QUARTERLY REPORT UNDER SECTION 13 0R 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from
______________ to _____________
Commission File Numbers 0-23232/1-14248
Arch Communications Group, Inc.
(Exact name of Registrant as specified in its Charter)
DELAWARE 31-1358569
(State of incorporation) (I.R.S. Employer Identification No.)
1800 West Park Drive, Suite 250
Westborough, Massachusetts 01581
(address of principal executive offices) (Zip Code)
(508) 870-6700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months or for such shorter period that the Registrant was
required to file such reports, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 48,060,782 shares of the
Company's Common Stock ($.01 par value) were outstanding as of August 12, 1999.
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets as of June 30, 1999 and
December 31, 1998 3
Consolidated Condensed Statements of Operations for the
Three and Six Months Ended June 30, 1999 and 1998 4
Consolidated Condensed Statements of Cash Flows for the
Six Months Ended June 30, 1999 and 1998 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ARCH COMMUNICATIONS GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---- ----
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 21,885 $ 1,633
Accounts receivable, net 60,015 30,753
Inventories 11,011 10,319
Prepaid expenses and other 14,344 8,007
----------- -----------
Total current assets 107,255 50,712
----------- -----------
Property and equipment, at cost 670,948 428,173
Less accumulated depreciation and amortization (242,194) (209,128)
----------- -----------
Property and equipment, net 428,754 219,045
----------- -----------
Intangible and other assets, net 952,980 634,528
----------- -----------
$ 1,488,989 $ 904,285
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt $ 3,060 $ 1,250
Accounts payable 26,082 25,683
Accrued restructuring 10,167 11,909
Accrued interest 25,567 20,997
Accrued expenses and other liabilities 95,234 27,175
----------- -----------
Total current liabilities 160,110 87,014
----------- -----------
Long-term debt 1,362,064 1,003,499
----------- -----------
Other long-term liabilities 79,968 27,235
----------- -----------
Stockholders' equity (deficit):
Preferred stock-- $.01 par value 3 3
Common stock-- $.01 par value 481 71
Additional paid-in capital 639,013 378,218
Accumulated deficit (752,650) (591,755)
----------- -----------
Total stockholders' equity (deficit) (113,153) (213,463)
----------- -----------
$ 1,488,989 $ 904,285
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Service, rental, and maintenance revenues $ 122,280 $ 92,883 $ 212,809 $ 184,280
Product sales 11,213 10,663 21,572 21,305
------------ ------------ ------------ ------------
Total revenues 133,493 103,546 234,381 205,585
Cost of products sold (7,603) (7,324) (14,529) (14,690)
------------ ------------ ------------ ------------
125,890 96,222 219,852 190,895
------------ ------------ ------------ ------------
Operating expenses:
Service, rental, and maintenance 28,093 20,220 48,386 40,409
Selling 18,033 12,374 31,044 24,244
General and administrative 37,395 28,198 63,021 56,516
Depreciation and amortization 76,915 54,686 128,033 108,400
Restructuring charge -- 14,700 -- 14,700
------------ ------------ ------------ ------------
Total operating expenses 160,436 130,178 270,484 244,269
------------ ------------ ------------ ------------
Operating income (loss) (34,546) (33,956) (50,632) (53,374)
Interest expense, net (33,373) (25,130) (59,187) (49,795)
Other expense (42,809) (627) (43,472) (1,328)
Equity in loss of affiliate -- (1,164) (3,200) (2,219)
------------ ------------ ------------ ------------
Income (loss) before extraordinary item and
accounting change (110,728) (60,877) (156,491) (106,716)
------------ ------------ ------------ ------------
Extraordinary charge from early extinguishment of
debt -- (1,720) -- (1,720)
Cumulative effect of accounting change -- -- (3,361) --
------------ ------------ ------------ ------------
Net income (loss) (110,728) (62,597) (159,852) (108,436)
Preferred stock dividend (530) -- (1,043) --
------------ ------------ ------------ ------------
Net income (loss) to common stockholders $ (111,258) $ (62,597) $ (160,895) $ (108,436)
============ ============ ============ ============
Basic/diluted net income (loss) per common share
before extraordinary charge and accounting change
$ (5.65) $ (8.71) $ (11.75) $ (15.30)
Extraordinary charge per basic/diluted common share
-- (0.25) -- (0.25)
Cumulative effect of accounting change per
basic/diluted common share -- -- (0.25) --
------------ ------------ ------------ ------------
Basic/diluted net income (loss) per common share
$ (5.65) $ (8.96) $ (12.00) $ (15.55)
============ ============ ============ ============
Basic/diluted weighted average number of common
shares outstanding 19,683,837 6,986,190 13,412,689 6,972,683
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 36,378 $ 33,669
--------- ---------
Cash flows from investing activities:
Additions to property and equipment, net (38,685) (38,353)
Additions to intangible and other assets (18,679) (21,584)
Net proceeds from tower site sale 3,041 10,240
Acquisition of paging company, net of cash acquired (519,105) --
--------- ---------
Net cash used for investing activities (573,428) (49,697)
--------- ---------
Cash flows from financing activities:
Issuance of long-term debt 466,058 450,964
Repayment of long-term debt (125,999) (459,013)
Net proceeds from sale of preferred stock -- 25,000
Net proceeds from sale of common stock 217,243 662
--------- ---------
Net cash (used for) provided by financing activities 557,302 17,613
--------- ---------
Net increase in cash and cash equivalents 20,252 1,585
Cash and cash equivalents, beginning of period 1,633 3,328
--------- ---------
Cash and cash equivalents, end of period $ 21,885 $ 4,913
========= =========
Supplemental disclosure:
Interest paid $ 35,809 $ 15,289
Accretion of discount on senior notes $ 20,316 $ 17,997
Issuance of common stock in acquisition of paging company $ 20,083 $ --
Liabilities assumed in acquisition of paging company $ 122,543 $ --
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
(a) Preparation of Interim Financial Statements - The consolidated
condensed financial statements of Arch Communications Group, Inc. ("Arch" or the
"Company") have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission. The financial information included
herein, other than the consolidated condensed balance sheet as of December 31,
1998, has been prepared by management without audit by independent accountants
who do not express an opinion thereon. The consolidated condensed balance sheet
at December 31, 1998 has been derived from, but does not include all the
disclosures contained in, the audited consolidated financial statements for the
year ended December 31, 1998. In the opinion of management, all of these
unaudited statements include all adjustments and accruals consisting only of
normal recurring accrual adjustments which are necessary for a fair presentation
of the results of all interim periods reported herein. These consolidated
condensed financial statements should be read in conjunction with the
consolidated financial statements and accompanying notes included in Arch's
Annual Report on Form 10-K for the year ended December 31, 1998. The results of
operations for the periods presented are not necessarily indicative of the
results that may be expected for a full year.
(b) Intangible and Other Assets - Intangible and other assets, net of
accumulated amortization, are comprised of the following (in thousands):
June 30, December 31,
1999 1998
---- ----
(unaudited)
Goodwill $257,213 $271,808
Purchased FCC licenses 379,783 256,519
Purchased subscriber lists 277,731 56,825
Deferred financing costs 31,125 22,072
Investment in Benbow PCS Ventures, Inc. ("Benbow") 871 11,347
Investment in CONXUS Communications, Inc. ("CONXUS") -- 6,500
Non-competition agreements 1,294 1,790
Other 4,963 7,667
-------- --------
$952,980 $634,528
======== ========
In June 1999, Arch, Benbow and Ms. June Walsh, who holds a 50.1% equity
interest in Benbow, agreed that:
o the shareholders agreement, the management agreement and the employment
agreement governing the establishment and operation of Benbow will be
terminated
o Benbow will not make any further FCC payments and will not pursue
construction of an N-PCS system o Arch will not be obligated to fund
FCC payments or construction of an N-PCS system by Benbow
o the parties will seek FCC approval of the forgiveness of Benbow's
remaining payment obligations and the transfer of Ms. Walsh's equity
interest in Benbow to Arch
o the closing of the transaction will occur on the earlier of January 23,
2001 or receipt of FCC approval
o Arch will pay Ms. Walsh, in installments, an aggregate amount of $3.5
million (if the transaction closes before January 23, 2001) or $3.8
million (if the transaction closes on January 23, 2001)
As a result of these arrangements, Benbow will not have any meaningful business
operations and is unlikely to retain its N-PCS licenses. Therefore, Arch has
written off substantially all of its investment in Benbow in the amount of $8.2
million. Arch has also accrued the payment to Ms. Walsh of $3.8 million and
legal and other expenses of approximately $1.0 million which is included in
accrued expenses. In addition, Arch guaranteed Benbow's obligations in
conjunction with Benbow's purchase of the stock of PageCall in June 1998. Since
it is unlikely that Benbow will be able to meet these obligations and Arch is
currently required to settle the obligation in stock, Arch has recorded the
issuance of $22.8 million of its common stock in additional paid-in capital, to
satisfy the obligation in April 2000.
6
<PAGE>
On May 18, 1999, CONXUS filed for Chapter 11 protection in the U.S.
Bankruptcy Court in Delaware. Arch is unable to predict the effect of CONXUS'
bankruptcy filing on Arch's 6.6% equity interest in CONXUS or the existing
agreements between Arch and CONXUS, therefore, in June 1999, Arch wrote-off its
investment in CONXUS of $6.5 million.
(c) Acquisition of MobileMedia - On June 3, 1999 Arch completed its
acquisition of MobileMedia Communications, Inc. ("MobileMedia") for $661.7
million, consisting of cash paid of $519.1 million, including direct transaction
costs, 4,781,656 shares of Arch common stock valued at $20.1 million and the
assumption of liabilities of $122.5 million. The cash payments were financed
through the issuance of approximately 36.2 million shares of Arch common stock
in a rights offering for $6.00 per share, the issuance of $147.0 million
principal amount of 13 3/4% senior notes due 2008 (see note (d)) and additional
borrowings under the Company's credit facility.
The purchase price was allocated based on the fair values of assets acquired
and liabilities assumed. The allocation is subject to change based on
finalization of asset appraisals. The acquisition has been accounted for as a
purchase, and the results of MobileMedia's operations have been included in the
consolidated financial statements from the date of the acquisition. Goodwill
resulting from the acquisition is being amortized over a ten-year period using
the straight-line method.
The liabilities assumed, referred to above, include an unfavorable lease
accrual related to MobileMedia's rentals on communications towers which were in
excess of market rental rates. This accrual amounted to approximately $52.4
million and is included in other long-term liabilities. This accrual will be
amortized over the remaining lease term of 14 1/4 years.
Concurrent with the consummation of the acquisition, Arch commenced the
development of a plan to integrate the operations of MobileMedia. The cost of
acquisition may be increased to cover the costs to eliminate redundant headcount
and facilities in connection with the overall integration of operations. Once
the plan is finalized, the purchase price will be adjusted accordingly.
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisition 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 acquisition
been made at the beginning of the period presented, or of results that may occur
in the future.
Six Months Ended
June 30,
1999 1998
---- ----
(in thousands,
except per share amounts)
Revenues $ 410,243 $ 428,999
Income (loss) before extraordinary item (183,893) (150,544)
Net income (loss) (183,893) (152,264)
Basic/diluted net income (loss) per common share (3.85) (3.17)
In connection with the acquisition of MobileMedia, Arch issued approximately
48.3 million warrants to purchase Arch common stock. Each warrant represents the
right to purchase one-third of one share of Arch common stock at an exercise
price of $3.01 ($9.03 per share). The warrants expire on September 1, 2001.
(d) Senior Notes -- On June 3, 1999, Arch Communications, Inc. ("ACI"), a
wholly-owned subsidiary of Arch, received the proceeds of an offering of $147.0
million principal amount of 13 3/4% Senior Notes due 2008 (the "13 3/4% Notes")
to qualified institutional buyers under Rule 144A promulgated under the
Securities Act of 1933, as amended. The 13 3/4% Notes were sold at an initial
price to investors of 95.091% for net proceeds of $134.6 million (after
deducting the discount to the Initial Purchasers and offering expenses). The 13
3/4% Notes mature on April 15, 2008 and bear interest at a rate of 13 3/4% per
7
<PAGE>
annum, payable semi-annually in arrears on April 15 and October 15 of each year,
commencing October 15, 1999.
The indenture governing the 13 3/4% Notes (the "Indenture") contains 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.
(e) Reverse Stock Split - On June 28, 1999, Arch effected a one for three
reverse stock split. All share and per share data included in this Quarterly
Report for all periods presented have been adjusted to give effect to this
reverse split.
(f) Change in Accounting Principle - 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. Arch adopted SOP 98-5 effective January 1,
1999. Initial application of SOP 98-5 resulted in a $3.4 million charge, which
was reported as the cumulative effect of a change in accounting principle. This
charge represents the unamortized portion of start-up and organization costs,
which had been deferred in prior years.
(g) Divisional Reorganization - As of June 30, 1999, 359 employees had
been terminated due to the divisional reorganization announced in June 1998. The
Company's restructuring activity as of June 30, 1999 is as follows (in
thousands):
Reserve
Initially Utilization of Remaining
Established Reserve Reserve
----------- ------- -------
Severance costs $ 9,700 $ 3,611 $ 6,089
Lease obligation costs 3,500 645 2,855
Other costs 1,500 277 1,223
--------- -------- ---------
Total $ 14,700 $ 4,533 $ 10,167
========= ======== =========
In conjunction with the completion of the MobileMedia Merger, management is
reviewing the timing and implementation of certain aspects of the Divisional
Reorganization. Management expects, based on reviews that are currently
underway, that adjustments to this reserve and additional restructuring reserves
may be necessary to affect the change in timing and the integration of
operations of the companies.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes", "anticipates", "plans", "expects" and similar expressions are
intended to identify forward-looking statements. There are a number of important
factors that could cause the Company's actual results to differ materially from
those indicated or suggested by such forward-looking statements. These factors
include, without limitation, those set forth below under the caption "Factors
Affecting Future Operating Results".
MOBILEMEDIA MERGER
On August 18, 1998, the Company entered into an Agreement and Plan of Merger
(as amended as of September 3, 1998, December 1, 1998 and February 8, 1999, the
"MobileMedia Merger Agreement") providing for a merger (the "MobileMedia
Merger") of MobileMedia Communications, Inc. ("MobileMedia") with and into a
subsidiary of Arch. The MobileMedia Merger was part of MobileMedia's Plan of
Reorganization (as amended, the "Reorganization Plan") to emerge from Chapter 11
bankruptcy. Arch's stockholders approved the MobileMedia Merger on January 26,
1999. On February 5, 1999, the Federal Communications Commission (the "FCC")
released an order approving the transfer of MobileMedia's FCC licenses to Arch
in connection with the MobileMedia Merger, subject to approval and confirmation
of the Reorganization Plan. The order granting the transfer became a final
order, no longer subject to reconsideration or judicial review, on March 8,
1999. The Reorganization Plan was confirmed by the U.S. Bankruptcy Court for the
District of Delaware on April 12, 1999. The MobileMedia Merger and the
associated debt and equity financings (described below) (collectively, the
"MobileMedia Transactions") was consummated on June 3, 1999.
Pursuant to the MobileMedia Merger, Arch: (i) issued certain stock and
warrants; (ii) paid $479.0 million in cash to certain creditors of MobileMedia;
(iii) paid approximately $40.0 million of administrative, transaction and
related costs; (iv) raised $217.2 million in cash through offerings of rights to
purchase its common stock; and (v) caused its wholly owned subsidiary, ACI and
ACI's principal operating subsidiary, Arch Paging Inc. ("API"), to borrow a
total of approximately $320.8 million. After consummation of the MobileMedia
Transactions on June 3, 1999, MobileMedia became a wholly owned subsidiary of
API. (See the Notes to Consolidated Condensed Financial Statements)
DIVISIONAL REORGANIZATION
In June 1998, the Arch Board approved a divisional reorganization (the
"Divisional Reorganization"). As part of the Divisional Reorganization, which is
being implemented over a period of 18 to 24 months, Arch has consolidated its
former Midwest, Western, and Northern divisions into four existing operating
divisions, and is in the process of consolidating certain regional
administrative support functions, such as customer service, collections,
inventory and billing, to reduce redundancy and take advantage of various
operating efficiencies.
In connection with the Divisional Reorganization, Arch (i) anticipates a net
reduction of approximately 10% of its workforce, (ii) is closing certain office
locations and redeploying other real estate assets and (iii) recorded a
restructuring charge of $14.7 million during 1998. The restructuring charge
consisted of approximately (i) $9.7 million for employee severance, (ii) $3.5
million for lease obligations and terminations, and (iii) $1.5 million of other
costs. The severance costs and lease obligations will require cash outlays
throughout the 18 to 24 month restructuring period. 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. See Note (g) to Arch's Consolidated Condensed Financial
Statements.
In conjunction with the completion of the MobileMedia Merger, management is
reviewing the timing and implementation of certain aspects of the Divisional
Reorganization. Management expects, based on reviews that are currently
underway, that adjustments to this reserve and additional restructuring reserves
may be necessary to affect the change in timing and the integration of
operations of the companies.
9
<PAGE>
RESULTS OF OPERATIONS
Total revenues increased to $133.5 million (a 28.9% increase) and $234.4
million (a 14.0% increase) in the three and six months ended June 30, 1999,
respectively, from $103.5 million and $205.6 million in the three and six months
ended June 30, 1998, respectively. Net revenues (total revenues less cost of
products sold) increased to $125.9 million (a 30.8% increase) and $219.9 million
(a 15.2% increase) in the three and six months ended June 30, 1999,
respectively, from $96.2 million and $190.9 million in the three and six months
ended June 30, 1998, respectively. Total revenues and net revenues in the 1999
period increased primarily due to the MobileMedia Merger, but were adversely
affected by a general slowing of paging industry growth, compared to prior
years. Revenues were also adversely affected by: (i) Arch's decision in the
fourth quarter of 1998, in anticipation of the MobileMedia Merger, not to
replace normal attrition among direct sales personnel; (ii) the reduced
effectiveness of the reseller channel of distribution; and (iii) reduced sales
through Arch's company owned stores. Arch expects revenue to continue to be
adversely affected in 1999 due to these factors. Service, rental and maintenance
revenues, which consist primarily of recurring revenues associated with the sale
or lease of pagers, increased to $122.3 million (a 31.6% increase) and $212.8
million (a 15.5% increase) in the three and six months ended June 30, 1999,
respectively, from $92.9 million and $184.3 million in the three and six months
ended June 30, 1998, respectively. These increases in revenues were due
primarily to the acquisition of MobileMedia on June 3, 1999. Maintenance
revenues represented less than 10% of total service, rental and maintenance
revenues in the three and six months ended June 30, 1999 and 1998. Arch does not
differentiate between service and rental revenues. Product sales, less cost of
products sold, increased to $3.6 million (a 8.1% increase) and $7.0 million (a
6.5% decrease) in the three and six months ended June 30, 1999, respectively,
from $3.3 million and $6.6 million in the three and six months ended June 30,
1998, respectively, as a result of the MobileMedia acquisition.
Service, rental and maintenance expenses, which consist primarily of
telephone line and site rental expenses, were $28.1 million (22.3% of net
revenues) and $48.4 million (22.0% of net revenues) in the three and six months
ended June 30, 1999, respectively, compared to $20.2 million (21.0% of net
revenues) and $40.4 million (21.2% of net revenues) in the three and six months
ended June 30, 1998, respectively. The increases in the three- and six-month
periods were due primarily to increased expenses associated with the provision
of paging services to a greater number of units. The acquisition of MobileMedia
added approximately 2.8 million units in service. As existing paging systems
become more populated through the addition of new paging units, the fixed costs
of operating these paging systems are spread over a greater subscriber base.
Annualized service, rental and maintenance expenses per unit were $21 and $20 in
the three and six months ended June 30, 1999, respectively, compared to $20 in
both the corresponding 1998 periods.
Selling expenses were $18.0 million (14.3% of net revenues) and $31.0 million
(14.1% of net revenues) in the three and six months ended June 30, 1999,
respectively, compared to $12.4 million (12.9% of net revenues) and $24.2
million (12.7% of net revenues) in the three and six months ended June 30, 1998,
respectively. These increases are due to increased headcount primarily as a
result of the MobileMedia Merger.
General and administrative expenses increased to $37.4 million (29.7% of net
revenues) and $63.0 million (28.7% of net revenues) in the three and six months
ended June 30, 1999, respectively, from $28.2 million (29.3% of net revenues)
and $56.5 million (29.6% of net revenues) in the three and six months ended June
30, 1998, respectively. The increases were primarily due to the added headcount,
administrative and facility costs associated with MobileMedia which were
partially offset by a reduction in headcount as a result of the divisional
reorganization which began in June 1998.
Depreciation and amortization expenses increased to $76.9 million and $128.0
million in the three and six months ended June 30, 1999, respectively, from
$54.7 million and $108.4 million in the three and six months ended June 30,
1998, respectively. These expenses principally reflect Arch's acquisitions of
paging businesses in prior periods, as well as the acquisition of MobileMedia,
accounted for as purchases, and investment in pagers and other system expansion
equipment to support growth. Additionally, depreciation expense for the three
and six months ended June 30, 1999 includes the write-off of approximately $7.1
million of costs associated with the development of an integrated billing and
management system. The Company decided to discontinue development efforts due to
the capabilities of the system acquired in conjunction with the MobileMedia
Merger.
10
<PAGE>
Operating losses were $34.5 million and $50.6 million in the three and six
months ended June 30, 1999, respectively, compared to $34.0 million and $53.4
million in the three and six months ended June 30, 1998, respectively, as a
result of the factors outlined above.
Net interest expense increased to $33.4 million and $59.2 million in the
three and six months ended June 30, 1999, respectively, from $25.1 million and
$49.8 million in the three and six months ended June 30, 1998, respectively. The
increases were principally attributable to an increase in Arch's outstanding
debt. Interest expense for the six months ended June 30, 1999 and 1998 include
approximately $20.0 million and $18.0 million, respectively, of non-cash
interest accretion on the 107/8% Senior Discount Notes due 2008 (the "Senior
Discount Notes") under which semi-annual interest payments commence on September
15, 2001.
Other expense increased to $42.8 million and $43.5 million in the three and
six months ended June 30, 1999, respectively, from $0.6 million and $1.3 million
in the three and six months ended June 30, 1998, respectively. In the 1999
periods, other expense includes $6.5 million representing the write-off of
Arch's investment in CONXUS (see note (b) to the Notes to Consolidated Condensed
Financial Statements) and $35.8 million associated with the arrangements made
between Arch, Benbow and Ms. Walsh in June 1999 (see note (b) to the Notes to
Consolidated Condensed Financial Statements).
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.
On January 1, 1999, Arch adopted SOP 98-5. SOP 98-5 requires costs of
start-up activities and organization costs to be expensed as incurred. Initial
application of SOP 98-5 resulted in a $3.4 million charge which was reported as
the cumulative effect of a change in accounting principle. This charge
represents the unamortized portion of start-up and organization costs which had
been deferred in prior years.
Net loss increased to $111.3 million and $160.9 million in the three and six
months ended June 30, 1999, respectively, from $62.6 million and $108.4 million
in the three and six months ended June 30, 1998, respectively, 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
Arch's capital expenditures decreased from $59.9 million in the six months
ended June 30, 1998 to $57.4 million in the six months ended June 30, 1999. Arch
generally has funded its capital expenditures with net cash provided by
operating activities and the incurrence of debt. Arch believes that it will have
sufficient cash available from operations and credit facilities to fund its
capital expenditures for the remainder of the year.
Arch was formerly obligated to advance to Benbow sufficient funds to service
debt obligations incurred by Benbow in connection with its acquisition of its
N-PCS licenses and to finance construction of an N-PCS system unless funds were
available to Benbow from other sources. This obligation was subject to approval
of Arch's designee on Benbow's board of directors. As of March 31, 1999, Arch
had advanced approximately $23.7 million to Benbow. In June 1999, Arch, Benbow,
and Benbow's majority stockholder, Ms. June Walsh, agreed that:
o the shareholders agreement, the management agreement and the employment
agreement governing the establishment and operation of Benbow will be
terminated
o Benbow will not make any further FCC payments and will not pursue
construction of an N-PCS system
o Arch will not be obligated to fund FCC payments or construction of an
N-PCS system by Benbow
o the parties will seek FCC approval of the forgiveness of Benbow's
remaining payment obligations and the transfer of Ms. Walsh's equity
interest in Benbow to Arch
o the closing of the transaction will occur on the earlier of January 23,
2001 or receipt of FCC approval
o Arch will pay Ms. Walsh, in installments, an aggregate amount of $3.5
million (if the transaction closes before January 23, 2001) or $3.8
million (if the transaction closes on January 23, 2001)
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<PAGE>
As a result of these arrangements, Benbow will not have any meaningful
business operations and is unlikely to retain its N-PCS licenses. The closing of
the transaction will not affect the funding obligations of Arch in connection
with Benbow's acquisition of Page Call in June 1998.
Sources of Funds
Arch's net cash provided by operating activities was $36.4 million and $33.7
million in the six months ended June 30, 1999 and 1998, respectively. 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 the Company's needs and market conditions, possible
sales of equity or debt securities.
Secured Credit Facility
In March 1999, Arch amended an existing credit facility to establish senior
secured revolving credit and term loan facilities with a wholly owned subsidiary
of Arch as borrower in the aggregate amount of $581.0 million consisting of:
o Tranche A: a $175.0 million reducing revolving credit facility;
o Tranche B: a $100.0 million 364-day revolving credit facility under which
the principal amount outstanding on June 27, 1999 was converted into a
term loan; and
o Tranche C: a $306.0 million term loan of which $125.0 million was made
available in a single drawing on June 29, 1998 and $181.0 million was made
available in a single drawing on June 3, 1999.
The amount of these facilities will reduce as time passes.
Recent Issuance of Notes
On June 3, 1999, ACI received the proceeds of an offering of $147.0 million
principal amount of 13 3/4% Senior Notes due 2008 (the "13 3/4% Notes") to
qualified institutional buyers under Rule 144A promulgated under the Securities
Act of 1933, as amended. The 13 3/4% Notes were sold at an initial price to
investors of 95.091% for net proceeds of $134.6 million (after deducting the
discount to the Initial Purchasers and offering expenses) The 13 3/4% Notes
mature on April 15, 2008 and bear interest at a rate of 13 3/4% per annum,
payable semi-annually in arrears on April 15 and October 15 of each year,
commencing October 15, 1999.
FACTORS AFFECTING FUTURE OPERATING RESULTS
The following important factors, among others, could cause Arch's actual
operating results to differ materially from those indicated or suggested by
forward-looking statements made in this Form 10-Q or presented elsewhere by
Arch's management from time to time.
Relating to Operations
Integrating Arch and MobileMedia presents challenges
Arch may not be able to successfully integrate MobileMedia's operations. Any
difficulties or problems encountered in the integration process could have a
material adverse effect on Arch. Even if integrated in a timely manner, there
can be no assurance that Arch's operating performance will be successful or will
fulfill management's objectives. Until integration is complete, the two
companies will continue to operate with some autonomy. This degree of autonomy
may blunt the implementation of the combined company's operating strategy.
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 cause the interruption of the activities of the two
businesses, or a loss of momentum. 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. Arch may not be able to retain key employees. The process of
integrating the businesses of Arch and MobileMedia may require a
disproportionate amount of time and attention of Arch's management and financial
and other resources of Arch and may involve other, unforeseen difficulties.
12
<PAGE>
Similar risks will attend future acquisition opportunities which Arch intends
to pursue. Furthermore, no assurance can be given that suitable acquisition
transactions can be identified, financed and completed on acceptable terms, or
that Arch will participate in any future consolidation of the paging industry.
Disruption of MobileMedia's operations that occurred during insolvency
proceedings may continue
MobileMedia's business operations were adversely affected by difficulties in
integrating the operations of certain businesses acquired in 1995 and 1996, 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 operated under Chapter 11. Any continued deterioration of
MobileMedia's business, including the loss of significant numbers of key
employees, could have material adverse effects.
