as in any respect necessary to permit the
issuance of the Warrants (to be defined) and the
consummation of the Transactions contemplated by
the Commitment Letter. There shall not exist (pro
forma for the Transactions) any default or Event
of Default (as hereinafter defined) under the
Bridge Financing Documents, the Acquisition
Agreement, the documents governing the Equity
Financing, the documents governing the Bank
Financing or documents governing any other
material Indebtedness (to be defined) of Parent,
the Company or any of their respective
subsidiaries, and each of the Lenders shall have
funded its share of the Aggregate Commitment.
As used herein, "REQUIRED LENDERS" means the
Lenders holding more than 50% of the Aggregate
Commitment or,
1-7
<PAGE>
2. Absence of Certain Changes. (A) Neither Parent
--------------------------
nor the Company, nor any of their subsidiaries,
shall have sustained since December 31, 1997 (or
(i) June 24, 1998, to the extent such matter is
disclosed in the Offering Memorandum dated June
24, 1998 with respect to the Company's 12 3/4%
Senior Notes due 2007 or (ii) June 29, 1998, to
the extent such matter is disclosed in the current
reports on Form 8-K of Parent and the Company
filed on June 29, 1998) any loss or interference
with its respective business from fire, explosion,
flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or
governmental action, order or decree, (B) since
such date there shall not have been a material
increase in short-term debt or long-term debt of
Parent, the Company or any of their subsidiaries,
and (C) since such date there shall not have been
any change, or any development involving a
prospective change, that could reasonably be
expected in the opinion of the Required Lenders to
result in a Material Adverse Effect with respect
to either Parent and its subsidiaries on a
consolidated basis or the Company and its
subsidiaries on a consolidated basis. As used
herein, "MATERIAL ADVERSE EFFECT" with respect to
any person or entity means a material adverse
effect on (i) the business, property, financial
condition, operations, projections or prospects of
such person or entity; (ii) the legality, validity
or enforceability of any of the Bridge Financing
Documents; (iii) the ability of the Company to
repay its obligations under the Bridge Loan
Agreement or of any other party to perform its
obligations under any Bridge Financing Documents;
or (iv) the rights and remedies of the Lenders
under the Bridge Financing Documents.
Neither the Target nor any of its subsidiaries
shall have sustained since December 31, 1997 any
loss or interference with its business from fire,
explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or
court or governmental action, order or decree
(other than litigation before the Bankruptcy Court
(as defined in the Acquisition Agreement) which
litigation is disposed of pursuant to the
Confirmation Order (as defined in the Acquisition
Agreement)), otherwise than as set forth in its
audited financial statements as of that date, (B)
since such date there shall not have been a
material increase in short-term debt or long-term
debt of the Target or any of its
1-8
<PAGE>
3. Documentation, Legal Matters, etc. The Bridge
----------------------------------
Loan Agreement and the other definitive
documentation evidencing the Bridge Loans shall be
prepared by Skadden Arps and shall be in form
reasonably satisfactory to the Company and the
Required Lenders and shall contain the terms
summarized herein and such other terms as are
customary for similar financings. All other
matters relating to the Acquisition, the
Refinancing and the Amended Plan (as defined in
the Acquisition Agreement) shall be satisfactory
in form and substance to each of the Required
Lenders in all material respects and the Lenders
shall have received such additional certificates,
legal and other opinions, including, to the extent
required by the banks providing the Bank
Financing, a third-party opinion with respect to
the solvency of the Company, in form and substance
reasonably satisfactory to such banks (but
addressed to such banks and the Lenders), and such
other documentation as any of the Lenders shall
reasonably request. The Company shall have
provided the Placement Agents with the preliminary
offering memorandum (or prospectus, as applicable)
described in section 6(b) of the Commitment
Letter.
1-9
<PAGE>
4. Financial Statements. At least ten (10)
--------------------
business days prior to the Closing Date, each of
the Lenders shall have received: (a) consolidated
financial statements of each of Parent, the
Company and the Target including balance sheets as
of the end of the last two fiscal years and income
and cash flow statements as of the end of and for
each of the last three fiscal years (which shall
not differ materially from the information
supplied to date to the Lenders), audited by
independent public accountants of recognized
national standing and prepared in conformity with
generally accepted accounting principles, together
with the report thereon; (b) unaudited selected
financial information of each of Parent, the
Company and the Target meeting the requirements of
Item 301(a) of Regulation S-K for the two fiscal
years immediately preceding the last three fiscal
years; and (c) unaudited interim financial
statements of each of Parent, the Company and the
Target, prepared in the same manner as the
historical audited statements for the most
recently ended quarterly period and for the same
quarterly period during the most recently ended
fiscal year. At least ten (10) business days prior
to the Closing Date, each of the Lenders shall
have also received (a) consolidating pro forma
balance sheets and income statements of Parent and
the Company as of the Closing Date, giving effect
to the Transactions contemplated by the Commitment
Letter and reflecting estimated purchase price
(and "fresh start," if applicable) accounting
adjustments (meeting the requirements of
Regulation S-X for a registration statement on
Form S-1) and (b) financial projections prepared
by the management of Parent and the Company for
the five years following the Closing Date
reflecting the combined operations of Parent, the
Company and the Target. Each of Parent, the
Company and the Target shall have provided to the
Lenders its written permission to disclose each of
the financial statements referred to in this
paragraph 4 in any manner in connection with the
Permanent Financing (other than financial
projections to the extent not publicly available)
and/or the Bridge Loans.
