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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 2, 1999
Arch Communications Group, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-23232 31-1358569
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(Commission File Number) (I.R.S. Employer Identification No.)
1800 West Park Drive, Suite 250, Westborough, MA 01581
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(Address of Principal Executive Offices) (Zip Code)
(508) 870-6700
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Page 1 of 3 pages
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Item 5. Other Events.
Pending MobileMedia Acquisition
The pending acquisition of MobileMedia Communications, Inc. ("MobileMedia")
by Arch Communications Group, Inc. ("Arch") is subject to confirmation of
MobileMedia's Third Amended Joint Plan of Reorganization (the "Reorganization
Plan") by the U.S. Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court"). The Reorganization Plan provides for the merger of
MobileMedia with and into a subsidiary of Arch (the "MobileMedia Merger").
On December 11, 1998, the Bankruptcy Court approved MobileMedia's
Disclosure Statement relating to the Reorganization Plan, and thereafter
MobileMedia solicited approval of the Reorganization Plan by its secured and
unsecured creditors. The holders of 94% in number and 69% in amount of allowed
claims in Class 6, the class of general unsecured creditors, voted to accept the
Reorganization Plan. New Generation Advisors, Inc. ("New Generation") has
contested the Class 6 voting results and has requested that the votes of certain
unsecured creditors of MobileMedia and its parent (the "Standby Purchasers"),
who have agreed to invest up to $217.0 million in Arch's rights offering made to
all unsecured creditors of MobileMedia and its parent, be ignored. If the
Bankruptcy Court were to sustain New Generation's challenge to the Class 6
voting results, it is likely that the Reorganization Plan would be deemed
rejected by Class 6. In that event, confirmation could occur only if MobileMedia
were able to satisfy the cram-down requirements of Section 1129(b) of the
Bankruptcy Code. MobileMedia has disputed New Generation's contentions and has
indicated that in any event it believes that the Reorganization Plan satisfies
the cram-down requirements.
Confirmation of the Reorganization Plan has been objected to by New
Generation, Merrill Lynch Phoenix Fund, Inc., Merrill Lynch Corporate Bond Fund,
Inc. High Income Portfolio and State Street Research High Income Fund. New
Generation has contended that an alternative reorganization for MobileMedia
could be devised that would result in greater recoveries for MobileMedia's
general unsecured creditors and has requested that MobileMedia provide due
diligence access and materials to persons identified by New Generation so as to
pursue the possibility of such an alternative. Notwithstanding New Generation's
contentions, MobileMedia has indicated that it believes that it previously
conducted an appropriate search for alternative transactions and also pursued
alternative plans. MobileMedia has also indicated that it believes that the
MobileMedia Merger represents the best possible alternative for MobileMedia's
creditors.
On February 12, 1999, at a continued hearing on confirmation of the
Reorganization Plan, the Bankruptcy Court ordered that certain supplemental
disclosure be provided to members of MobileMedia's Class 6 general unsecured
creditors and that MobileMedia resolicit votes from that class on the
Reorganization Plan. The Bankruptcy Court also ordered that MobileMedia provide
New Generation with due diligence access and materials in order to pursue the
possibility of an alternative reorganization plan for MobileMedia.
On February 18, 1999, the Bankruptcy Court approved the supplemental
disclosure material to be provided to MobileMedia's Class 6 creditors, allowing
MobileMedia to proceed with the Bankruptcy Court-ordered resolicitation of votes
from the Class 6 creditors on the Reorganization Plan. The supplemental
disclosure is intended to provide Class 6 creditors with a summary of certain
information that was available to the Standby Purchasers in connection with
their commitment to become Standby Purchasers. The Bankruptcy Court set March
23, 1999 as the deadline for re-voting by MobileMedia's Class 6 creditors on the
Reorganization Plan and for filing objections to the Reorganization Plan, and
scheduled the confirmation hearing on the Reorganization Plan to resume on March
26, 1999.
Financing Arrangements
On November 16, 1998, the lenders to Arch Paging, Inc. ("API"), an indirect
wholly-owned subsidiary of Arch, approved an increase in API's existing credit
facility from $400.0 million to $600.0 million. The increase of $200.0 million
(the "API Credit Facility Increase") was to fund a portion of the cash necessary
for Arch to complete the MobileMedia Merger. The API Credit Facility Increase
is available only through March 31, 1999. As a result of the resolicitation of
votes of the holders of Class 6 creditors, it is not possible to consummate the
MobileMedia Merger by March 31, 1999. API's lenders have indicated their
willingness to extend $135.0 million of the API Credit Facility Increase through
June 30, 1999, subject to federal approval, definitive documentation and an
increase in the interest rate on borrowings under API's credit facility.
In August 1998, Arch Communications, Inc. ("ACI"), a wholly-owned
subsidiary of Arch, and The Bear Stearns Companies, Inc., The Bank of New York,
TD Securities (USA) Inc. and Royal Bank of Canada (collectively, the "Bridge
Lenders") executed a commitment letter for a bridge facility (the "Bridge
Facility") consisting of a $120.0 million term loan available to ACI in a single
drawing upon the closing of the MobileMedia Merger (the "Bridge Loan"). The
Bridge Lenders are also lenders under API's credit facility. If not paid on or
before maturity 180 days after the closing of the MobileMedia Merger, the Bridge
Loan will convert into a term loan (the "Term Loan") due in December 2006. Upon
notice from the Bridge Lenders given prior to the MobileMedia Merger or at any
time after the funding of the Bridge Loan and prior to the Bridge Loan maturity
date, ACI will issue and sell new senior notes (the "Planned ACI Notes") in an
amount at least sufficient to substitute for or refinance the Bridge Loan on
such terms and conditions as may be specified by the Bridge Lenders, provided
however that the interest rate on the Planned ACI Notes shall be determined by
the Bridge Lenders in light of the then prevailing market conditions, but in no
event shall the yield on the Planned ACI Notes exceed a rate equal to an agreed
upon margin over the yield to worst on ACI's 12 3/4% Senior Notes due 2007. The
Bridge Facility requires payment of certain fees to the Bridge Lenders, which
fees vary based on the amount and timing of the Bridge Facility and the Bridge
Loan. The Bridge Lenders have agreed to refund a portion of the fees if the
Bridge Loan is repaid prior to maturity. The Bridge Facility was scheduled to
expire on February 28, 1999 but ACI elected to extend it to June 30, 1999.
Subject to market conditions and other factors, Arch's intention has been
(i) to raise funds through the private issuance of the Planned ACI Notes and
(ii) to use the proceeds of the Planned ACI Notes to provide a portion of the
funds necessary for the MobileMedia Merger (rather than use the proceeds of the
Bridge Facility for such purpose). Arch recently deferred such an offering due
to market conditions. Notwithstanding the deferral of such offering and the
contemplated reduction in the API Credit Facility Increase, Arch continues to
intend to raise the remaining necessary funds for the MobileMedia Merger through
the private issuance of the Planned ACI Notes, together with borrowings under
API's credit facility and the proceeds to be obtained by Arch from the rights
offering (including the related commitments of the Standby Purchasers)
contemplated by the Reorganization Plan, as and when market and other conditions
are appropriate for such purpose. However, no assurance can be given that Arch
will be able to obtain sufficient additional financing on acceptable terms to
complete the MobileMedia Merger or to provide desired liquidity following the
MobileMedia Merger. If issued, the Planned ACI Notes are expected to be issued
without registration under the Securities Act of 1933 and may not be offered or
sold in the United States absent registration or an applicable exemption from
registration requirements.
Recent Financial Results
On March 2, 1999, Arch announced its financial results for the quarter
and year ended December 31, 1998. The Press Release is filed herewith as Exhibit
99.5.
Exhibits Description
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99.1 Notice of Supplemental Disclosure and of Resolicitation to
Holders of Allowed Class 6 Claims.
99.2 Supplemental Disclosure Dated February 18, 1999 to
Holders of Allowed Class 6 Claims.
99.3 Third Amendment to Agreement and Plan of Merger, dated as of
February 8, 1999, by and among Arch Communications Group,
Inc., Farm Team Corp., MobileMedia Corporation and
MobileMedia Communications, Inc.
99.4 Amendments to Commitment Letters to Purchase Stock and
Warrants, dated as of February 8, 1999, by and among Arch
Communications Group, Inc., MobileMedia Communications, Inc.
and W.R. Huff Asset Management Co., L.L.C., Northwestern
Mutual Series Fund, Inc., The Northwestern Mutual Life
Insurance Company, Whippoorwill Associates, Inc. and Credit
Suisse First Boston Corporation.