Downturn in MobileMedia's units in service may continue
Cancellation of units in service can significantly affect the results of
operations of wireless messaging service providers. The sales and marketing
costs associated with attracting new subscribers are substantial compared to the
costs of providing service to existing customers. Because the paging business is
characterized by high fixed costs, cancellations directly and adversely affect
EBITDA.
After filing for bankruptcy protection on January 30, 1997, MobileMedia
experienced a significant decline in units in service. At March 31, 1999,
MobileMedia had 3,106,775 units in service compared to 3,440,342 units in
service at December 31, 1997. A failure to correct this cancellation trend could
have a material adverse effect on the combined company.
Competition and technological change may undermine Arch's business
There can be no assurance that Arch will be able to compete successfully with
current and future competitors in the paging business or with competitors
offering alternative communication technologies.
Competition may intensify and may adversely affect margins. Arch and
MobileMedia have each faced competition from other paging service providers in
all markets in which they operate, including some competitors who hold
nationwide licenses. Due in part to competitive conditions, monthly fees for
basic paging services have generally declined in recent years. Arch may face
significant price-based competition in the future which could have a material
adverse effect on its revenues and EBITDA. Some competitors possess greater
financial, technical and other resources than Arch. 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 historical markets, this could have a material
adverse effect on the combined company.
New two-way paging technology may adversely affect Arch's competitive
position. Competitors are currently using and developing a variety of two-way
paging technologies. Neither Arch nor MobileMedia currently provides such
two-way services, other than as a reseller. Although these services generally
are higher priced than traditional one-way paging services, this situation may
change. Technological improvements could result in increased capacity and
efficiency for two-way paging technologies and this could result in increased
competition for Arch. Future technological advances in the telecommunications
industry could increase new services or products competitive with the paging
services historically provided by Arch and MobileMedia. Future technological
advances could also require Arch to reduce the price of its 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 also compete with the paging services that the
combined company provides. These include cellular and broadband personal
communications services, which are commonly referred to as PCS, as well as
specialized mobile radio services. Although these services are primarily focused
on two-way voice communications, many service providers are electing to provide
paging services as an adjunct to their primary services.
Obsolescence in company-owned units may impose additional costs on Arch.
Technological change may also adversely affect the value of the paging units
owned by Arch that are leased to its subscribers. If Arch's current subscribers
request more technologically advanced units, including two-way units, Arch could
13
<PAGE>
incur additional inventory costs and capital expenditures if required to replace
units leased to its subscribers within a short period of time. Such additional
investment or capital expenditures could have a material adverse effect on the
combined company.
Government regulation may burden operations
Licenses may not be automatically renewed. Arch's FCC paging licenses are for
varying terms of up to 10 years. When the licenses expire, renewal applications
must receive approval from the FCC. To date, the FCC has approved each
assignment and transfer of control for which Arch and MobileMedia have sought
approval; however, no assurance can be given that any of the combined company's
renewal applications will be free of challenge or will be granted by the FCC.
Regulatory changes could add burdens or benefit competing technologies. The
FCC continually reviews and revises its rules affecting paging companies.
Therefore, regulatory requirements that apply to Arch may change significantly
over time. Acquisitions of Arch's stock by foreigners could jeopordize Arch's
licenses. The Communications Act limits foreign investment in and ownership of
radio common carriers licensed by the FCC. Arch may not have more than 25% of
its stock owned or voted by aliens or their representatives, a foreign
government or its representatives or a foreign corporation if the FCC finds that
the public interest would be served by denying such ownership. Arch'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. Arch's certificate of incorporation permits the redemption of
shares of its capital stock from foreign stockholders where necessary to protect
FCC licenses held by Arch or its subsidiaries, but such a redemption would be
subject to the availability of capital to Arch and any restrictions contained in
applicable debt instruments and under the Delaware corporations statute. These
restrictions currently would not permit any such redemptions. The failure to
redeem shares promptly could jeopardize the FCC licenses held by Arch or its
subsidiaries. See "--High degree of leverage burdens operations" and
"--Competition and technological change may undermine Arch's business".
Arch cannot control third parties on whom Arch depends for products and
services
Arch does not manufacture any of the paging units used in its paging
operations. It is dependent primarily on Motorola and NEC America Inc. to obtain
sufficient pager inventory for new subscriber and replacement needs and on
Glenayre Electronics, Inc. and Motorola for sufficient terminals and
transmitters to meet its expansion and replacement requirements. Significant
delays in obtaining paging units, terminals or transmitters, such as MobileMedia
experienced before its bankruptcy filing, could lead to disruptions in
operations and adverse financial consequences. Arch's purchase agreement with
Motorola expires on March 17, 2000. There can be no assurance that the agreement
with Motorola will be renewed or, if renewed, that such agreements will be on
terms and conditions as favorable to Arch as those under the current agreement.
Arch relies on third parties to provide satellite transmission for some
aspects of its paging services. To the extent there are satellite outages or if
satellite coverage is impaired in other ways, Arch may experience a loss of
service until such time as satellite coverage is restored, which could have a
material adverse effect.
Loss of key personnel could adversely impact operations
Arch's success 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 any of its current executive officers, or maintain
life insurance on their lives, although 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.
Divisional reorganization may not achieve objectives
Arch is currently reorganizing its operating divisions. Once fully
implemented, this divisional reorganization is expected to result in annual cost
savings of approximately $15.0 million. Arch recorded a restructuring charge of
$14.7 million in 1998. There can be no assurance that the expected cost savings
will be achieved or that the reorganization of Arch's business will be
14
<PAGE>
accomplished smoothly, expeditiously or successfully. The difficulties of the
divisional reorganization may be increased by the need to integrate
MobileMedia's operations in many locations and to combine two corporate
cultures. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Divisional Reorganization".
Impact of the Year 2000 issue is not fully known
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 the combined
company's 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.
Arch has created a cross-functional Y2K project group to work on the Year
2000 problem. The Y2K project group is continuing its analysis of external and
internal areas likely to be affected by the Year 2000 problem and classifying
the identified areas of concern into either a mission critical or non-mission
critical status. For external areas, Arch has distributed, and continues to
distribute, surveys requesting information about the Year 2000 readiness of
certain vendors. As part of its evaluation of Year 2000 vulnerability related to
its pager and paging equipment vendors, Arch has discussed with such vendors
their efforts to identify potential issues associated with their equipment
and/or software. Internally, Arch is completing an inventory audit of hardware
and software testing for both its corporate and divisional operations.
Arch is in the process of reviewing, evaluating and, where necessary,
modifying or replacing its computerized systems and applications to enable it to
be Year 2000 ready. This includes both information and non-information
technology systems. Any failure of systems or products to be Year 2000 ready
could have a material adverse effect on Arch's business, financial condition,
results of operations or prospects.
The costs associated with the replacement of hardware, software and paging
equipment have been capitalized and amortized in accordance with Arch's existing
accounting policies and any future costs relating thereto will be capitalized
and amortized in a similar manner. Maintenance or modification costs have been,
and will be expensed as incurred. Based on Arch's costs incurred to date, as
well as estimated costs to be incurred later in 1999, 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 once plans are further developed and implemented.
Although Arch and MobileMedia each began testing its internal
business-related hardware and software applications in 1998, there can be no
assurance that such testing has detected or will detect all applications that
may be affected by Year 2000 compliance problems. Arch's objective is to make
its internal computer systems Year 2000 ready by end of year 1999 but there can
be no assurance that this objective will be met. Furthermore, it is possible
that one or more mission critical vendors, such as utility providers, telephone
carriers, other paging carriers, satellite carriers or other telecommunication
providers, may not be Year 2000 compliant. Because of the unique nature of
vendors, alternative providers of these services may not be available.
Furthermore, all pagers and paging-related equipment used by Arch and its
customers are manufactured by third parties. Although Arch has initiated testing
of such equipment, it has relied to a large extent on the representations of its
vendors with respect to their readiness and cannot offer any assurance about the
accuracy of its vendors' representations.
Arch is designing and implementing contingency plans relating to the Year
2000 problem, identifying the likely risks and determining commercially
reasonable solutions. Arch intends to complete its Year 2000 contingency
planning during calendar year 1999.
Continued losses are likely
Arch expects to continue to report net losses for the foreseeable future and
cannot predict when, if ever, it is likely to attain profitability.
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<PAGE>
Arch and MobileMedia have reported losses in all but one of the periods shown
in the table below:
Three Months
Ended
Year Ended December 31, March 31,
1996 1997 1998 1999
---- ---- ---- ----
Net income (loss): (dollars in millions)
Arch $ (114.7) $(181.9) $(206.1) $(49.1)
MobileMedia $(1,059.9) $(124.6) $ 35.6 $ (7.7)
Furthermore, MobileMedia had net income during the year ended December 31,
1998 solely because of a $94.2 million gain on the sale of transmission towers
and related equipment. After giving effect to the MobileMedia acquisition, Arch
would have incurred, on a pro forma basis, losses before extraordinary item of
$193.2 million for the year ended December 31, 1998 and $60.1 million for the
three months ended March 31, 1999. 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. This will result
in significant additional interest expense which could have a material adverse
effect on Arch's future income or loss. See "--Funding for future capital needs
is not assured" and "--High degree of leverage burdens operations".
Revenues and operating results may fluctuate
Arch believes that future fluctuations in its revenues and operating results
may occur due to 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 cash flow growth. Arch may
be unable to adjust spending in a timely manner to compensate for any revenue or
cash flow shortfall. It is possible that, due to future fluctuations, Arch's
revenue, cash flow or operating results may not meet the expectations of
securities analysts or investors. This may have a material adverse effect on the
price of Arch's common stock. If shortfalls were to cause Arch not to meet the
financial covenants contained in its debt instruments, the debtholders could
declare a default and seek immediate repayment.
Relating to Liquidity, Capital Resources and Capital Structure.
High degree of leverage burdens operations
Each of Arch and MobileMedia has been highly leveraged, and the combined
company expects to continue to be highly leveraged. The following table compares
the total debt, total assets and latest three-month annualized adjusted pro
forma EBITDA of Arch at or as of June 30, 1999.
(dollars in millions)
Total debt $ 1,365.1
Total assets $ 1,489.0
Annualized adjusted pro forma EBITDA $ 251.1
Adjusted 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. Adjusted EBITDA, as determined by Arch, may not
necessarily be comparable to similarly titled data of other paging companies.
Arch's high degree of leverage may have adverse consequences for Arch. These
include the following:
o High leverage may impair or extinguish Arch's ability to obtain additional
financing necessary for acquisitions, working capital, capital
expenditures or other purposes on acceptable terms, if at all.
o A substantial portion of Arch's cash flow will be required to pay interest
expense; this will reduce the funds which would otherwise be available for
operations and future business opportunities.
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<PAGE>
o Arch's credit facilities and indentures contain financial and restrictive
covenants; the failure to comply with these covenants may result in an
event of default which could have a material adverse effect on Arch if not
cured or waived.
o Arch may be more highly leveraged than its competitors which may place it
at a competitive disadvantage.
o Arch's high degree of leverage will make it more vulnerable to a downturn
in its business or the economy generally.
o Arch's high degree of leverage may impair its ability to participate in
the future consolidation of the paging industry.
There can be no assurance that Arch will be able to reduce its financial
leverage as it intends, nor 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.
Debt instruments restrict operations
Various debt instruments impose operating and financial restrictions on Arch.
Arch's secured credit facility requires various Arch operating subsidiaries to
maintain specified financial ratios, including a maximum leverage ratio and a
minimum fixed charge coverage ratio. In addition, the secured credit facility
limits or restricts, among other things, the operating subsidiaries' ability to:
o declare dividends or redeem or repurchase capital stock;
o prepay, redeem or purchase debt;
o incur liens and engage in sale/leaseback transactions;
o make loans and investments;
o incur indebtedness and contingent obligations;
o amend or otherwise alter debt instruments and other material agreements;
o engage in mergers, consolidations, acquisitions and asset sales;
o engage in transactions with affiliates; and
o alter its lines of business or accounting methods.
Other debt instruments limit, among other things:
o the incurrence of additional indebtedness by Arch and its subsidiaries;
o the payment of dividends and other restricted payments by Arch and its
subsidiaries;
o asset sales;
o transactions with affiliates;
o the incurrence of liens; and
o 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 secured credit
facility and/or other debt instruments. Upon the occurrence of an event of
default, the creditors could elect to declare all amounts outstanding to be
immediately due and payable, together with accrued and unpaid interest. If Arch
were unable to repay any such amounts, the secured creditors could proceed
against the collateral securing a portion of the indebtedness. If the lenders
under the secured credit facility or other debt instruments accelerated 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 other indebtedness of
Arch. In addition, because the secured credit facility and other debt
17
<PAGE>
instruments limit Arch's ability to engage in certain transactions except under
certain circumstances, Arch may be prohibited from entering into transactions
that could be beneficial to Arch.
Funding for future capital needs is not assured
Arch's business strategy requires substantial funds to be available to
finance the continued development and future growth and expansion of its
operations, including possible acquisitions. Future amounts of capital required
by Arch will depend upon a number of factors. These factors include 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 and 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. If sufficient financing is unavailable when needed, this may have a
material adverse effect on Arch. See "--Liquidity and Capital Resources".
Charter provisions may impede takeovers of Arch
Arch's certificate of incorporation and by-laws provide for a classified
board of directors, the issuance of "blank check" preferred stock whose terms
may be fixed by Arch's board of directors 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 Delaware corporations
statute will, with certain exceptions, prohibit Arch from engaging in any
business combination with any "interested stockholder" for a three-year period
after 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 even though such a transaction might be
beneficial to Arch's stockholders.
Trading prices may be volatile
The market price of Arch's common stock has been experiencing significant
fluctuation and has declined materially since 1996. Between January 1, 1998 and
August 4, 1999, the reported sale price of common stock on the Nasdaq National
Market has ranged from a high of $20.8125 per share in April 1998 to a low of
$2.0625 per share in October 1998. The trading price of common stock will likely
be affected by numerous factors. These include the factors affecting future
operating results set forth in this quarterly report, as well as prevailing
economic and financial trends and conditions in the public securities markets.
Share prices of paging companies such as Arch have exhibited a high degree of
volatility during recent periods. 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 Arch's common stock in any given period.
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 which may not have any direct relationship with Arch's business or
long-term prospects. These include reported financial results and fluctuations
in trading prices of the shares of other publicly held companies in the paging
industry generally.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The majority of the Company's long-term debt is subject to fixed rates of
interest or interest rate protection. In the event that the interest rate on the
Company's non-fixed rate debt fluctuates by 10% in either direction, the Company
believes the impact on its results of operations would be immaterial. The
Company transacts infrequently in foreign currency and therefore is not exposed
to significant foreign currency market risk.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various lawsuits and claims arising in the normal
course of business. The Company believes that none of such matters will have a
material adverse effect on the Company's business or financial condition.
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<PAGE>
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on May 18, 1999 the
following proposals were adopted by the vote specified below:
<TABLE>
<CAPTION>
Broker
Proposal For* Against* Abstain* Nonvotes*
-------- ---- -------- -------- ---------
<S> <C> <C> <C> <C>
To elect two directors of the Company
1. James S. Hughes 20,002,427 -- 615,804 --
2. Allan L. Rayfield 20,000,922 -- 617,309 --
3. To approve amendments to the Company's Non-
Employee Directors' Stock Option Plan (a)
increasing the number of shares of Common Stock
issuable under such plan from 80,200* to 140,000*
and (b) providing that all options granted under
such plan after May 18, 1999 shall become fully
exercisable on the date of grant. 16,994,971 3,480,351 73,961 68,948
4. To ratify the selection by the Board of Directors of
Arthur Andersen LLP as the independent public
accountants for the Company for the fiscal year
ending December 31, 1999. 20,517,821 39,582 60,828 --
------------------
<FN>
* Does not reflect the June 1999 one-for-three reverse stock split of Arch's
common stock
</FN>
</TABLE>
Item 5. Other Information
Stockholder Proposals for 2000 Annual Meeting
As set forth in the Company's Proxy Statement for its 1999 Annual Meeting of
Stockholders, stockholder proposals submitted pursuant to Rule 14a-8 under the
Exchange Act for inclusion in the Company's proxy materials for its 2000 Annual
Meeting of Stockholders must be received by the Secretary of the Company at the
principal offices of the Company no later than December 17, 1999.
In addition, the Company's By-laws require that the Company be given advance
notice of stockholder nominations for election to the Company's Board of
Directors and of other matters which stockholders wish to present for action at
an annual meeting of stockholders (other than matters included in the Company's
proxy statement in accordance with Rule 14a-8). The required notice must be made
in writing and delivered or mailed to the Secretary of the Company at the
principal offices of the Company, and received not less than 80 days prior to
the 2000 Annual Meeting; provided, however, that if less than 90 days' notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, such nomination shall have been mailed or delivered to the
Secretary not later than the close of business on the 10th day following the
date on which the notice of the meeting was mailed or such public disclosure was
made, whichever occurs first. The 2000 Annual Meeting is currently expected to
be held on May 16, 2000. Assuming that this date does not change, in order to
comply with the time periods set forth in the Company's By-Laws, appropriate
notice would need to be provided no later than February 25, 2000.
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Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits listed on the accompanying index to exhibits are filed as
part of this Quarterly Report on Form 10-Q.
(b) The following reports on Form 8-K were filed for the quarter for which
this report is filed.
Current Report on Form 8-K dated April 28, 1999 (reporting that
supplements to the Company's prospectus dated January 5, 1999 and proxy
statement/prospectus dated December 18, 1998 were distributed) filed
April 29, 1999.
Current Report on Form 8-K dated May 14, 1999 (reporting that the
Rights Agreement was amended) filed May 20, 1999.
Current Report on Form 8-K dated June 3, 1999 (reporting the completion
of the MobileMedia Merger) filed June 18, 1999.
Amendment No. 1 to Current Report dated June 3, 1999 on Form 8-K/A
(filing MobileMedia's financial statements and certain pro forma
financial statements) filed June 24, 1999.
Current Report on Form 8-K dated June 28, 1999 (reporting the Company's
one-for-three reverse stock split) filed June 28, 1999.
20
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-Q for the quarter ended June
30, 1999, to be signed on its behalf by the undersigned thereunto duly
authorized.
ARCH COMMUNICATIONS GROUP, INC.
Dated: August 13, 1999 By: /s/ J. Roy Pottle
-------------------------------
J. Roy Pottle
Executive Vice President and
Chief Financial Officer
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INDEX TO EXHIBITS
Exhibit Description
10.1 - Amendment No. 4 to the Second Amended and Restated Credit Agreement
(Tranche A and Tranche C Facilities).
10.2 - Amendment No. 4 to the Second Amended and Restated Credit Agreement
(Tranche B Facility).
10.3+ - Paging Products Sales Agreement, dated March 17, 1999, by and
between Motorola, Inc. and the Company.
10.4+ - Satellite Services Agreement, dated September 1, 1998, between
AvData Systems, Inc. and MobileMedia Communications, Inc.
10.5 - Master Lease For Transmitter Systems Space by and between Pinnacle
Towers, Inc. and MobileMedia Communications, Inc.
27.1 - Financial Data Schedule.
_____________
+ A Confidential Treatment Request has been filed with respect to portions
of this exhibit
EXHIBIT 10.1
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
AMENDMENT NO. 4 (this "Amendment"), dated as of March 31, 1999, under 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, Royal Bank of
Canada, Toronto Dominion (Texas), Inc. and Barclays Bank PLC, as Managing
Agents, Royal Bank of Canada, as Documentation Agent, Toronto Dominion (Texas),
Inc., as Syndication Agent, and The Bank of New York, as Administrative Agent,
as amended by Amendment No. 1, dated as of September 14, 1998, Amendment No. 2,
dated as of December 8, 1998 and Amendment No. 3 and Consent No. 1, dated as of
February 22, 1999 (as so amended, the "Credit Agreement").
RECITALS
A. Capitalized terms used herein which are not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement as amended hereby.
B. The Borrower has requested that certain provisions of the Credit Agreement
be amended in connection with the MobileMedia Merger and the Administrative
Agent and the Lenders signing below are willing to agree thereto subject to the
terms and conditions hereinafter set forth.
Accordingly, in consideration of the Recitals and the covenants, conditions
and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Clause (b) of the definition of "Applicable Margin" contained in Section
1.1 of Credit Agreement is amended in its entirety to read as follows:
(b) On and after the Merger Effective Date:
(i) As to the Tranche A Loans and Letters of Credit, at
all times during the applicable periods set forth below: (1)
with respect to the unpaid principal amount thereof
consisting of ABR Advances, the applicable percentage set
forth in the following table under the heading "ABR" and (2)
with respect to (x) the unpaid principal amount thereof
consisting of Eurodollar Advances, and (y) Letter of Credit
Fees, the applicable percentage set forth in the following
table under the heading "Eurodollar and LC Rate":
<PAGE>
-------------------------------------------------------
PRICING LEVERAGE RATIO
-------------------------------------------------------
-------------- ------------- --------- -------------
Greater Than Eurodollar
or Equal To Less Than ABR and LC Rate
-------------- ------------- --------- -------------
-------------- ------------- --------- -------------
4.50:1.00 1.875% 3.125%
-------------- ------------- --------- -------------
-------------- ------------- --------- -------------
4.00:1.00 4.50:1.00 1.500% 2.750%
-------------- ------------- --------- -------------
-------------- ------------- --------- -------------
3.00:1.00 4.00:1.00 1.125% 2.375%
-------------- ------------- --------- -------------
-------------- ------------- --------- -------------
3.00:1.00 0.750% 2.000%
-------------- ------------- --------- -------------
(ii) As to the Tranche C Loans:
(A) If there are bona fide trades of the Applicable Notes
on at least six Business Days during the Calculation Period,
the Applicable Margin for Tranche C Loans for the period on
and after the Merger Effective Date shall be (1) with respect
to the unpaid principal amount thereof consisting of ABR
Advances, the Average Spread for ABR Advances (as defined
below) and (2) with respect to the unpaid principal amount
thereof consisting of Eurodollar Advances, the Average Spread
for Eurodollar Advances (as defined below), provided that in
no event will the Applicable Margin on Tranche C Loans (1) be
less than 3.00% in the case of ABR Advances and (2) be less
than 4.250% in the case of Eurodollar Advances. For purposes
of this clause (b)(ii)(A), the following terms shall have the
meanings set forth below:
"Applicable Notes": the New Arch Notes or the Arch 12
3/4% Senior Notes.
"Average Spread for Eurodollar Advances": a rate
(expressed as a percentage rounded to the next highest
0.125%) equal to the Average Trading Yield on the New Arch
Notes or the Average Trading Yield on the Arch 12 3/4%
Senior Notes, whichever is greater, minus the sum of (i)
the average total return on such date for interpolated
seven year treasury notes during the Calculation Period,
(ii) the average swap rate from seven year fixed to seven
year floating rate and (iii) a premium of 200 basis points
(reflecting the senior status of the Tranche C Loans).
"Average Spread for ABR Advances": the Average Spread
for Eurodollar Advances minus 1.25%.
"Average Trading Yield": means, with respect to each of
the Applicable Notes, the average of the yields, on a
yield to worst basis, of the mid-market price for such
Applicable Notes during the Calculation Period based on
the number of days during the Calculation Period on which
there were bona fide trades of such Applicable Notes. For
2
<PAGE>
any Business Day during the Calculation Period, the yield,
on a yield to worst basis, of the mid-market price for
each of the Applicable Notes shall be the average of the
mid-market prices as quoted by Bear Stearns & Co. Inc.
("Bear Stearns") and by TD Securities as of the close of
trading on such Business Day for such Applicable Notes. If
the average for the Calculation Period of the mid-market
price quoted by Bear Stearns and TD Securities for the
Applicable Notes differs by more than 37.5 basis points,
the mid-market price for determining the yield on the
Applicable Notes for the Calculation Period shall be the
average of the mid-market prices for such Applicable Notes
for the Calculation Period as quoted by Bear Stearns, TD
Securities and BNY Capital Markets. The "mid-market price"
quoted by any person on any Business Day shall be the
average of the bid and asked price as quoted by such
person as of the close of business on such Business Day.
"Calculation Period": the ten Business Day period from
and including the sixth Business Day after the issuance of
the New Arch Notes to and including the 15th Business Day
after the issuance of the New Arch Notes.
(B) If there are not bona fide trades of the Applicable
Notes on at least six Business Days during the Calculation
Period, the Applicable Margin for Tranche C Loans for the
period on and after the Merger Effective Date shall be (1)
with respect to the unpaid principal amount thereof
consisting of ABR Advances, 5.625%, and (2) with respect to
the unpaid principal amount thereof consisting of Eurodollar
Advances, 6.875%.
(iii) Changes in the Applicable Margin described in clause
(b)(i) above resulting from a change in the Pricing Leverage
Ratio, as set forth in a Compliance Certificate delivered
pursuant to Section 7.1(c) evidencing such a change, shall
become effective upon the second Business Day following the
delivery by the Borrower to the Administrative Agent of a new
Compliance Certificate pursuant to Section 7.1(c) evidencing
a change in the Pricing Leverage Ratio. If the Borrower shall
fail to deliver a Compliance Certificate within 60 days after
the end of each of the first three fiscal quarters (or 90
days after the end of the last fiscal quarter) as required by
Section 7.1(c), the Pricing Leverage Ratio, solely for
purposes of calculating the Applicable Margin, shall be
deemed to be greater than 4.50:1.00 from and including the
date on which such Compliance Certificate was required to be
delivered to the date of delivery to the Administrative Agent
of such Compliance Certificate.
3
<PAGE>
2. The definition of "Commitment Fee Percentage" contained in Section 1.1 of
Credit Agreement is amended in its entirety to read as follows:
(a) (i) Prior to the Merger Effective Date, at all times
during the applicable periods set forth below, the applicable
percentage set forth below next to the words "Tranche A
Commitment":
------------------------------------ ------------------------- ---------
Applicable
Period Commitment Margin
------------------------------------ ------------------------- ---------
------------------------------------ ------------------------- ---------
when the Pricing Leverage Ratio is Tranche A Commitment 0.5000%
greater than or equal to 4.00:1.00
------------------------------------ ------------------------- ---------
------------------------------------ ------------------------- ---------
when the Pricing Leverage Ratio is Tranche A Commitment 0.3750%
less than 4.00:1.00
------------------------------------ ------------------------- ---------
(ii) Changes in the Commitment Fee Percentage resulting from
a change in the Pricing Leverage Ratio, as set forth in a
Compliance Certificate delivered pursuant to Section 7.1(c)
evidencing such a change, shall become effective upon the second
Business Day following the delivery by the Borrower to the
Administrative Agent of a new Compliance Certificate pursuant to
Section 7.1(c) evidencing a change in the Pricing Leverage
Ratio. If the Borrower shall fail to deliver a Compliance
Certificate within 60 days after the end of each of the first
three fiscal quarters (or 90 days after the end of the last
fiscal quarter) as required by Section 7.1(c), the Pricing
Leverage Ratio, solely for purposes of calculating the
Commitment Fee Percentage, shall be deemed to be greater than
4.00:1.00 from and including the date on which such Compliance
Certificate was required to be delivered to the date of delivery
to the Administrative Agent of such Compliance Certificate.
(b) On and after the Merger Effective Date, 0.500%.
3. Section 1.1 of the Credit Agreement is amended by adding the following new
definition thereof in its appropriate alphabetical order:
"New Capital" shall mean all capital raised by the
Borrower or any of its Affiliates in connection with the
consummation of the MobileMedia Transactions, including,
without limitation, (A) the Additional Tranche C Loans, (B)
the proceeds of any debt offering (including the New Arch
Notes), and (C) the proceeds of any equity issuance (other
than the rights offering contemplated by the MobileMedia
Merger Documents in the anticipated amount of $217,000,000).