1-10
<PAGE>
5. Absence of Default. Absence of any Event of
------------------
Default under the Bridge Loan Agreement or event
that, with notice and/or the passage of time,
could become an Event of Default under the Bridge
Loan Agreement. The Required Lenders shall be
reasonably satisfied that Parent and the Company
have not failed to comply with any of their
material obligations under the Engagement Letter
and the Fee Letter.
6. Bankruptcy Court Approvals. The assumption by
--------------------------
the Target and certain of its subsidiaries of the
Assumed Contracts (as defined in the Acquisition
Agreement) shall have been authorized and approved
by an order (in form and substance satisfactory to
the Required Lenders) of the Bankruptcy Court (as
defined in the Acquisition Agreement) for which
all applicable periods for appeal or rehearing
have expired and no notice of appeal or request
for rehearing shall have been entered and such
order shall be in full force and effect without
any material modification or amendment. The
Confirmation Order (as defined in the Acquisition
Agreement), in a form reasonably satisfactory to
each of the Parties (as defined in the Acquisition
Agreement) and reasonably satisfactory in form and
substance to the Required Lenders, shall have been
entered by the Bankruptcy Court, such Confirmation
Order shall have been in full force and effect for
eleven days without any modification or amendment
or stay thereof and, there shall not be pending
any appeal or request for rehearing (other than
those which in the opinion of the Required Lenders
in their sole discretion would not, individually
or in the aggregate, have a Material Adverse
Effect with respect to Parent and its subsidiaries
on a consolidated basis, the Company and its
subsidiaries on a consolidated basis or the Target
and its subsidiaries on a consolidated basis.
1-11
<PAGE>
7. Other Approvals and Consents. Receipt of all
----------------------------
governmental, shareholder and third-party consents
(including Hart-Scott-Rodino clearance and FCC
approval of transfer of licenses) and approvals
necessary or desirable in connection with the
Transactions contemplated in the Commitment Letter
and expiration of all applicable waiting periods
without any action being taken by any competent
authority that could, in the opinion of the
Required Lenders in their sole discretion,
restrain or prevent the Transactions or impose any
Material Adverse Effect on Parent and its
subsidiaries on a consolidated basis, the Company
and its subsidiaries on a consolidated basis or
the Target and its subsidiaries on a consolidated
basis.
8. Litigation, etc. The absence of any action,
---------------
suit, investigation, litigation or proceeding
pending or threatened in any court or before any
arbitrator or governmental instrumentality that
purports to affect the Transactions or which
would, individually or in the aggregate, in the
opinion of the Required Lenders in their sole
discretion, result in, or be reasonably expected
to result in, a Material Adverse Effect with
respect to Parent and its subsidiaries on a
consolidated basis, the Company and its
subsidiaries on a consolidated basis or the Target
and its subsidiaries on a consolidated basis. In
addition, all licenses shall be in full force and
effect with no pending or threatened regulatory
proceedings with respect thereto.
9. Accuracy of Representations and Warranties.
------------------------------------------
All representations and warranties contained in
the Bridge Financing Documents, the Bank Financing
documents, the Equity Financing documents and/or
the Acquisition Agreement shall be true and
correct in all material respects as of the Closing
Date, except as, in certain circumstances, would
not reasonably be expected to result in a Material
Adverse Effect with respect to Parent and its
subsidiaries on a consolidated basis, the Company
and its subsidiaries on a consolidated basis or
the Target and its subsidiaries on a consolidated
basis.
1-12
<PAGE>
10. Payment of Fees and Expenses. All fees and
----------------------------
expenses (including reasonable legal fees and
disbursements) due to the Lenders and the
Placement Agents on or before the Closing Date in
connection with the Bridge Loans, pursuant to the
Commitment Letter, the Fee Letter, the Engagement
Letter or otherwise, shall have been paid in full.
11. Market Disruption; Certain Events. Trading in
---------------------------------
securities generally on the New York or American
Stock Exchanges or NASDAQ shall not have been
suspended and minimum or maximum prices shall not
have been established on any such exchange, nor
shall there have occurred any material change in,
or development with respect to, the financial
markets of the United States or international
markets in general, or the new issue market for
high yield securities in particular which, in the
sole discretion of the Required Lenders, makes it
impracticable or inadvisable to proceed with the
Bridge Financing or any refinancings thereof, or
that would materially adversely affect the ability
to sell or assign the Bridge Loans on the terms
contemplated by the Commitment Letter. There shall
not have occurred and be continuing (a) any
declaration of a general banking moratorium by
either federal or New York authorities, (b) an
outbreak or escalation of hostilities between the
United States and any other power, (c) an outbreak
or escalation of any other insurrection or armed
conflict involving the United States, or (d) any
other national or international calamity or
emergency.
1-13
<PAGE>
12. Due Diligence. The Lenders' legal and tax due
-------------
diligence investigations with respect to Parent,
the Company and their respective subsidiaries, the
Target and its subsidiaries, the Acquisition and
the other Transactions contemplated hereby shall
be satisfactory in all respects to the Required
Lenders, and any supplemental business, financial
or accounting due diligence that any of the
Lenders determine has become necessary shall not
have disclosed information not previously
disclosed to the Required Lenders which causes the
results of such diligence not to be satisfactory
in all respects to the Required Lenders. The
Lenders shall also have received any information
reasonably necessary to conduct continuing due
diligence.
13. Capitalization. The corporate, tax, capital
--------------
and ownership structure (including articles of
incorporation and by-laws), shareholders
agreements and management of the Company before
and after the Transactions shall be reasonably
satisfactory to the Required Lenders in all
respects. In addition, substantially
simultaneously with the Acquisition, the Target
shall be a wholly-owned subsidiary of the Company
or Paging.
14. Other Agreements. The Lenders shall have
----------------
received and approved all operating agreements,
management agreements, joint venture or
partnership agreements, if any.