99.5 Press Release dated March 2, 1999 issued by Arch
Communications Group, Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: March 3, 1999 ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
---------------------------------
Title: Executive Vice President and
Chief Financial Officer
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Exhibit 99.1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: ) Chapter 11
)
MobileMedia Communications, ) Case No. 97-174 (PJW)
Inc., et al., )
-- ---
) (Jointly Administered)
Debtors. )
NOTICE OF SUPPLEMENTAL DISCLOSURE AND OF RESOLICITATION
TO HOLDERS OF ALLOWED CLASS 6 CLAIMS
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TO: THE HOLDERS OF ALLOWED CLASS 6 CLAIMS
FOR THE REASONS OUTLINED BELOW, THE BANKRUPTCY COURT HAS DIRECTED THAT YOU BE
SUPPLIED WITH CERTAIN SUPPLEMENTAL INFORMATION REGARDING MOBILEMEDIA'S PENDING
THIRD AMENDED PLAN OF REORGANIZATION (THE "PLAN"), AND THAT, BASED UPON SUCH
SUPPLEMENTAL DISCLOSURE, YOU BE PERMITTED TO CHANGE YOUR VOTE WHETHER TO APPROVE
OR REJECT THE PLAN.
THIS SUPPLEMENTAL DISCLOSURE IS INTENDED TO PROVIDE CLASS 6 CREDITORS WITH A
SUMMARY OF CERTAIN INFORMATION THAT WAS PROVIDED TO THE STANDBY PURCHASERS IN
CONNECTION WITH THEIR COMMITMENT TO PURCHASE THE RIGHTS.
YOU SHOULD REVIEW THE INFORMATION IN THE SUPPLEMENTAL DISCLOSURE CAREFULLY, AS
YOUR VOTE IS IMPORTANT.
NOTICE IS HEREBY GIVEN AS FOLLOWS:
i. Disclosure Statement. On December 11, 1998, the Bankruptcy Court
--------------------
entered an order (the "Disclosure Statement Approval Order") approving
the Disclosure Statement (the "Disclosure Statement") relating to the
Debtors' Third Amended Joint Plan of Reorganization (the "Plan"). *
Attached to the Disclosure Statement
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* Capitalized terms used and not defined herein shall have the meanings
ascribed to them in the Disclosure Statement.
<PAGE>
as Exhibit F was a preliminary Prospectus of Arch dated December 17,
1998 relating to the Rights. Thereafter, a final Prospectus of Arch
dated January 5, 1999 relating to the Rights was issued after the
Registration Statement related thereto was declared effective by the
SEC.
ii. Original Solicitation of Votes. In accordance with the Disclosure
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Statement Approval Order, the Debtors provided to each holder of an
Allowed Claim in Class 6 (General Unsecured Claims) a solicitation
package that included (a) the Disclosure Statement, together with the
Exhibits thereto (including the Disclosure Statement Prospectus), (b)
a Ballot or Master Ballot, as appropriate, for voting to accept or
reject the Plan and (c) instructions for filling out the Ballots or
Master Ballots. In response to the Debtors' solicitation, Class 6
voted to accept the Plan. Specifically, the Debtors timely received
1029 Ballots from the holders of Allowed Claims in Class 6, with 968
of such holders (approximately 94% in number and 69% in amount) voting
to accept the Plan, and 61 of such holders (approximately 6% in number
and 31% in amount) voting to reject the Plan. New Generation Advisors,
Inc. ("New Generation") has contested the foregoing voting results and
has requested that the votes of certain of the Standby Purchasers be
designated and ignored. If the Court were to sustain New Generation's
challenge to the voting results, it is likely that the Plan would be
deemed to have been rejected by Class 6. If Class 6 were determined
to have rejected the Plan, confirmation could occur only if the
Debtors were able to satisfy the cram-down requirements of section
1129(b) of the Bankruptcy Code. The Debtors dispute New Generation's
contentions with regard to the previously announced voting results
and, in any event, believe that the Plan satisfies the cram-down
requirements of section 1129(b) of the Bankruptcy Code.
iii. Objections to Confirmation. Confirmation of the Plan has been
--------------------------
objected to by New Generation, Merrill Lynch Phoenix Fund, Inc.,
Merrill Lynch Corporate Bond Fund, Inc. High Income Portfolio
(collectively, "the Merrill Lynch Asset Management Bond Funds") and
State Street Research High Income Fund ("State
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Street" and, together with New Generation and the Merrill Lynch Asset
Management Bond Funds, the "Objectors").
iv. Hearing on Plan of Reorganization and Order Requiring Additional
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Disclosure. On February 12, 1999, at a continued hearing on
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confirmation of the Plan, the Bankruptcy Court ordered the Debtors to
prepare supplemental disclosure to the holders of Allowed Claims in
Class 6, and to resolicit the votes of such holders on the Plan. At a
hearing held before the Bankruptcy Court on February 18, 1999, the
Bankruptcy Court entered an order approving this Notice and the
Supplemental Disclosure attached hereto, and directing the Debtors to
resolicit the votes of all holders of Allowed Class 6 Claims.
v. Debtors Ordered to Provide Access to Due Diligence by New Generation.
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New Generation has contended that an alternative reorganization for
MobileMedia could be devised that would result in greater recoveries
for MobileMedia's general unsecured creditors and has requested that
the Debtors provide due diligence to New Generation's nominee(s) so as
to pursue the possibility of such an alternative. By order dated
February 12, 1999, the Bankruptcy Court directed the Debtors to
provide such due diligence. Notwithstanding New Generation's
contentions, the Debtors believe that they previously conducted an
appropriate search for alternative transactions and also pursued
alternative plans. The Debtors believe that the Arch merger proposal
contained in the Plan represents the best possible alternative for its
creditors.
vi. Supplemental Ballots. If you previously voted to accept or reject
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the Plan and do not wish to change your vote, you do not need to do
anything, and your vote will be counted as previously submitted. If
you previously voted to accept or reject the Plan, and you now wish to
change your vote, or if you did not previously vote to accept or
reject the Plan and now wish to do so, you should submit the
Supplemental Ballot, appropriately filled out, on
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or before March 23, 1999 at 5:00 p.m. Eastern time (the "Supplemental
Voting Deadline"). The Supplemental Ballot enclosed herewith must
actually be received by the Solicitation Agent on or before the
Supplemental Voting Deadline. The Supplemental Ballot of any holder
that holds its Class 6 Claim through a broker, bank, proxy,
intermediary, agent or other nominee ("Representative"), must be
submitted to its Representative to be incorporated in a Supplemental
Master Ballot to be submitted by the Representative to the
Solicitation Agent so as to be actually received by the Supplemental
Voting Deadline. PLEASE READ THE INSTRUCTIONS ACCOMPANYING YOUR
SUPPLEMENTAL BALLOT OR SUPPLEMENTAL MASTER BALLOT CAREFULLY.
vii. Supplemental Objection Deadline. Any further objections to
confirmation of the Plan arising out of the matters set forth in this
Notice of Supplemental Disclosure, including any supporting memoranda,
must be in writing, be filed with the Clerk of the United States
Bankruptcy Court for the District of Delaware, 5th Floor, 824 Market
Street, Marine Midland Plaza, Wilmington, Delaware 19801 together with
proof of service, and shall (a) state the name and address of the
objecting party and the amount of its Claim or the nature of its
interest in the Debtors' chapter 11 cases, (b) state with
particularity the provision or provisions of the Plan objected to and,
for any objection asserted, the legal and factual basis for such
objection and (c) be served, so as to be received on or before March
23, 1999 at 4:00 p.m. Eastern time, on (i) counsel to the Debtors (A)
Young Conaway Stargatt & Taylor, LLP, 11th Floor, Rodney Square North,
P.O. Box 391, Wilmington, Delaware 19899 (Attention: James L. Patton,
Jr., Esq.) and (B) Sidley & Austin, 875 Third Avenue, New York, New
York 10022 (Attention: Shelley C. Chapman, Esq.), (ii) counsel to the
agent for the Debtors' pre- and post-petition secured lenders (the
"Agent"), Simpson, Thacher & Bartlett, 425 Lexington Avenue, New York,
New York 10017 (Attention: Lillian E. Kraemer, Esq.), (iii) counsel to
the Official Committee of Unsecured Creditors
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(the "Committee"), Jones, Day, Reavis & Pogue, 77 West Wacker,
Chicago, Illinois 60601 (Attention: David S. Kurtz, Esq. and Timothy
R. Pohl, Esq.), (iv) counsel to Arch Communications Group, Inc.
("Arch"), Hale and Dorr LLP, 60 State Street, Boston, Massachusetts
02109 (Attention: Mark N. Polebaum, Esq.) and (v) the Office of the
United States Trustee, Suite 950 West, Curtis Center, 601 Walnut
Street, Philadelphia, Pennsylvania 19106 (Attention: John D.
McLaughlin, Esq.).
vii. Continuation of Confirmation Hearing. The Confirmation Hearing will
resume on March 26, 1999 at 9:30 a.m. before the Honorable Peter J.
Walsh, United States Bankruptcy Court for the District of Delaware,
6th Floor, 824 Market Street, Marine Midland Plaza, Wilmington,
Delaware.