4
<PAGE>
4. Section 8.3(iv)(S)(4) of the Credit Agreement shall be amended by
substituting "June 30, 1999" for "March 31, 1999" on the second line thereof.
5. Section 8.3(iv)(C) is amended in its entirety to read as follows:
(C) New Capital; Officer's Certificate. Arch shall have
(1) raised New Capital in a minimum amount of
$320,000,000, of which at least $125,000,000 shall be in
the form of additional notes issued by Arch or, if Arch
Escrow shall have issued such notes, Arch shall have
assumed the obligations of Arch Escrow in respect thereof
(in either case, the "New Arch Notes") on terms and
conditions satisfactory to the Managing Agents, (2)
received proceeds in an amount not less than $320,000,000
(less customary underwriting discounts, commissions and
related expenses) from the issuance of such New Capital
(either directly or as a result of the Arch Escrow
Merger), and (3) the Administrative Agent shall have
received a certificate of a Financial Officer of the
Borrower, dated the Merger Effective Date, in all respects
satisfactory to the Administrative Agent as to the
foregoing matters and, unless theretofor delivered to the
Administrative Agent, attaching a true, complete and
correct copy of each of the New Arch Indenture, any
security agreement or other document executed in
connection therewith and the Offering Memorandum or other
disclosure document, if any, in respect thereof, each of
which shall be in form and substance satisfactory to the
Managing Agents.
6. Paragraphs 1-5 of this Amendment shall not be effective until the prior or
simultaneous fulfillment of the following conditions (the "Amendment Effective
Date"):
(a) The Administrative Agent shall have received this Amendment, duly
executed by a duly authorized officer or officers of the Borrower, the
Parent, the Subsidiary Guarantors, the Administrative Agent and Required
Lenders.
(b) The Administrative Agent shall have received Amendment No. 4, dated
the date hereof, to the Tranche B Credit Agreement (the "Tranche B Credit
Agreement Amendment"), duly executed by a duly authorized officer or officers
of the Borrower, the Parent, the Subsidiary Guarantors, the Administrative
Agent and Required Lenders (each under and as defined in the Tranche B Credit
Agreement).
(c) The Administrative Agent shall have received a certificate of the
Secretary or Assistant Secretary of the Borrower: (i) attaching a true and
complete copy of the resolutions of its Managing Person authorizing this
Amendment in form and substance satisfactory to the Administrative Agent,
(ii) certifying that its certificate of incorporation and by-laws have not
been amended since June 29, 1998, or, if so, setting forth the same and (iii)
setting forth the incumbency of its officer or officers who may sign this
Amendment, including therein a signature specimen of such officer or
officers.
(d) The Administrative Agent shall have received an opinion of counsel to
the Borrower, in form and substance satisfactory to the Managing Agents.
5
<PAGE>
(e) All fees due and payable on or prior to the Amendment Effective Date
shall have been paid.
(f) The representations and warranties contained in the Loan Documents
shall be true and correct in all material respects (except to the extent such
representations and warranties specifically relate to an earlier date) and no
Default or Event of Default shall exist, and the Administrative Agent shall
have received a certificate of an officer of the Borrower, dated the
Amendment Effective Date, certifying to such effect.
(g) The Administrative Agent shall have received such other documents as
it shall reasonably request.
10. The Borrower and the Parent each hereby (i) reaffirms and admits the
validity and enforceability of the Credit Agreement (as amended by this
Amendment) and the other Loan Documents and all of its obligations thereunder,
(ii) represents and warrants that there exists no Default or Event of Default,
and (iii) represents and warrants that the representations and warranties
contained in the Loan Documents, including the Credit Agreement as amended by
this Amendment (other than the representations and warranties made as of a
specific date) are true and correct in all material respects on and as of the
date hereof, except to the extent that such representations and warranties are
no longer true or correct as a result of events, acts, transactions or
occurrences after the Second Restatement Effective Date which are permitted
under the Credit Agreement.
11. This Amendment may be executed in any number of counterparts, each of
which shall be an original and all of which shall constitute one agreement. It
shall not be necessary in making proof of this Amendment to produce or account
for more than one counterpart signed by the party to be charged.
12. This Amendment is being delivered in and is intended to be performed in
the State of New York and shall be construed and enforceable in accordance with,
and be governed by, the internal laws of the State of New York without regard to
principles of conflict of laws.
13. Except as amended hereby, the Credit Agreement shall in all other
respects remain in full force and effect.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 4 to
the Second Amended and Restated Credit Agreement (Tranche A and Tranche C
Facilities) to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written.
ARCH PAGING, INC.
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
THE BANK OF NEW YORK,
Individually, as Letter of Credit Issuer, as
Managing Agent and as Administrative Agent
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
TORONTO DOMINION (TEXAS), INC.,
Individually, as Managing Agent and as
Syndication Agent
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
ROYAL BANK OF CANADA,
Individually, as Managing Agent and as
Documentation Agent
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
BARCLAYS BANK PLC, Individually and as a
Managing Agent
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
FIRST UNION NATIONAL BANK
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
VAN KAMPEN PRIME RATE INCOME TRUST
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
VAN KAMPEN CLO I, LIMITED
By: Van Kampen Management, Inc.,
as Collateral Manager
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
PNC BANK, NATIONAL ASSOCIATION
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
FLEET NATIONAL BANK
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
BANKBOSTON, N.A.
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
SOCIETE GENERALE
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
BEAR STEARNS INVESTMENT PRODUCTS INC.
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
KZH CNC LLC
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
FRANKLIN FLOATING RATE TRUST
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE A AND C FACILITIES)
CONSENTED TO BY:
ARCH CONNECTICUT VALLEY, INC.
ARCH COMMUNICATIONS ENTERPRISES, LLC
AS TO EACH OF THE FOREGOING:
By:
Name:
Title:
ARCH COMMUNICATIONS, INC.
By:
Name:
Title:
ARCH COMMUNICATIONS GROUP, INC.
By:
Name:
Title:
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
AMENDMENT NO. 4 (this "Amendment"), dated as of March 31, 1999, under the
Second Amended and Restated Credit Agreement (Tranche B Facility), dated as of
June 29, 1998, by and among Arch Paging, Inc. (the "Borrower"), the Lenders
party thereto, The Bank of New York, Royal Bank of Canada, Toronto Dominion
(Texas), Inc. and Barclays Bank PLC, as Managing Agents, Royal Bank of Canada,
as Documentation Agent, Toronto Dominion (Texas), Inc., as Syndication Agent,
and The Bank of New York, as Administrative Agent, as amended by Amendment No.
1, dated as of September 14, 1998, Amendment No. 2, dated as of December 8, 1998
and Amendment No. 3 and Consent No. 1, dated as of February 22, 1999 (as so
amended, the "Credit Agreement").
RECITALS
A. Capitalized terms used herein which are not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement as amended hereby.
B. The Borrower has requested that certain provisions of the Credit Agreement
be amended in connection with the MobileMedia Merger and the Administrative
Agent and the Lenders signing below are willing to agree thereto subject to the
terms and conditions hereinafter set forth.
Accordingly, in consideration of the Recitals and the covenants, conditions
and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Clause (b) of the definition of "Applicable Margin" contained in Section
1.1 of Credit Agreement is amended in its entirety to read as follows:
(b) On and after the Merger Effective Date:
(i) at all times during the applicable periods set forth
below: (1) with respect to the unpaid principal amount
thereof consisting of ABR Advances, the applicable percentage
set forth in the following table under the heading "ABR" and
(2) with respect to the unpaid principal amount thereof
consisting of Eurodollar Advances, the applicable percentage
set forth in the following table under the heading
"Eurodollar Rate":
<PAGE>
-------------------------------------------------------------------
PRICING LEVERAGE RATIO
-------------------------------------------------------------------
----------------- ------------- ----------- --------------------
Greater Than or
Equal To Less Than ABR Eurodollar Rate
----------------- ------------- ----------- --------------------
----------------- ------------- ----------- --------------------
4.50:1.00 1.875% 3.125%
----------------- ------------- ----------- --------------------
----------------- ------------- ----------- --------------------
4.00:1.00 4.50:1.00 1.500% 2.750%
----------------- ------------- ----------- --------------------
----------------- ------------- ----------- --------------------
3.00:1.00 4.00:1.00 1.125% 2.375%
----------------- ------------- ----------- --------------------
----------------- ------------- ----------- --------------------
3.00:1.00 0.750% 2.000%
----------------- ------------- ----------- --------------------
(ii) Changes in the Applicable Margin described in clause
(b)(i) above resulting from a change in the Pricing Leverage
Ratio, as set forth in a Compliance Certificate delivered
pursuant to Section 7.1(c) evidencing such a change, shall
become effective upon the second Business Day following the
delivery by the Borrower to the Administrative Agent of a new
Compliance Certificate pursuant to Section 7.1(c) evidencing
a change in the Pricing Leverage Ratio. If the Borrower shall
fail to deliver a Compliance Certificate within 60 days after
the end of each of the first three fiscal quarters (or 90
days after the end of the last fiscal quarter) as required by
Section 7.1(c), the Pricing Leverage Ratio, solely for
purposes of calculating the Applicable Margin, shall be
deemed to be greater than 4.50:1.00 from and including the
date on which such Compliance Certificate was required to be
delivered to the date of delivery to the Administrative Agent
of such Compliance Certificate.
2. The definition of "Commitment Fee Percentage" contained in Section 1.1 of
Credit Agreement is amended in its entirety to read as follows:
(a) (i) Prior to the Merger Effective Date, at all times
during the applicable periods set forth below, the applicable
percentage set forth below next to the words "Tranche B
Commitment":
------------------------------------ ---------------------- --------
Period Applicable Commitment Margin
------------------------------------ ---------------------- --------
------------------------------------ ---------------------- --------
when the Pricing Leverage Ratio is Tranche B Commitment 0.1875%
greater than or equal to 4.00:1.00
------------------------------------ ---------------------- --------
------------------------------------ ---------------------- --------
when the Pricing Leverage Ratio is Tranche B Commitment 0.1875%
less than 4.00:1.00
------------------------------------ ---------------------- --------
(ii) Changes in the Commitment Fee Percentage resulting
from a change in the Pricing Leverage Ratio, as set forth in
a Compliance Certificate delivered pursuant to Section 7.1(c)
evidencing such a change, shall become effective upon the
2
<PAGE>
second Business Day following the delivery by the Borrower to
the Administrative Agent of a new Compliance Certificate
pursuant to Section 7.1(c) evidencing a change in the Pricing
Leverage Ratio. If the Borrower shall fail to deliver a
Compliance Certificate within 60 days after the end of each
of the first three fiscal quarters (or 90 days after the end
of the last fiscal quarter) as required by Section 7.1(c),
the Pricing Leverage Ratio, solely for purposes of
calculating the Commitment Fee Percentage, shall be deemed to
be greater than 4.00:1.00 from and including the date on
which such Compliance Certificate was required to be
delivered to the date of delivery to the Administrative Agent
of such Compliance Certificate.
(b) On and after the Merger Effective Date, 0.500%.
3. Section 1.1 of the Credit Agreement is amended by adding the following new
definition thereof in its appropriate alphabetical order:
"New Capital" shall mean all capital raised by the
Borrower or any of its Affiliates in connection with the
consummation of the MobileMedia Transactions, including,
without limitation, (A) the Additional Tranche C Loans, (B)
the proceeds of any debt offering (including the New Arch
Notes), and (C) the proceeds of any equity issuance (other
than the rights offering contemplated by the MobileMedia
Merger Documents in the anticipated amount of $217,000,000).
4. Section 8.3(iv)(S)(4) of the Credit Agreement shall be amended by
substituting "June 30, 1999" for "March 31, 1999" on the second line thereof.
5. Section 8.3(iv)(C) is amended in its entirety to read as follows:
(C) New Capital; Officer's Certificate. Arch shall have
(1) raised New Capital in a minimum amount of
$320,000,000, of which at least $125,000,000 shall be in
the form of additional notes issued by Arch or, if Arch
Escrow shall have issued such notes, Arch shall have
assumed the obligations of Arch Escrow in respect thereof
(in either case, the "New Arch Notes") on terms and
conditions satisfactory to the Managing Agents, (2)
received proceeds in an amount not less than $320,000,000
(less customary underwriting discounts, commissions and
related expenses) from the issuance of such New Capital
(either directly or as a result of the Arch Escrow
Merger), and (3) the Administrative Agent shall have
received a certificate of a Financial Officer of the
Borrower, dated the Merger Effective Date, in all respects
satisfactory to the Administrative Agent as to the
foregoing matters and, unless theretofor delivered to the
Administrative Agent, attaching a true, complete and
correct copy of each of the New Arch Indenture, any
security agreement or other document executed in
3
<PAGE>
connection therewith and the Offering Memorandum or other
disclosure document, if any, in respect thereof, each of
which shall be in form and substance satisfactory to the
Managing Agents.
6. Paragraphs 1-5 of this Amendment shall not be effective until the prior or
simultaneous fulfillment of the following conditions (the "Amendment Effective
Date"):
(a) The Administrative Agent shall have received this Amendment, duly
executed by a duly authorized officer or officers of the Borrower, the
Parent, the Subsidiary Guarantors, the Administrative Agent and Required
Lenders.
(b) The Administrative Agent shall have received Amendment No. 4, dated
the date hereof, to the Tranche B Credit Agreement (the "Tranche A and C
Credit Agreement Amendment"), duly executed by a duly authorized officer or
officers of the Borrower, the Parent, the Subsidiary Guarantors, the
Administrative Agent and Required Lenders (each under and as defined in the
Tranche A and C Credit Agreement).
(c) The Administrative Agent shall have received a certificate of the
Secretary or Assistant Secretary of the Borrower: (i) attaching a true and
complete copy of the resolutions of its Managing Person authorizing this
Amendment in form and substance satisfactory to the Administrative Agent,
(ii) certifying that its certificate of incorporation and by-laws have not
been amended since June 29, 1998, or, if so, setting forth the same and (iii)
setting forth the incumbency of its officer or officers who may sign this
Amendment, including therein a signature specimen of such officer or
officers.
(d) The Administrative Agent shall have received an opinion of counsel to
the Borrower, in form and substance satisfactory to the Managing Agents.
(e) All fees due and payable on or prior to the Amendment Effective Date
shall have been paid.
(f) The representations and warranties contained in the Loan Documents
shall be true and correct in all material respects (except to the extent such
representations and warranties specifically relate to an earlier date) and no
Default or Event of Default shall exist, and the Administrative Agent shall
have received a certificate of an officer of the Borrower, dated the
Amendment Effective Date, certifying to such effect.
(g) The Administrative Agent shall have received such other documents as
it shall reasonably request.
10. The Borrower and the Parent each hereby (i) reaffirms and admits the
validity and enforceability of the Credit Agreement (as amended by this
Amendment) and the other Loan Documents and all of its obligations thereunder,
(ii) represents and warrants that there exists no Default or Event of Default,
and (iii) represents and warrants that the representations and warranties
contained in the Loan Documents, including the Credit Agreement as amended by
this Amendment (other than the representations and warranties made as of a
specific date) are true and correct in all material respects on and as of the
date hereof, except to the extent that such representations and warranties are
no longer true or correct as a result of events, acts, transactions or
4
<PAGE>
occurrences after the Second Restatement Effective Date which are permitted
under the Credit Agreement.
11. This Amendment may be executed in any number of counterparts, each of
which shall be an original and all of which shall constitute one agreement. It
shall not be necessary in making proof of this Amendment to produce or account
for more than one counterpart signed by the party to be charged.
12. This Amendment is being delivered in and is intended to be performed in
the State of New York and shall be construed and enforceable in accordance with,
and be governed by, the internal laws of the State of New York without regard to
principles of conflict of laws.
13. Except as amended hereby, the Credit Agreement shall in all other
respects remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 4 to
the Second Amended and Restated Credit Agreement (Tranche B Facility) to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
ARCH PAGING, INC.
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
THE BANK OF NEW YORK,
Individually, as Letter of Credit Issuer, as
Managing Agent and as Administrative Agent
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
CONSENTED TO BY:
TORONTO DOMINION (TEXAS), INC.,
Individually, as Managing Agent and as
Syndication Agent
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
CONSENTED TO BY:
ROYAL BANK OF CANADA,
Individually, as Managing Agent and as
Documentation Agent
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
CONSENTED TO BY:
BARCLAYS BANK PLC, Individually and as a
Managing Agent
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
CONSENTED TO BY:
FIRST UNION NATIONAL BANK
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
CONSENTED TO BY:
VAN KAMPEN PRIME RATE INCOME TRUST
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
CONSENTED TO BY:
VAN KAMPEN CLO I, LIMITED
By: Van Kampen Management, Inc.,
as Collateral Manager
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
CONSENTED TO BY:
PNC BANK, NATIONAL ASSOCIATION
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
CONSENTED TO BY:
FLEET NATIONAL BANK
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
CONSENTED TO BY:
BANKBOSTON, N.A.
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
CONSENTED TO BY:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
CONSENTED TO BY:
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
CONSENTED TO BY:
SOCIETE GENERALE
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
CONSENTED TO BY:
BEAR STEARNS INVESTMENT PRODUCTS INC.
By:
Name:
Title:
<PAGE>
ARCH PAGING, INC.
AMENDMENT NO. 4 TO THE
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(TRANCHE B FACILITY)
CONSENTED TO BY:
ARCH CONNECTICUT VALLEY, INC.
ARCH COMMUNICATIONS ENTERPRISES, LLC
AS TO EACH OF THE FOREGOING:
By:
Name:
Title:
ARCH COMMUNICATIONS, INC.
By:
Name:
Title:
ARCH COMMUNICATIONS GROUP, INC.
By:
Name:
Title:
**CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.3
Arch
March 17, 1999 Paging Products Sales Agreement
PAGING PRODUCTS SALES AGREEMENT
THIS AGREEMENT ("Agreement") is entered into on March 17, 1999, by and
between Motorola, Inc., a Delaware corporation, acting through its Paging
Products Group, with an address at 1500 Gateway Blvd, Boynton Beach, Florida
33426-8292 ("Motorola") and ARCH COMMUNICATIONS GROUP a Delaware corporation,
with an address at 1800 West Park Drive, Suite 250, Westborough, MA 01581
("Buyer").
PRODUCTS AND PRICES
Because of the prices set forth in competitive offers received by Buyer,
Motorola agrees to sell to Buyer the paging products listed on Attachment "A"
("Pagers") at the prices stated therein. These prices apply to Pagers ordered on
common carrier frequencies for which Buyer (or its subsidiary companies) are the
licensee or bona fide sales agent of the licensee. All prices include a primary
cell battery unless otherwise noted.
PRICE CHANGES AND SPECIAL PROMOTIONS
The prices stated in Attachment "A" are firm for the Term of this
Agreement. In the event Motorola lowers the standard common carrier price of any
product set forth in Attachment "A" during the Term of this Agreement, no price
adjustment shall be made in the Attachment "A" prices unless the new standard
common carrier price is lower than the Attachment "A" price for the same product
stated in this Agreement. In which case, all such products remaining to be
shipped under this Agreement shall be shipped at the new, lower standard common
carrier price. If, during the Term of this Agreement, Motorola offers a special
promotional price on any product in Attachment "A", Buyer may select the lower
of the special promotional price or the price in this Agreement.
QUANTITY
Motorola agrees to sell and Buyer agrees to purchase and accept delivery on
a minimum of ** Pagers within one year from date of this Agreement (**). All
products are quoted for sale subject to availability.
ORDERS
All orders placed during the Term of this Agreement are subject to the
terms and conditions set forth in Attachment "B" ("Standard Terms and
Conditions"). If any conflict arises between the Standard Terms and Conditions
and any other terms and conditions involved in the sale or Buyer's Purchase
Orders, the attached Standard Terms and Conditions shall prevail.
<PAGE>
NON-DISCLOSURE
Both Buyer and Motorola recognize the confidentiality of the pricing
information set forth in this Agreement and agree to not disclose same to third
parties during the Term of this Agreement, unless required by judicial or
administrative order. In the event of any potential merger or stock sale
transactions, Buyer will protect this confidentiality by obtaining written
Non-Disclosure Agreements from the parties.
DELIVERY SCHEDULE
Prices quoted are for Pagers whose delivery is requested at or beyond the
current gaiting schedule, following receipt and acceptance of Buyer's
processable order at Motorola's Boynton Beach, Florida headquarters.
BUSINESS METHODS IMPROVEMENT INCENTIVE
The prices in this Agreement are based in part on efforts to implement an
improved system of order forecasting and order management. The goal of this
program is to improve overall efficiency with longer-range visibility of Pager
requirements and to reduce the number of orders which are changed within 30 days
of scheduled ship date. Buyer shall provide Motorola a rolling six (6) month
forecast of projected Pager purchases on a monthly basis and shall issue firm
orders for three (3) month periods for product not to be fulfilled by the
Motorola Distribution Fulfillment Center (DFC). Accuracy of the rolling forecast
must be within 20% of actual orders placed to assure assignment of ship dates to
match the current gaiting schedule.
CHANGE ORDERS
Change orders will not be accepted by Motorola if requested within
twenty-one (21) days of the acknowledged shipment date. Customer agrees to
accept any Pagers shipped by Motorola where a change order was rejected by
Motorola because said change order was submitted within twenty-one (21) days of
the acknowledged shipment date.
ENTIRE AGREEMENT
This Agreement constitutes the entire and final expression of the agreement
between the parties pertaining to the subject matter hereof and supersedes all
prior related communications or agreements, oral, written or electronically
communicated, between the parties. The Attachments listed below are hereby
incorporated herein.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives on the date first written above.
ARCH COMMUNICATION GROUP MOTOROLA, INC.
By: _________________________ By: ___________________
Title: ________________________ Title: V Pres. & Dir. Of Distribution
------------------------------
Attachments:
A- Paging Products Pricing
B- Standard Terms and Conditions
ARCH Contract Alpha MDF Bonus (3/5/99)
<PAGE>
**CONFIDENTIAL TREATMENT REQUESTED
ATTACHMENT A
PAGING PRODUCTS PRICING
Based on a minimum quantity of ** pagers, the following prices are offered on
the basic models indicated, exclusive of available options:
- ---------------------- -------------------------------- ------- -------- -------
DESCRIPTION LOW / UHF
PRODUCT FEATURES HIGH BAND 900 MHz
- ------- BAND
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
Pronto Numeric Display w/vibe ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
Pronto FLX Numeric Display w/vibe ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
Bravo LX(TM) Numeric Display w/vibe ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
Bravo FLX(TM) Numeric Display w/vibe ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
Express Luna(TM) Numeric Display ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
LS 350 Numeric Display FLX(TM)& Pocsag ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
LS 550 Numeric Display FLX(TM) ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
LS 750 Numeric Display FLX(TM)& Pocsag ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
BR 850 Numeric Display FLX(TM) ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
Wordline(TM) ** POCSAG ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
Wordline FLX(TM) ** FLX Word Message ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
Jazz(TM) Flex Word Message Display ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
Advisor Gold(TM) Alpha Display w/vibe ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
Advisor Elite(TM) FLX Alpha Display w/vibe ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
CP 1250 Word Message Pager Flex ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
PF 1500 Word Messaging Reflex 50 & 25 ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
Pagewriter 2000 Two Way Reflex 50 (Deluxe) ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
Packaging Standard or Retail Boxes ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
QuickWord(TM) Message Entry Device ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
WordTrek(TM) Message Entry Device ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
WordTrek Plus(TM) Message Entry Device ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
Keynote (5/6 Tone) ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
Keynote (2-Tone) ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
Keynote Voice Storage ** ** **
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
- ---------------------- -------------------------------- ------- -------- -------
* Monet Mystique Housing is available for an additional charge of $ ** each.
<PAGE>
ATTACHMENT B
STANDARD TERMS AND CONDITIONS
TERM. This Agreement shall become effective upon execution by both parties on
the date stated herein and shall continue in effect for a term of one year, and
will automatically renew for successive one year terms subject to 30 days
written notice by either party.
PAYMENT. Buyer shall make net payment to Motorola at Motorola's offices at 1500
Gateway Boulevard, Boynton Beach, Florida 33426-8292, or at such other place as
Motorola may designate in writing. Payment shall be made within 30 days after
the date of invoice for each product, accessory, or other charge. Any invoiced
amount which is not paid within the terms and conditions of this Agreement will
be considered delinquent. Based on acceptable credit and collection practices,
Motorola is entitled to past due interest or a late-payment charge on the
delinquent balance outstanding not to exceed 1.5% per month on the outstanding
balance. In addition, Motorola may revise Buyers credits status based on Buyers
payment history. Any past due interest or late-payment charge will become due
and payable immediately at our discretion. Buyer also agrees to reimburse
Motorola for all legal fees and expenses incurred in collecting any amounts due
hereunder.
PACKING AND DELIVERY; RESTOCKING. All delivered goods shall be packed and
shipped in accordance with Buyer's instructions or in accordance with Motorola's
standards. All articles shall be sold and delivered FOB Motorola's shipping
facility(ies) unless otherwise expressly agreed to in writing. All stipulated
delivery or shipment dates are estimated only. Motorola reserves the right to
make deliveries in installments and the contract shall be severable as to any
such installments. Delay in delivery or other default of any installment shall
not relieve the Buyer of its obligation to accept and pay for remaining
deliveries. Claims for shipment shortage or delay in delivery shall be deemed
waived unless presented to Motorola in writing within 30 days after delivery of
each shipment. IN NO EVENT SHALL MOTOROLA BE LIABLE FOR INCREASED MANUFACTURING
COSTS, LOSS OF PROFITS OR GOOD WILL, OR ANY OTHER SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES. All returned goods are subject to a restocking fee equal
to twenty percent (20%) of the value of the returned goods. No goods may be
returned to Motorola after ninety (90) days from shipment.
RESPONSIBILITY AND TITLE; SECURITY INTEREST. Title and risk of loss or damage to
articles sold shall pass to the Buyer when the articles are delivered to the FOB
point referred to above or to the specified FOB point. Buyer shall bear all
costs of their purchase hereunder after delivery to the FOB point including, but
not limited to, insurance, consular fees, taxes, ocean, air and/or inland
freight, shipping or handling charges and the like. Any loss or damage after
delivery to carrier will not relieve Buyer of its payment obligations to
Motorola. Motorola shall retain and Buyer hereby grants Motorola a security
interest and right of possession in articles sold until Buyer makes full
payment. Buyer agrees to cooperate in whatever manner necessary to assist
Motorola in perfection of said security interest upon request.
<PAGE>
TAXES. Federal, State and/or Local excise, sales and use taxes or similar taxes
are not included in the prices in Attachment A and B. They will be invoiced at
prevailing rates unless a current Tax Exemption Certificate for the shipping
destination state has been submitted by Buyer and is on file with Motorola. If
any such excluded tax is determined to be applicable to this transaction or
Motorola is required to pay or bear the burden thereof, the prices set forth
herein shall be increased by the amount of such tax and any interest or penalty
thereon, and Buyer shall pay to Motorola the full amount of any such increase no
later than 30 days after receipt of an invoice therefore.
PATENT AND COPYRIGHT INDEMNIFICATION. Motorola agrees to defend, at its expense,
any suits against Buyer based upon a claim that any Motorola manufactured
products furnished hereunder directly infringe a U.S. patent or copyright and to
pay costs and damages finally awarded in any such suit, provided that Motorola
is notified promptly in writing of the suit and at Motorola's request and at its
expense is given control of said suit and all requested assistance for defense
of same. If the use or sale of any such product(s) furnished hereunder is
enjoined as a result of such suit, Motorola, at its option and at no expense to
Buyer, shall obtain for Buyer the right to use or sell such product(s) or shall
substitute an equivalent product reasonably acceptable to Buyer and extend this
indemnity thereto or shall accept the return of such product(s) and reimburse
Buyer the purchase price therefore, less a reasonable charge for reasonable wear
and tear. This indemnity does not extend to any suit based upon any infringement
or alleged infringement of any patent or copyright by the combination of any
such product(s) furnished hereunder and other elements nor does it extend to any
such product(s) of Buyer's design or formula. The foregoing states the entire
liability of Motorola for patent or copyright infringement. IN NO EVENT SHALL
MOTOROLA BE LIABLE FOR INCIDENTAL SPECIAL OR CONSEQUENTIAL DAMAGES ARISING FROM
INFRINGEMENT OR ALLEGED INFRINGEMENT OF PATENTS OR COPYRIGHTS.