15. Opinions. The Lenders shall have received
--------
satisfactory opinions of counsel to the Company as
to the transactions contemplated hereby (including
without limitation the tax aspects thereof and
compliance with all applicable securities laws),
and such corporate resolutions, certificates and
other documents as the Lenders shall reasonably
request.
1-14
<PAGE>
16. Tower Site Sale. The sale of the Target's
---------------
tower sites shall have been consummated on terms
and conditions and pursuant to documentation
satisfactory to the Required Lenders, and the
Lenders shall have received evidence of the
receipt of at least $165 million in connection
with the sale of the Target's tower sites.
17. No Change of Control. No change of control
--------------------
under any documents evidencing indebtedness of
Parent, the Company or any of their respective
subsidiaries shall have occurred or would result
from consummation of any of the Transactions.
18. Acquisitions. After acceptance of the
------------
Commitment Letter and prior to the Closing Date,
Parent, the Company and their respective
subsidiaries shall not have completed acquisitions
(other than the Acquisition) which exceed $15
million in the aggregate.
19. Additional Conditions. All conditions set
---------------------
forth in the Acquisition Agreement, the Bank
Financing documents and the Equity Financing
documents shall have been satisfied and not waived
without the consent of the Required Lenders.
1-15
<PAGE>
COVENANTS: The Bridge Loan Agreement will contain such
affirmative and negative covenants with respect to
the Company and its subsidiaries as are usual and
customary for financings of this kind (which
generally will be substantially similar to the
covenants set forth in the Bank Financing
documents, including, without limitation, as to
(i) use of proceeds, (ii) refinancing of the
Bridge Loans, (iii) furnishing of financial
information in accordance with generally accepted
accounting principles, (iv) compliance with laws,
(v) maintenance of existence, licenses and
franchises, (vi) restrictions on liens, (vii)
restrictions on indebtedness, (viii) restrictions
on investments, (ix) restrictions on dividends,
distributions, redemptions and other restricted
payments (to be defined), (x) restrictions on
sales of assets, (xi) restrictions on mergers and
consolidations (other than with existing
subsidiaries) and prohibition of additional
acquisitions and consolidations, (xii)
restrictions on transactions with affiliates,
(xiii) restrictions on sale-leaseback
transactions, (xiv) restrictions on business
activities; (xvi) restrictions on material adverse
amendments to charter documents; (xvii)
restrictions on transactions between Parent and
its direct and indirect subsidiaries other than
certain transactions through the Company; and
(xviii) maintenance of certain financial ratios;
provided, however, that in certain material
instances such covenants shall be substantially
more restrictive than those set forth in the Bank
Financing documents).
1-16
<PAGE>
EVENTS OF DEFAULT: The Bridge Loan Agreement will include such events
of default (each, an "EVENT OF DEFAULT") (and, as
appropriate, grace periods) as are usual and
customary for financings of this kind, including,
without limitation: (i) the failure of the Company
to pay principal on the Bridge Financing when due
(it being understood that payment of the principal
amount of the Bridge Loans on the Maturity Date
through the issuance of the Exchange Notes in
compliance with the Bridge Loan Agreement shall
not constitute an event of default under the
Bridge Loan Agreement); (ii) the failure of the
Company to pay interest or fees on the Bridge
Financing and the continuance of such failure for
5 days; (iii) the failure of the Company to comply
with any other provision, condition, covenant,
promise, warranty or representation in the Bridge
Financing Documents, provided that in certain
cases such failure continues for 30 days after
notice; (iv) a default under any instrument or
instruments governing indebtedness of Parent, the
Company or any of their respective subsidiaries or
failure to pay principal on any such indebtedness
in accordance with its terms in an aggregate
principal amount exceeding a threshold amount to
be agreed; (v) final judgments aggregating in
excess of a threshold amount to be agreed rendered
against Parent, the Company or any of their
respective subsidiaries and not discharged or
stayed within 60 days; (vi) certain events of
bankruptcy, insolvency or reorganization with
respect to Parent, the Company or any of their
respective subsidiaries; (vii) material
misrepresentations in the Bridge Financing
Documents; and (viii) certain ERISA defaults.
1-17
<PAGE>
In case an Event of Default shall occur and be
continuing, the holders of a majority in aggregate
principal amount of the Bridge Loans then
outstanding, by notice in writing to the Company
and other Lenders, may declare the principal of
and all accrued interest on the Bridge Loans to be
immediately due and payable; provided, however,
that no such notice shall be necessary in the case
of (i) a bankruptcy Event of Default with respect
to the Company or (ii) a default under any
instrument or instruments governing indebtedness
of Parent, the Company or any of their respective
subsidiaries when such default causes such
indebtedness to become due prior to its stated
maturity. An acceleration, whether by notice or
otherwise, may be annulled and past defaults
(except for payment defaults not yet cured) may be
waived by the holders of a majority in aggregate
principal amount of Bridge Loans then outstanding.
REPRESENTATIONS AND The Bridge Loan Agreement will contain such
WARRANTIES: representations and warranties with respect to the
Company, the Target and their respective
subsidiaries as are usual and customary for
financings of this kind or as are otherwise deemed
appropriate by the Lenders, including, without
limitation: (i) organization and good standing,
(ii) capitalization, (iii) authorization and
enforceability, (iv) no conflicts, (v) all third
party consents obtained and compliance with
governmental regulations (including margin
regulations), (vi) no defaults, (vii) no violation
of law, (viii) absence of litigation, proceedings,
labor disputes, etc., (ix) financial condition
(including solvency matters), (x) Investment
Company Act and Hart-Scott-Rodino matters, (xi)
absence of material adverse change, (xii) absence
of undisclosed liabilities, (xiii) financial
statements and (xiv) full disclosure.