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ix. Additional Copies. If you need additional copies of the Disclosure
-----------------
Statement, the Final Rights Prospectus, the Supplemental Disclosure or
the Supplemental Ballot, contact the Solicitation Agent, Bankruptcy
Services LLC, 70 E. 55th St., 6th Floor, New York, New York 10022
(212) 376-8494, Attention: Diane M. Rocano, and copies will be
provided to you at no cost.
DATED: Wilmington, Delaware
February 18, 1999
YOUNG CONAWAY STARGATT &
TAYLOR, LLP
James L. Patton, Jr. (No. 2202)
Joel A. Waite (No. 2925)
11th Floor - Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899
(302) 571-6600
SIDLEY & AUSTIN
J. Ronald Trost
Shelley C. Chapman
Lee M. Stein
Marshall S. Huebner
875 Third Avenue
New York, New York 10022
(212) 906-2000
Attorneys for Debtors and
Debtors-in-Possession
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Exhibit 99.2
SUPPLEMENTAL DISCLOSURE DATED FEBRUARY
18, 1999 TO HOLDERS OF ALLOWED CLASS 6 CLAIMS
---------------------------------------------
FOR THE REASONS OUTLINED BELOW, THE BANKRUPTCY COURT HAS DIRECTED THAT YOU BE
SUPPLIED WITH CERTAIN SUPPLEMENTAL INFORMATION REGARDING MOBILEMEDIA'S PENDING
THIRD AMENDED PLAN OF REORGANIZATION (THE "PLAN"), AND THAT, BASED UPON SUCH
SUPPLEMENTAL DISCLOSURE, YOU BE PERMITTED TO CHANGE YOUR VOTE WHETHER TO APPROVE
OR REJECT THE PLAN.
THIS SUPPLEMENTAL DISCLOSURE IS INTENDED TO PROVIDE CLASS 6 CREDITORS WITH A
SUMMARY OF CERTAIN INFORMATION THAT WAS PROVIDED TO THE STANDBY PURCHASERS IN
CONNECTION WITH THEIR COMMITMENT TO PURCHASE THE RIGHTS.
YOU SHOULD REVIEW THE INFORMATION IN THIS SUPPLEMENTAL DISCLOSURE CAREFULLY, AS
YOUR VOTE IS IMPORTANT.
__________________________
(This Supplemental Disclosure supplements the information set forth in the
Disclosure Statement that was approved by the Bankruptcy Court on December 11,
1998, and should be read in conjunction therewith.)
A. Recent Approvals.
After taking into account the information and matters set forth below and
upon the recommendation of The Blackstone Group, L.P. ("Blackstone"), financial
advisor to the Debtors, the board of directors of MobileMedia Corporation and
the sole director of MobileMedia Communications,
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Inc. have ratified the August 18 Agreements, as modified by the September 3
Amendments and the December 1 Amendments (as each such term is defined below).
In addition, after taking into account such information and matters and upon the
recommendation of Houlihan Lokey Howard & Zukin ("Houlihan Lokey"), financial
advisor to the Unsecured Creditors Committee, the Unsecured Creditors Committee
has ratified the August 18 Agreements, as modified by the September 3 Amendments
and the December 1 Amendments. In addition to the approval of ratification by
W.R. Huff and Northwestern Mutual (see certain information and matters relating
to W.R. Huff and Northwestern Mutual below), such ratification included the
approval of each other member of the Unsecured Creditors Committee (except for
Intek Telecommunications, Inc. ("Intek"), which is no longer participating on an
active basis in the activities of the Unsecured Creditors Committee) and
Mountain Dew Marketing, Inc. (which was unavailable but had previously indicated
that it supports any proposal recommended by Houlihan Lokey). The Unsecured
Creditors Committee is comprised of U.S. Bank Trust National Association (as
trustee under the indenture relating to the 10 1/2% Notes), State Street Bank
and Trust Company (as trustee under the indenture relating to 9 3/4% Notes),
Mountain Dew Marketing, Inc. and Intek, in addition to W.R. Huff and
Northwestern Mutual.
B. Recommendations.
The Debtors believe that the Plan complies with all requirements of the
Bankruptcy Code and provides the best available recovery to their estates. The
Plan also has the support of the Unsecured Creditors Committee, which has
recommended to its constituency that it vote to accept the Plan. The Objectors
(as defined in the accompanying Notice of Supplemental Disclosure) have objected
to confirmation of the Plan and recommend that holders of Class 6 Claims vote to
reject the Plan.
C. Certain Background Information.
1. The August 18 Agreements. As set forth under "The Merger and the
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Reorganization--Background of the Merger" in the Rights Prospectuses, ** on
March 17, 1998, Arch, the Unsecured Creditors Committee, W.R. Huff and
Northwestern Mutual executed a term sheet relating to an acquisition of
MobileMedia by Arch upon the proposed terms set forth therein. In addition, by
letter dated March 17, 1998 to MobileMedia and Blackstone, Arch proposed an
acquisition of MobileMedia on the terms set forth in such term sheet.
Thereafter, representatives of Arch, MobileMedia, the Unsecured Creditors
Committee and the Standby Purchasers *** (together with various financial
advisors and legal counsel) held numerous discussions and negotiations
concerning the acquisition of MobileMedia by Arch in a merger transaction. On
August 19, 1998, the parties reached final agreement and thereafter executed the
Agreement and Plan of Merger dated as of August 18, 1998 (the "Original Merger
Agreement"), the First Amended Joint Plan of Reorganization dated as of August
18, 1998 and related documents (the "August 18 Agreements"), including the
Standby Purchase Agreements of the Standby Purchasers (the "Original Standby
Purchase Agreements").
Upon the recommendation of Houlihan Lokey, financial advisor to the
Unsecured Creditors Committee, the August 18 Agreements were approved by all
members of the Unsecured Creditors Committee (other than Intek). After
consultation with Blackstone, the Unsecured Creditors Committee, the Standby
Purchasers and the Pre-Petition Agent and their respective financial advisors,
MobileMedia
- --------------------
** The Disclosure Statement includes, as Exhibit F thereto, the
preliminary Prospectus of Arch dated December 17, 1998 relating to the Rights
(the "Disclosure Statement Prospectus"). Thereafter, a final Prospectus of Arch
dated January 5, 1999 in respect of the Rights (the "Final Prospectus") was
issued after the Registration Statement related thereto was declared effective
by the SEC. As used herein, "Rights Prospectuses" means the Disclosure Statement
Prospectus and the Final Prospectus, collectively. Capitalized terms used and
not defined herein shall have the meanings ascribed to them in the Rights
Prospectuses.
*** The four Standby Purchasers are W.R. Huff Asset Management Co.,
L.L.C., as agent for various discretionary accounts and affiliates ("W.R.
Huff"), The Northwestern Mutual Life Insurance Company and an affiliate
(together, "Northwestern Mutual"), Credit Suisse First Boston Corporation ("CS
First Boston") and Whippoorwill Associates, Inc., as agent for various
discretionary accounts.
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Corporation and MobileMedia Communications, Inc. determined that the agreement
reached with Arch (as reflected in the August 18 Agreements) represented the
highest and best offer received for a third-party transaction and was superior
to a stand-alone plan for the Debtors' creditors. Upon the recommendation of
Blackstone, financial advisor to the Debtors (and without knowledge of the
information set forth in "D. Certain Potential Conflicts of Interest and Other
Matters -- 1. Certain Ownership of Arch Indebtedness"), the August 18 Agreements
were then approved by the board of directors of MobileMedia Corporation and by
the sole director of MobileMedia Communications, Inc.
The Original Merger Agreement provided that Arch would issue (the "Direct
Issuance") to the unsecured creditors of the Debtors, in partial satisfaction of
their claims, between approximately 17.2% (14,345,000 shares) and 31.3%
(23,279,000 shares) of the Arch Common Stock, depending upon the number of
shares of Arch Common Stock to be available for purchase pursuant to the Rights
Offering which, in turn, depended upon the average trading price for the Arch
Common Stock (the "Rights Mechanism Price") during certain trading days within
the 20 trading days immediately prior to September 22, 1998 (the "Original
Pricing Period"). In addition, the Original Merger Agreement provided that such
holders would receive rights (the "Original Rights") to purchase, for cash, (i)
an aggregate number of shares of Arch Common Stock between approximately
34.3% **** (if the Direct Issuance percentage were 31.3%) and 52.1% ***** (if
the Direct Issuance percentage were 17.2%) of the Arch Common Stock, and (ii)
warrants to purchase, in the aggregate, a number of shares of Arch Common Stock
equal to approximately 2.5% of the issued and outstanding shares of Arch Common
Stock at an exercise price of $8.19 per share. The exercise price ("Original
Exercise Price") for the Original Rights was equal to 80% of the Rights
Mechanism Price, provided that in no event could the Original Exercise Price be
less than $5.00 or more than $8.50. The Original Merger Agreement also
- --------------------
**** This percentage would equal 25,529,000 shares.
***** This percentage would equal 43,400,000 shares.
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provided that Arch would distribute to its existing stockholders warrants (the
"Initial Arch Warrants") to acquire Arch Common Stock equal to approximately
7.0% of the number of shares anticipated to be outstanding immediately following
the Merger at an exercise price of $8.19 per share.