COPYRIGHTS AND MASK WORKS. Motorola mask works and other works of authorship may
be used in and redistributed only with the Products associated with same. No
other use, including without limitation reproduction, modification or
disassembly of such Motorola mask works or other works of authorship is
permitted.
REVERSE ENGINEERING. Buyer acknowledges Motorola's claim that the Motorola
products furnished hereunder contain valuable trade secrets of Motorola and
therefore agrees that it will not translate, reverse engineer, decompile,
disassemble or make any other unauthorized use of such Motorola Equipment. Since
unauthorized use of such Motorola products will cause irreparable harm to
Motorola, Buyer agrees that Motorola, in addition to any other remedies it may
have, shall be entitled to equitable relief to protect such trade secrets,
including without limitation temporary and permanent injunctive relief without
proof of damages.
LOGOS AND TRADEMARKS. 1) The products shipped under the terms and conditions of
this Agreement will carry Motorola's logo or such other logo as expressly agreed
<PAGE>
to by Motorola. 2) In order that Motorola may protect and preserve its
trademarks, trade names, corporate slogans, corporate logo, goodwill and product
designations, Buyer, without the express written consent of Motorola, shall have
no right to use any such marks, names, slogans or designations of Motorola in
the sale, lease or advertising of any products or on any product, product
container, component part, business forms, sales, advertising and promotional
materials or other business supplies or materials, whether in writing, orally or
otherwise.
GOVERNMENT SALES. In the event Buyer elects to sell Motorola products or
services to any U.S. federal, state or local, or any foreign government agency,
or to a prime contractor or subcontractor selling to such entity, Buyer shall do
so at their own option and risk and agrees not to obligate Motorola as a
subcontractor or otherwise to such Buyer except as indicated in the paragraph
below. Buyer remains solely and exclusively responsible for compliance with all
statutes, regulations and clauses governing sales to any U.S. federal, state or
local, or any foreign government agency, or to a prime contractor or
subcontractor selling to such entity, except as indicated in the paragraph
below. Motorola makes no representations, certifications, or warranties
whatsoever with respect to the ability of its goods, services or prices to
satisfy any such statutes, regulations and clauses.
Motorola represents that it generally complies with the following FAR clauses:
FAR Clause Title
52.221-21 Certification of Nonsegregated Facilities
52.222-22 Previous Contracts and Compliance Reports
52.222-25 Affirmative Action Compliance
52.222-26 Equal Opportunity
52.222-35 Affirmative Action for Special Disabled and Vietnam Era
Veterans
52.222-36 Affirmative Action for Handicapped Workers
52.222-37 Employment Reports on Special Disabled Veterans And
Veterans of the Vietnam Era
52.223-2 Clean Air and Water
LICENSE DISCLAIMER. Except for the right to use the Motorola products for the
purposes provided herein which arises by operation of law and except as
expressly provided herein, nothing contained in this Agreement shall be deemed
to grant to Buyer either directly or by implication, estoppel or otherwise, any
license or right under any patents, copyrights, trademarks or trade secrets of
Motorola or any third party.
INDEPENDENT CONTRACTORS. The parties agree that each is an independent
contractor, that neither is an agent of the other party, and that neither party
can bind the other to third parties.
<PAGE>
NOTICES. Each party shall serve notices on the other party at the address set
forth in this Agreement and must serve same via certified mail, facsimile or
courier.
EXCUSABLE DELAY. In addition to other limitations on liability set forth in this
Agreement, Motorola shall not be liable for any delay or failure to perform due
to any cause beyond its reasonable control. Causes include, but are not limited
to, strikes, acts of God, acts of the Buyer, interruptions of transportation or
inability to obtain necessary materials or facilities, default of any supplier,
or delays in FCC frequency authorization or license grant. In the event Motorola
is unable to wholly or partially perform because of any cause beyond its
reasonable control, Motorola may terminate the Agreement without any liability
to Buyer.
FCC AND OTHER GOVERNMENT MATTERS. Buyer is solely responsible for obtaining any
licenses from, and complying with any rules and regulations required by, the
Federal Communications Commission ("FCC") or any other Federal, State or Local
governmental agency.
COMMUNICATIONS SERVICES. Buyer agrees that communications services are not
provided under the Agreement. MOTOROLA DISCLAIMS LIABILITY FOR RANGE, COVERAGE,
AVAILABILITY OR OPERATION OF ANY SYSTEM.
LIMITATION OF LIABILITY. EXCEPT FOR PERSONAL INJURY AND EXCEPT AS PROVIDED FOR
IN THE SECTION "PATENT AND COPYRIGHT INDEMNIFICATION", MOTOROLA'S TOTAL
LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT, WHETHER FOR BREACH OF
CONTRACT, WARRANTY, MOTOROLA'S NEGLIGENCE, STRICT LIABILITY IN TORT OR
OTHERWISE, IS LIMITED TO THE PRICE OF THE PARTICULAR PRODUCTS SOLD HEREUNDER
WITH RESPECT TO WHICH LOSSES OR DAMAGES ARE CLAIMED. BUYER'S SOLE REMEDY IS TO
REQUEST MOTOROLA AT MOTOROLA'S OPTION TO EITHER REFUND THE PURCHASE PRICE OR
REPAIR OR REPLACE PRODUCTS THAT ARE NOT AS WARRANTED. IN NO EVENT WILL MOTOROLA
BE LIABLE FOR INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT
LIMITED TO, FRUSTRATION OF ECONOMIC OR BUSINESS EXPECTATIONS, LOSS OF PROFITS,
LOSS OF DATA, COST OF CAPITAL, COST OF SUBSTITUTE PRODUCT(S), FACILITIES OR
SERVICES, DOWNTIME COST OR ANY CLAIM AGAINST BUYER BY ANY OTHER PARTY, WHETHER
FOR BREACH OF CONTRACT, WARRANTY, MOTOROLA'S NEGLIGENCE, STRICT LIABILITY IN
TORT, OR OTHERWISE.
INSURANCE. It is further understood that Motorola is not an insurer and that
Buyer shall obtain all insurance, if any, that is desired and that Motorola does
not represent or warrant that Motorola products will avert or prevent
occurrences, or the consequences therefrom, which are monitored, detected or
controlled with the use of the products.
<PAGE>
TIME TO SUE. Except for money due upon an open account, no action shall be
brought for any breach of this Agreement more than two (2) years after the
accrual of such cause of action except where a shorter limitation period is
provided by applicable law. Except as otherwise already disclosed in writing to
Motorola, Buyer is not presently aware of any facts that could give rise to a
claim against Motorola for breach of contract, warranty, or otherwise.
NO REPRESENTATIONS. The issuance of information, advice, approvals, instructions
or cost projections by Motorola's sales personnel or other representatives shall
be deemed expressions of personal opinion only and shall not affect Motorola's
and Buyer's rights and obligations hereunder, unless the same is in writing and
signed by an officer of Motorola with the explicit statement that it constitutes
an amendment to this Agreement.
WARRANTIES. Paging products are sold subject to Motorola's written Limited
Warranty (a copy of which has been provided to Buyer and will accompany the
shipment of products). THIS WARRANTY IS GIVEN IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, WHICH ARE SPECIFICALLY EXCLUDED, INCLUDING, WITHOUT
LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. UPON ACCEPTANCE OF A SHIPMENT, BUYER SHALL BE DEEMED TO ACKNOWLEDGE
RECEIPT OF SUCH WARRANTY.
GENERAL. (A) Buyer acknowledges that it has read and understands the terms and
conditions of this Agreement and agrees to be bound by them. (B) No modification
of or additions to this Agreement shall be binding upon Motorola unless such
modification is in writing and signed by an officer of Motorola. (C) If any term
or provision of this Agreement shall to any extent be held invalid, void or
unenforceable, by a court or other tribunal, then that term or provision shall
be inoperative and void insofar as it is in conflict with law, but the remaining
terms and provisions shall nevertheless continue in full force and effect. (D)
The failure of Motorola to insist, in any one or more instances, upon the
performance of any of the terms, covenants or conditions of this Agreement, or
to exercise any right herein, shall not be construed as a waiver or
relinquishment of the future performance of any such term, covenant or condition
or the future exercise of such right, but the obligation of the Buyer with
respect to such future performance shall continue in full force and effect. (E)
THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE
GOVERNED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.
ALTERNATIVE DISPUTE RESOLUTION. Motorola and Buyer will attempt to settle any
claim or controversy arising out of this Agreement, except for actions by
Motorola to collect payment from Buyer, through consultation and negotiation in
a spirit of mutual cooperation. If those attempts fail, then the dispute will be
mediated by a mutually-acceptable mediator to be chosen by Motorola and Buyer
within 45 days after written notice demanding mediation. Neither party may
<PAGE>
unreasonably withhold consent to the selection of a mediator, and Motorola and
Buyer will share the costs of the mediation equally. Motorola and Buyer,
however, may postpone mediation by mutual agreement, until some specified but
limited discovery has been completed regarding the dispute. The parties may also
agree to replace mediation with some other form of alternative dispute
resolution (ADR), such as neutral fact-finding or a minitrial.
Any dispute which cannot be resolved through negotiation, mediation or other
form of ADR within six months of the date of the initial demand for it may be
submitted to the state and federal courts within Illinois for resolution, and
Motorola and Buyer hereby consent to the jurisdiction of state and federal
courts sitting in Illinois. The use of any ADR procedures will not be construed
under the doctrines of laches, waiver or estoppel to adversely affect the rights
of either party. Nothing in this section will prevent either party from
resorting to judicial proceedings if (a) good faith efforts to resolve the
dispute under these procedures have been unsuccessful, or (b) interim relief
from a court is necessary to prevent serious and irreparable injury to one party
or to others. Motorola and Buyer knowingly, voluntarily and intentionally waive
the right each may have to a jury with respect to any such judicial proceedings.
<PAGE>
**CONFIDENTIAL TREATMENT REQUESTED
ARCH Contract Alpha MDF Bonus
PRODUCT PRICING MDF BONUS
Pagewriter 2000X (Deluxe) ** **
PF 1500 ** **
CP 1250 ** **
Advisor Gold ** **
Advisor Elites ** **
Jazz ** **
Wordline ** **
Note: * Arch will receive the additional $** per pager when Arch reaches 1998
total of **. This would be an extra $** in MDF money. A Grand total of
$ ** for ** products.
Steve Daigneault 3/5/99
Motorola NAPSD
** CONFIDENTIAL TREATMENT REQUESTED Exhibit 10.4
SATELLITE SERVICES AGREEMENT
THIS SATELLITE SERVICES AGREEMENT (this "Agreement") is entered into as of
the 1st day of September, 1998 by and between AvData Systems, Inc., a Delaware
corporation, whose principal place of business is located at 55 Marietta Street,
NW, Atlanta, Georgia, 30303 ("AvData"), and MobileMedia Communications, Inc., a
Delaware corporation whose principal place of business is located at One
Executive Drive, Fort Lee, New Jersey, 07024 and which is operating as a Debtor
in possession in and under the Case ("Customer").
RECITALS
WHEREAS, AvData and Customer are parties to a Satellite Services Agreement
dated August 8, 1995 (the "Existing SS Agreement"), concerning the provision of
certain satellite services. AvData and Customer now desire to terminate the
Existing SS Agreement and to enter into this Agreement for the provision of
satellite transponder capacity as provided herein;
WHEREAS, Customer and AvData also are parties to a 1998 Master Agreement
dated August 1, 1998 (the "Master Agreement"), pursuant to which AvData provides
certain network services to Customer;
WHEREAS, contemporaneously herewith, AvData and Customer are entering into
an amendment to the Master Agreement; and
WHEREAS, this Agreement is independent of the Master Agreement and all
rights and obligations hereunder shall continue in full force and effect
notwithstanding any termination of, or default by either party under, the Master
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration received and acknowledged, the parties agree as follows:
A. DEFINITIONS. When used in this Agreement, the following terms shall have the
meaning assigned below:
1. "Affiliates" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control
(i.e., the power to direct affairs by reason of ownership of voting stock,
by contract or otherwise) with such Person and any member, director,
officer or employee of such Person.
2. "Alternate Hub" shall mean the Equipment at Customer's alternate hub
location in Dayton, New Jersey which will be used to access the Satellite
Capacity to run Customer's network in the event of a failure of the Primary
Hub.
<PAGE>
3. "Case" shall mean Bankruptcy case number 97-174 (PJW) throughout and
including 97-192 (PJW), pending in the United States Bankruptcy court for
the District of Delaware pursuant to which Customer is operating as a
debtor in possession under a Chapter 11 proceeding.
4. "Commencement Date": 12:00 a.m. (Eastern Time) on September 1, 1998.
5. "Default" shall have the meaning assigned pursuant to Section J.1.b hereto.
6. "Equipment" shall mean the Single Channel Per Carrier (SCPC) satellite
receivers, Very Small Aperture satellite Terminals (VSATs) and associated
hub hardware and remote site hardware including embedded software owned by
Customer.
7. "FCC" shall mean the Federal Communications Commission or any successor
organization.
8. "GE" shall mean GE American Communications, Inc. and its successors and
assigns under the GE Agreement.
9. "GE Agreement" shall mean that certain GE-1 Satellite Single Channel per
Cover Service Agreement between GE and AvData dated July 15, 1996.
10. "GE Satellite" shall mean GE-1, or if GE-1 becomes a GE Satellite Failure,
a suitable replacement if made available by GE to AvData pursuant to the GE
Agreement.
11. "GE Satellite Capacity" shall mean 2.9 MHz of Ku-band capacity on the GE
Satellite.
12. "GE Satellite Failure" shall have the meaning assigned to such term in
Schedule A-1 attached hereto.
13. "GE Term" shall mean a term commencing on the Commencement Date and ending
on the GE Termination Date, subject to earlier termination as provided in
Section J hereof.
14. "GE Termination Date" shall mean the earlier of (i) 11:59 p.m. (Eastern
Time) on July 31, 2001; (ii) the End of Life or Replacement Date (as such
terms are defined in Schedule A-1) of the GE Satellite; or (iii) the date
the GE Transponder or the GE Satellite on which the GE Satellite Capacity
is being provided becomes a GE Transponder Failure or a GE Satellite
Failure and cannot be restored by GE in accordance with Article V of the GE
Agreement, unless within seven (7) business days thereafter GE provides
service on another GE Transponder on the GE Satellite or on alternate
facilities acceptable to Customer and AvData (provided that, if GE offers
such alternate facilities on terms different from those specified in this
Agreement, use of such alternate facilities shall be subject to the terms
on which such facilities are offered), unless earlier terminated pursuant
to the terms of this Agreement. In the event that AvData receives
notification from GE of any event described in the foregoing clauses (ii)
and (iii), AvData agrees to provide Customer notice of the same as soon as
practicable after receipt of such notice from GE.
15. "GE Transponder" shall mean a component of the GE Satellite which, for a
particular frequency band, receives, amplifies, translates frequency and
retransmits radio signals as further defined in Schedule A-1 as a
"Transponder." GE Transponder shall also mean, for purposes of this
definition, any replacement or alternate components thereof, as further
defined in Schedule A-1 as "Protection Transponder".
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16. "GE Transponder Failure" shall have the meaning assigned to such term in
Schedule A-1.
17. "GE-1" shall mean the communications satellite designated GE-1 and operated
by GE located at the 103(Degree) West Longitude orbital position.
18. "Laws" shall mean any federal, state, local or other law or governmental
requirement of any kind, domestic or foreign, and the rules, regulations
and orders promulgated thereunder, including, without limitation, rules,
regulations and orders of the FCC.
19. "Loral" shall mean Loral Skynet and its successors and assigns under the
Loral Agreement.
20. "Loral Agreement" shall mean that certain agreement between Loral and
AvData for the provision of satellite-transponder services on Telstar 4
dated as of August 29, 1998.
21. "Loral Satellite" shall mean Telstar 4, or, if necessary and appropriate
due to a "Space Segment Interruption or Failure" as defined in Schedule B-1
attached hereto, a suitable replacement made available by Loral to AvData
pursuant to the Loral Agreement.
22. "Loral Satellite Capacity" shall mean 4.4 MHz of Ku-band capacity on the
Loral Satellite.
23. "Loral Satellite Capacity Failure" shall mean a "Space Segment Interruption
or Failure" as defined in Schedule B-1 attached hereto.
24. "Loral Term" shall mean a term commencing on the Commencement Date and
ending on the Loral Termination Date, subject to earlier termination as
provided in Section J hereof.
25. "Loral Termination Date": 11:59 p.m. (Eastern Time) on July 31, 2001,
unless terminated earlier pursuant to the terms of this Agreement.
26. "Loral Transponder" shall mean a component of the Loral Satellite which,
for a particular frequency band, receives, amplifies, translates frequency
and retransmits radio signals. Loral Transponder shall also mean, for
purposes of this definition, any replacement or alternate components
thereof.
27. "Person" shall mean any individual, corporation, partnership, limited
liability company, limited partnership, joint venture, trust,
unincorporated association or other business entity or any governmental
entity.
28. "Primary Hub" shall mean the Equipment at Customer's primary hub location
in Dallas, Texas which will be used to access the Satellite Capacity to run
Customer's network.
29. "Satellite Capacity" shall mean, collectively, the GE Satellite Capacity
and the Loral Satellite Capacity.
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<PAGE>
30. "Satellites" means the GE Satellite and the Loral Satellite.
31. "Satellite Operators" shall mean GE and Loral.
32. "Telstar 4" shall mean the communications satellite designated as Telstar 4
and operated by Loral located at the 89E West Longitude orbital position.
33. "Transponder" shall mean a GE Transponder or a Loral Transponder.
34. "Usage" or "Use" shall refer to radio transmission to, or utilization of,
the Satellite(s) for the Customer's one-way or two-way messaging network.
35. "Users Guide" shall mean the Commercial Operation System Users Guide
attached to the GE Agreement as Attachment B thereto, as such may be
amended from time to time for technical or operational reasons upon written
notice by GE to Customer. AvData represents and warrants to Customer that
Schedule C to this Agreement is the most current version of the Commercial
Operation System Users Guide and agrees to provide Customer with any and
all such guidelines and instructions, and any updates, promptly upon the
receipt thereof by AvData.
B. PROVISION OF THE GE SATELLITE CAPACITY. During the GE Term, AvData shall
provide the GE Satellite Capacity through Ku-band transponder capacity
contracted for by AvData on the GE Satellite pursuant to the GE Agreement.
AvData has a current contract for "full time transponder protected" space
segment transponder service from GE, which service is outlined in Schedule A-1
hereto. With respect to the GE Satellite Capacity, AvData will provide "full
time transponder protected" space segment transponder service under this
Agreement to Customer to the same extent AvData receives such protected service
from GE. The GE Satellite Capacity shall be provided upon the terms and subject
to the conditions specified in Schedule A-2 attached hereto and incorporated
herein by reference.
C. PROVISION OF THE LORAL SATELLITE CAPACITY. During the Loral Term, AvData
shall provide the Loral Satellite Capacity through Ku-band transponder capacity
contracted for by AvData on the Loral Satellite pursuant to the Loral Agreement.
The Loral Agreement provides "fully protected space segment" transponder service
from Loral, which service is outlined in Schedule B-1 hereto. With respect to
the Loral Satellite Capacity, AvData will provide "fully protected space
segment" transponder service under this Agreement to Customer to the same extent
AvData receives such protected service from Loral. The Loral Satellite Capacity
shall be provided upon the terms and subject to the conditions specified in
Schedule B-2 attached hereto and incorporated herein by reference.
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<PAGE>
** CONFIDENTIAL TREATMENT REQUESTED
D. BILLING.
1. For GE Satellite Capacity. Customer shall pay AvData the amount set
forth for the GE Satellite Capacity on AvData's invoice therefore in accordance
with Section I below and Schedule A-3 attached hereto, within thirty (30) days
of Customer's receipt of such invoice. AvData shall invoice Customer for the GE
Satellite Capacity provided hereunder as of the first day of each month for
which service is to be provided AvData agrees to promptly credit Customer's
account, as reflected on the invoice to Customer next following the date of the
interruption of service, for any Interruption (as defined in the GE Agreement)
affecting GE Satellite Capacity provided hereunder (a) to the extent AvData
receives a credit from GE or (b) for which AvData did not receive a credit
pursuant to Section 4.B.1 of the GE Agreement due to the fault of AvData
personally or any AvData customer other than Customer. The credit shall be equal
to a pro rata portion of the monthly charges to Customer (based on a month of 30
days) determined by the length of the interruption in such service as follows:
**
Notwithstanding the foregoing, a credit will not be granted for any service
outage or disruption affecting the GE Satellite Capacity provided hereunder that
is a result of, or attributable in whole or in part, to: 1) the fault of
Customer or any third party (other than AvData's other customers using GE-1
satellite capacity provided by AvData); or 2) the failure or unavailability of
satellites, transponders, facilities, services or equipment furnished to
Customer by any other entity which may be used in conjunction with the GE
Satellite; or 3) sun outages or rain fade; or 4) suspensions of service made in
accordance with this Agreement, unless the applicable provision of this
Agreement expressly provides for granting of a credit hereunder; or 5) any cause
for which GE otherwise is not responsible under Article 11.C of the GE
Agreement.
2. For Loral Satellite Capacity. Customer shall pay AvData the amount set
forth for the Loral Satellite Capacity on AvData's invoice therefore in
accordance with Section I below and Schedule B-3 attached hereto, within thirty
(30) days of Customer's receipt of such invoice. AvData shall invoice Customer
for the Loral Satellite Capacity provided hereunder as of the first day of each
for which service is to be provided. AvData agrees to promptly credit Customer's
account, as reflected on the invoice to Customer next following the date of the
interruption in service or failure, for an Interruption or Failure (as defined
in the Loral Agreement) affecting Loral Satellite Capacity provided hereunder
(a) to the extent AvData receives a credit from Loral, or (b) for which AvData
did not receive a credit pursuant to Sections 12.(1) or (2) of Codicil 3 Terms
and Conditions of the Loral Agreement due to the fault of AvData personally or
any of AvData customer other than Customer. The credit shall be equal to a pro
rata portion (based on a month of 30 days) determined by the length of the
interruption in such service as follows:
5
<PAGE>
** CONFIDENTIAL TREATMENT REQUESTED
An Interruption or Failure period begins when Customer or AvData
reports the service to a space segment to be interrupted or failed
and releases the affected space segment for testing and repair. An
Interruption or Failure period ends when the affected space
segment is operative. If Customer reports a space segment to be
interrupted or failed but declines to release it for testing and
repair, it is considered to be impaired, but not interrupted or
failed. Such credit will be given for any Interruption or Failure
of **, ** for each occurrence for the period of time when the
space segment is Interrupted or Failed, except when Interrupted or
Failed for any of the following reasons:
(1) Interruptions or Failures caused by the action or failure to
act of Customer or others authorized by Customer to use the
affected space segment, not pursuant to the directions of
Loral.
(2) Interruptions or Failures during periods when Customer elects
not to release the affected space segment for testing.
(3) Interruptions or Failures due to the effects of sun transit or
receiving earth stations.
(4) Interruptions or Failures due to service affecting atmospheric
conditions.
3. Failure to Pay When Due. Notwithstanding anything to the contrary
contained in this Agreement, AvData may suspend GE Satellite Capacity and Loral
Satellite Capacity service on twenty-four (24) hours notice for failure by
Customer to pay any sum due, which has not been cured within 3 business days
following notice pursuant to Section K.8 hereof by AvData to Customer of such
failure.
E. DEPOSIT.
1. GE Satellite Capacity Deposit. Within three business days following
execution of this Agreement, Customer will pay AvData a deposit equal to **
($**) (the "GE Deposit"), less 1) the amount currently held on deposit under the
Existing SS Agreement (** ($**)), 2) the amounts paid by Customer on or about
May 20, 1998 to secure provision of additional satellite capacity on GE-1 (**
($**)), and 3) the amounts paid by Customer to AvData for back-up support
services which it did not receive (** ($**)).
6
<PAGE>
** CONFIDENTIAL TREATMENT REQUESTED
2. Loral Satellite Capacity Deposit. Within three business days following
execution of this Agreement, Customer will pay AvData a deposit equal to **($**)
(the "Loral Deposit").
3. Treatment of Deposit. The GE Deposit ($**) and the Loral Deposit ($**)
will be held by AvData and applied in accordance with this Section E.3. If
Customer makes all payments under this Agreement through September 1, 1999 in a
timely manner (without regard to any applicable notice and cure period), then
AvData shall apply one-half of the GE Deposit and one-half of the Loral Deposit,
respectively, to Customer's account hereunder in accordance with the AvData
invoices relating to the three monthly billing cycles immediately following
September 1, 1999. To the extent that such amounts are not so applied, AvData
shall (i) apply the GE Deposit and the Loral Deposit to Customer's account
hereunder in accordance with the AvData final monthly invoices and (ii) refund
the balance, if any, to the Customer upon expiration or other termination of the
Satellite Capacity to which the GE Deposit and/or the Loral Deposit,
respectively, pertain.
F. CERTAIN UNDERSTANDINGS.
1. Ownership of Transponders. Customer understands and agrees that the
Satellite Operators are the FCC-authorized operators of the Satellites and that
Customer has, and will have, no possessory interest in the space segment(s)
provided pursuant to this Agreement. Neither this Agreement nor the provision of
the Satellite Capacity hereunder shall, or shall be deemed to, convey title or
any other ownership interest to Customer in or to the Satellites, any
Transponder or any part thereof. Customer acknowledges and agrees (i) that
nothing contained in this Agreement shall prevent any sale, mortgage, or
encumbrance of the Satellite or any Transponder thereof by the Satellite
Operators, (ii) that the Satellite Capacity is provided on a right to use basis
and is not being sold to Customer, (iii) that neither any Transponder nor any
Satellite, nor any right to use thereof nor any interest of any type therein,
shall be subject to any claim, prior, subsequent or otherwise, of Customer or
its creditors as a result of this Agreement, and (iv) that, as to any
Transponder, the rights of Customer under this Agreement will be subject and
subordinate to the rights of any purchaser purchasing such Transponder and
leasing it back to the Satellite Operator pursuant to a sale and leaseback
transaction. Notwithstanding the foregoing, AvData shall use reasonable efforts
to provide that the foregoing restrictions shall not impact or interfere with
Customer's use of the Satellite Capacity as provided for herein.
2. Control of Satellite. Customer understands and agrees that the Satellite
Operators shall have sole and exclusive control of the operation of the
Satellites.
3. Communication with Satellite. All communications with the Satellites
will be provided through Equipment controlled by Customer at either the Primary
Hub or Alternate Hub. Customer shall be solely responsible for the operation and
maintenance of the Equipment, except to the extent provided in Section F.5
hereof.
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<PAGE>
4. Content Of Transmissions. As between AvData and Customer, Customer is
solely responsible for the content of transmissions using the Satellite Capacity
provided hereunder.
5. Satellite Carrier Monitoring Services of AvData. As a part of the
Satellite Capacity and services provided hereunder, through its Advanced Network
Center, 24 hours per day, seven days per week, AvData agrees to monitor
Customer's illumination of the Satellite Capacity provided hereunder and Used by
Customer in order to identify and notify Customer of any problems and anomalies
in the Use thereof. AvData will also monitor the illumination and operation of
all other Satellite space segments used by AvData or AvData's other customers
and will notify Customer promptly upon AvData's determination of any improper
illumination, failure to conform to power, frequency or access specifications,
or possible transmission interference by AvData or any customer of AvData which
would constitute a breach of the GE Agreement or the Loral Agreement. AvData
will use commercially reasonable efforts to assist with the resolution of any of
the aforementioned problems or anomalies with regard to the Satellite Capacity.