GOVERNING LAW AND FORUM: New York.
COUNSEL FOR THE LENDERS: Skadden, Arps, Slate, Meagher & Flom LLP ("SKADDEN
ARPS")
1-18
<PAGE>
ANNEX 2
SUMMARY OF TERMS AND CONDITIONS OF EXCHANGE NOTES
The several Commitments of the Lenders to issue the Bridge Loans are
subject expressly to the negotiation, execution and delivery of definitive
documentation, including, without limitation, the Indenture (as hereinafter
defined), which will contain the terms, conditions and other provisions set
forth herein and such other representations, warranties, covenants, events of
default and other provisions as are customary for financings of this kind.
Capitalized terms used but not defined herein have the meanings given in the
Bridge Commitment Letter to which this Annex 2 is attached or, if not defined
therein, in Annex 1 thereto.
EXCHANGE NOTES: If the Bridge Loans are not repaid in their entirety
at or before the maturity date of the Bridge Loans
(in this Annex 2, the "BRIDGE MATURITY DATE"), the
Bridge Loans will be automatically exchanged on the
Bridge Maturity Date for Exchange Notes in an
aggregate principal amount equal to the principal
amount of the outstanding Bridge Loans plus any
capitalized interest added to pay interest in excess
of the original principal amount, PROVIDED THAT (a)
no default or event of default under certain
provisions of the Bridge Loan Agreement to be agreed
upon (but which, in any event, will include payment
defaults or events of default on the Bridge Loans
and the Bank Financing) has occurred and is
continuing with respect to the Bridge Loans, (b) no
bankruptcy defaults have occurred with respect to
Parent, the Company or any of their respective
subsidiaries and (c) there is no outstanding
acceleration notice for any debt of Parent, the
Company or any of their respective subsidiaries.
The Company will issue Exchange Notes under an
indenture which complies with the Trust Indenture
Act of 1939, as amended (the "INDENTURE"). The
Company will appoint a trustee reasonably acceptable
to the holders of the Exchange Notes. The Exchange
Notes and the Indenture will be fully executed on
the Closing Date and the Exchange Notes will be
deposited into escrow at the closing of the Bridge
Loans.
MATURITY: The Exchange Notes will mature December 2006.
2-1
<PAGE>
INTEREST RATE: The rate per annum (expressed as a fixed percentage)
applicable to the Bridge Loans on the Bridge
Maturity Date plus 50 basis points, which rate shall
increase by 50 basis points on the last day of each
third month after the Bridge Maturity Date;
provided, however, that the interest rate applicable
to the Exchange Notes (i) shall not (except as
provided in the next paragraph) exceed 18% per
annum, and (ii) shall not exceed the maximum rate
permitted by applicable law; and, provided, further,
that the Company shall have the option to pay any
interest in excess of 15% per annum on the Exchange
Notes through the issuance of additional Exchange
Notes.
Notwithstanding the foregoing, after the occurrence
and during the continuance of a Default or an Event
of Default, interest will accrue on the Exchange
Notes at the then-applicable rate plus 200 basis
points per annum. Interest will be payable in
arrears at the end of each third month after their
release from escrow on the Bridge Maturity Date or
date of prepayment of the Bridge Loans, and on the
maturity date of the Exchange Notes. No yield
protection provisions shall be applicable to the
Exchange Notes.
RANKING: Same as Bridge Loans.
GUARANTEES: None.
SECURITY: None.
OPTIONAL REDEMPTION: During the first four years after the issuance of
the Exchange Notes, the Exchange Notes may be
redeemed at a price of 105% of principal amount,
such premium to decline ratably to 100% of principal
amount at the end of the sixth year.
MANDATORY REDEMPTION: None.
2-2
<PAGE>
CHANGE OF CONTROL: Upon the occurrence of a Change of Control, the
Company shall offer to redeem the Exchange Notes at
a price of 101% of principal amount, plus accrued
and unpaid interest through the date of the
redemption.
PAYMENTS: Same as Bridge Loans.
TRANSFERABILITY: Unlimited except as otherwise provided by law.
DEFEASANCE PROVISIONS OF Customary for high-yield bonds.
EXCHANGE NOTES:
MODIFICATION: Same as Bridge Loans.
2-3
<PAGE>
REGISTRATION RIGHTS: The Company will file within 90 days after the
initial issuance date of the Bridge Loans, and will
use its best efforts to cause to become effective as
soon thereafter as practicable, but no later than
the Bridge Maturity Date, a shelf registration
statement with respect to the Exchange Notes (a
"SHELF REGISTRATION STATEMENT"). The Company will
keep such registration statement effective and
available (subject to customary exceptions) until it
is no longer needed to permit unrestricted resales
of the Exchange Notes. If, on or before the Bridge
Maturity Date, a Shelf Registration Statement for
the Exchange Notes has not been declared effective,
then the Company will pay liquidated damages in the
form of increased interest of 50 basis points per
annum on the principal amount of Exchange Notes
outstanding to holders of such Exchange Notes who
are unable freely to transfer Exchange Notes from
and including the Bridge Maturity Date to but
excluding the effective date of such Shelf
Registration Statement. On each 90-day anniversary
of the Bridge Maturity Date thereafter, the
liquidated damages shall increase by 50 basis points
per annum, to a maximum increase in interest of 200
basis points. The Company will also pay such
liquidated damages for any period of time (subject
to customary exceptions) following the issuance of
the Exchange Notes and the effectiveness of a Shelf
Registration Statement that such Shelf Registration
Statement is not available for sales thereunder. All
accrued liquidated damages will be paid on each
quarterly interest payment date and shall be payable
without regard to the 18% cap on interest rates or
the 15% cash cap option on interest rates. In
addition, unless and until the Company has caused
the Shelf Registration Statement to become effective
by the Bridge Maturity Date, the holders of the
Exchange Notes will have the right to "piggy-back"
in the registration of any debt securities (subject
to customary scale-back provisions) that are
registered by the Company (other than on a Form S-4)
unless all the Exchange Notes will be redeemed or
repaid from the proceeds of such securities.