In order to ensure that, in connection with the Rights Offering, Arch
would receive an aggregate of $217 million in cash necessary for Arch to
complete the Merger, the Original Standby Purchase Agreements obligated the
Standby Purchasers in effect to exercise, in the aggregate, any Original Rights
not exercised by the other Class 6 unsecured creditors at the Original Exercise
Price and thereby purchase shares of Arch Common Stock at a price equal to the
Original Exercise Price. As consideration for entering into the Original Standby
Purchase Agreements, the Standby Purchasers were entitled to be granted warrants
(the "Standby Consideration") to purchase Arch Common Stock (at a price of $8.19
per share) that would constitute, in the aggregate, approximately 2.5% of the
equity ownership of Arch immediately following the Merger.
The obligations of the Standby Purchasers under the Original Standby
Purchase Agreements were subject to various conditions, including conditions to
the effect that (a) the Confirmation Order shall have been entered by the
Bankruptcy Court and shall have become a "Final Order" (as defined in Section
5.1(h) of the Merger Agreement), (b) the FCC Grant shall have been issued by the
FCC, and such FCC Grant shall have become a "Final Order" (as defined in Section
5.1(c) of the Merger Agreement) (the conditions in clauses (a) and (b) being
referred to herein as the "Final Order Conditions"), and (c) there shall not
have occurred during certain specified periods (i) any event or events (other
than those affecting generally the economy or the industry in which Arch and
MobileMedia conduct their respective businesses) which have had or would have a
material adverse effect on the business, assets, financial condition, operating
income or prospects of the Combined Company (defined to mean Arch and
MobileMedia on a combined basis after giving effect to the Merger), (ii) any
event or events involving a regulatory or statutory change and affecting
generally the
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industry in which Arch and MobileMedia conduct their respective businesses which
would materially and adversely affect the ability of the Combined Company to
operate its business, or (iii) any event or events affecting generally the
industry in which Arch and MobileMedia conduct their respective business which
would materially and adversely affect the ability of the Combined Company to
operate its businesses (the condition in clause (c) being referred to herein as
the "Material Adverse Effect Condition"). Under the Original Standby Purchase
Agreements, no single Standby Purchaser (treating affiliated entities as a
single Standby Purchaser) could assert any of these three conditions if the
other three Standby Purchasers, acting in good faith, waived such condition.
2. The September 3 Amendments. As set forth in the Rights Prospectuses
--------------------------
under "The Merger and the Reorganization--Background of the Merger", on August
31 and September 1, 1998, senior management of Arch and MobileMedia, the
Unsecured Creditors Committee, the Standby Purchasers and their respective
financial advisors and legal counsel met to discuss, among other things,
concerns resulting from increased volatility in the capital markets and the
decline in the market price of the Arch Common Stock following the execution and
announcement of the August 18 Agreements. During these meetings, representatives
of Arch, MobileMedia, the Unsecured Creditors Committee and the Standby
Purchasers negotiated certain amendments to the August 18 Agreements.
Amendments to the August 18 Agreements and a Second Amended Joint Plan of
Reorganization were executed on September 3, 1998 (the "September 3
Amendments").
The September 3 Amendments were approved by all members (other than Intek)
of the Unsecured Creditors Committee (after consultation with Houlihan Lokey)
and were approved by the board of directors of MobileMedia and by the sole
director of MobileMedia Communications, Inc. (after consultation with
Blackstone).
As set forth in the Rights Prospectuses under "The Merger and the
Reorganization--Background of the Merger", the principal changes effected by the
September 3 Amendments were to
6
<PAGE>
(i) incorporate an additional pricing period subsequent to the Original Pricing
Period, and (ii) in the event that the market price of Arch Common Stock during
such subsequent pricing period was below $6.25, (a) provide for the reduction
(for purposes of the Rights and the Standby Purchase Agreements) of the Original
Exercise Price to 80% of such market price, but not below $2.00 (which reduction
would have had the effect of increasing the number of shares of Arch Common
Stock issuable pursuant to the Rights), (b) provide for the issuance of rights
(at an exercise price equal to the exercise price of the Rights) to the existing
Arch stockholders (the "Arch Stockholder Rights") that would, upon exercise (or
upon exercise of warrants to be granted to such Arch stockholders (the "Arch
Participation Warrants") to the extent they did not exercise the Arch
Stockholder Rights), together with their existing stockholdings, constitute up
to approximately 32.175% of the Arch Common Stock, and (c) provide for the
elimination from the transaction of the warrants previously contemplated to be
issued to the Debtors' unsecured creditors upon exercise of the Original Rights
and for the elimination of the Initial Arch Warrants previously contemplated to
be issued to the Arch Stockholders. In addition, the exercise price of the
warrants to be issued to the Standby Purchasers as the Standby Consideration and
of the Arch Participation Warrants was set at an amount that would result at
September 1, 2001 from an investment on the Effective Date of an amount equal to
the Rights Exercise Price plus an annual internal rate of return of 20%.
3. The December 1 Amendments. As set forth in the Rights Prospectuses
-------------------------
under "The Merger and the Reorganization--Background of the Merger", from time
to time following the execution of the September 3 Amendments, the Unsecured
Creditors Committee, the Standby Purchasers, senior management of Arch and
MobileMedia and their respective financial advisors discussed additional
concerns raised by the continued volatility in the capital markets and the
market price of the Arch Common Stock. As a result of such volatility and
market price, the hearing on approval of disclosure statement relating to the
Second Amended Joint Plan of Reorganization scheduled for October 14, 1998
7
<PAGE>
was adjourned to December 10, 1998. In early November 1998, the Standby
Purchasers formally proposed specific modifications to the August 18 Agreements,
as previously amended by the September 3 Amendments. Thereafter, representatives
of Arch, MobileMedia, the Unsecured Creditors Committee and the Standby
Purchasers negotiated various additional terms and documentation. Amendments to
the August 18 Agreements, as previously amended by the September 3 Amendments,
were executed on December 2, 1998 (the "December 1 Amendments").
The December 1 Amendments were approved by all members (other than Intek)
of the Unsecured Creditors Committee (after consultation with Houlihan Lokey)
and were approved by the board of directors of MobileMedia Corporation and by
the sole director of MobileMedia Communications, Inc. (after consultation with
Blackstone).
As set forth in the Rights Prospectuses under "The Merger and the
Reorganization--Background of the Merger", the principal modifications effected
by the December 1 Amendments consisted of (i) fixing the Rights Exercise Price
(for purposes of the Rights and the Standby Purchase Agreements) at $2.00 per
share of Arch Common Stock (the low point of the range in the subsequent pricing
period incorporated by the September 3 Amendments), resulting in (a) the number
of Rights to be issued to holders of Allowed Class 6 Claims being fixed at
108,500,000 and (b) the number of shares issued to holders of Allowed Class 6
Claims in the Direct Issuance being fixed at 14.345 million, (ii) increasing by
10,000,000 the number of Arch Stockholder Rights and/or Arch Participation
Warrants to be distributed to the Arch Stockholders in the Arch Rights Offering
(increasing the percentage of Arch Common Stock to be available to the existing
Arch stockholders from approximately 32.175% to approximately 35.8%) and (iii)
incorporating covenants of the Standby Purchasers not to fund any other
MobileMedia acquisition proposals and covenants of the Unsecured Creditors
Committee (except as required by their fiduciary duties) and Standby Purchasers
not to seek or negotiate any other MobileMedia acquisition proposals.
8
<PAGE>
In addition, as part of the December 1 Amendments, CS First Boston (i)
waived its right to assert the failure of the occurrence of either of the Final
Order Conditions (unless any of the other Standby Purchasers waived or otherwise
abrogated its right to do so other than in connection with a scheduled closing),
(ii) waived its right to assert the Material Adverse Effect Condition and (iii)
agreed to deposit $2,000,000 into escrow or post a $2,000,000 letter of credit
(unless Arch and CS First Boston agreed that such escrow arrangement or letter
of credit was unnecessary). In addition, the warrants constituting the Standby
Consideration were reduced so that the Standby Purchasers would be entitled to
purchase, upon exercise thereof, Arch Common Stock constituting in the aggregate
approximately 1.9% of the Arch Common Stock outstanding immediately following
the Merger. The exercise price of such warrants was set an amount equal to the
fixed $2.00 exercise price of the Rights plus an amount that would result at
September 1, 2001 from an investment on the Effective Date of an amount equal to
an annual internal rate of return of 20%. The reduction in the number of
warrants constituting the Standby Consideration was a result of CS First Boston
agreeing to reduce the number of warrants that would be issued to it. ******
4. Summary of Certain Changes Effected by Amendments. Under the August 18
-------------------------------------------------
Agreements, if the market price of the Arch Common Stock was less than $6.25,
(a) the Direct Issuance was fixed at 14.345 million shares (which represented a
percentage ownership of the outstanding Arch Common Shares of approximately
17.2%) and (b) the number of Rights Shares was
******Subsequent to the December 1 Amendments, additional amendments to
the Merger Agreement and the Standby Purchase Agreements, dated as of February
8, 1999, were executed to incorporate certain additional conditions to the
obligation of MobileMedia to consummate the Merger and the obligations of the
Standby Purchasers to make purchases under the Standby Purchase Agreements.