As part of the provision of these services, Customer agrees to
provide AvData with the necessary equipment and access means, and hereby
authorizes AvData to take such action as AvData deems necessary or appropriate,
to alter or cease Customer's illumination of the Satellite Capacity in Use as
may be required by GE to maintain compliance with the GE Agreement or, as the
case may be, by Loral to maintain compliance with the Loral Agreement, or to
prevent charges from GE or Loral for improper illumination of the Satellite
Capacity. AvData will use commercially reasonable efforts to notify Customer
prior to altering or ceasing illumination of the Satellite Capacity. Not
withstanding the foregoing, to the extent that illumination of the Satellite
Capacity is attributable to, in whole or in part, Customer's negligence or
willful misconduct, Customer agrees to reimburse AvData for any related improper
illumination charges from GE or Loral.
6. Notice of Default; Compliance with Agreements. In the event that AvData
receives from the Satellite Operator a written notice of breach or default by
AvData under either the GE Agreement or the Loral Agreement, AvData shall
promptly provide notice of the same to Customer. AvData represents and warrants
to Customer that (i) as of September 1, 1998, AvData is in material compliance
with the terms of the GE Agreement and (ii) as of the date of execution and
delivery of the Loral Agreement, AvData will be in material compliance with the
terms of the Loral Agreement.
G. LIMITATION ON LIABILITY.
1. Warranty Exclusions, Liability Limited.
a. NO WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, INCLUDING
ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, APPLY TO
THE SERVICE WITH RESPECT TO THE SATELLITE CAPACITY PROVIDED HEREUNDER OR THE
EQUIPMENT AND FACILITIES USED TO PROVIDE SUCH SERVICE.
8
<PAGE>
b. As a material condition of receiving such service hereunder
at the price specified herein, and in regard to any and all causes arising out
of or relating to this Agreement, including but not limited to claims of
negligence, breach of contract or warranty, failure of a remedy to accomplish
its essential purpose or otherwise, Customer agrees that AvData's entire
liability for damages or losses arising out of mistakes, omissions,
interruptions, delays, errors or defects of any kind with respect to its
performance of this Agreement, or the use, operation, maintenance, repair, or
restoration of the Satellites, the Transponders used to provide service to
Customer hereunder, or of other satellites, transponders, facilities, services
or equipment furnished to Customer by AvData in accordance with the GE Agreement
and/or the Loral Agreement, including but not limited to tracking, telemetry and
control facilities or services, or anything done in connection therewith
regardless of whether occasioned by AvData's negligence, shall be limited to a
refund or waiver, as the case may be, of the applicable charges for such service
during which such service is not provided and any other applicable refund
payable pursuant to Section I. This limitation shall not, however, affect
Customer's entitlement to restoration, where applicable, in the event of a GE
Transponder Failure or Loral Satellite Capacity Failure. Credits for
interruptions shall be determined in accordance with Section D.1 (GE) and D.2
(Loral) hereto.
c. AvData is not liable for damages arising out of service,
space segments, or equipment which are not furnished by AvData, GE or Loral.
Customer is not liable for damages arising out of the gross negligence or
willful misconduct of AvData.
2. No Indirect or Consequential Damages. Neither party shall be liable, in
connection with this Agreement, or the arrangements contemplated hereby, for any
indirect, incidental, consequential, punitive, special or other similar damages
(whether in contract, tort, strict liability or under any other theory of
liability), including but not limited to costs of substitute services or
facilities, loss of actual or anticipated revenues or profits, loss of business,
customers or good will, or damages and expenses arising out of third party
claims. The foregoing exclusion shall apply even if the party has been advised
of the possibility of such damages.
3. Force Majeure. AvData shall not be liable to Customer for any failure of
or delay in performance with respect to the Satellite Capacity hereunder due to
causes beyond its commercially reasonable control. These causes include but are
not limited to: acts of God; fire, flood or other natural catastrophes; the need
to comply with any law or any rule, order, regulation or direction of the United
States Government, or of any other government, including state and local
governments having jurisdiction over either party, or of any department, agency,
commission, bureau, court or other instrumentality thereof, or of any civil or
military authority; national emergencies; insurrections; riots; acts of war;
quarantine restrictions; embargoes; or strikes, lockouts, work stoppages or
labor difficulties.
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H. INDEMNIFICATION.
1. Customer shall indemnify and hold AvData harmless from and against, and
agrees to defend promptly AvData for, any and all losses, damages, costs,
expenses, liabilities, obligations and claims of any kind (including, without
limitation, reasonable attorneys' fees and other legal costs and expenses), that
AvData may at any time suffer or incur, or become subject to, as a result of or
in connection with:
a. Claims by third parties (including, without limitation, the
Satellite Operators) arising from or relating to any failure of Customer to
carry out, perform, satisfy and discharge any of its covenants, agreements,
liabilities or obligations under this Agreement;
b. Claims for libel, slander, invasion of privacy,
infringement of copyright or other intellectual property rights arising from the
communications transmitted by Customer or Customer's designees; and
c. Any other claim arising from the provision of the Satellite
Capacity to Customer or any Use of the Satellite Capacity provided under this
Agreement and not based on the content of the communications transmitted using
the service, except to the extent arising out of the gross negligence or willful
misconduct of AvData.
2. Any party obligated to provide indemnification pursuant to this Section
H (the "indemnitor") shall promptly defend any claims against the party entitled
to indemnification from the indemnitor pursuant to this Section H (the
"indemnitee"), any affiliated company of the indemnitee or any of their
respective directors, officers, agents or employees (together with the
indemnitee, the "indemnified group"), with counsel of the indemnitor's choosing
at its own cost and expense. The indemnitee shall cooperate with, and assist as
reasonably requested by, the indemnitor in the defense of any such claim,
including the settlement thereof on a basis stipulated by the indemnitor (with
the indemnitor being responsible for all costs and expenses of defending such
claim or making such settlement); provided, however, that (1) the indemnitor
shall not, without the indemnitee's consent, settle or compromise any claim or
consent to any entry of judgment which does not include the giving by the
claimant or the plaintiff to each member of the indemnified group of an
unconditional release from all liability with respect to such claim, (2) the
indemnitee shall be entitled to participate at its sole expense in support of
the indemnitor's action the defense of any such claim and to employ counsel at
the indemnitee's own expense to assist in the handling of such claim, and (3)
the indemnitee shall have the right to pay, settle or compromise any such claim
as to itself, provided that in such event the indemnitor shall be relieved of
any liability or obligation which would otherwise then or thereafter have
existed or arisen under this Section H in respect of such claim.
3. In the event any criminal, civil or administrative proceeding or
investigation (other than civil proceedings for libel, slander, or infringement
of copyright or other intellectual property rights, which shall be governed by
Sections H.1 and H.2 hereof) is instituted against AvData or any of the
directors, officers, agents or employees of AvData (the "Indemnified Parties"),
based upon the content of any communication which is transmitted using the
service provided hereunder, Customer shall indemnify and save harmless the
Indemnified Parties from all costs, expenses (including attorney fees and expert
witness fees), liabilities and damages of any nature, including, without
limitation, to the extent permitted by law, any fines or other penalties
resulting from or arising out of such proceedings or investigations. The
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Indemnified Party shall have the right, but not the obligation, to require
Customer to conduct the defense of the Indemnified Party in any such proceedings
or investigations at the expense of Customer. If the Indemnified Party elects to
conduct its own defense, Customer shall nevertheless remain liable for all
costs, expenses, liabilities and damages resulting from or arising out of such
proceedings or investigations.
4. AvData will provide Customer with prompt notice of any claim for
indemnification hereunder; provided that the failure of an indemnitee to give
timely notice hereunder shall not affect its right to indemnification hereunder,
except to the extent that Customer demonstrates that it has been materially
prejudiced by such failure.
I. PAYMENTS TO AVDATA.
1. Payment Terms.
a. Unless otherwise provided, any sum due AvData for the
provision of the Satellite Capacity shall be invoiced and payable in advance on
the first day of each month for which service is to be provided.
b. If any payment of any sum due from Customer is not received
by AvData within thirty (30) days after such payment is due, then such overdue
amount shall be subject to a delinquency charge at the rate of interest equal to
one and one-half percent (1 1/2%) per month, from the date such overdue amount
was actually due until the date it is actually received by AvData.
c. Customer's obligations to make the monthly Satellite
Capacity payments provided by Section D above and Section I.2. below shall be
absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim, recoupment, defense or
other right which Customer may have against AvData or anyone else for any reason
whatsoever.
d. The charges specified herein do not include any amounts for
sales, gross receipts, use, transfer, Universal Service Fund, property,
privilege, license, excise or similar taxes, fees or assessments which may be
levied by any governmental agency on this Agreement, the services provided or
the payments made hereunder. Any such taxes or charges (excluding any income or
similar taxes of AvData or the Satellite Operators) shall be paid directly by
Customer to the taxing authority, if legally permitted. Otherwise, if required
to be paid by AvData (excluding any income or similar taxes of AvData or the
Satellite Operators), the amount shall be reimbursed to AvData by Customer. Upon
request, Customer shall provide AvData with tax exemption certificates, if
applicable, or evidence of tax payments, if made by Customer.
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** CONFIDENTIAL TREATMENT REQUESTED
2. Required Satellite Capacity. Commencing as of the Commencement Date ,
Customer shall pay AvData:
a. ** ($**) per month for the GE Satellite Capacity; and
b. ** ($**) per month for the Loral Satellite Capacity.
J. TERMINATION.
1. Events of Termination. The obligation of the parties hereunder with
respect to the GE Satellite Capacity shall terminate automatically on the GE
Termination Date and with respect to the Loral Satellite Capacity shall
terminate automatically on the Loral Termination Date, unless terminated earlier
pursuant to one of the following paragraphs:
a. Termination By Either Party. The obligations of the parties
hereunder (i) with respect to the GE Satellite Capacity may be terminated by
either party by prior written notice to the other if the GE Agreement terminates
for any reason other than breach by AvData and (ii) with respect to the Loral
Satellite Capacity may be terminated by either party by written notice to the
other if the Loral Agreement terminates for any reason other than breach by
AvData. However, the foregoing right of termination shall apply to only the
affected Satellite Capacity and this Agreement shall continue in force with
respect to the remaining portion of Satellite Capacity. AvData agrees to notify
Customer promptly if AvData gives or receives notice of termination of the GE
Agreement or the Loral Agreement. If so terminated, AvData shall refund to
Customer a prorated amount of any prepaid monthly charges, and Customer's
deposit, for the terminated capacity and AvData shall have no other or further
liability to Customer hereunder with respect to such capacity.
b. Defaults by Customer. Notwithstanding anything to the
contrary and in addition to all other remedies AvData may have, AvData may
immediately cancel this Agreement and accelerate all remaining payments due
through the respective termination dates, if (the events described in clauses
(i), (ii) and (iii) below being referred to collectively as "Defaults" and
individually as a "Default"):
(i) (A) Customer fails to pay when due any amount due
pursuant to this Agreement or pursuant to the Master
Agreement within ten (10) days after AvData has
delivered written notice to Customer of such
non-payment, (B) Customer violates the terms and
conditions of Schedule A-2 hereto or of Schedule B-2
hereto and fails to cure such violation within any
applicable cure period, or (C) except as provided in
the foregoing clauses (A) and (B), Customer breaches in
any material respect any other obligation under this
Agreement, which failure has not been cured within
thirty (30) days after AvData has delivered written
notice to Customer of such failure.
12
<PAGE>
(ii) Customer ceases doing business as a going concern, has
the Case converted from Chapter 11 to a Chapter 7
proceeding or fails to pay AvData $69,342.50 on account
of its filed pre-petition claim within the earlier of
eighteen (18) months from the date hereof and the date
specified in a plan of reorganization in the Case in
accordance with the terms thereof. Following the
effective date of Customer's plan of reorganization, it
shall be a default hereunder if Customer makes an
assignment for the benefit of creditors, admits in
writings its inability to pay its debts as they become
due, files a voluntary petition in bankruptcy, is
adjudicated as bankrupt or an insolvent, files a
petition seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar arrangement under any present or
future statute, law or regulation or files an answer
admitting the material allegations of a petition filed
against it in any such proceeding, consents to or
acquiesces in the appointment of a trustee, receiver or
liquidator of it or of all or any substantial part of
its assets or properties, or if it or its shareholders
shall take any action looking to its dissolution or
liquidation.
(iii)With the exception of the Case, if within sixty (60)
days after the commencement of any proceedings against
Customer seeking reorganization, arrangement,
readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or
regulation such proceedings shall not have been
dismissed, or if within sixty (60) days after the
appointment without Customer's consent or acquiescence
of any trustee, receiver or liquidator of it or of all
or any substantial part of its assets and properties,
such appointment shall not have been vacated.
Upon termination pursuant to this Section J.1.b, AvData shall
be entitled to transfer the Satellite Capacity immediately to
whomever AvData sees fit, Customer shall not be entitled to
any equitable relief as a result thereof, but Customer shall
be entitled to a refund of any accelerated payments made by it
to AvData to the extent that AvData recovers amounts in excess
of its damages by reselling the terminated Satellite Capacity.
c. Termination by Customer. In event that AvData fails to
provide the Satellite Capacity to Customer as a result of the termination by a
Satellite Operator of the GE Agreement or the Loral Agreement, as the case may
be, due to a default by AvData, or AvData otherwise fails to provide the
Satellite Capacity in breach of this Agreement, provided that Customer not in
Default hereunder, Customer shall have the right to reduce Satellite Capacity
under this Agreement to the extent of the Satellite Capacity received hereunder
from such Satellite Operator if AvData fails to cure such failure within thirty
(30) days after receiving written notice of such failure from Customer. AvData
agrees to notify Customer if AvData receives notice of a default by AvData under
the GE Agreement or the Loral Agreement. If the Satellite Capacity is so
reduced, AvData shall (i) refund to Customer the amount of any prepaid monthly
charges for the terminated Satellite Capacity prorated from the date AvData
failed to provide such Satellite Capacity and (ii) provide reasonable
cooperation, at Customer's request and expense, with any efforts by Customer to
contract directly with the Satellite Operator for such terminated Satellite
Capacity, and AvData shall have no other or further liability to Customer with
respect to such terminated Satellite Capacity.
13
<PAGE>
2. Pro Ration of Payments. If the Satellite Capacity is reduced or a
portion terminated pursuant to the terms of this Agreement, the monthly
Satellite Capacity payments shall be reduced pro rata on the basis of the
Satellite Capacity band width.
3. Refund Sole Remedy for Unavailability. The payment of a refund to
Customer under this Section J or the granting of a credit under Section D.1
where such a refund or credit is provided, shall be Customer's sole and
exclusive remedy under this Agreement for the unavailability of service on the
GE Transponder.
4. Continuation after Termination of Master Agreement. The parties
acknowledge and agree that this Agreement is separate and independent of the
Master Agreement. Subject to Section J.1.b. above, this Agreement, and the
parties' rights and obligations hereunder, shall continue in full force and
effect notwithstanding any termination of, or default by either party under, the
Master Agreement.
K. MISCELLANEOUS.
1. Headings. The headings used in this Agreement are for convenience of
reference only and shall not affect the interpretation hereof.
2. Waiver. No delay or omission by either party to exercise any right or
power shall impair any such right or power or be construed to be a waiver
thereof. A waiver by either of the parties of any of the covenants, conditions
or agreements to be performed by the other or any breach thereof shall not be
construed to be a waiver of any succeeding breach thereof or of any other
covenant, condition or agreement herein contained.
3. Severability. If, but only to the extent that, any provision of this
Agreement is declared or found to be illegal, unenforceable or void, then both
parties shall be relieved of all obligations arising under such provision, it
being the intent and agreement of the parties that this Agreement shall be
deemed amended by modifying such provision to the extent necessary to make it
legal and enforceable while preserving its intent. If that is not possible,
another provision that is legal and enforceable and achieves substantially the
same objective shall be substituted. If the remainder of this Agreement is not
affected by such declaration or finding and is capable of substantial
performance then the remainder shall be enforced to the extent permitted by law.
4. Relationship of Parties. AvData is performing pursuant to this Agreement
only as an independent contractor and nothing set forth in this Agreement shall
be construed to create any partnership or the relationship of principal and
agent between AvData and Customer. Neither AvData nor Customer shall act or
attempt to act or represent itself, directly or by implication, as an agent of
the other party or its Affiliates or in any manner assume or create, or attempt
to assume or create, any obligation on behalf of, or in the name of, the other
party or its Affiliates.
14
<PAGE>
5. Approvals and Authorizations. The obligations of the parties hereto
shall be subject to obtaining and maintaining all necessary regulatory and other
governmental approvals and authorizations. The parties agree to use their
respective and, where applicable, collective best reasonable efforts to obtain
promptly and maintain any such approvals.
6. Notices. Subject to Section K.8 below, all notices hereunder shall be in
writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, by cable, telecopy, telegram or telex, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties as follows:
If AvData, send to: If Customer, send to:
AvData Systems, Inc. MobileComm
55 Marietta Street One Executive Drive
Atlanta, GA 30303 Fort Lee, NJ 75219
Attn: Judith H. Drobinski Attn: General Counsel
V.P. - Corporate Affairs With a copy to:
MobileComm
6221 N. O'Connor, Suite 116
Irving, Texas 75039
Attn: Chief Technology Officer
Notices will be deemed to have been given hereunder when delivered, as shown by
appropriate receipt confirmation.
7. Confidentiality. Each party hereby agrees that all non-public,
confidential or proprietary information communicated to it by the other party or
its customers, whether before or after the date of this Agreement, shall be and
was received in strict confidence, shall be used only for purposes of this
Agreement, and, for a period of five (5) years following the termination of this
Agreement, shall not be disclosed by such party, its agents or employees without
the prior written consent of the other party, except as may be necessary by
reason of legal, accounting or regulatory requirements beyond the reasonable
control of the disclosing party. The obligations set forth in this Section shall
survive termination of this Agreement. Each party agrees that this restriction
shall not apply to any information which is (1) independently developed by the
receiving party or (2) otherwise in such party's possession through no breach of
this restriction by the receiving party or (3) otherwise in the public domain.
With respect to the terms of the GE Agreement and any confidential or
proprietary information of GE received by Customer, Customer agrees to comply
with and to be bound by the confidentiality obligations of AvData to GE under
the GE Agreement as if Customer were the "Customer" thereunder. With respect to
the terms of the Loral Agreement and any confidential or proprietary information
of Loral received by Customer, Customer agrees to comply with and to be bound by
the confidentiality obligations of AvData to Loral under the Loral Agreement as
if Customer were the "Customer" thereunder.
15
<PAGE>
8. Urgent Notices By Telephone. Notices of other technical or operational
matters requiring immediate attention, may be given by telephone. Each party
will designate a point or points of contact where the other party may call on a
7 day-a-week, 24 hour-a-day basis. Any notice given verbally will be confirmed
in writing as soon as practicable thereafter pursuant to the procedures set out
in Section K.6 above.
9. Applicable Law and Entire Agreement. This Agreement shall be
interpreted, construed and governed in accordance with the laws of the State of
Georgia WITHOUT REGARD TO ITS CONFLICTS OF LAWS PRINCIPLES OR RULES. This
Agreement constitutes the entire agreement between the parties, supersedes all
previous understandings, commitments or representations and is intended as the
complete and exclusive statement of the terms of the agreement between the
parties concerning the subject matter hereof. This Agreement may not be amended
or modified in any way, and none of its provisions may be waived, except by a
writing signed by each party hereto.
10. Attorney's Fees. In the event of any dispute or controversy arising
hereunder, any court having jurisdiction in any such dispute or controversy
shall determine which of the parties is the prevailing party and shall award to
the prevailing party the reasonable fees and expenses of counsel, experts and
other court costs incurred in connection with such dispute or controversy.
11. No Right of Transfer. Customer shall not, and shall not have the right
to, grant, sell, assign, encumber, permit the utilization of, license, lease, or
otherwise convey, directly or indirectly, in whole or in part (individually, a
"Transfer"), the Satellite Capacity, or any of its rights under this Agreement,
to any other entity or person except to an Affiliate or successor to all or
substantially all of the assets and business of Customer pursuant to a confirmed
plan of reorganization in the Case.
12. Resale. Customer may not resell all or any part of the Satellite
Capacity to a third party without AvData's prior written consent and only (i) to
the extent permitted by applicable law and (ii) so long as there is no change
from the initial loading plan or subsequent authorized Different Loading Plan.
Customer shall be solely responsible for any permitted resale and shall
indemnify and hold AvData and the Satellite Operators harmless for any claim or
liability for damages made by any third party in connection with such resale.
13. Successors and Assigns. Subject to Section K.11. above, this Agreement
shall be binding on and shall inure to the benefit of any successors and assigns
of the parties, provided that no assignment of this Agreement shall relieve
either party hereto of its obligations to the other party. Any purported
assignment by either party not in compliance with the provisions of this
Agreement shall be null and void and of no force and effect.
16
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf by an officer thereunto duly
authorized, all as of the day and year first above written.
AVDATA SYSTEMS, INC.
By:
Title:
Date:
Signed:
MOBILEMEDIA COMMUNICATIONS, INC.
By:
Title:
Date:
Signed:
17
<PAGE>
SCHEDULE A-1
GE SATELLITE CAPACITY
The following pertinent paragraphs are excerpted from the agreement between
GE and AvData:
1. ARTICLE 1. DEFINITIONS
As used in this agreement:
I. "End of Life" or "EOL" means the date on which, in GE Americom's
reasonable judgment, a satellite should be taken out of service because of
insufficient fuel.
J. "Failed Satellite" or "Satellite Failure" means a satellite: (1) on
which one or more of the basic subsystems fail, rendering the use of the
satellite for its intended purposes impractical, as determined by GE Americom in
its reasonable business judgment, or on which more than one-half of the
transponders are transponder failures, and (2) that GE Americom has declared a
failure. For purposes of this definition, a hybrid satellite with both C-band
and Ku-band payloads shall be treated, at GE Americom's option, either (i) as a
single satellite or (ii) as though the C-band and Ku-band payloads were located
on separate satellites.
K. "Failed Transponder" or "Transponder Failure" means, with respect to any
Transponder used to provide service to AvData under this Agreement, any of the
following events:
1) Such Transponder fails to meet the Transponder Performance
Specifications in any material respect for any period of five (5)
consecutive days;
2) Twenty (20) or more Outage Units shall occur within any ninety (90)
consecutive days; or
3) Such Transponder shall fail to meet the Transponder Performance
Specifications in any material respect for any period of time under
circumstances that make it clearly ascertainable or predictable, based
on satellite industry engineering standards, that any failure set
forth in Paragraphs 1. or 2. will occur.
For purpose of this definition, measurement of periods of failure hereunder
shall commence when AvData has vacated its signal to permit verification of the
existence of the failure by GE Americom.
L. "Fully Protected Service" or "Fully Protected Transponder" means a
satellite service or transponder that, if restoration thereof is needed as a
result of a satellite failure, or as a result of a transponder failure under
circumstances in which no Protection Transponder is available on the satellite
on which such satellite service or transponder is located, is entitled to
restoration, subject to availability of facilities and to the conditions of the
applicable contract, on another satellite.
<PAGE>
V. "Protected Service" or "Protected Transponder" means a service or
transponder that is entitled to preempt a Preemptible Service or Preemptible
Transponder. A Protected Service may be a Transponder-Protected Service or a
Fully Protected Service.
W. "Protection Transponder" means a Replacement Transponder, Preemptible
Transponder or unassigned transponder used to restore a Protected Service.
X. "Replacement Date" means the date on which a successor satellite to the
Satellite or to the Ku-band payload of the Satellite is made Commercially
Operational at the orbital location to which the Satellite is assigned.
Y. "Replacement Transponder" means a spare transponder amplifier and its
associated components, which is accessible for purposes of restoral and which is
capable of carrying communications traffic within the parameters as described in
the transponder performance specifications for the transponder to be restored.
A-A. "Satellite" means (1) the communications spacecraft designated GE-1 to
be constructed, launched and operated by GE Americom, or (2) if GE-1 shall have
become a Launch Failure, the Ground Spare, or (3) if GE-1 becomes a Satellite
Failure, a suitable replacement if made available by GE Americom, or (4) another
communications spacecraft designated by GE Americom pursuant to Section 2.A.1.).
When used in the lower case, "satellite" means a domestic communications
satellite operating in KU-band (12/14/Ghz).
D-D. "Transponder" means a Ku-band radio frequency transmission channel on
the Satellite, having a nominal bandwidth of 36 MHz, used to provide service to
AvData pursuant to the terms of this Agreement. When used in the lower case,
"transponder" means a Ku-band radio frequency transmission channel on a
communications satellite.
G-G. "Transponder Protected Service" or "Transponder Protected Transponder"
means a satellite service or transponder that may not be preempted to restore
another service or transponder, that is itself entitled to be restored by
Protection Transponders on the same satellite but that is not entitled to be
restored if there is no such Protection Transponder available.
2. ARTICLE 2. SCOPE AND TERM
A. Scope.
1) GE Americom agrees to provide Full Time Transponder Protected SCPC
service to AvData, and AvData agrees to take such service from GE Americom, in
accordance with the terms and conditions set forth in this Agreement, on a
Ku-band Transponder on the Satellite. The transponder number shall be assigned
by GE Americom approximately two months prior to the date on which the Satellite
is scheduled to become Commercially Operational. GE Americom reserves the right
to reassign AvData's service to a different frequency within the Transponder or
to another transponder on the Satellite that is of the same polarization as the
Transponder.
<PAGE>
** CONFIDENTIAL TREATMENT REQUESTED
2) The service is provided on a Transponder-Protected Transponder and
encompasses a maximum of 15 MHz of allocated bandwidth, with a maximum of
39.2dBW/8333 watts of downlink EIRP as measured at Vernon Valley, New Jersey.
Within sixty (60) days after signature of this Agreement by both Parties, AvData
shall notify GE Americom of the amount of allocated bandwidth, not to be less
than 1.9 MHz, AvData is to be provided during the first month of service. Unless
this Agreement is terminated earlier in accordance with the terms of this
Agreement, for the next thirty-seven (37) months of service or until AvData is
provided within 15 MHz of allocated bandwidth in any given month, whichever
occurs first (the "Initial Phase"), AvData shall be provided with the same
capacity as the preceding month unless AvData notifies GE Americom in writing at
least sixty (60) days prior to the start of any month during the Initial Phase
that it is increasing the amount of capacity AvData is to be provided with for
the respective month. In no event shall the amount of capacity in any month
during this Initial Phase be less than the amount of capacity provided in the
preceding month and increases in capacity shall be in 200 Khz increments. For
each 200 Khz of capacity provided to AvData pursuant to this Agreement, the
corresponding power level shall be 20.5dbW/112.2 watts.
Unless this Agreement is terminated earlier in accordance with the terms of
this Agreement, for the months following the Initial Phase through the
fifty-eighth month of service, AvData shall be provided with 15 MHz of bandwidth
and 39.2dbW/8333 watts of power each month. Provision of uplink and/or downlink
equipment and its operation and maintenance are the responsibility of AvData at
AvData's location(s).
4. ARTICLE 4. CREDITS FOR INTERRUPTIONS OR OUTAGES
A. Method of Calculation. Credits for Interruptions in the service provided to
AvData under this Agreement shall be granted in accordance with this Article.
The length of an Interruption shall be measured from the time AvData notifies GE
Americom of the Interruption. For the purpose of calculating the credit, a month
is considered to have thirty (30) days.