EXCHANGE NOTES ESCROWED: The Exchange Notes will be executed and delivered on
the Closing Date but undated (and the Trustee shall
be granted an irrevocable power of attorney to date
the Exchange Notes upon issuance) and will be held
in escrow by the Trustee or another mutually
agreeable fiduciary.
2-4
<PAGE>
COVENANTS: Substantially similar to the covenants set forth in
the indenture for the Company's 12 3/4% Senior Notes
due 2007.
EVENTS OF DEFAULT: Customary for high-yield bonds.
GOVERNING LAW AND FORUM: New York.
2-5
<PAGE>
EXHIBIT 10.17
AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT
This Amendment No. 1 dated August 19, 1998 (this "Amendment") amends that
certain Registration Rights Agreement dated as of June 29, 1998 by and among
Arch Communications Group, Inc., a Delaware corporation (the "Company"), and the
Investors that are parties thereto (the "Agreement"). Capitalized terms used
but not otherwise defined in this Amendment shall have the respective meanings
ascribed to such terms in the Agreement.
INTRODUCTION
WHEREAS, the Company and the Investors have executed the Agreement
providing the Investors with certain registration rights;
WHEREAS, the Company wishes to acquire MobileMedia Communications, Inc.
("MobileMedia") pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") and a related plan of reorganization (the "Plan").
WHEREAS, in connection with the Merger Agreement and the Plan, the Company
will issue rights to acquire its equity securities to certain unsecured
creditors of MobileMedia;
WHEREAS, pursuant to the Merger Agreement and the Plan, the Company will be
required to grant certain registration rights to (a) W.R. Huff Asset Management
Co., L.L.C., The Northwestern Mutual Life Insurance Company, The Northwestern
Mutual Life Insurance Company for its Group Annuity Separate Account,
Northwestern Mutual Series Fund, Inc. for its High Yield Bond Portfolio, Credit
Suisse First Boston and Whippoorwill Associates, Inc. or their affiliates
(collectively, the "Standby Purchasers") and (b) other creditors of MobileMedia
or its affiliates that become the beneficial owner of at least 10% of the
outstanding shares of Arch common stock as a result of transactions contemplated
by the Merger Agreement and Plan (the "Other MobileMedia Acquirors");
WHEREAS, in connection with the Merger Agreement and the Plan the Company
wishes to amend the Agreement, and the Investors are willing to amend the
Agreement on the terms set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Section 2.3 of the Agreement shall be and hereby is deleted and the
following is substituted in lieu thereof:
If the distribution of Registrable Securities is being effected by
means of an underwriting and if the managing underwriter has not
limited the number of Registrable Securities to be underwritten, the
Company (i) may include securities for its own account in such
registration if the managing underwriter so agrees and
<PAGE>
(ii) may include securities for the account of stockholders other than
the Holders in such registration if the managing underwriter so agrees
and if Holders holding a majority of the Registrable Securities
covered by such registration consent to such inclusion; provided that
no such consent of the managing underwriters or the Holders shall be
required if such securities are for the account of a Standby Purchaser
or Other MobileMedia Acquiror. The inclusion of such shares by the
Company or such other holders shall be on the same terms as the
registration of shares held by the Initiating Holders. In the event
that the underwriters exclude some of the securities to be registered,
the securities to be sold for the account of the Company and any other
holders shall be excluded in their entirety prior to the exclusion of
any Registrable Securities.
2. Section 3.2(a) of the Agreement shall be and hereby is deleted and the
following is substituted in lieu thereof:
(a) Notwithstanding any other provision of this Article 3, if the
managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the underwriter
may exclude some or all Registrable Securities from such registration
and underwriting. The Company shall so advise all Holders of
Registrable Securities, and the number of shares of Common Stock to be
included in such registration shall be allocated as follows: first,
for the account of the Company, all shares of Common Stock proposed to
be sold by the Company; and second, for the account of the Holders and
any other stockholder participating in such registration, the number
of shares of Common Stock requested to be included in the registration
by such Holders and other stockholders, which shall be allocated on a
pari passu basis in proportion, as nearly as practicable, to the
respective amounts of Common Stock that are proposed to be offered and
sold by such Holders or other stockholders at the time of filing the
registration statement; provided, however, that if such registered
public offering involving an underwriting is initiated at the request
of any Standby Purchaser or any Other MobileMedia Acquiror, and if the
managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the shares to
be included in such registration shall be allocated as follows: first,
for the account of the Standby Purchasers (if the registration has
been initiated at the request of a Standby Purchaser) or the Other
MobileMedia Acquirors (if the registration has been initiated at the
request of an Other MobileMedia Acquiror), all such shares of Common
Stock proposed to be sold by them; and second, for the account of the
Holders and any other stockholder (including the Other MobileMedia
Acquirors in the case of a registration initiated at the request of a
Standby Purchaser, or the Standby Purchasers in the case of a
registration initiated at the request of an Other MobileMedia
Acquiror) participating in such registration, the number of shares of
Common Stock requested to be included in the registration by such
Holders and other
-2-
<PAGE>
stockholders, which shall be allocated on a pari passu basis in
proportion, as nearly as practicable, to the respective amounts of
Common Stock that are proposed to be offered and sold by such Holders
or other stockholders at the time of filing the registration
statement; provided further, however, that the immediately preceding
proviso shall only be effective if and to the extent that the Holders
receive substantially similar treatment, for purposes of exclusion
priorities, under any "piggyback" registration rights granted by the
Company to the Standby Purchasers or other MobileMedia Acquirors in
connection with registrations initiated hereunder upon the request of
the Holders. No Registrable Securities excluded from the underwriting
by reason of the underwriters' marketing limitation shall be included
in such registration.