These additional conditions require, among other things, (i) Arch to deliver
audited financials of Arch for the year ended 1998 to each of MobileMedia and
the Standby Purchasers, and (ii) Arch to have Buyer 1998 Adjusted EBITDA (as
defined in such amendment to the Merger Agreement) for the year ended December
31, 1998 of no less than $136.5 million.
9
<PAGE>
fixed at 43.4 million shares (which represented a percentage ownership of the
outstanding Arch Common Shares of approximately 52.1%).
Under the September 3 Amendments, if the market price of the Arch Common
Stock was between $2.50 and $6.24, (a) the Direct Issuance continued to be fixed
at 14.345 million shares (which represented a percentage ownership of the
outstanding Arch Common Shares that ranged from approximately 9.7% at the $2.50
price to approximately 17.2% at the $6.24 price), and (b) the number of Rights
Shares varied from 108.5 million shares at the $2.50 price (which represented a
percentage ownership of the outstanding Arch Common Shares of approximately
73.1%) to 43.4 million shares at the $6.24 price (which represented a percentage
ownership of the outstanding Arch Common Shares of approximately 52.1%). The
effect of the September 3 Amendments, therefore, was that at share prices
between $2.50 and $6.24, the aggregate percentage ownership represented by the
Direct Issuance was reduced, but, in the view of the financial advisers to the
Unsecured Creditors Committee and MobileMedia, the value of the Rights was
enhanced by the reduction of the floor of the Rights Exercise Price from $5.00
per share to $2.00 per share. Subject to satisfaction of the conditions to
making purchases under the Standby Purchase Agreements, the reduction of the
Rights Exercise Price also reduced the risk of the Standby Purchasers' having to
purchase shares under the Standby Purchase Agreements at a price in excess of
the market price thereof.
Under the December 1 Amendments, the market price of Arch Common Shares is
irrelevant because the Rights Exercise Price is fixed (for purposes of the
Rights and the Standby Purchase Agreements) at $2.00, and (a) the Direct
Issuance remains fixed at 14.345 million shares (representing a percentage
ownership of outstanding Arch Common Shares that ranges from approximately 7.3%
to 9.7% depending on the number of Arch Stockholder Rights that are exercised),
and (b) the number of Rights Shares is fixed at 108.5 million shares
(representing a percentage ownership of outstanding Arch Common Shares ranging
from approximately 55.1% to 73.1% depending on the number of Arch
10
<PAGE>
Stockholder Rights that are exercised).
5. Arch Financing Requirements. As set forth in the Rights Prospectuses
---------------------------
under "Risk Factors--Risks Related to Arch--Merger Cash Requirements," the API
lenders approved an increase of As set forth in the Rights $200,000,000 to the
API Credit Facility (the "API Credit Facility Increase") in order to fund a
Prospectuses under "Risk portion of the cash necessary to pay the Allowed
Secured Claims in Class 4 under the Plan in full and to pay the other costs and
liabilities assumed by Arch in the Merger. As approved by the API lenders, the
API Credit Facility Increase is available only through March 31, 1999. As a
result of the resolicitation of votes by MobileMedia of the holders of Allowed
Class 6 claims, it is not possible to consummate the Merger prior to March 31,
1999. Arch has advised MobileMedia that Arch will undertake to obtain an
extension of the API Credit Facility Increase through June 30, 1999. However,
there can be no assurance that Arch will be able to obtain such an extension or,
if it can, that the terms for an extension will not be less favorable than those
set forth in the API Credit Facility Increase.
6. Arch Stock Price. As set forth in the Rights Prospectuses under "Market
----------------
Price Information and Dividend Policy", the high and low reported sale prices
per share of Arch Common Stock on the Nasdaq National Market ("NNM") were as
follows for the periods indicated:
<TABLE>
<CAPTION>
1998 High Low
------ ------ -------
<S> <C> <C>
First Quarter $6.125 $ 3.00
Second Quarter $6.938 $ 3.50
Third Quarter $ 5.00 $1.6875
Fourth Quarter $ 1.75 $0.6875
(through December 16, 1998)
</TABLE>
The high and low reported sale prices per share of Arch Common Stock on the NNM
were as follows for the indicated subsequent periods:
<TABLE>
<CAPTION>
Period High Low
------- ------- ------
<S> <C> <C>
1998 Fourth Quarter (December 17 $1.5625 $1.156
through December 31)
First Quarter 1999 (through February $ 2.50 $1.281
15, 1999)
</TABLE>
The closing reported sale price per share of Arch Common Stock on the NNM was
$2.00 on February 11, 1999 and $1.75 on February 12, 1999.
11
<PAGE>
D. Certain Potential Conflicts of Interest and Other Matters.
Allegations have been made before the Bankruptcy Court by New Generation
(as defined in the accompanying Notice of Supplemental Disclosure) to the effect
that W.R. Huff and Northwestern Mutual--two members of the Unsecured Creditors
Committee that are also Standby Purchasers--had potential conflicts of interest
at the time of the negotiation of the August 18 Agreements, the September 3
Amendments and the December 1 Amendments. The Bankruptcy Court, in its ruling on
February 12, 1999, stated that no findings of fact had been made, but ordered
that certain supplemental disclosure should be made so that creditors would have
additional information concerning developments and circumstances surrounding the
negotiations and the execution of the Merger Agreement when their votes were
resolicited. The information set forth below should be read in conjunction with
the information set forth elsewhere herein as well as the information set forth
in the Disclosure Statement.
1. Certain Ownership of Arch Indebtedness. As set forth in the Rights
--------------------------------------
Prospectuses under "Description of Certain Arch Indebtedness", Arch and certain
of its subsidiaries have long-term indebtedness outstanding that aggregated
$992,790,000 as of September 30, 1998. Included in such indebtedness are: (a)
$127,534,000 aggregate principal amount of 12 3/4% Senior Notes (the "ACI 12
3/4% Notes") of ACI, a subsidiary of Arch, which 12 3/4% Senior Notes were
issued on June 24, 1998 in an offering effected pursuant Rule 144A under the
Securities Act of 1933, as amended (the "Rule 144A Offering"); (b) $100,000,000
aggregate principal amount of 14% Senior Notes of ACI; and (c) $125,000,000
aggregate principal amount of 9 1/2% Senior Notes of ACI (the "ACI 9 1/2%
Notes"). Also included in such indebtedness are $467.4 million in aggregate
principal amount (at maturity) of discount notes of Arch ("Arch Discount Notes")
that are scheduled to mature on March 15, 2008 and were issued at a substantial
discount from the principal amount due at maturity.
The Unsecured Creditors Committee has disclosed that W.R. Huff and
Northwestern Mutual--
12
<PAGE>
the two members of the Unsecured Creditors Committee that are also Standby
Purchasers--made certain purchases and sales of ACI 12 3/4% Notes after Arch had
announced publicly (by the filing of a Current Report on Form 8-K with the SEC
on June 22, 1998) that Arch was engaged in discussions concerning a possible
acquisition of MobileMedia.******* The purchase and sale activity of ACI 12 3/4%
Notes by W.R. Huff for the period from February 10, 1997 (the date the Unsecured
Creditors Committee was formed) through December 10, 1998 (the original voting
record date under the Plan) consisted of purchases (commencing on June 24, 1998)
of $17,230,000 in aggregate principal amount of ACI 12 3/4% Notes and sales
(thereafter) of $10,500,000 in aggregate principal amount, at prices ranging
from 98.050% of the principal amount to 106.250% of the principal amount, with
an aggregate principal amount of $6,730,000 owned as of August 26, 1998 and
through the rest of such period.