1) Interruptions of 24 Hours of Less
Credit for Interruptions will be allowed as follows:
Length of Interruption Credit
** **
<PAGE>
** CONFIDENTIAL TREATMENT REQUESTED
Two or more Interruptions of **, during any period up to but not including **,
shall be considered as one Interruption.
2) Interruptions Over 24 Hours. Credit will be allowed in ** multiples for
each ** period of Interruption or fraction thereof. No more than one full day's
credit will be allowed for any period of twenty-four (24) hours.
B. Events Not Constituting Creditable Interruptions. A credit will not be
granted for any service outage or disruption that is a result of, or
attributable in whole or in part, to:
1) the fault of AvData or of any third party;
2) the failure or unavailability of satellites, transponders, facilities,
services, or equipment furnished to AvData by any other entity that may be used
in conjunction with GE Americom's satellites, transponders, facilities,
services, or equipment, or any act or omission of such other entity; or
3) sun outages or rain fade;
4) suspensions of service made in accordance with this Agreement, unless
the applicable provision of this Agreement expressly provides for granting of a
credit hereunder;
5) any cause for which GE Americom otherwise is not responsible under
Section 11.C.
5. ARTICLE 5. TRANSPONDER PROTECTED SERVICE
If the Transponder-Protected Transponder on which the service is provided
to AvData hereunder becomes a Transponder Failure, GE Americom shall immediately
initiate all reasonable measures, consistent with protecting the Satellite and
all services provided thereon, to restore the Transponder Failure as quickly as
is practicable. Restoration shall be effected in the following manner and order,
on a first-needed, first-serviced basis: first, by utilizing any available
Replacement Transponder of the same Transponder Class on the Satellite; and
second, if no such Replacement Transponder is available, by using an unassigned
or Preemptible Transponder of the same Transponder Class and same polarization
on the Satellite, if available. If no such Protection Transponder is available
on the Satellite, AvData's service shall not be restored and this Agreement will
terminate. The Transponder-Protected Transponder on which service is provided to
AvData may not be preempted to restore another service or transponder.
14. ARTICLE 14. TERMINATION
B. By AvData. AvData may terminate this Agreement within ninety (90) days
after the commencement of the Service Term and upon ten (10) days' prior written
notice of intent to terminate to GE Americom if the Transponder on which service
is provided to AvData under this Agreement does not meet in all material
respects the Transponder Performance Specifications on the commencement of the
Service Term; provided, however, that before AvData may terminate for reasons
specified in this Paragraph, GE Americom shall be given thirty (30) days either
to bring the Transponder into compliance in all material respects with the
Transponder Performance Specifications or to make available to AvData service on
a Protection Transponder on the Satellite which meets in all material respects
the Transponder Performance Specifications.
<PAGE>
SCHEDULE A-2
ADDITIONAL TERMS AND CONDITIONS OF GE SATELLITE CAPACITY
1. Earth Station Requirements and Satellite Access Specifications. Earth
station requirements, satellite access specifications, and operating procedures
for the GE Satellite Capacity are set forth in the Users Guide. Customer agrees
to conform its uplink earth station transmissions to the access specifications
and comply with the operating procedures. Prior to transmitting from either the
Primary Hub or the Alternate Hub, Customer will cooperate with AvData to
demonstrate for the ability of each of the Primary Hub and the Alternate Hub to
perform in accordance with the access specifications.
2. Improper Operation. In the event of any failure of Customer to comply
with the guidelines, instructions, and requirements provided by GE with respect
to the GE Satellite Capacity, or if operation by Customer interferes materially
with GE's other satellite services or with the use of other transponders,
Customer agrees to correct such improper operation immediately upon discovery or
receiving notice from AvData or GE of the occurrence of such improper operation.
In the event of Customer's failure to discontinue, AvData or GE may take such
action as is reasonable and necessary in the circumstances to eliminate such
improper operation, including suspending Customer's use of the services, without
any liability for loss or damage whatsoever, until such time as Customer is able
to operate in a proper manner. Customer will pay AvData, as liquidated damages,
Two Hundred Dollars ($200) for each minute improper operation continues after
Customer has been notified of such improper operation; provided that, if
Customer discovers such improper operation prior to the time the Customer is
notified, the duration of the improper operation shall be measured at the time
of discovery. The foregoing assessment will only be applicable if AvData
determines in its reasonable judgment that Customer is not utilizing good faith
efforts in attempting to resolve such improper operation.
3. Action to Protect Satellite. GE shall have sole and exclusive control of
operation of the GE Satellite. If circumstances occur which in GE's reasonable
judgment pose a threat to the stable operation of the GE Satellite, GE shall
have the right to take appropriate action to protect the Satellite, including
discontinuance or suspension of operation of the GE Satellite, the GE
Transponder on which Customer is taking service or any other transponder,
without any liability to Customer, except that Customer may be entitled to
receive a credit as provided for in this Agreement. AvData shall give Customer
as much notice as practical under the circumstances of any such discontinuance
or suspension.
4. Testing. GE and/or AvData may suspend service to Customer hereunder on
such notice as is reasonable under the circumstances for purposes of testing in
connection with a failure or suspected failure of a component or subsystem of
the GE Satellite or any transponder thereon, or in response to an order of a
court or governmental agency, or to determine the cause or source of any
interference. In addition, GE shall have the right to periodically transmit
essential station keeping signals to selected transponders including the GE
Transponder on the GE Satellite providing the GE Satellite Capacity. Such
transmissions will not degrade the performance of such receiving transponder. If
in the GE's judgment, any of such transmissions actually degrades the receiving
transponder's performance, GE will discontinue such transmission until such time
as performance is no longer degraded.
<PAGE>
5. Applicable Law. Construction, launch, location, and operation of the GE
Satellite and GE's satellite system are subject to all applicable laws and
regulations, including, without limitation, the Communications Act of 1934, as
amended, and the rules and regulations of the FCC. Both parties shall comply
with all such applicable laws and regulations.
6. Prohibited Use. Customer agrees that it will not itself use the service
with respect to the GE Satellite Capacity, and will not authorize or permit
others, including, without limitation, its successors, subcontractors or
transferees, (hereinafter "Customer's Designees") to use the service to transmit
unlawful programming of any nature. Customer and Customer's Designee will not
transmit programming containing "sexually explicit conduct" as defined in 18
U.S.C. ss. 2256(2) unless the depiction or description of such conduct in a
communication is integrally related to and advances the thematic content of the
program and such content has serious literary, artistic, political or scientific
value.
7. Response to Governmental Action or Litigation. GE and/or AvData may
terminate, prevent, or restrict any communications using the service with
respect to the GE Satellite Capacity provided hereunder as a means of
transmission if such actions (i) are undertaken at the request or by direction
of a governmental agency (including the FCC) or (ii) are taken subsequent to the
institution against GE, AvData, Customer, or Customer's Designees, any legal
entity affiliated with any of them, or any of the directors, officers, agents,
or employees of GE, AvData, Customer, Customer's Designees, or their affiliates,
of criminal, civil, or administrative proceedings or investigations based upon
the content of such communications, other than civil proceedings for libel,
slander, or infringement of copyright or other intellectual property rights.
8. Actions in Response to Other Circumstances. GE and/or AvData may
terminate, prevent or restrict any communications using the GE Satellite
Capacity provided hereunder as a means of transmission ("Suspension Event") if,
in the judgment of GE after review of the content of such communications, (1)
such actions are reasonably appropriate to avoid violation of applicable law; or
(2) there is a reasonable risk that criminal, civil or administrative
proceedings or investigations based upon the content of such communications will
be instituted against GE or AvData or any of the directors, officers, agents or
employees thereof; or (3) such communications will expose GE or AvData to costs,
expenses, liability, damages, fines or other penalties from which GE or AvData
is not protected by arrangements for compensation, indemnity and insurance
provided by Customer. AvData shall provide notice of any Suspension Event to
Customer promptly following AvData's receipt of written notice from GE as to
such Suspension Event.
9. No Waiver. A decision by the Satellite Operator or AvData at any time
that action to terminate, prevent, or restrict communications is or is not
warranted shall not operate to, or be deemed to, limit or waive the GE's or
AvData's right to take or not take action at another time to terminate, prevent,
or restrict communications.
<PAGE>
** CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE A-3
GE SATELLITE CAPACITY/MONTHLY recurring charges
Item description Monthly recurring price
- ---------------- -----------------------
2.9 MHz of Ku-band capacity on GE1 satellite **
<PAGE>
** CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE B-1
LORAL SATELLITE CAPACITY
The following pertinent paragraphs are excerpted from the agreement between
Loral and AvData:
5. TYPES OF SPACE SEGMENTS
FULLY PROTECTED SPACE SEGMENTS (If Applicable)
Except where the failure is caused by the actions or inactions of Customer
not pursuant to directions of SKYNET. "Fully protected" space segments, in the
event of failure, shall be restored using spare equipment that may be available
on the satellite at the time of failure, or on a comparable space segment on the
same satellite, or on another SKYNET satellite then in orbit pursuant to
Paragraph 7 ("RESTORATION OF A FULLY PROTECTED FAILED SPACE SEGMENT") hereof.
Fully Protected space segments are non-preemptible and protected.
6. SPACE SEGMENT INTERRUPTION OR FAILURE
For the purposes of the Agreement: (i) an interruption ("Interruption")
shall be defined as a period during which a space segment fails to meet the
network performance parameters specified by the Customer and as indicated in
Section 1 ("SERVICE") of the Agreement, such that the space segment is precluded
from being used for its intended commercial purpose, and (ii) a failure
("Failure") shall be defined as any of the following:
a) the inability, for any period of **, to pass signals through a space
segment when it is illuminated with any authorized transmitted
carrier, or
b) an interruption for any period of ** , or
c) **or more interruptions of at least ** or longer per occurrence within
any period of thirty (30) consecutive days.
For purposes of this Paragraph 6 ("SPACE SEGMENT INTERRUPTION OR FAILURE"),
measurement of period of Interruption or Failure shall commence only upon
Customer's written or verbal notification to SKYNET's Hawley earth station and
Customer having vacated its signal from the affected space segment to permit
SKYNET's verification of the existence of the Interruption or Failure.
<PAGE>
** CONFIDENTIAL TREATMENT REQUESTED
7. RESTORATION OF A FAILED SPACE SEGMENT
FULLY PROTECTED SPACE SEGMENT (If Applicable)
In the event any Fully Protected space segment provided hereunder fails,
pursuant to Paragraph 6 ("SPACE SEGMENT INTERRUPTION OR FAILURE") above, and if
SKYNET is unable to restore service on the affected space segment by switching
in spare equipment that may be available on the satellite at the time of such
failure, then SKYNET shall restore such service either (1) on a space segment of
the same frequency band, having the same bandwidth and the equivalent power as
the failed space segment, on the same satellite or (2) on a space segment of the
same frequency band, having the same or greater bandwidth, and the same or
greater power, on another SKYNET satellite then in orbit. Such space segment
will then become the Fully Protected Space segment.
12. CREDIT ALLOWANCES
Credit allowances may be given to AVDATA for Interruptions and/or Failures
as defined in Paragraph 6 ("SPACE SEGMENT INTERRUPTION OR FAILURE") above. These
credit allowances will be applied against amounts not yet paid, or in the event
of such interruption or failure during the final month of Service will result in
a refund equal to the amount of the credit allowance. An Interruption or Failure
period begins when the Customer reports the service to a space segment to be
interrupted or failed and releases the affected space segment for testing and
repair. An Interruption or Failure period ends when the affected space segment
is operative. If AVDATA reports a space segment to be interrupted or failed but
declines to release it for testing and repair, it is considered to be impaired,
but not interrupted or failed. For calculation of such credit allowance each
month is considered to have thirty (30) days. Such credit allowance will be
given for any Interruption or Failure of ** for each occurrence for the period
of time when the space segment is Interrupted or Failed, except when Interrupted
or Failed for any of the following reasons:
(1) Interruptions or Failures caused by the action or failure to act of
AVDATA or others authorized by AVDATA to use the affected space
segment, not pursuant to the directions of SKYNET.
(2) Interruptions or Failures during periods when AVDATA elects not to
release the affected space segment for testing.
(3) Interruptions or Failures due to the effects of sun transit or
receiving earth stations.
(4) Interruptions or failures due to service affecting atmospheric
conditions.
<PAGE>
SCHEDULE B-2
ADDITIONAL TERMS AND CONDITIONS OF LORAL SATELLITE CAPACITY
1. FCC Compliance. AvData represents and warrants to Customer that if
AvData has the right to terminate the Agreement under Section 24.2 of the Loral
Agreement with respect to the Loral Satellite Capacity, Customer may, upon
thirty (30) days written notice to AvData, terminate the Loral Satellite
Capacity service provided hereunder, and AvData will refund to Customer the
amount of any prepaid monthly charges for the terminated Loral Satellite
Capacity.
2. Non-Interference. Customer's radio transmissions (and those of its
uplinking agents) to the Loral Satellite shall comply, in all material respects,
with all Laws applicable to it regarding the operation of the Loral Satellite,
space segment, and any backup space segments to which Customer is given access
pursuant to this Agreement and shall not interfere with the use of any other
space segment or cause physical harm to this space segment, any backup space
segment to which Customer is given access pursuant to this Agreement, and other
space segments, or to the Loral Satellite on which the space segment is located.
Further, Customer will coordinate with (and will require its uplinking agents to
coordinate with) Loral, in accordance with procedures reasonably established by
Loral and uniformly applied to all users of space segments on the Loral
Satellite, its transmissions to the Loral Satellite, so as to minimize adjacent
space segment and adjacent satellite interference. For purposes of this Section,
interference shall also mean acts or omissions, which cause a space segment to
fail to meet its space segment performance parameters. Without limiting the
generality of the foregoing, Customer (and its uplinking agents) shall comply
with all FCC rules and regulations regarding use of automatic transmitter
identification systems (ATIS).
3. Improper Illumination. In the event improper illumination of any space
segment on the Loral Satellite provided under this Agreement is detected by
AvData or Loral, Customer shall be notified and, if AvData is not able to
correct such illumination, Customer shall take prompt corrective action to stop
the improper illumination. If, for any reason, Customer does not take corrective
action, Customer shall be charged $1,100 per minute for any improper
illumination that continues beyond the five minute period after notification.
Furthermore, if prompt corrective action is not taken by Customer, AvData shall
have the right to take immediate action to protect its services or its
interests, including but not limited to suspending or terminating Customer's
service on the affected space segment. Customer will provide AvData with all
necessary information and equipment required to correct any improper
illumination or to cease transmission to the Loral Satellite.
4. Changes In Operations or Procedures. AvData is not responsible to
Customer if a change in operations, procedures or transmission parameters of
Loral: (i) affects any facilities, Customer equipment or Customer communications
systems in any way, or (ii) requires their modification in order to be used with
any space segment provided pursuant to this Agreement. However, if such changes
can be reasonably expected to materially affect the operating or transmission
characteristics of the Loral Satellite Capacity, or render with the Loral
Satellite Capacity, any Customer equipment or Customer communications system
incompatible with the Loral Satellite Capacity, AvData shall use reasonable
efforts to provide adequate notice, in writing, to allow Customer an opportunity
to maintain uninterrupted service. Neither AvData nor Loral shall have any
obligation to change or modify any components, operations or procedures to be
compatible with Customer.
<PAGE>
5. Conformance to Loading Plan. Customer shall not transmit to any space
segment of the Loral Satellite provided under this Agreement in any manner
different than such space segment's initial loading plan, unless Customer
submits, and AvData and Loral authorize a different loading plan (an "Different
Loading Plan") at least thirty (30) days before the authorized Different Loading
Plan is in effect. To the extent that AvData authorizes any space segment on the
Loral Satellite for use of multiple carriers where the number of carriers is
greater than the initial loading plan, then Customer shall pay its appropriate
portion of any multiple carrier charge imposed by Loral for the affected space
segment.
6. Space Segment Allocation. Assignment of the specific space segments to
be used for the Loral Satellite Capacity remains the sole prerogative of AvData
and Loral. During the Loral Term, AvData shall have the right to change any of
the space segment assignments on the Loral Satellite with not less than thirty
(30) days prior written notice to Customer.
7. Refusal Of Service. Loral and/or AvData shall have the right,
immediately upon oral or written notice, to prevent or restrict any
communications using the Loral Satellite Capacity provided hereunder, in the
event that Loral has reason to believe (1) the Loral Satellite Capacity is
being, or is intended to be, used in a way that Loral or AvData might have to
rely on the substance of Sections G ("Limitation of Liability") or H
("Indemnification") of the Agreement or (2) the material being transmitted by
Customer is harmful to Loral or AvData name or business or (3) if Customer is
indicted or is otherwise charged as a defendant in a criminal proceeding, or is
convicted under any obscenity law, or has been found by any governmental
authority to have violated any such law. Nothing in this Section 7 of Schedule
B-2 of the Agreement shall affect any other term or condition hereof, including,
without limitation, any obligation under Section H of the Agreement
("Indemnification") or any obligation to pay the rates in Section D.2 of the
Agreement ("Billing") throughout the Loral Term.
8. General Obligations. In the event Customer breaches any of its
obligations in connection with the usage procedures and restrictions described
in this Agreement with respect to the Loral Satellite Capacity, including,
without limitation, transponder usage, non-interference, government regulations,
preemptive rights, and no transfer, then AvData may, in its sole discretion and
in addition to the exercise of its other rights against Customer, require
Customer to cease transmissions to any or all of the affected transponder(s)
provided hereunder and take any actions necessary to enforce AvData's rights.
Customer will pay to AvData all expenses (including attorney's fees) incurred in
connection with AvData's enforcement against Customer arising out of Customer's
use of the affected transponder(s).
<PAGE>
** CONFIDENTIAL TREATMENT REQUESTED
SCHEDULE B-3
LORAL SATELLITE CAPACITY/MONTHLY recurring charges
Item description Monthly recurring price
- ---------------- -----------------------
4.4 MHz of Ku-band capacity on the Telstar 4 satellite $**
EXECUTION COPY
MASTER LEASE FOR TRANSMITTER SYSTEMS SPACE
LESSOR: PINNACLE TOWERS INC. LESSEE: MOBILEMEDIA
1549 Ringling Blvd. COMMUNICATIONS, INC.
Third Floor Suite 116
Sarasota, FL 34236 6221 North O'Connor Blvd.
Telecopy: (941) 364-3761 Irving, TX 75039-3541
Attn: Robert J. Wolsey Telecopy: (972) 501-1599
Attn: Site Lease
Administrator
DATE: September 3, 1998
A. Lessor or its Affiliates own, lease or manage the antenna tower sites
and the related underlying land as identified in Schedule A hereto ("Initial
Lessor Sites"). As used in this Master Lease For Transmitter Systems Space (this
"Lease"), "Lessor Sites" refers individually and collectively to the Initial
Lessor Sites and any other antenna tower sites and the related underlying land
("Additional Lessor Sites") that Lessor or its Affiliates may own, lease or
manage from time to time during the Initial Term (defined in Section 2(a) below)
or the Renewal Term (defined in Section 2(a) below). Schedule A indicates
whether the Lessor Site is owned, leased or managed by Lessor or a specified
Affiliate. The Lessor Sites include antenna tower sites and the related
underlying land at which, as of the date hereof, Lessee rents space from Lessor
as a tenant under other leases ("Existing Other Leases"). Each Lessor Site shall
include such portion of the related underlying land (the "Land") which shall
provide appropriate and adequate space thereon for Lessee to install its
Transmitter System (defined in Paragraph B below), and other equipment upon the
antenna tower (or towers) and in the equipment shelter at each Lessor Site, as
is commercially reasonable under the circumstances. Schedule A also lists the
<PAGE>
existence of any mortgages or other liens which encumber any Lessor Sites as of
the date hereof. As used herein, "Affiliate" means, when used with reference to
a specific individual or entity, any individual or entity that, directly or
indirectly, or through one or more intermediaries, owns or controls, is owned or
controlled by, or is under common ownership or common control with, such
individual or entity. As used herein, "control" means the power to direct the
management or affairs of an entity, and "ownership" means the beneficial
ownership of more than 50% of the equity interests of such entity.
B. Lessor desires to lease to Lessee and Lessee desires to lease from
Lessor space at all the Lessor Sites specified on Schedule B hereto (as such
Schedule may be amended periodically in connection with a substitution of Site
Spaces pursuant to Sections 1(c), 2(c), 2(d), 5(a), 5(d), 10(a), 10(d) or 11
below) (the "Premises Sites") for installation and operation of Lessee's
Transmitter Systems on the terms set forth herein (including the Schedules
hereto). As used herein, a "Transmitter System" means any radio frequency
transmission and reception equipment, including, but not limited to,
transmitter, receiver, satellite reception dish, transmit antenna, receive
antennas and associated cabinetry and cabling (including existing equipment and
any upgrades, enhancements and related substitutions, improvements, accessions
and additions thereto), but in any event, for purposes hereof, a single
Transmitter System shall not exceed a single cabinet (including a hot standby),
three (3) antennas, a satellite dish, a multicopuler, a multiplexer (or similar
devices if applicable), and battery back-up equipment, except to the extent that
from time to time Lessee makes changes to the composition thereof (which changes
shall not include installing an additional transmitter) that are consistent with
the prevailing industry practices and which changes do not materially detract
from the remaining capacity of the subject tower.
1. Leased Premises; Lessor Sites; Supplemental Sites. (a) Schedule B lists
the particular Premises Sites at which Lessor shall make space available on
towers (the "Towers") and the Land for the installation and operation by Lessee
of Transmitter Systems and related equipment, and indicates the number of such
spaces that will be available at each of the Premises Sites (the "Site Spaces",
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<PAGE>
as such list may from time to time be amended in connection with a substitution
of Site Spaces pursuant to Sections 1(c), 2(c), 2(d), 5(a), 5(d), 10(a), 10(d)
or 11 below). As used herein, "Site Space" includes the related Land at the
applicable Lessor Site. The Site Spaces shall be made available to Lessee at the
specific tower heights at which Lessee presently operates Transmitter Systems
thereon as of the date hereof, and as soon as reasonably practicable after the
date hereof, Schedule B shall be amended to list such specific tower heights.
For this Lease, there shall not be more than one (1) Transmitter System per
individual Site Space. Lessor hereby leases to Lessee space at the Site Spaces
for the Transmitter Systems and related equipment permitted hereunder on the
terms and conditions specified herein. If Lessee's equipment will be connected
to a multiplexer or similar device at any of the Site Spaces, Lessee shall be
responsible for all costs of multiplexer modules and other equipment required
for the connection.
(b) At any time and from time to time during the term of this Lease, upon
Lessee's request, Lessor shall promptly notify Lessee of the existence of all
Additional Lessor Sites in the locations requested by Lessee, and Schedule A
shall be automatically supplemented to include such Additional Lessor Sites (but
no such Additional Lessor Site shall be a Premises Site except in accordance
with the other terms hereof). Lessor shall furnish to Lessee from time to time
other information regarding Additional Lessor Sites as Lessee may reasonably
request.
(c) From time to time throughout the term of this Lease, Lessee shall have
the right to request that space at any Lessor Sites, at specific heights
designated by Lessee, be made available to Lessee as a "Site Space" in
substitution for an existing Site Space, on a one-for-one substitution basis.
Lessor shall use commercially reasonable efforts to facilitate and accommodate
all Lessee requests regarding the substitution of Site Spaces. The substitution
of Site Spaces shall become effective on the date designated by Lessee in its
substitution request notice, which date shall not be less than thirty (30) days
nor more than ninety (90) days following Lessee's delivery of the substitution
request notice and by the designated date Lessee shall remove its Transmitter
Systems and related equipment from such existing Site Space, unless Lessor
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within twenty (20) days after it receives such request notice denies the request
by providing Lessee with a written explanation regarding the unavailability of
such space due to capacity constraints. Notwithstanding the foregoing, with
respect to space at a Lessor Site for which Lessor has denied a request by
Lessee for substitution space, Lessor shall be entitled to modify, renew or
extend any existing leases, provided, however, if space at the applicable
Tower(s) becomes available within six (6) months after Lessor has denied
Lessee's space substitution request, Lessor shall not otherwise be entitled to
enter into new leases, licenses or other similar arrangements for space at such
Lessor Site unless Lessor gives Lessee an opportunity of first refusal,
exercisable by Lessee within ten (10) days following written notice from Lessor,
entitling Lessee to designate a specific height at such Lessor Site (to the
extent of availability) as a substitution site space ("Substitution Site Space")
pursuant to the above provisions of this Section 1(c), and in its exercise
notice Lessee shall designate a date, which shall not exceed thirty (30) days
after the exercise notice date, when such substitution of Site Spaces shall
become effective and by when Lessee shall remove its Transmitter Systems and
related equipment from the existing Site Space. The lease term of any
substitution Site Space pursuant to this Section 1(c) or Sections 2(c), 2(d),
5(a), 5(d), 10(a), 10(d) or 11 below shall be a continuation of the
then-existing lease term of the predecessor Site Space. "Substitution Site
Space" includes the related Land at the applicable Lessor Site. Upon the
effectiveness of the substitution of a Site Space, the Substitution Site Space
shall become a Site Space for purposes of this Lease, including any substitution
of Site Spaces pursuant to Lessee designations of Other Lease Spaces (defined in
Section 2(c) below) as Site Spaces pursuant to Sections 1(f), 2(c), 2(d), 5(a),
5(d), 10(a), 10(d) or 11 below, and the parties shall as soon as practicable
amend Schedule B to reflect such substitution.
(d) Lessor shall provide Lessee with such information and officer's
certificates as Lessee may reasonably request of Lessor, from time to time, to
demonstrate Lessor's compliance with this Section l.
(e) With respect to any new lease that Lessee may enter into with Lessor
for antenna tower space at Lessor Sites that are not Site Spaces under this
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Lease ("New Other Leases" and together with the Existing Other Leases, the
"Other Leases"), Lessor shall use commercially reasonable efforts to lease such
other space (the "Supplemental Sites") to Lessee at a rental rate which is at
least twenty percent (20%) less than the prevailing rental rate that Lessor is
then charging for the leasing of space for equivalent Transmitter Systems at the
applicable Supplemental Site, and the lease for the Supplemental Site shall
contain other commercially reasonable terms as Lessor and Lessee may agree upon
(and shall not be governed by the other terms of this Lease). Lessor and Lessee
shall in good faith negotiate New Other Leases regarding the leasing of antenna
tower space by Lessee at Lessor Sites for Lessee's Transmitter Systems and
related equipment, which as of the date hereof are installed on Towers
("Acquired Towers") that Lessor acquired under the Purchase Agreement dated as
of July 7, 1998 as amended (the "Purchase Agreement") among Lessor, Lessee and
certain of its Affiliates, and which Transmitter Systems are not listed on
Schedule B (but neither Lessor nor Lessee shall be under any obligation to enter
into any such lease).