3. Section 11.8 of the Agreement shall be and hereby is deleted and the
following is substituted in lieu thereof:
Each Holder agrees, if requested by the Company and an underwriter of
Common Stock (or other securities) of the Company, not to sell or otherwise
transfer or dispose of, whether in privately negotiated or open market
transactions, any Common Stock (or other securities) of the Company held by
such Holder during the ninety (90) day period following the effective date
of a registration statement of the Company filed under the Securities Act
for any underwritten registered public offering for the account of and
initiated by the Company, without the prior consent of such underwriter,
provided, however, that all Holders (except as provided in the following
-------- -------
proviso), officers, directors of the Company and all other holders and
optionholders of at least 1% of the Company's voting securities on an as-
converted basis enter into similar agreements; and provided, further,
-------- -------
however, that this Section 11.8 shall not apply to any Holder that
-------
beneficially owns less than 4% of the Company's outstanding Common Stock
(assuming the conversion of all outstanding convertible securities).
Such agreement shall be in writing in a form satisfactory to the Company
and such underwriter. The Company may impose stop-transfer instructions with
respect to the shares (or securities) subject to the foregoing restriction until
the end of said ninety (90) day period.
4. Except as amended hereby, the Agreement is confirmed in all respects.
5 This Amendment shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and to be
performed entirely within the state without regard to principles of conflicts of
law.
6. This Amendment may be executed in any number of counterparts, each of
which shall be an original, but all of which together constitute one instrument.
[The remainder of this page intentionally left blank]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
COMPANY:
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ C.E. Baker, Jr.
---------------------------------
Name: C.E. Baker, Jr.
Title: Chairman of the Board and
Chief Executive Officer
INVESTORS:
SANDLER CAPITAL PARTNERS IV, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management, General
Partner
By: MJDM Corp., a General Partner
By: /s/ Edward G. Grinacoff
---------------------------------
Edward G. Grinacoff
President
-4-
<PAGE>
SANDLER CAPITAL PARTNERS IV, FTE, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General Partner
By: /s/ Edward G. Grinacoff
---------------------------------
Edward G. Grinacoff
President
/s/ Harvey Sandler
---------------------------------
HARVEY SANDLER
/s/ John Kornreich
---------------------------------
JOHN KORNREICH
/s/ Michael J. Marocco
---------------------------------
MICHAEL J. MAROCCO
/s/ Andrew Sandler
---------------------------------
ANDREW SANDLER
-5-
<PAGE>
SOUTH FORK PARTNERS
By: /s/ Richard Reiss, Jr.
---------------------------------
Richard Reiss, Jr.
Reiss Capital Management LLC
General Partner of South Fork Partners
THE GEORGICA INTERNATIONAL
FUND LIMITED
By: /s/ Richard Reiss, Jr.
---------------------------------
Richard Reiss, Jr.
Georgica Advisors LLC
Investment Advisor to The Georgica
International Fund Limited
ASPEN PARTNERS
By: /s/ Nikos Hecht
---------------------------------
Nikos Hecht
Reiss Capital Management LLC
General Partner of Aspen Partners
CONSOLIDATED PRESS
INTERNATIONAL LIMITED
By: /s/ Nikos Hecht
---------------------------------
Nikos Hecht
Georgica Advisors LLC
Investment Advisor to
Consolidated Press
International Limited
-6-
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in this
registration statement of our report dated February 9, 1998 (except with
respect to the matter discussed in Notes 3, 4 and 8, as to which the date is
June 29, 1998) included herein and to all references to our Firm included in
this registration statement.
/s/ Arthur Andersen LLP
Boston, Massachusetts ARTHUR ANDERSEN LLP
September 14, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated July 31, 1998, except for the third paragraph of
Note 15 as to which the date is September 3, 1998, with respect to the
financial statements of MobileMedia Communications, Inc. as of December 31,
1997 and 1996 and for each of the three years in the period ended December 31,
1997, included in the Registration Statement (Form S-4 No. 333-62211) and
Prospectus of Arch Communications Group, Inc. for the registration of shares
of its common stock, stock purchase warrants and rights to purchase such stock
and warrants.
/s/ Ernst & Young LLP
MetroPark, New Jersey
September 11, 1998
<PAGE>
EXHIBIT 23.4
CONSENT
We hereby consent to the reference to our firm under the heading "Experts" in
the Prospectus constituting part of the Registration Statement on Form S-4
(File Number 333-62211) of Arch Communications Group, Inc.
Wilkinson, Barker, Knauer & Quinn,
LLP
/s/ Kenneth D. Patrich
By: _________________________________
KENNETH D. PATRICH
<PAGE>
EXHIBIT 23.5
CONSENT
We hereby consent to the reference to our firm under the heading "Experts"
in the Prospectus constituting part of the amended Registration Statement on
Form S-4 (File Number 333-62211) of Arch Communications Group, Inc. As noted
therein, our review and input has only pertained to FCC matters unique to
MobileMedia included in the description of the regulatory requirements under
the Communications Act and the regulations thereunder set forth under "Risk
Factors--Risks Common to Arch and MobileMedia--Government Regulation, Foreign
Ownership and Possible Redemption" and "Industry Overview--Regulation."