The purchase and sale activity of ACI 12 3/4% Notes by Northwestern Mutual
for the period from February 10, 1997 (the date the Unsecured Creditors
Committee was formed) through December 10, 1998 (the original voting record date
under the Plan), is summarized below:
<TABLE>
<CAPTION>
Transactions by Northwestern Mutual in ACI 12 3/4% Notes
- ---------------------------------------------------------------------------------------------
Principal Amount Aggregate Principal
Date Transaction Type Purchase/Sale Price Bought(Sold) Amount Owned
- ------------- ----------------- --------------------- ---------------- --------------------
<C> <S> <C> <C> <C>
06/23/98 -- -- -- --
06/24/98 Purchase 98.050% $13,500,000* $13,500,000
06/24/98 Purchase 99.750% $ 2,000,000 $15,500,000
06/24/98 Purchase 100.750% $ 1,000,000 $16,500,000
07/10/98 Purchase 101.875% $ 1,000,000 $17,500,000
07/10/98 Purchase 102.375% $ 2,000,000 $19,500,000
07/10/98 Purchase 102.750% $ 2,000,000 $21,500,000
</TABLE>
- ------------------------
*******W.R. Huff also had previously owned certain amounts of ACI 14%
Notes, ACI 9 1/2% Notes and Arch Discount Notes, as well as shares of Arch
Common Stock. All of these debt and equity holdings were disposed of on or prior
to January 23, 1998. In addition, the Debtors have been advised that on December
28, 1998, W.R. Huff purchased $5,000,000 of the pre-petition secured
indebtedness of MobileMedia that is classified in Class 4 under the Plan.
13
<PAGE>
<TABLE>
<CAPTION>
Transactions by Northwestern Mutual in ACI 12 3/4% Notes
- ---------------------------------------------------------------------------------------------
Principal Amount Aggregate Principal
Date Transaction Type Purchase/Sale Price Bought(Sold) Amount Owned
- ------------- ----------------- --------------------- ---------------- --------------------
<C> <S> <C> <C> <C>
07/17/98 Purchase 103.500% $ 2,500,000 $24,000,000
07/17/98 Purchase 104.000% $ 2,000,000 $26,000,000
07/17/98 Sale 103.750% $ (300,000) $25,700,000
07/29/98 Purchase 104.750% $ 1,000,000 $26,700,000
12/10/98 -- -- -- $26,700,000
</TABLE>
---------------------------------------------
* These ACI 12 3/4% Notes were purchased by Northwestern Mutual in the 144A
Offering.
The ownership and purchases and sales of ACI 12 3/4% Notes by W.R. Huff and
Northwestern Mutual set forth above existed and occurred during their
participation in the negotiations relating to the August 18 Agreements, the
September 3 Amendments and the December 1 Amendments. An effect of the Merger
would be to reduce the leverage ratio of ACI. Leverage for ACI on a pro forma
basis after giving effect to the Merger (excluding the impact of expected
operational cost synergies), as measured by the ratio of long-term debt to
annualized adjusted pro forma EBITDA for the nine months ended September 30,
1998 would be 3.7:1. By contrast, at September 30, 1998 ACI's long-term debt was
$619.5 million and its third quarter 1998 annualized adjusted EBITDA was $143.2
million, yielding a leverage ratio (as so computed) of 4.3:1.
It should also be noted that W.R. Huff and Northwestern Mutual also have a
direct interest in MobileMedia by reason of their direct ownership of
MobileMedia unsecured debt. More specifically, (a) W.R. Huff currently owns
(and, since December 19, 1997, has owned) $57.8 million in face amount of
MobileMedia's Senior Subordinated Notes due November 1, 2007 ("9 3/8%
MobileMedia Notes") and $28 million in face amount of MobileMedia's 10 1/2%
Senior Subordinated Deferred Coupon Notes due December 1, 2003 ("10 1/2%
MobileMedia Notes"), and (b) Northwestern Mutual currently owns (and, since
December 11, 1997, has owned) $19.8 million in face amount of 9 3/8% MobileMedia
Notes and $12.35 million in face amount of 10 1/2% MobileMedia Notes.
14
<PAGE>
2. Standby Purchase Agreements. The purpose of the Standby Purchase
---------------------------
Agreements was to ensure that $217 million in cash would be invested in Arch and
thereby be available to Arch to meet its financial obligations in order to
consummate the Merger and effect the Debtors' Third Amended Joint Plan of
Reorganization. As set forth in the Rights Prospectuses under "The Rights
Offering--the Standby Purchase Agreements," under the Standby Purchase
Agreements, the four Standby Purchasers agreed (subject to certain conditions)
to exercise all of the Rights distributed to them as holders of Allowed Class 6
Claims and to purchase all of the Arch Common Stock not otherwise purchased
pursuant to the Rights Offering. In the cases of W.R. Huff and Northwestern
Mutual under their respective Standby Purchase Agreements, subject to such
conditions (and to possible reduction in the event Arch Stockholder Rights are
exercised), W.R. Huff is obligated to purchase up to $75.07 million of Arch
Common Stock and Northwestern Mutual is obligated to purchase up to $27.43
million of Arch Common Stock (in each case, at $2 per share). In addition, as
noted above, the Standby Purchasers are entitled to receive their share (as set
forth in the Standby Purchase Agreements) of the Standby Consideration.
As noted under "C. Certain Background Information--4. Summary of Certain
Changes Effected by Amendments", an effect of the negotiations relating to the
September 3 Amendments and the December 1 Amendments was to reduce the Rights
Exercise Price (for purposes of the Rights and the Standby Purchase Agreements)
to $2.00 per share. This reduction resulted in an increase in the number of
shares of Arch Common Stock to be issued under the Standby Purchase Agreements
in the event (and to the extent) that such shares were not purchased through the
exercise of Rights by other creditors at the same reduced Rights Exercise Price.
See "E. Additional Valuation Information" below for certain additional
projections and valuation information that was provided to the Standby
Purchasers or given in court testimony. Such projections and information are
being provided herein so that such projections and information will be available
to all unsecured creditors in Class 6.
15
<PAGE>
E. Additional Valuation Information.
1. Certain Projections. During the negotiations, the Debtors, Arch, the
-------------------
Unsecured Creditors Committee and their respective professionals prepared
various financial analyses and projections. Set forth below is a summary of one
of such projections relating to the Combined Company that was distributed to the
Unsecured Creditors Committee and the Standby Purchasers in October 1998 in
connection with the negotiation of the December 1 Amendments:
<TABLE>
<S> <C> <C> <C>
1999 2000 2001
------------- ---------------- ------------------
Ending Units in Service 8,671,000 9,601,000 10,503,000
Average Revenue Per Unit (ARPU) $8.67 $8.66 $8.64
Revenue $989,100,000 $1,096,800,000 $1,201,600,000
EBITDA* $299,500,000 $ 367,300,000 $ 420,800,000
Capital Expenditures $207,000,000 $ 174,400,000 $ 160,800,000
Free Cash Flow (before interest expense) $ 92,500,000 $ 192,900,000 $ 260,000,000
</TABLE>
____________________
* Earnings before interest, taxes, depreciation and amortization.
The above projections are more favorable than those set forth in Exhibit E
to the Disclosure Statement or in the Rights Prospectuses under "Unaudited
Combined Company Projected Statement of Operations" and "Unaudited Company
Projected Statement of Cash Flow" (collectively, the "Prospectus Projections").
None of Arch, any of the Debtors, any of the Standby Purchasers, any member of
the Unsecured Creditors Committee, Houlihan Lokey or Blackstone endorses or
approves the foregoing data and information. Arch and the Debtors note that the
revenue, EBITDA and capital expenditures shown above for 1999 differ from the
amounts of revenue, EBITDA and capital expenditure shown for 1999 in Exhibit E
to the Disclosure Statement and in the Prospectus Projections (Exhibit E and the
Prospectus Projections show projected 1999 revenue of $922.3 million, EBITDA of
$267.5 million and capital expenditures of $178.0 million; Exhibit E and the
Prospectus Projections do not identify free cash flow (which can be calculated
as EBITDA less capital expenditures) and do not contain any
16
<PAGE>
projections beyond 1999).
2. Certain Market Multiples and Share Prices. In connection with the
-----------------------------------------
negotiation of the December 1 Amendments, in November 1998, Houlihan Lokey also
delivered to the Unsecured Creditors Committee and the Standby Purchasers
information indicating that "current market multiples in the paging industry are
between 6.5 and 7.0 times latest quarter annualized EBITDA" and showing that
application of EBITDA multiples ranging from 6.25 to 7.75 implied a share price
for the Combined Company of $1.63 to $3.85 per share, depending in part upon the
number of shares of Arch Common Stock issued upon the exercise of the Arch
Stockholder Rights issued pursuant to the Merger Agreement.