(f) The provisions of this Section 1(f) shall be applicable only in the
event that as of the date hereof Lessee has installed fewer than 683 Transmitter
Systems on the Acquired Towers ("Site Space Shortfall"). The positive numerical
difference (if any) between 683 and the number of Transmitter Systems that
Lessee has installed on the Acquired Towers as of the date hereof is referred to
herein as the "Shortfall Number". In the event of a Site Space Shortfall, Lessee
may in its discretion (from time to time) designate such number of Other Lease
Spaces ("Shortfall Substitution Site Spaces") under any Other Leases up to the
Shortfall Number, which designated Other Lease Spaces shall become Site Spaces
under this Lease, the Other Leases shall terminate as to the Other Lease Spaces
and Lessee shall have no further rental or other obligation under the Other
Leases with respect thereto. The parties shall amend Schedule B to reflect such
substitution, as applicable. (In the event that pursuant to the above provisions
of this Section 1(f) Lessee has not designated Other Lease Spaces in an amount
equal to the Shortfall Number, Lessee shall remain obligated to pay any
Shortfall Monthly Payment pursuant to the below provisions of this Section
1(f).) The dollar amount difference, if any, between (i) $1,300 multiplied by
5
<PAGE>
the Shortfall Number less (ii) the aggregate monthly rental payable by Lessee
for the Shortfall Substitution Site Spaces is referred to herein as the
"Shortfall Monthly Payment". As applicable under this Section 1(f), for each
month until the fifth (5th) anniversary of the date of this Lease, Lessee shall
pay to Lessor the amount (if any) of the Shortfall Monthly Payment. Each
Shortfall Monthly Payment shall be considered to be the payment of rent for
purposes of Sections 3(b), 3(c) and 15 below. Notwithstanding the foregoing, in
the event that Lessee terminates any lease of Site Spaces (including Shortfall
Substitution Site Spaces) hereunder pursuant to Sections 2(d), 5(d), 10(a),
10(d), 11 or 16 below prior to the fifth (5th) anniversary of the date of this
Lease, for purposes of calculating any Shortfall Payment Amount, the Shortfall
Number shall be reduced by the aggregate number of Site Spaces (including
Shortfall Substitution Site Spaces) as to which this Lease is so terminated.
There shall be no Shortfall Monthly Payment relating to any period on or after
the fifth (5th) anniversary of the date of this Lease.
2. Term.
(a) The initial lease term for each Site Space shall be fifteen (15)
years (the "Initial Term") from the date hereof; provided that the lease term
for each Site Space shall automatically renew for one (1) renewal period of five
(5) years (the "Renewal Term"), unless Lessee terminates this Lease with respect
to such Site Space (i) upon prior written notice by Lessee to Lessor no later
than ninety (90) days before the expiration of the Initial Term. Lessee in its
termination notice may designate any or all of the Site Spaces for termination.
(b) If Lessee holds over at a Site Space after the expiration of the
term with respect thereto, this Lease shall revert to a month-to-month term with
respect to such Site Space, and rent for such Site Space shall be the rent for
such Site Space during the last month of the preceding term. Each of Lessor and
Lessee shall have the right during any month-to-month term to terminate this
Lease with respect to such Site Space, without cause, upon thirty (30) days'
prior written notice to the other party.
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(c) If with respect to a Premises Site (i) any ground lease ("Assigned
Ground Lease") that was assigned or deeded to Lessor under the Purchase
Agreement terminates on a date prior to the fifth (5th) anniversary of this
Lease because the stated term thereof ended prior to the fifth (5th) anniversary
of this Lease and Lessor has not committed a breach or default with respect
thereto or (ii) any other non-fee ownership possessory interest ("Assigned
Non-Fee Possessory Interest") that was assigned to Lessor under the Purchase
Agreement terminates on a date prior to the fifth (5th) anniversary of this
Lease and Lessor has not committed a breach or default in respect thereto,
Lessee shall remain obligated to pay the per month rent provided under Section
3(a) below for the duration of the Initial Term as to the Site Space(s) at such
Premises Sites ("Terminated Assigned Interest Site Space"), unless Lessee
occupies a Substitution Site Space pursuant to the below provisions of this
Section 2(c). (The Assigned Ground Leases and Assigned Non-Fee Possessory
Interests are referred to herein individually as an "Assigned Ground Lease or
Possessory Interest".) A "non-fee ownership possessory interest" includes any
real property which is referred to as an "Owned Site" under the Purchase
Agreement but as to which the "Sellers" thereunder have not conveyed fee title
to Purchaser. Lessor shall use commercially reasonable efforts to cause the
terms (including any options of renewal) of each Assigned Ground Lease or
Possessory Interest to be at least coextensive with the term of this Lease
(including the Renewal Term), and Lessee shall cooperate in connection therewith
as provided in Section 7.09(a) of the Purchase Agreement. With respect to any
Terminated Assigned Interest Site Space, for the duration of the Initial Term
following termination of the relevant Assigned Ground Lease or Possessory
Interest, unless there is a Substitution Site Space that is identified and made
available to Lessee, Lessor and Lessee shall in good faith attempt to determine
whether other space at any Lessor Site is comparable to such Terminated Assigned
Interest Site Space in terms of location and geography, functionality and other
relevant factors (except to the extent that Lessee waives the requirement of
comparability), and if such space can be identified by the parties Lessor shall
use commercially reasonable efforts to make such space available to Lessee as
soon as reasonably practicable, and such other space and the related land shall
become a Substitution Site Space in substitution for the Terminated Assigned
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Interest Site Space. Lessee shall pay all the costs incurred by Lessee in moving
Transmitter Systems and related equipment to such Substitution Site Space. As an
alternative to the Site Space substitution procedures provided above, Lessee
shall have the option to designate space and the related land under any Other
Lease at which Lessee leases space for a Transmitter System and related
equipment ("Other Lease Space") as a Substitution Site Space, in which event
such Other Lease Space shall become a Substitution Site Space in substitution
for the Terminated Assigned Interest Site Space, such Other Lease Space shall
become a Substitution Site Space under this Lease, the Other Lease shall
terminate as to the Other Lease Space and Lessee shall have no further rental or
other obligation under the Other Lease with respect thereto.
(d) If with respect to a Premises Site where Lessor is a ground lessee
or Lessor is otherwise not the fee owner of the underlying land, if effective on
or after the fifth (5th) anniversary of the date hereof Lessor's leasehold or
other non-fee ownership possessory interest in the Premises Site expires or
terminates ("Early Termination Site Space"), Lessee shall have no further rental
or other obligation hereunder with respect to such Early Termination Site Space
(subject to Sections 8(b), 13(a)(ii) and 17 below). Lessor shall use
commercially reasonable efforts to cause the terms of such ground leases and
other non-fee ownership possessory interests to be at least coextensive with the
term of this Lease (including the Renewal Term). If this Lease expires or
terminates as to a Early Termination Site Space, Lessor and Lessee shall in good
faith attempt to determine whether other space at any Lessor Site is comparable
to such Early Termination Site Space in terms of location and geography,
functionality and other relevant factors, and if such space can be identified by
the parties and provided that Lessor is in a position to make such space
available to Lessee no later than (30) days after the expiration or other
termination of this Lease as to the Early Termination Site Space, such other
space and the related land shall become a Substitution Site Space in
substitution for the Early Termination Site Space. Lessor shall pay all the
reasonable costs incurred by Lessee in moving Transmitter Systems and related
equipment from the Early Termination Site Space to such Substitution Site Space.
As an alternative to the Site Space substitution procedures provided above,
Lessee shall have the option to designate any Other Lease Space as a
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Substitution Site Space in substitution for the Early Termination Site Space, in
which event such Other Lease Space shall become a Substitution Site Space under
this Lease, the Other Lease shall terminate as to such Other Lease Space and
Lessee shall have no further rental or other obligation under the Other Lease
with respect thereto.
3. Rent.
(a) During the Initial Term, for each Site Space that is subject to
this Lease, Lessee shall pay rent at a rate equal to $1,300 per month. During
the Renewal Term, for each Site Space that is subject to this Lease, Lessee
shall pay the "fair market monthly rent" applicable to each Site Space. For
purposes of this Section 3(a), "fair market monthly rent" as to each Site Space
refers to the rent that is generally being charged at the time of commencement
of the Renewal Term in the market where such Site Space is located for making
tower space available for Transmitter Systems, at spaces and sites and with
respect to Transmitter Systems which are similar to the Site Space and Lessee's
Transmitter System that is then-installed at such Site Space. Between two
hundred forty (240) and one hundred eighty (180) days prior to the end of the
Initial Term, Lessor shall deliver to Lessee a proposal by Lessor as to the fair
market monthly rent for each Site Space for the Renewal Term. If Lessor and
Lessee cannot agree on the fair market monthly rent with respect to one or more
Site Spaces at least one hundred thirty (130) days prior to the end of the
Initial Term, then Lessor and Lessee shall at least one hundred twenty (120)
days prior to the end of the Initial Term each appoint an appraiser for purposes
of determining the fair market monthly rent as to such Site Spaces. If the
appraisers are unable to agree on the fair market monthly rent within the
succeeding thirty (30)-day period, they shall select a third appraiser within
fifteen (15) days thereafter. If they are unable to agree on the third
appraiser, either party, by giving ten (10) days' written notice to the other
can apply to the presiding judge of the trial court of the general jurisdiction
in the county in which the subject Site Space is situated, for the selection of
a third appraiser. The third appraiser, however selected, shall be a person who
has not previously acted in any capacity for either party. Within thirty (30)
days after the selection of the third appraiser, a majority of the appraisers
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shall set the fair market monthly rent. If a majority of the appraisers are
unable to do so within such thirty (30) day period, the two closest appraisals
shall be added together and their total shall be divided by two, and the
resulting quotient shall be deemed to be the fair market monthly rent. Each
party shall be responsible for compensating their respective appraiser, and
shall bear equally the compensation payable to any third appraiser.
(b) Rent shall be due no later than the first day of each calendar
month with respect to which such rent is payable (subject to Section 3(c)
below). Rent for any fractional month at the beginning or end of a term shall be
prorated. If payment is not delivered by the 10th business day of such month,
Lessor has the option to charge a late fee not to exceed one and one-half
percent (1.5%) of the delinquent amount. Notice of the imposition of any such
late fee must be given in writing to Lessee within ten (10) business days after
such tenth (10th) business day. Failure to give such notice will result in
forfeiture of any late fee in such month.
(c) Lessee in its discretion from time to time may withhold and setoff
against rent payable hereunder the amount of any payments or reimbursements that
Lessor is delinquent in making under Section 6 below, and any such withholding
and setoff by Lessee shall not be deemed a breach by Lessee, and shall not limit
Lessee's other rights and remedies under this Lease or available to Lessee at
law or in equity.
4. Installation.
(a) Lessee shall install and operate at the Site Spaces only the
Transmitter Systems and related equipment, and the cost of Lessee's installation
and licensing fees shall be borne solely by Lessee.
(b) During the installation, repair or maintenance of a Transmitter
System and related equipment at a Premises Site, Lessee shall not cause material
interference to the activities of Lessor or other lessees at such Premises Site.
Lessee shall install its Transmitter Systems and related equipment in a manner
consistent with good engineering practices. If such interference is caused by
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Lessee and cannot be reduced to levels reasonably acceptable to Lessor, Lessee
shall immediately halt all installation work, repair or maintenance and Lessor
may elect to terminate this Lease as to such Site Space by giving Lessee at
least ten (10) days written notice and thereafter Lessee's only obligation
hereunder with respect to such Site Space shall be the removal of the
Transmitter System and equipment in accordance with Section 16 below and the
payment of any past due rent remaining for such Site Space.
5. Uses of Leased Premises.
(a) Lessee shall use the Site Space and conduct its communications
operations thereon in compliance with the terms of its Federal Communications
Commission ("FCC") licenses and applicable regulations imposed by the FCC or any
other governmental agency and shall otherwise comply with all applicable laws
relating to its use of the Site Spaces. Lessee shall, if requested, provide
Lessor with copies of such licenses. If a license is denied or Lessee is
otherwise prohibited from operating a Transmitter System at a Site Space because
of any law, regulation, governmental decree, court order or similar action, and
Lessee notifies Lessor and provides evidence to Lessor of such denial or
prohibition, Lessee may terminate this Lease as to the applicable Site Space,
or, if the denial or prohibition relates to a Transmitter System, Lessee may
terminate this Lease as to such number of Site Spaces that equal the number of
denied or prohibited Transmitter Systems, as so designated by Lessee ("License
Termination Site Space"). Licensee shall use commercially reasonable efforts to
obtain and maintain any FCC licenses that Lessee is required to hold in order to
operate at such Site Space. The termination of this Lease with respect to a
License Termination Site Space shall become effective thirty (30) days following
written notification from Lessee to Lessor, and Lessee shall have no further
rental or other obligation hereunder with respect to such License Termination
Site Space (subject to Sections 8(b), 13(a)(ii) and 17 below). Notwithstanding
the foregoing, until the fifth (5th) anniversary of the date of this Lease,
Lessee shall continue to have rental obligations hereunder with respect to a
License Termination Site Space (although Lessee might not be operating a
Transmitter System at the License Termination Site Space) unless Lessee occupies
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a Substitution Site Space pursuant to the provisions set forth below in this
Section 5(a). If this Lease terminates as to a License Termination Site Space,
Lessor and Lessee shall in good faith attempt to determine whether other space
at any Lessor Site is comparable to the License Termination Site Space in terms
of location and geography, functionality and other relevant factors, and if such
space can be identified by the parties and provided that Lessor is in a position
to make such space available to Lessee no later than thirty (30) days after the
termination of this Lease as to the License Termination Site Space, such other
space and the related land shall become a Substitution Site Space in
substitution for the License Termination Site Space. Lessee shall pay all the
costs incurred by Lessee in moving Transmitter Systems and related equipment
from the License Termination Site Space to such Substitution Site Space. As an
alternative to the Site Space substitution procedures provided above, Lessee
shall have the option to designate any Other Lease Space as a Substitution Site
Space in substitution for the License Termination Site Space, in which event
such Other Lease Space shall become a Substitution Site Space under this Lease,
the Other Lease shall terminate as to such Other Lease Space and Lessee shall
have no further rental or other obligation under the Other Lease with respect
thereto.
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(b) Lessee shall have a non-exclusive right of access to all Site
Spaces and Premises Sites twenty-four (24) hours a day, 365 days a year for its
employees, agents, contractors or representatives; provided that with respect to
Substitution Site Spaces, Lessee shall be subject to any reasonable access
restrictions that apply uniformly to all tenants at the Substitution Site Space
if the restrictions are described on Schedule B prior to the date on which
Lessee commits to lease such Substitution Site Space pursuant to this Lease.
(c) Neither the Lessee nor the Lessor shall bring onto any of the
Premises Sites any hazardous substances or hazardous wastes in violation of
applicable laws.
(d) Lessee shall not cause objectionable interference of any kind to
the operations of Lessor or other lessees at any of the Premises Sites.
"Objectionable interference" means any material degradation of signal in excess
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of levels permitted by the FCC, as well as interference to consumer electronic
devices and blanketing interference under the applicable FCC rules. If Lessee is
notified in writing by Lessor that Lessee's operations are causing such
objectionable interference, Lessee shall, at its expense, immediately undertake
all reasonable steps to determine the cause of and eliminate such interference.
If the interference continues for a period in excess of seventy-two (72)
consecutive hours following notification, Lessor shall have the right to cause
Lessee to promptly cease operating the offending equipment or to reduce the
power sufficiently to remove the interference until the condition can be
remedied. Lessee shall continue to be obligated to pay rent with respect to the
applicable Site Spaces (subject to the next sentence), and Lessor shall not be
held liable for any damages or loss of revenues resulting therefrom. If Lessee
is required to discontinue its operation at one (1) or more Site Spaces under
this Section 5(d) for a period in excess of sixty (60) days, and provided that
Lessee has diligently pursued all reasonable cures and is unable to eliminate
the interference, then Lessee shall have the right to terminate this Lease as to
the affected Site Space(s) ("Interference Site Spaces") at such Premises Site
and (commencing on the applicable termination date) Lessee shall have no further
rental or other obligation hereunder with respect to such Site Space (subject to
Sections 8(b), 13(a)(ii) and 17 below). If this Lease terminates as to an
Interference Site Space, Lessor and Lessee shall in good faith attempt to
determine whether other space at any Lessor Site is comparable to the
Interference Site Space in terms of location and geography, functionality and
other relevant factors, and if such space can be identified by the parties and
provided that Lessor is in a position to make such space available to Lessee
within thirty (30) days following the termination of this Lease as to the
Interference Site Space, such other space and the related land shall become a
Substitution Site Space in substitution for the Interference Site Space. Lessee
shall pay all the costs incurred by Lessee in moving Transmitter Systems and
related equipment from the Interference Site Space to such Substitution Site
Space. As an alternative to the Site Space substitution procedures provided
above, Lessee shall have the option to designate any Other Lease Space as a
Substitution Site Space in substitution for the Interference Site Space, in
which event such Other Lease Space shall become a Substitution Site Space under
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this Lease, the Other Lease shall terminate as to such Other Lease Space and
Lessee shall have no further rental or other obligation under the Other Lease
with respect thereto. Provided that Lessee's equipment is operating properly, if
the operations of any equipment that is installed by another person or entity at
any Lessor Site subsequent to Lessee's installation of its Transmitter System
and related equipment at such Lessor Site causes objectionable interference to
Lessee's operations as reasonably determined by Lessee, then Lessor shall
require the interfering person or entity to remedy promptly the interference,
and Lessor and/or such other person or entity shall bear the costs thereof.
(e) Lessee understands that it is the intention of Lessor to
accommodate as many users as reasonably practicable at the Premises Sites
subject to the rights of Lessee hereunder. As reasonably requested by Lessor,
and provided that Lessor is not in material breach of this Lease, Lessee shall
in good faith cooperate with Lessor's reasonable requests with respect to
Lessee's rescheduling transmitting activities, reducing power or interrupting
its activities for limited periods of time in order to permit the safe
installation of new equipment on the Towers or to permit repair to the equipment
of any user of the Towers; provided, however, that any such work to be performed
by or on behalf of Lessor shall be performed between the hours of 11:00 p.m. and
5:00 a.m., except with respect to any emergency for which necessary work
relating thereto may be performed at any time as necessary under the
circumstances. Without limiting Lessee's installation and repair rights under
other Sections of this Lease, as reasonably requested by Lessee, and provided
that Lessee is not in material breach of this Lease, Lessor shall in good faith
cooperate with Lessee's reasonable requests that Lessor cause other tenants at
the applicable Premises Sites to reschedule transmitting activities, reduce
power or interrupt their activities for limited periods of time in order to
permit the safe installation by Lessee of new equipment on the Towers or to
permit repair to the equipment of Lessee on the Towers; provided, however, that
any such work to be performed by or on behalf of Lessee shall be performed
between the hours of 11:00 p.m. and 5:00 a.m., except with respect to any
emergency for which necessary work relating thereto may be performed at any time
as necessary under the circumstances.
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(f) From time to time Lessee at its sole discretion may move and
substitute Transmitter Systems and related equipment among Site Spaces, subject
to the other applicable provisions of this Agreement.
(g) Lessor represents and warrants to Lessee that: (i) throughout the
Initial Term and any Renewal Term (x) with respect to any Lessor Sites which
Lessor acquired under the Purchase Agreement, Lessor will maintain the title
sufficient for Lessor to perform its obligations and for Lessee to have the
rights as contemplated hereunder; that Lessor acquired thereunder, and (y) with
respect to any Lessor Sites which Lessor did not acquire under the Purchase
Agreement, Lessor has and will maintain good and valid title thereto sufficient
for Lessor to perform its obligations and for Lessee to have the rights as
contemplated hereunder; (ii) neither Lessor nor any of its employees,
Affiliates, agents, representatives or mortgagees or lenders or other lessees
will interfere with Lessee's quiet enjoyment with respect to the use, operation
or occupancy of the Site Spaces (other than in connection with Lessor's exercise
of permitted eviction or dispossession remedies in the event of a default by
Lessee hereunder and following the expiration of applicable grace and cure
periods);and (iii) Lessor shall be deemed to have provided all representations
and warranties that a lessor is deemed to provide pursuant to applicable leasing
statutes. Lessee acknowledges and agrees that Lessee has sold and assigned to
Lessor under the Purchase Agreement various Towers, land and ground leaseholds
where Site Spaces hereunder are located (the "Acquired Sites"). Lessee hereby
holds harmless Lessor from and against, and waives, any and all claims of Lessee
relating to any real property title defect pertaining to the Acquired Sites
existing as of the date when the Acquired Sites were sold and assigned by Lessee
to Lessor.
6. Utilities. Lessee shall pay its pro rata share of installation costs for
any new electrical power feeds, phone lines, and other utilities to its
equipment. Lessee shall not pay any costs associated with any new, updated or
enhanced metering of its electrical usage at the Premises Sites. Lessor shall
pay for all of Lessee's electrical power usage at the Premises Sites, by direct
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payment to the utility company, or, at Lessee's request by reimbursement to
Lessee for payments made by Lessee to the utility company.
7. Insurance.
(a) Before the commencement of and continuing through the lease term
Lessee shall procure and maintain comprehensive public liability and property
damage insurance with a responsible insurance company legally qualified to do
business in the States where the applicable Lessor Site Spaces are located,
covering its operations and activities on or in connection with the Site Spaces
with a single occurrence limit of not less than $1,000,000 and naming Lessor as
an "Additional Insured." Lessee shall furnish Lessor with a certificate
evidencing such insurance and stating that coverage shall be canceled or changed
only upon thirty (30) days' written notice to Lessor.
(b) Before the commencement of and continuing through the lease term
Lessor shall procure and maintain comprehensive public liability and property
damage insurance with a responsible insurance company legally qualified to do
business in the States where the applicable Site Spaces are located, covering
all its operations and activities on or in connection with the Site Spaces with
a single occurrence limit of not less than $1,000,000 and naming Lessee as an
"Additional Insured." Lessor shall furnish Lessee with a certificate evidencing
such insurance and stating that coverage shall be canceled or changed only upon
thirty (30) days' written notice to Lessee.
8. Maintenance of Sites.
(a) Lessor shall maintain the Lessor Sites in good repair, ordinary
wear and tear excepted, and in compliance with applicable rules and regulations
of the FCC, Federal Aviation Administration ("FAA") and other governmental
agencies pertaining to lighting (subject to Section 8(c) below), marking,
inspection, and maintenance. In cases where any governmental regulations require
the painting of Lessee's feedlines (including without limitation FAA
regulations), Lessee hereby consents to such painting. Without limiting the
foregoing, (i) Lessor shall comply with all of Lessee's reasonable instructions
or requests regarding Lessor compliance with any relevant rules, regulations or
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standards promulgated by the FAA, FCC or other applicable governmental agencies
from time to time, including without limitation in connection with radio
frequency emission standards and lighting standards promulgated by the FCC or
FAA, (ii) Lessor shall comply with applicable Tower registration requirements of
the FCC and any other applicable governmental agencies, and Lessor shall
maintain such registrations in full force and effect, and (iii) Lessor shall
maintain appropriate climate control at each Site Space to assure proper
functioning of the Transmitter Systems and related equipment. With respect to
Acquired Sites, Lessor shall only be obligated to maintain the climate control
at no less than the quality levels existing thereon as of the date hereof.
Subject to the applicable provisions of Section 5 above, Lessor and its
authorized representatives, upon reasonable advance notice to Lessee as
practicable under the circumstances, shall have the right to enter upon the Site
Spaces as necessary in order to comply with Lessor's maintenance and compliance
obligations under this Section 8(a).
(b) Lessee shall maintain its equipment in accordance with standards
of good engineering practice and in material compliance with the rules and
regulations of the FCC, FAA and other applicable governmental agencies. At the
conclusion of the term with respect to a Site Space, Lessee shall surrender
possession to Lessor of such Site Space in substantially the same condition as
existed at the commencement of the leasing of such Site Space under this Lease,
ordinary wear and tear excepted. Lessor shall be entitled to charge Lessee the
reasonable cost of any and all maintenance and repair undertaken by Lessor,
which was the express obligation of Lessee under this Lease or which was
necessary as a direct result of a failure by Lessee to perform its obligations
under this Lease, if Lessee has not commenced and continued to use commercially
reasonable efforts to complete such maintenance and repair within thirty (30)
days after written notice from Lessor requesting such maintenance and repair and
providing sufficient detail of the basis for the Lessee maintenance and repair
obligation hereunder, or, in any event Lessee has not completed such maintenance
and repair within sixty (60) days after such notice, or such longer period as is
reasonably necessary not to exceed one hundred twenty (120) days provided that
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Lessee is diligently proceeding with such repair and maintenance. Lessee shall
reimburse Lessor for all such maintenance and repair costs that are reasonably
incurred by Lessor under this Section 8(b) within thirty (30) days after
Lessor's delivery to Lessee of written invoices, receipts and similar bills
detailing and describing the costs and the related maintenance and repair work.
(c) Notwithstanding anything to the contrary in other Sections of this
Lease (but subject to Section 13 of this Lease), from the date hereof through
February 28, 1999, Lessee shall monitor the lighting of Towers at Site Spaces
for outages (including without limitation "Notems"), until Lessor assumes such
responsibility therefor (as provided below). Lessee's monitoring obligations
hereunder shall be based on Lessee using its lighting monitoring methodology
existing as of the date hereof, and for Lessee to report any outages to the FAA
as required by applicable rules and regulations, and for Lessee to notify Lessor
of any such outages within 24 hours after Lessee becomes aware thereof. Lessee
shall not charge Lessor for Lessee's monitoring services under this Section
8(c). As soon as reasonably practicable on and after the date hereof, Lessor
shall periodically (on a Site by Site basis) assume all of the lighting
monitoring obligations regarding Towers at Site Spaces (including without
limitation "Notems"), including compliance with all notifications required by
applicable FAA rules and regulations. Lessee shall have no further obligations
under this Section 8(c) as to monitoring lighting at Site Spaces for which
Lessor assumes such responsibility as provided herein. By March 1, 1999 Lessor
shall fully assume and be responsible for lighting monitoring at all Sites
Spaces. Throughout the term of this Lease, Lessor shall provide Lessee with
notice of all non-standard situation reports and related reports with respect to
the lighting monitoring system utilized by Lessor at the Sites Spaces.
Throughout the term of this Lease (including any period during which Lessee
performs lighting monitoring services under this Section 8(c)), Lessor shall be
and remain obligated to maintain the lighting in accordance with the rules and
regulations of the FAA and other applicable laws, and to repair or replace any
defective lighting. Lessor shall perform all of its obligations under this
Section 8(c) at no charge to Lessee. Pursuant to the indemnification provisions
under Section 13(b) below, Lessor shall indemnify and hold harmless Lessee and
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its Affiliates from and against any and all costs, liabilities, penalties or
similar charges that may be assessed or charged against Lessee or its Affiliates
(or their assets) by the FAA or other persons, entities or agencies in
connection with Lessor failing to adequately maintain or monitor the lighting.
9. Alteration by Lessee.
Lessee may alter and replace its Transmitter Systems and related
equipment that are installed at a Site Space, provided that such alteration or
replacement does not materially increase the "wind loading" at the applicable
Tower. At Lessor's request and expense, Lessee will provide an independent
professional analysis of "wind loading" to determine whether the alteration or
replacement causes a material increase in "wind loading" at such Tower. Subject
to the terms of this Lease, Lessee may make improvements to the Site Space. Any
such improvements that are made by Lessee on a Transmitter System or other
property of Lessee at a Site Space shall be the property of Lessee (the "Lessee
Owned Improvements"). All other improvements made by Lessee at a Site Space
shall become the property of Lessor upon the termination or expiration of the
Lease. Lessee shall remove the Lessee Owned Improvements as provided in Section
17 below.
10. Site Damage; Damage to Lessee's Equipment; Service Interruption.
(a) If a Site Space is fully or partially destroyed or damaged,
Lessee, at its option, may elect to terminate this Lease with respect to such
Site Space ("Damaged Site Space") upon at least ten (10) days written notice to
Lessor, provided that Lessee has not been a primary cause of such destruction or
damage. In such event, Lessee shall owe rent only up to the date on which Lessee
was unable to conduct its normal operations at such Site Space because of the
damage or destruction, and Lessee shall have no further rental or other
obligation hereunder with respect to such Damaged Site Space (subject to Section
8(b) above and Sections 13(a)(ii) and 17 below). If this Lease is terminated as
to a Damaged Site Space, Lessor and Lessee shall in good faith attempt to
determine whether other space at any Lessor Site is comparable to the Damaged
Site Space in terms of location and geography, functionality and other relevant
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factors, and if such space can be identified by the parties and provided that
Lessor is in position to make such space available to Lessee no later than
thirty (30) days after the termination of this Lease as to the Damaged Site
Space, such other space and the related land shall become a Substitution Site
Space in substitution for the Damaged Site Space. Provided that Lessee has not
been a primary cause of such destruction or damage, Lessor shall pay all the
reasonable costs incurred by Lessee in moving Transmitter Systems and related
equipment from the Damaged Site Space to such Substitution Site Space. As an
alternative to the Site Space substitution procedures provided above, Lessee
shall have the option to designate Other Lease Space as a Substitution Site
Space in substitution for the Damaged Site Space, in which event such Other
Lease Space shall become a Substitution Site Space under this Lease, the Other
Lease shall terminate as to such Other Lease Space and Lessee shall have no
further rental or other obligation under the Other Lease with respect thereto.