Stockholders of Arch should not rely on Wiley, Rein & Fielding with respect to
any other matters or any other sections of the document.
WILEY, REIN & FIELDING
/s/ Nancy J. Victory
By: _________________________________
Nancy J. Victory
Dated: September 14, 1998
<PAGE>
EXHIBIT 99.1
THE REGISTERED OWNER OF THIS SUBSCRIPTION CERTIFICATE IS ENTITLED TO THE
NUMBER OF RIGHTS SHOWN IN THE UPPER RIGHT HAND CORNER OF THE OTHER SIDE OF
THIS FORM AND TO SUBSCRIBE FOR UNITS CONSISTING OF SHARES OF COMMON STOCK AND
WARRANTS OF ARCH COMMUNICATIONS GROUP, INC. UPON THE TERMS AND CONDITIONS
SPECIFIED IN THE PROSPECTUS RELATING THERETO, WHICH ARE INCORPORATED HEREIN BY
REFERENCE.
PLEASE FILL IN ALL APPLICABLE INFORMATION:
I hereby irrevocably subscribe for
the number of Units indicated
above upon the terms and
conditions specified in the
Prospectus relating hereto.
Receipt of the Prospectus is
hereby acknowledged.
1.(A) Number of Units Subscripted Signature of Subscriber: __________
for (not to exceed the ratio
of one (1) Unit for every
Right held):
(Joint owners should each sign. If
signing as executor,
administrator, attorney, trustee,
or guardian, give title as such.
If a corporation, sign in full
corporate name by authorized
officer. If a partnership, sign in
the name of authorized person.)
TO BE EXECUTED ONLY BY NON-UNITED
2. Method of Payment: Check (A) STATES RESIDENTS:
and (B): _______________________
I hereby certify that the
(A)Notice of Guaranteed Delivery foregoing purchase of Common Stock
of Payment _______________________ has been effected in accordance
with the applicable laws of the
or jurisdiction in which I reside.
(B) Multiply number of Shares Dated:__________________, 1999
on Line 1(A) by the
Subscription Price** (and
enclose money order or
check in this amount
payable to "Arch
Communications Group,
Inc.")** _____________
-----------------------------------
-----------------------------------
-----------------------------------
--------
**The Subscription Price will be
announced by Arch in a press
release on the first business day
following the determination of the
Subscription Price. See page of
the Prospectus.
SUBSCRIPTION CERTIFICATE NUMBER: _____________ NUMBER OF RIGHTS: _________
SUBSCRIPTION CERTIFICATE
ARCH COMMUNICATIONS GROUP, INC.
SUBSCRIPTION RIGHT FOR UNITS CONSISTING OF SHARES OF COMMON STOCK
AND WARRANTS
This Subscription Certificate represents the number of Rights set forth in
the upper right hand corner of this Form. The Holder is entitled to acquire
one unit consisting of one (1) Share of Common Stock and, in specified
circumstances, a fraction of one warrant of Arch Communications Group, Inc.
("Arch") for each Right held.
To subscribe for Shares of Common Stock and, in specified circumstances,
warrants, the Holder must present to the Subscription Agent, prior to 5:00
p.m., New York City time, on the Expiration Date, either (i) a notice of
guaranteed delivery attached hereto, guaranteeing delivery of (a) payment for
the subscription Units and (b) a properly completed and executed copy of this
Subscription Certificate; or (ii) a properly completed and executed copy of
this Subscription Certificate, together with a money order or check drawn on a
bank located in
<PAGE>
the United States of America and payable to Arch Communications Group, Inc.
Securities Fund for an amount equal to the number of Units subscribed for
multiplied by $5.00. Subscribers will be subsequently notified as to the
number of Units subscribed and the total amount owed based on the Subscription
Price as set on the pricing date. See page of the Prospectus. Payment for
any balance will be due three (3) business days after the Confirmation Date.
If an outstanding balance as described above is not received within the
three (3) business day period, Arch reserves the right to (i) find other
purchasers for the subscribed-for and unpaid-for Units; (ii) apply any payment
actually received by it toward the purchase of the greatest whole number of
Units which could be acquired by such holder upon exercise of the Rights;
and/or (iii) exercise any and all other rights and/or remedies to which it may
be entitled, including, without limitation, the right to set-off against
payments actually received by it with respect to such subscribed Units and to
enforce the relevant guaranty of payment.
REGISTERED OWNER ARCH COMMUNICATIONS GROUP, INC.
THE BANK OF NEW YORK as Subscription
Agent
By: _________________________________
TO: The Bank of New York
Subscription Agent
Tender and Exchange
Department
P.O. Box 11248
Church Street Station
New York, New York 10286-1248
THIS CERTIFICATE MAY NOT BE
TRANSFERRED
THIS RIGHTS OFFERING HAS BEEN QUALIFIED OR IS BELIEVED TO BE EXEMPT FROM
QUALIFICATION ONLY UNDER THE FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF
EACH OF THE STATES IN THE UNITED STATES. RESIDENTS OF OTHER JURISDICTIONS MAY
NOT PURCHASE THE SHARES OF COMMON STOCK OFFERED HEREBY UNLESS THEY CERTIFY
THAT THEIR PURCHASES OF SUCH SHARES ARE EFFECTED IN ACCORDANCE WITH THE
APPLICABLE LAWS OF SUCH JURISDICTIONS.
<PAGE>
September , 1998
TO THE HOLDERS OF ALLOWED
CLASS SIX CLAIMS UNDER THE SECOND
AMENDED JOINT PLAN OF REORGANIZATION
OF MOBILEMEDIA COMMUNICATIONS, INC.