3. Certain Valuation Testimony. On February 3 and 9, 1999, Arthur B.
---------------------------
Newman, senior managing director of Blackstone, testified at the Confirmation
Hearing regarding his views as to valuation of the Combined Company after giving
effect to the Merger. Mr. Newman testified that paging companies are valued
primarily based upon a multiple of EBITDA. He testified that the last quarter
annualized EBITDA multiple ranged from 6.8 to 7.4 for Arch and two other
comparable paging companies, based upon (a) their respective stock prices of
January 29, 1999, (b) the total enterprise value and (c) the annualized EBITDA
for the third quarter of 1998. In addition, Mr. Newman testified that, applying
EBITDA multiples of 6.5, 7.0 and 7.5 and based upon combined third quarter 1998
annualized EBITDA for Arch and MobileMedia (and after giving effect to certain
adjustments), the total enterprise value of the Combined Company, the pro forma
common equity value of the Combined Company and the pro forma share price of the
Combined Company, ranged as follows:
<TABLE>
<CAPTION>
EBITDA Multiple
------------------------------------------------
<S> <C> <C> <C>
6.5 7.0 7.5
-------------- --------------- --------------
Total Enterprise Value of the Combined Company $1,804,600,000 $1,943,400,000 $2,082,200,000
Pro Forma Common Equity Value of the Combined Company $ 454,700,000 $ 581,300,000 $ 706,400,000
Pro Forma Share Price of the Combined Company $ 3.16 $ 4.04 $ 4.91
</TABLE>
17
<PAGE>
Mr. Newman also testified that the above data represent "fully distributed"
valuation data, which he defined to mean valuation data after the shares of Arch
to be distributed pursuant to the Plan have been absorbed in the market and any
overhang of shares received by MobileMedia's creditors has been dissipated.
Mr. Newman also testified that the foregoing determination of the pro forma
share prices of the Combined Company was not a prediction that the shares of the
Combined Company would trade in the market place at the indicated prices. Mr.
Newman's testimony is not investment advice or a recommendation as to whether
any holder of an Allowed Class 6 Claim should exercise any Rights distributed to
such holder.
4. Fourth Quarter 1998 Financial Data. On February 10, 1999, MobileMedia
----------------------------------
reported expected results for the fourth quarter ended December 31, 1998.
MobileMedia announced expected net revenue of $103.7 million, expected service
revenues of $103.1 million and expected Adjusted EBITDA******** of $28.7
million, respectively. MobileMedia also announced it expected Adjusted EBITDA
margin (Adjusted EBITDA divided by net revenues) of 27.7% and product margin
(equipment sales less cost of goods sold) of $0.6 million for the fourth
quarter, and units in service of 3,144,000 as of December 31, 1998.
On February 18, 1999, Arch reported expected results for the fourth quarter
ended December 31, 1998. Arch announced expected net revenue of $95.9 million,
expected service revenues of $93.3 million and expected Adjusted EBITDA
********* of $36.1 million, respectively. Arch also announced it expected
Adjusted EBITDA margin (Adjusted EBITDA divided by net revenues) of 37.6% and
- --------------------
********Defined as earnings before other income (expense), taxes,
depreciation, amortization, adjustment to reduce liability subject to compromise
to estimated allowed claims, amortization of deferred gain on tower sale and
restructuring costs.
*********As defined in the Rights Prospectuses.
18
<PAGE>
product margin (equipment sales less cost of goods sold) of $2.6 million for the
fourth quarter, and units in service of 4,276,000 as of December 31, 1998.
F. Releases Under the Plan.
Section 7.3 of the Plan provides that:
None of the Debtors, the Reorganized Debtors, Arch or any affiliate
thereof, the Unsecured Creditors Committee, the Pre-Petition Agent, the
Pre-Petition Lenders, the DIP Agent, the DIP Lenders, the Standby
Purchasers, the indenture trustees for the Notes, Arch's financing
sources, nor any of their respective officers, directors, employees,
members, agents, underwriters or investment bankers, nor any other
professional Persons employed by any of them (collectively, the
"Exculpated Persons"), shall have or incur any liability to any Person
for any act taken or omission made in good faith in connection with or
related to formulating, negotiating, implementing, confirming or
consummating this Plan, the Disclosure Statement or any contract,
instrument, release or other agreement or document created in connection
with this Plan. The Exculpated Persons shall have no liability to any
Debtor, holder of a Claim, holder of an Interest, other party in interest
in the Cases or any other Person for actions taken or not taken under
this Plan, in connection herewith or with respect hereto, or arising out
of their administration of this Plan or the property to be distributed
under this Plan, in good faith, including, without limitation, failure to
obtain Confirmation of this Plan or to satisfy any condition or
conditions, or refusal to waive any condition or conditions, to the
occurrence of the Effective Date, and in all respects such Exculpated
Persons shall be entitled to rely upon the advice of counsel with respect
to their duties and responsibilities under this Plan.
The Debtors and the Unsecured Creditors Committee believe that the releases
provided for under Section 7.3 of the Plan--which relate to the designated
actions taken (or omitted to be taken) in good faith--are appropriate under the
circumstances. As to the Standby Purchasers, it should be noted that they are
providing a significant source of financing under their Standby Purchase
Agreements necessary to consummate the Merger and effect the Plan. New
Generation contests the release and exculpation provisions provided for under
the Plan.
-----------------------------
This Supplemental Disclosure contains forward-looking statements that are made
pursuant to the safe harbor provisions of 11 U.S.C. (S) 1125 and of the Private
Securities Litigation Reform Act
19
<PAGE>
of 1995. Any statements contained herein that are not statements of historical
fact should be considered as forward-looking statements. A number of important
factors could cause actual results to differ materially from those expressed in
any forward-looking statements contained herein. Achieving the anticipated
benefits of the Merger and the Reorganization will depend in significant part on
whether integration of the businesses of Arch and MobileMedia is accomplished in
an efficient manner, and there can be no assurance that this will occur. The
combination of the two companies will require, among other things, coordination
of administrative, sales and marketing, distribution, and accounting and finance
functions and expansion of information and management systems. The integration
process could divert the attention of management, and any difficulties or
problems encountered in the transition process could have a material adverse
effect on the Combined Company following the Merger. In addition, the process of
combining the companies could cause the interruption of, or a loss of momentum
in, the activities of the respective businesses, which could also have a
material adverse effect on the Combined Company. The difficulty of combining the
businesses may be increased by the need to integrate personnel and the
geographic distance separating the organizations. There can be no assurance that
the Combined Company will retain key employees or that the Combined Company will
realize any of the other anticipated benefits of the Merger. See "Acquisition of
the Debtors by Arch and Future Business of the Reorganized Debtors--Information
Relevant to the Risks Posed to Creditors Under the Plan" in the Disclosure
Statement.
The forward-looking statements contained herein are dependent on many
factors over which neither Arch nor MobileMedia has any control. No assurance
can be given that any of the assumptions on which such forward-looking
statements are based will prove to be correct. The forward-looking statements
contained herein were not prepared with a view to public disclosure or
compliance with (i) published guidelines of the SEC, (ii) the guidelines
established by the American Institute of Certified Public Accountants regarding
projections or (iii) GAAP. Arthur Andersen LLP, the independent public
20
<PAGE>
accountants for Arch, has neither compiled nor examined such statements and,
accordingly, does not express any opinion or any other form of assurance with
respect to, assumes no responsibility for, and disclaims any association with,
such statements. Ernst & Young LLP, the independent auditors for MobileMedia,
has neither compiled nor examined such statements and, accordingly, does not
express any opinion or any other form of assurance with respect to, assumes no
responsibility for, and disclaims any association with, such statements. While
presented with numerical specificity, such statements are based upon a variety
of assumptions, which may not be realized, relating to the future business and
operations of Arch and MobileMedia and the integration of their operations and
are subject to significant uncertainties and contingencies, all of which are
difficult to predict and many of which are beyond the control of Arch and
MobileMedia. NONE OF ARCH, ANY OF THE DEBTORS, ANY OF THE STANDBY PURCHASERS,
ANY MEMBER OF THE UNSECURED CREDITORS COMMITTEE, HOULIHAN LOKEY, BLACKSTONE, MR.
NEWMAN OR ANY OF THEIR RESPECTIVE PROFESSIONALS (AS APPLICABLE) MAKES ANY
EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY AS TO THE ATTAINABILITY OF THE
PROJECTED OR HYPOTHETICAL FINANCIAL INFORMATION OR VALUATION DATA SET FORTH IN
THE FORWARD LOOKING STATEMENTS CONTAINED HEREIN OR AS TO THE ACCURACY OR
COMPLETENESS OF THE ASSUMPTIONS FROM WHICH SUCH PROJECTED OR HYPOTHETICAL
INFORMATION OR VALUATION DATA IS DERIVED.
* * * * *
21
<PAGE>
EXHIBIT 99.3
THIRD AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This Third Amendment, dated as of February 8, 1999 (this "Amendment"), to
the Agreement and Plan of Merger, dated as of August 18, 1998 (as amended by the
First Amendment thereto dated as of September 3, 1998 and the Second Amendment
thereto dated as of December 1, 1998, the "Merger Agreement"), by and among Arch
Communications Group, Inc. (the "Buyer"), Farm Team Corp. (the "Merger
Subsidiary"), MobileMedia Corporation (the "Parent") and MobileMedia
Communications, Inc. (the "Company"). Terms used herein with initial capital
letters that are not otherwise defined shall have the meanings ascribed to such
terms in the Merger Agreement.
PRELIMINARY STATEMENT
A. The Buyer, the Merger Subsidiary, the Parent and the Company have
entered into the Merger Agreement.