(b) Notwithstanding Section 10(a) above, Lessor, at its option by
notice to Lessee within ten (10) days after the occurrence of such damage or
destruction, may elect to repair or rebuild the Damaged Site Space, in which
case, Lessee shall not be entitled to terminate this Lease as to the Damaged
Site Space, and this Lease shall remain in force with respect to the Damaged
Site Space (although Lessee shall not be obligated to pay rent for any period
during which Lessee is unable to conduct its normal operations at the Damaged
Site Space because of the damage or destruction), as long as reconstruction or
repair can be promptly undertaken and diligently completed within thirty (30)
days following the occurrence of such damage or destruction and without
materially interrupting Lessee's business at such Site Space.
(c) Subject to Sections 5(d) and 5(g) above, Lessor shall not be
liable to Lessee for any loss or damage, actual or consequential, sustained by
Lessee, arising out of or related to any loss or interruption of communication
or the use of the Premises Sites, whatever the cause, or any diminution or
failure of the signal emanating from or being received at the Towers, except to
the extent that such events or circumstances are caused (in whole or part) by
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any breach by Lessor of this Lease or by acts or negligent omissions of Lessor,
its Affiliates or their respective agents or representatives.
(d) Lessor and Lessee shall incur no liability to the other party, if
Lessor or Lessee (as the case may be) is prevented from performing its
obligations hereunder or conducting its operations at a Site Space as a result
of any of the following events beyond such performing party's reasonable
control: war, fire, flood, lightning, earthquake or other acts of God
(individually and collectively the "Force Majeure Events"). Without limiting the
foregoing, if either Lessor or Lessee is prevented from performing its
obligations hereunder or conducting its operations at a Site Space as a result
of Force Majeure Event, such party shall not be liable to the other party for
any financial loss due to business interruption, or be liable for any loss or
damage, actual or consequential, sustained by the other party or third parties
making claims against such other party arising out of or relating to any loss or
interruption of communication or the use of the Premises Site affected by the
Force Majeure Event or any diminution or failure of the signal emanating from or
being received at the Tower affected by the Force Majeure Event. Lessee shall be
entitled to a pro rata abatement of rent for the time it is unable to conduct
substantially normal operations at such Site Space as a result of a Force
Majeure Event except that Lessee shall not be entitled to any abatement for
outages of less than seventy-two (72) consecutive hours duration unless such
outages exceed 216 cumulative hours during any thirty (30)-day period; provided,
that if Lessee is unable to conduct such normal operations for more than fifteen
(15) consecutive days as a result of a Force Majeure Event ("Force Majeure
Termination Right Period"), Lessee at any time during the Force Majeure
Termination Right Period may terminate this Lease as to such affected Site Space
and Lessee shall have no further rental or other obligation hereunder with
respect to such Site Space (subject to Section 8(b) above and Sections 13(a)(ii)
and 17 below). If this Lease is terminated as to a Site Space affected by a
Force Majeure Event, Lessor and Lessee shall in good faith attempt to determine
whether other space at any Lessor Site is comparable to such Site Space in terms
of location and geography, functionality and other relevant factors, and if such
space can be identified by the parties and provided that Lessor is in a position
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to make such space available to Lessee no later than thirty (30) days after the
termination of this Lease with respect to the affected Site Space, such other
space and the related land shall become a Substitution Site Space in
substitution for the Force Majeure Site Space. Lessor shall pay all the
reasonable costs incurred by Lessee in moving Transmitter Systems and related
equipment from the Force Majeure Site Space to such Substitution Site Space. As
an alternative to the Site Space substitution procedures provided above, Lessee
shall have the option to designate Other Lease Space as a Substitution Site
Space in substitution for such Site Space, in which event such Other Lease Space
shall become a Substitution Site Space under this Lease, the Other Lease shall
terminate as to such Other Lease Space and Lessee shall have no further rental
or other obligation under the Other Lease with respect thereto.
11. Overloading.
(a) This Section 11 shall not apply (and Lessee shall have no
obligation under this Section 11) as to the Acquired Towers which are listed as
Tower numbers 164, 165 and 166 on Schedule A. If within six (6) months after the
date hereof, Lessor determines that any of the Acquired Towers, based on the
antennae that are installed thereon as of the date hereof, is then overloaded in
excess of levels permitted by applicable laws (existing as of the date hereof),
and Lessor notifies Lessee thereof by Lessor providing reasonable detail in
respect of its conclusions as to overloading regarding the affected Towers, and
if Lessee in good faith disagrees with Lessor's conclusions, the parties shall
mutually select an engineering firm to conduct a study regarding overloading at
such Towers, at Lessor's expense. In the event of a determination of such
overloading, whether confirmed by Lessee agreement with Lessor's conclusions, or
pursuant to the findings of any such engineering firm, as to each such affected
Tower Lessee shall undertake any one of the following actions: (i) correct the
overloading (which correction may include, without limitation, making
improvements to the affected Tower to be or removing non-operable antennas);
(ii) remove such number of Lessee's Transmitter Systems from Site Spaces
("Overloaded Site Spaces") on the affected Tower to cause the affected Tower to
be in compliance with the loading levels permitted by applicable laws (existing
as of the date hereof), in which event the parties shall attempt to identify
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appropriate Substitution Site Spaces pursuant to the procedures of Section 11(b)
below; or (iii) pay Lessor $10,000 in cash for each antenna that would need to
be removed to cause the affected Tower to be in compliance with the loading
levels permitted by applicable laws (existing as of the date hereof). Upon
Lessee removing its Transmitter Systems and related equipment from an Overloaded
Site Space pursuant to the preceding clause (ii), Lessee shall have no further
rental or other obligation under this Lease with respect to such Overloaded Site
Space (subject to Section 8(b) above and Section 13(a)(ii) below). If Lessee
does not so elect one of the options set forth in the preceding clauses (i)
through (iii) as to an affected Tower, or if Lessee elects to correct the
overloading pursuant to the preceding clause (i) or to remove Transmitter
Systems pursuant to the preceding clause (ii) but Lessee does not complete such
action by the one (1) year anniversary of the date hereof, then Lessee shall be
obligated to promptly pay Lessor the applicable amounts pursuant to the
preceding clause (iii) regarding such affected Tower (in lieu of Lessee's
performance of the act under clauses (i) or (ii)).
(b) If Lessee pursuant to clause (ii) of Section 11(a) above requests
that Lessor and Lessee attempt to identify Substitution Site Spaces, Lessor and
Lessee shall in good faith attempt to determine whether other space at any
Lessor Site is comparable to an Overloaded Site Space in terms of location and
geography, functionality and other relevant factors, and if such space can be
identified by the parties and provided that Lessor is in position to make such
space available to Lessee no later than one hundred twenty (120) days after
Lessee delivers its notice pursuant to clause (ii) of Section 11(a) above, such
other space and the related land shall become a Substitution Site Space in
substitution for the Overloaded Site Space. Lessee shall pay all the costs
incurred by Lessee in moving Transmitter Systems and related equipment from the
Overloaded Site Space to such Substitution Site Space. As an alternative to the
Site Space substitution procedures provided above, Lessee at its option shall
designate Other Lease Space as a Substitution Site Space in substitution for the
Overloaded Site Space, in which event such Other Lease Space shall become a
Substitution Site Space under this Lease, the Other Lease shall terminate as to
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such Other Lease Space and Lessee shall have no further rental or other
obligation under the Other Lease with respect thereto.
12 Eminent Domain. If a Premises Site or the land upon which a Premises
Site is located or a Premises Site is acquired or condemned under the power of
eminent domain, whether by public authority, public utility, or otherwise, in an
amount that renders the Site Space materially unusable for Lessee's purposes,
then this Lease shall terminate with respect to the Site Spaces at such Premises
Site as of the date of the acquisition, and Lessee shall not be responsible for
rental or other obligation hereunder with respect to Site Spaces after such
termination. Lessor shall be entitled to the entire amount of any condemnation
award, and Lessee shall be entitled to make claim for and retain a condemnation
award based on and attributable to the expense and damage of removing its
fixtures.
13 Indemnification.
(a) Lessee shall indemnify, hold harmless, and defend Lessor (together
with Lessor's Affiliates, officers, directors, employees, agents and
representatives) from and against any and all liabilities, claims, demands,
suits, damages, actions, recoveries, judgments, and expenses (including court
costs, reasonable attorneys' fees, and costs of investigation) resulting (i)
from Lessee's breach of this Lease (including any representation, warranty or
covenant set forth herein), or (ii) from injury to or death of any person or any
damage to property or loss of rent due to discontinuance of operations at the
Site Spaces (excluding discontinuance of operations in connection with the
substitution of Site Spaces or as otherwise permitted hereunder), which injury,
death, damage or loss in the case of this clause (ii) results from the willful
misconduct or gross negligence of Lessee or its contractors, subcontractors,
agents or representatives in or around the applicable Site Spaces (individually
and collectively "Lessee Indemnity Liabilities"), except to the extent that any
such Lessee Indemnity Liabilities are directly caused by the willful misconduct
or gross negligence of Lessor, its Affiliates or their respective officers,
directors, employees, contractors, subcontractors, agents or representatives.
Notwithstanding the foregoing, Lessee shall have no indemnification obligation
24
<PAGE>
under this Lease with respect to any activity that Lessee is to perform under
Section 8(c) of this Lease, other than for any Lessee Indemnity Liabilities
based upon the willful misconduct of Lessee, its Affiliates or their respective
officers, directors, employees, contractors, subcontractors, agents or
representatives.
(b) Lessor shall indemnify, hold harmless, and defend Lessee (together
with Lessee's Affiliates, officers, directors, employees, agents and
representatives) from and against any and all liabilities, claims, demands,
suits, damages, actions, recoveries, judgments and expenses (including court
costs, reasonable attorneys' fees, and costs of investigation) resulting (i)
from Lessor's breach of this Lease (including any representation, warranty or
covenant set forth herein), (ii) from injury to or death of any person or any
damage to property or loss of revenues due to discontinuance of operations at
the Site Spaces (excluding discontinuance of operations in connection with the
substitution of Site Spaces or as otherwise permitted hereunder), which injury,
death, damage or loss in the case of this clause (ii) results from the willful
misconduct or gross negligence of Lessor or its contractors, subcontractors,
agents or representatives in or around the applicable Site Spaces (individually
and collectively "Lessor Indemnity Liabilities"), or (iii) from any activity
that Lessee is to perform under Section 8(c) of this Lease, other than with
respect to the willful misconduct of Lessee, its Affiliates or their respective
officers, directors, employees, contractors, subcontractors, agents or
representatives, except to the extent that any such Lessor Indemnity Liabilities
are directly caused by the willful misconduct or gross negligence of Lessee, its
Affiliates or their respective officers, directors, employees, contractors,
subcontractors, agents or representatives.
14 Assignment. (a) With respect to any Site Space, Lessee shall not assign,
mortgage, or encumber Lessee's interest under this Lease and shall not sublet or
permit the leased premises or any part thereof to be used by others without the
express written approval of Lessor, which approval shall not be unreasonably
withheld or delayed, except that Lessee may assign or sublet its rights and
obligations hereunder or sublet the leased premises or any portion thereof (i)
to an Affiliate of Lessee or (ii) to any successor of all or substantially all
25
<PAGE>
the operating assets of Lessee and its Affiliates, which Affiliate or successor
agrees to be bound hereby. No sublease or assignment or authorized use by others
shall relieve Lessee of its obligations under this Lease, except for an
assignment by Lessee pursuant to clause (ii) of the preceding sentence.
(b) With respect to a Site Space, Lessor shall not assign, mortgage,
or encumber the Lessor Sites nor Lessor's interest under this Lease (except for
mortgages or encumbrances which are identified on Schedule A) without the
express written approval of Lessee, which approval shall not be unreasonably
withheld or delayed, except that Lessor may assign its rights and obligations
hereunder (i) to an Affiliate of Lessor, (ii) to any successor of all or
substantially all the operating assets of Lessor and its Affiliates, which
Affiliate or successor agrees to be bound hereby, or (iii) to a lender of Lessor
or an agent for a group of lenders under a collateral assignment in form
reasonably satisfactory to Lessee, subject to the applicable provisions of
Section 18 below.
15 Default by Lessee. If, with respect to any Site Space, Lessee fails to
pay rent hereunder within ten (10) days after Lessor provides Lessee with a
written notice regarding such breach, or Lessee breaches Section 5(d) above by
not ceasing any objectionable interference at a Premises Site within three (3)
days after Lessor provides Lessee with notice of such interference, or Lessee
fails to comply with any other term of this Lease and does not cure such other
failure within thirty (30) days after Lessor provides Lessee with a written
notice regarding the applicable breach or for such longer period not to exceed
one hundred eighty (180) days if Lessee is using commercially reasonable efforts
to cure such breach, and provided that Lessee is not otherwise excused from
performing hereunder, Lessor shall have the option (i) (x) if such default is a
default in the payment of rent, to terminate this Lease as to the subject Site
Space or to terminate this Lease as to all Site Spaces, and (y) if such default
is a default other than a default in the payment of rent, to terminate this
Lease only as to the subject Site Space, in which event Lessee shall surrender
possession of such Site Space(s) within thirty (30) days after Lessor's delivery
of a termination notice, and (ii) to pursue any other remedy available to Lessor
26
<PAGE>
under this Lease or otherwise provided by law or equity with respect to such
Site Spaces. Lessee shall be liable for reasonable expenses incurred by Lessor
for its recovery and repossession of the Site Space in accordance with the
provisions hereof. Repossession by Lessor shall terminate this Lease as to such
repossessed Site Space, including terminating all further rental and other
obligations of Lessee for the unexpired term with respect to such Site Space,
but any such termination shall not mitigate or abate any payment obligation
under Section 2(c) above if applicable. Lessor shall use its commercially
reasonable efforts to re-lease any Site Space for which this Lease has been so
terminated, and Lessor shall use commercially reasonable efforts to mitigate
Lessor's damages and related costs.
16 Default by Lessor. If, with respect to a Site Space, Lessee's right to
quiet enjoyment is interfered with in contravention of Section 5(g)(ii) above or
otherwise under this Lease and Lessor does not cure such violation within ten
(10) days after Lessee provides Lessor with written notice regarding such
violation, or Lessor fails to comply with any other term of this Lease and does
not cure such failure within thirty (30) days after Lessee provides Lessor with
written notice regarding the applicable breach or for such longer period not to
exceed one hundred eighty (180) days if Lessor is using commercially reasonable
efforts to cure such breach, Lessee shall have the option (i) to terminate this
Lease as to such Site Space, in which event Lessee shall surrender possession of
such Site Space within ninety (90) days after Lessee's delivery of a termination
notice, and (ii) to pursue any other remedy available to Lessee under this Lease
or otherwise provided by law or equity with respect to such Site Space. Lessee
shall use commercially reasonable efforts to deliver to mortgagees which are
listed on Schedule A, copies of any default notices that Lessee delivers to
Lessor under this Section 15. In the event of a termination pursuant to this
Section 15, Lessor shall be liable for all reasonable expenses incurred by
Lessee in connection with the removal of Lessee's equipment and improvements
from the Site Space. Lessee shall use commercially reasonable efforts to
mitigate Lessee's damages and related costs.
17 Certain Transition Rights. Approximately ninety (90) days prior to the
end of the term of this Lease as to a Site Space (whether the Initial Term or
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<PAGE>
Renewal Term, as applicable) Lessor and Lessee shall in good faith agree upon a
plan to enable an orderly and efficient wind-down period ("Wind-Down Period")
during which Lessee will remove its Transmitter Systems and related equipment
from such Site Space(s) and the parties anticipate that the Wind-Down Period
will provide for Lessee to remove all of its Transmitter Systems and related
equipment from such Site Space(s) no later than one hundred eighty (180) days
following the end of such term. Lessee shall be deemed as holding over for
purposes of Section 2(b) above for any portion of the Wind-Down Period that
extends beyond the end of such term, provided that Lessee shall not be obligated
to pay rent for any partial month during which Lessee so holds over at any Site
Space. Except as otherwise provided in Section 1(c) above, the period for moving
Transmitter Systems and related equipment from a Site Space to a Substitution
Site Space shall be thirty (30) days, provided that Lessee shall remove its
Transmitter Systems and related equipment from a Terminated Assigned Interest
Site Space under Section 2(c) above promptly after Lessee has notice of such
termination thereunder ("Terminated Assigned Interest Removal Period"). Upon the
termination of this Lease with respect to a Site Space pursuant to Section 16
above, Lessee shall have up to ninety (90) days to remove its Transmitter
Systems and related equipment. (Each of such Wind-Down Period, applicable
removal period under Section 1(c) above, Terminated Assigned Interest Removal
Period, thirty (30)-day removal period or ninety (90)-day removal period are a
"Removal Period", as applicable.) Lessee shall pay all costs in connection with
the removal of its Transmitter Systems and related equipment (other than as
provided in Sections 2(d), 10(a), 10(d) and 16 above). Lessee's rental
obligation (if any) during a Removal Period regarding the substitution of Site
Spaces shall be governed by the applicable provisions of this Lease relating to
such substitution event. During any Removal Period Lessee may continue to
operate its Transmitter Systems and related equipment at such Site Space. If the
Transmitter Systems and equipment are not removed by Lessee during the
applicable Removal Period, and the failure to remove is caused by the
intentional, reckless or negligent acts or omissions of Lessor, then for all
days subsequent to the applicable Removal Period during which the Transmitter
Systems and related equipment remain on such Site Space, Lessee shall not be
28
<PAGE>
deemed to be holding over and Lessee shall not be obligated to pay rent pursuant
to Section 2(b) above. The applicable Removal Period shall be extended by the
number of days that any Force Majeure Events prevent Lessee from working on the
removal of its Transmitter Systems and related equipment from a Site Space.
18 Subordination. (a) Subject to the terms and continuing conditions of
this Section 18(a), this Lease is and shall be subject and subordinate to all
existing or future mortgages, deeds of trust, security deeds or other similar
instruments (collectively "Security Instruments") that as of the date hereof or
at any time in the future encumber the Premises Sites and to all renewals,
modifications, consolidations, replacements, and extensions thereof, provided
that such subordination shall only be effective upon the following terms and
conditions:
(i) if judicial or non-judicial foreclosure proceedings or other
remedies are instituted under any such Security Instruments or
otherwise and Lessee is not in default under this Lease (following the
expiration of applicable grace and cure periods), then (a) Lessee shall
not be made a party defendant in any such proceedings or other action,
(b) this Lease shall not be terminated, and (c) Lessee's possession and
quiet enjoyment with respect to the use, operation or occupancy of the
Site Spaces shall not be disturbed by the holder of such Security
Instruments or by the purchaser at any such foreclosure proceedings or
other action nor shall Lessee's possession and quiet enjoyment with
respect to the use, operation or occupancy of the Site Spaces be
otherwise affected by such proceedings or other action;
(ii) upon the completion of any such foreclosure proceedings and the
sale of one(1) or more of the Lessor Sites, or if such the holder of
such Security Instrument should otherwise acquire any or all of the
Lessor Sites, Lessee shall attorn to the purchaser at foreclosure or to
the holder of such Security Instrument as the case may be, and shall
recognize such purchaser or the holder of such Security Instrument as
29
<PAGE>
Lessee's landlord under this Lease, and from time to time, upon the
request of the purchaser at foreclosure or the holder of such Security
Instrument as the case may be, Lessee shall execute and deliver any
instrument reasonably specified in such request to evidence such
attornment or this subordination; and
(iii) upon an attornment by Lessee pursuant to the immediately
preceding clause (ii), this Lease shall continue in full force and
effect as a direct lease between the purchaser at foreclosure or
otherwise or the holder of such Security Instrument as the case may be,
and Lessee, upon all of the terms of this Lease, except that such
purchaser or the holder of such Security Instrument as the case may be,
shall not (a) be liable for any previous act or omission of Lessor
under this Lease, (b) be subject to any setoff which shall have
theretofore accrued to Lessee against Lessor under this Lease (provided
that Lessee shall be entitled to exercise set off rights under Section
3(c) above prior to the completion of any such foreclosure proceeding
and sale), or (c) be bound by any prepayment of more than one (1)
month's rent unless such prepayment shall have been approved by the
holder of such Security Instrument.
(b) Lessee shall retain all rights and remedies available to Lessee
under this Lease or at law or in equity relating to any disturbance of Lessee's
quiet enjoyment with respect to the use, operation or occupancy of Site Spaces.
(c) Subject to the terms and conditions of Sections 18(a) and 18(b)
above:
(i) this subordination shall be self-operative and no further
instrument of subordination and nondisturbance shall be required by the
holder of any such Security Instruments; and
(ii) upon written request from Lessor, Lessee shall execute a
certificate confirming such subordination in form reasonably satisfactory
to Lessee and the holder of such Security Instrument.
30
<PAGE>
19 Mechanics' Liens.
(a) Lessee shall not suffer or permit any liens to stand against the
Premises Sites or any part thereof by reason of any work, labor, service, or
materials done for, or supplied for, or supplied to or claimed to have been done
for, or supplied to, Lessee or anyone holding Lessee's property or any part
thereof through or under Lessee ("Lessee's Mechanics' Liens"). If any Lessee's
Mechanics' Lien shall at any time be filed against the Premises Site, Lessee
shall cause it to be discharged of record within thirty (30) days after the date
of filing by either payment, deposit, or bond. If Lessee fails to discharge any
such Lessee's Mechanics' Lien within such period, then, in addition to any other
right or remedy of Lessor, Lessor may, but shall not be obligated to, procure
the discharge of the Lessee's Mechanics' Lien. All amounts incurred by Lessor,
including reasonable attorneys' fees, in procuring the discharge of such
Lessee's Mechanics' Lien, together with interest thereon at twelve percent (12%)
per annum from the date of incurrence, shall become due and payable immediately
by Lessee to Lessor.
(b) Lessor shall not suffer or permit any liens to stand against any
Transmitter System or any part thereof by reason of any work, labor, service, or
materials done for, or supplied for, or supplied to or claimed to have been done
for, or supplied to, Lessor or anyone holding Lessor's property or any part
thereof through or under Lessor ("Lessor's Mechanics' Liens"). If any Lessor's
Mechanics' Lien shall at any time be filed against the Transmitter System,
Lessor shall cause it to be discharged of record within thirty (30) days after
the date of filing by either payment, deposit, or bond. If Lessor fails to
discharge any such Lessor's Mechanics' Lien within such period, then, in
addition to any other right or remedy of Lessee, Lessee may, but shall not be
obligated to, procure the discharge of the Lessor's Mechanics' Lien. All amounts
incurred by Lessee, including reasonable attorneys' fees, in procuring the
discharge of such Lessor's Mechanics' Lien, together with interest thereon at
twelve percent (12%) per annum from the date of incurrence, shall become due and
payable immediately by Lessor to Lessee.
20 Estoppel Certificates. At any time, but not with less than ten (10) days
prior notice, Lessee shall execute, acknowledge, and deliver to Lessor a
31
<PAGE>
statement in writing certifying that this Lease is unmodified and in full force
and effect (or, if there have been any modifications, that the Lease is in full
force and effect as modified and stating the modifications), and the dates to
which rent and other charges, if any, have been paid in advance.
21 Miscellaneous.
(a) The remedies provided herein shall be cumulative and shall not
preclude the assertion by any party hereto of any other rights or the seeking of
any other remedies against the other parties hereto; provided, that Lessor
acknowledges and agrees that any claim it may have in the chapter 11 bankruptcy
proceedings of Lessee and its Affiliates (Case No. 97-174 (PJW)), other than a
claim for breach of this Lease, shall be satisfied in full by assumption by the
Lessee (or a successor to Lessee) of this Lease under and as of the effective
date of any plan of reorganization for Lessee (or a successor to Lessee).
(b) Should Lessor permit a continuing default by Lessee under this
Lease, the obligations of Lessee hereunder shall continue, and such permissive
default shall not be construed as a renewal of the term hereof nor as a waiver
of any of the rights of Lessor or obligations of Lessee hereunder.
(c) This Lease may be executed in counterparts, and any number of
counterparts signed in the aggregate by the parties will constitute a single,
original instrument.
(d) This Lease, including the Schedules and other documents referred
to herein contain the entire understanding of the parties with respect to its
subject matter. There are no restrictions, agreements, promises, warranties,
covenants, or understandings other than expressly set forth herein or therein.
This Lease supersedes all prior agreements and understandings between the
parties with respect to its subject matter. No modification of this Lease shall
be effective unless contained in a writing signed, dated and fully witnessed by
the authorized representative of both parties.
32
<PAGE>
(e) All notices, requests, claims, demands, and other communications
hereunder ("Notices") shall be in writing and shall be deemed to have been duly
given if delivered by personal delivery, by telecopy (other than Notices with
respect to Sections 13, 15, 16 or 18 which shall be delivered by another
permitted means under this Section 21(e)), by overnight courier or mailed
(certified mail, postage prepaid, return receipt requested): (i) to Lessor, at
the address and telecopy number shown above or to such other address and
telecopy number as Lessor may have furnished to Lessee in writing in accordance
with this Section 21(e); and (ii) to Lessee, at the address and telecopy number
shown above, except that Notices to Lessee with respect to Sections 13, 15, 16
or 18 above shall (instead) be delivered to MobileMedia Communications, Inc.,
Fort Lee Executive Park, One Executive Drive, Suite 500, Fort Lee, NJ 07024,
attention General Counsel, or to such other address as Lessee may have furnished
to Lessor in writing in accordance with this Section 21(e).
(f) This Lease shall be governed by, construed and enforced in
accordance with the internal laws of the State of New York.
(g) Reference to Sections, Schedules and Paragraphs refer to Sections,
Schedules and Paragraphs of this Lease, except as otherwise indicated herein.
(h) Reference to the singular includes the plural and reference to the
plural includes the singular, according to the context.
33
<PAGE>
IN WITNESS WHEREOF, this Lease has been duly executed and
delivered by Lessor and Lessee as of the day and year first above written.
LESSOR: PINNACLE TOWERS INC.,
a Delaware corporation
BY:___________________________
Name: Steven Day
Title: Vice President
LESSEE: MOBILEMEDIA COMMUNICATIONS,
INC., a Delaware corporation,
as debtor and debtor-in-possession
BY:____________________________
Name: Joseph A. Bondi
Title: Chairman-Restructuring
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000915390
<NAME> Arch Communications Group, Inc.
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<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Jun-30-1999
<EXCHANGE-RATE> 1
<CASH> 21,885
<SECURITIES> 0
<RECEIVABLES> 60,015
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<INVENTORY> 11,011
<CURRENT-ASSETS> 107,255
<PP&E> 670,948
<DEPRECIATION> 242,194
<TOTAL-ASSETS> 1,488,989
<CURRENT-LIABILITIES> 160,110
<BONDS> 1,362,064
0
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<COMMON> 481
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<TOTAL-LIABILITY-AND-EQUITY> 1,488,989
<SALES> 21,572
<TOTAL-REVENUES> 234,381
<CGS> 14,529
<TOTAL-COSTS> 14,529
<OTHER-EXPENSES> 48,386
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<INTEREST-EXPENSE> 59,187
<INCOME-PRETAX> (156,491)
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (3,361)
<NET-INCOME> (159,852)
<EPS-BASIC> (12.00)
<EPS-DILUTED> (12.00)
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