AND ITS SUBSIDIARIES
Arch Communications Group, Inc. ("Arch") has agreed to acquire MobileMedia
Communications, Inc. and its Subsidiaries ("MobileMedia") pursuant to an
Agreement and Plan of Merger dated August 18, 1998, as amended (the "Merger
Agreement"), and MobileMedia's Second Amended Joint Plan of Reorganization
dated as of September 3, 1998 (the "Amended Plan").
Pursuant to the Merger Agreement and in connection with the Amended Plan,
Arch has agreed to issue to the holders of Allowed Class 6 Claims under the
Amended Plan (general unsecured claims) rights (the "Rights") to purchase the
Arch securities which are described in the accompanying prospectus (the
"Prospectus"). The terms of the Rights, the securities of Arch issuable upon
exercise of the Rights and the risks related thereto are described in detail
in the Prospectus. The discussion of the Rights contained in this transmittal
letter is qualified in its entirety by reference to the Prospectus, which you
are urged to read in its entirety.
Included with this letter are the following materials:
1. the Prospectus;
2. the Subscription Certificate; and
3. the Notice of Guaranteed Delivery of Payment.
Separately, you have received or will receive from MobileMedia a Disclosure
Statement relating to the Amended Plan.
The Rights are distributed to you as part of the consideration you receive
on account of your Class Six Claim under the Amended Plan. If the Amended Plan
is not approved by the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"), the Rights may not be exercised. The number
of Rights which have been issued to you is set forth in the upper right-hand
corner of the Subscription Certificate which is enclosed herewith.
The Arch securities which may be purchased upon exercise of the Rights will
not be determined until the sixteenth (16th) business day following approval
of the Amended Plan by the Bankruptcy Court (presently estimated to be January
, 1999). Prior to the time such determination is made, the Rights may not be
exercised, although they are transferable. When the determination has been
made, Arch will issue a press release, file a Form 8-K Report with the
Securities and Exchange Commission and post a notice on Arch's website
www.arch.com announcing the securities which may be purchased upon exercise of
the Rights, the exercise price and the date by which you must deliver your
Subscription Certificate (the "Expiration Date") if you chose to exercise your
Rights (the "Public Announcement"). It is expected that the Expiration Date
will be approximately fifteen (15) days following the Public Announcement.
The Rights are transferable. Transfer instructions are set out in pages to
of the Prospectus.
<PAGE>
If you do not exercise the Rights or sell the Rights prior to the Expiration
Date, the Rights will have no value. To exercise the Rights, you must complete
the Subscription Certificate enclosed herewith and deliver it and either the
purchase price or the Notice of Guaranteed Delivery, duly completed, to the
Subscription Agent, on or prior to the Expiration Date at the following
address:
BY FIRST-CLASS MAIL
The Bank of New York
Attn: Tender and Exchange Department
P.O. Box 11248
Church Street Station
New York, NY 10286-1248
BY HAND, EXPRESS MAIL OR OVERNIGHT COURIER
The Bank of New York
Tender and Exchange Department
101 Barclay Street
Receive and Delivery Window
New York, NY 10286
Payment of the exercise price must be made prior to the Expiration Date in
the manner described at page of the Prospectus.
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY FOR SHARES OF COMMON STOCK AND WARRANTS OF ARCH
COMMUNICATIONS GROUP, INC. SUBSCRIBED FOR IN RIGHTS OFFERING
As set forth on pages and of the Prospectus under "Payment for
Shares," this form or one substantially equivalent hereto may be used as a
means of effecting subscription and payment for all Units consisting of Arch's
Common Stock and warrants subscribed for in connection with the Rights
Offering. Such form may be delivered by hand or sent by facsimile
transmission, overnight courier or mail to the Subscription Agent.
THE SUBSCRIPTION AGENT IS:
THE BANK OF NEW YORK
ATTENTION: TENDER AND EXCHANGE DEPARTMENT
BY MAIL: BY FACSIMILE: BY HAND, EXPRESS MAIL OR
P.O. BOX 11248 (TELECOPIER): OVERNIGHT COURIER:
CHURCH STREET (212) 815-6213 101 BARCLAY STREET
STATION CONFIRM BY TELEPHONE RECEIVE & DELIVERY
NEW YORK, NEW YORK (800) 507-9357 WINDOW
10286-1248 NEW YORK, NEW YORK 10286
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A TELECOPY OR FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT
CONSTITUTE A VALID DELIVERY
The New York Stock Exchange member firm or bank or trust company which
completes this form must communicate the guarantee and the number of Units
subscribed for to the Subscription Agent and must deliver this Notice of
Guaranteed Delivery of Payment, guaranteeing delivery of (i) payment in full
for all Subscribed Shares and (ii) a properly completed and signed copy of the
Subscription Certificate, to the Subscription Agent prior to 5:00 p.m., New
York City time, on the Expiration Date. Failure to do so will result in a
forfeiture of the Rights.
GUARANTEE
The undersigned, a member firm of the New York Stock Exchange or a bank or
trust company, (i) guarantees delivery to the Subscription Agent by the close
of business (5:00 p.m., New York City time) on of (A) a properly completed
and executed Subscription Certificate, and (B) payment of the full
Subscription Price for Shares subscribed for, as subscription for such Shares
is indicated herein or in the Subscription Certificate.
_________________________________
NUMBER OF SHARES ON SUBSCRIPTION
_________________________________
Name of Firm
_____________________________
Authorized Signature
_________________________________
Address
_________________________________
Zip Code
_________________________________
Telephone Number