B. The Buyer, the Merger Subsidiary, the Parent and the Company desire to
amend the Merger Agreement as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:
1. Amendment of Section 1.2. Section 1.2 of the Merger Agreement is
------------------------
hereby amended (i) to delete the phrase "seven, but no more than ten, business
days" in the first sentence thereof and replace such phrase with the phrase "one
business day" and (ii) to delete the reference to "twelve" in the second
sentence thereof and replace such reference with a reference to "ten".
2. Amendment of Article IV. Article IV of the Merger Agreement (as
-----------------------
heretofore amended) is hereby amended to add the following Sections 4.23 and
4.24 at the end thereof:
4.23 Year-End Financial Statements. As promptly as practicable after
-----------------------------
they become available (and, in any event, at least two business days prior
to the Closing Date), the Buyer will deliver to the Parent and the Company
the audited consolidated balance sheet of the Buyer and the Buyer
Subsidiaries as of December 31, 1998 and the related audited consolidated
statements of operations, stockholders' equity or deficit and cash flows
for the year ended December 31, 1998 (collectively, the "Buyer 1998 Audited
Financial Statements"), accompanied by:
(a) an audit report (that is unqualified and contains no explanatory
paragraphs) of Arthur Andersen LLP ("AA"), the Buyer's
independent public accountants, relating to the Buyer 1998
Audited Financial Statements stating that, in the opinion of AA,
the Buyer 1998 Audited Financial Statements present fairly, in
all material respects, the consolidated financial position of the
Buyer and the Buyer Subsidiaries as of December 31, 1998 and the
results of their operations for the year
<PAGE>
ended December 31, 1998, in conformity with GAAP (the "AA 1998
Audit Report"); and
(b) a certificate (the "1998 Financial Statement Certificate") signed
by the chief financial officer of the Buyer, on behalf of the
Buyer:
(i) stating that (A) the Buyer 1998 Audited Financial Statements
were prepared in accordance with GAAP and present fairly the
consolidated financial position of the Buyer and the Buyer
Subsidiaries as of December 31, 1998 and the consolidated
results of operations and cash flows for the year ended
December 31, 1998, and (B) neither the Buyer nor any Buyer
Subsidiary has any liability (whether known or unknown,
whether absolute or contingent, whether liquidated or
unliquidated, whether due or to become due), except for (x)
liabilities separately shown or expressly reserved on the
balance sheet included in the Buyer 1998 Audited Financial
Statements, (y) liabilities that have arisen since December
31, 1998 in the Ordinary Course of Business of the Buyer or
any Buyer Subsidiary and that are similar in nature and
amount to the liabilities that arose during the comparable
period of time in the immediately preceding fiscal period,
and (z) liabilities incurred in the Ordinary Course of
Business of the Buyer or any Buyer Subsidiary that are not
required by GAAP to be reflected on the balance sheet
included in the Buyer 1998 Audited Financial Statements and
that are not in the aggregate material; and
(ii) setting forth (A) the Buyer's earnings before interest,
taxes, depreciation and amortization (net of restructuring
charges, write-off of capitalized software, equity in loss
of affiliates, income tax benefit, interest and non-
operating expenses (net) and extraordinary items) ("Buyer
1998 Adjusted EBITDA") for the fiscal year ended December
31, 1998, as derived from the Buyer 1998 Audited Financial
Statements and (B) the calculation thereof.
4.24 AA Letter. As promptly as practicable (and, in any event, at
---------
least two business days prior to the Closing Date), the Buyer will cause AA
to deliver to the Parent and the Company a letter dated as of a date on or
after February 8, 1999 and on or prior to the date which is two business
days prior to the Closing Date, addressed to the Parent and the Company
(the "AA Letter"), which letter shall be either:
(a) if the Parent and the Company provide to AA representation
letters, opinions of counsel or other documentation required to
be provided by an addressee of a so-called "comfort letter" under
applicable accounting guidelines, including without limitation
Statement on Auditing
-2-
<PAGE>
Standards No. 72, as amended by Statements on Auditing Standards
Nos. 76 and 86, and AU Section 634 (collectively, the
"AA-Required Documentation"), in form, scope and substance
substantially similar to the letter expected to be delivered by
AA to the underwriters, placement agents or initial purchasers of
securities in connection with the issuance of debt securities by
the Buyer as part of its financing for the transactions
contemplated hereby, a draft of which is attached hereto as
Exhibit M, except that such letter shall refer to the
---------
Registration Statement on Form S-4 (File No. 333-62211) rather
than the offering memorandum relating to such issuance of debt;
or
(b) if the Parent and the Company do not provide to AA the AA-
Required Documentation, in substantially in the form of the
letter attached hereto as Exhibit N; provided that the Parent and
---------
the Company shall have provided to AA a letter in substantially
in the form of the letter attached hereto as Exhibit O.
---------
3. Amendment to Article V. Article V of the Merger Agreement (as
----------------------
heretofore amended) is hereby amended (i) to delete the "and" after the
semicolon at the end of subsection (d) of Section 5.3 thereof, (ii) to replace
the period at the end of subsection (e) of Section 5.3 thereof with a semicolon,
and (iii) to add the following subsections (f) and (g) at the end of Section 5.3
thereof:
(f) The Buyer shall have delivered to the Parent and the Company (i)
the Buyer 1998 Audited Financial Statements, accompanied by the AA 1998
Audit Report and the 1998 Financial Statement Certification, in accordance
with Section 4.23 and (ii) the AA Letter in accordance with Section 4.24;
and
(g) Buyer 1998 Adjusted EBITDA shall have been not less than $136.5
million.
4. Continuation of Merger Agreement. Except as specifically amended
--------------------------------
hereby, the Merger Agreement shall continue in full force and effect and is
hereby ratified and confirmed in all respects. From and after the execution and
delivery of this Amendment, each reference in the Merger Agreement to "this
Agreement," "hereunder," "hereof," "herein" and words of like import shall be
deemed to refer to the Merger Agreement as amended by this Amendment.
5. Governing Law. This Amendment shall be governed by and construed in
-------------
accordance with the internal laws (and not the law of conflicts) of the State of
Delaware.
6. Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-3-
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date
first above written.
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ J. Roy Pottle
----------------------------
Name: J. Roy Pottle
----------------------
Title: Executive Vice President and
Chief Financial Officer
-----------------------------
FARM TEAM CORP.
By: /s/ J. Roy Pottle
----------------------------
Name: J. Roy Pottle
----------------------
Title: Executive Vice President and
Chief Financial Officer
-----------------------------
SUBJECT TO THE RECEIPT OF THE CONFIRMATION ORDER
FROM THE BANKRUPTCY COURT WITH RESPECT TO THE
AMENDED PLAN:
MOBILEMEDIA CORPORATION
By: /s/ Joseph A. Bondi
----------------------------
Name: Joseph A. Bondi
----------------------
Title: Chairman Restructuring
-----------------------
MOBILEMEDIA COMMUNICATIONS, INC.
By: /s/ Joseph A. Bondi
----------------------------
Name: Joseph A. Bondi
----------------------
Title: Chairman Restructuring
-----------------------
-4-
<PAGE>
EXHIBIT 99.4
W.R. HUFF ASSET MANAGEMENT CO., L.L.C.
67 Park Place, Ninth Floor
Morristown, New Jersey 07960
February 8, 1999
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Amendment to Commitment
-----------------------
Gentlemen:
Reference is made to the letter agreement, dated August 18, 1998 (as
amended pursuant to the letter agreements dated September 3, 1998 and December
1, 1998, the "Standby Commitment Letter"), among Arch Communications Group,
Inc., MobileMedia Communications, Inc. and W. R. Huff Asset Management Co.,
L.L.C. Terms used herein with initial capital letters that are not otherwise
defined shall have the meanings ascribed to such terms in the Standby Commitment
Letter.
The parties hereto hereby agree as follows:
1. New Sections 5(m) and 5(n). Section 5 of the Standby Commitment
--------------------------
Letter is hereby amended (i) to replace the period at the end of subsection (l)
of Section 5 thereof with a semicolon and (ii) to add the following subsections
(m) and (n) at the end of Section 5 thereof:
(m) Arch shall have delivered to the Standby Purchaser (i) the Arch
1998 Audited Financial Statements (as defined in Section 10(j) below),
accompanied by the AA 1998 Audit Report (as defined in Section 10(j) below)
and the 1998 Financial Statement Certification (as defined in Section 10(j)
below), in accordance with Section 10(j) and (ii) the AA Letter (as defined
in Section 10(k) below) in accordance with Section 10(k); and
(n) Arch 1998 Adjusted EBITDA (as defined in Section 10(j) below)
shall have been not less than $136.5 million.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
2. Amendment to Section 10(f). Section 10(f) of the Standby Commitment
--------------------------
Letter is hereby amended to delete the reference to "$100,000" and to substitute
therefor a reference to "$150,000".
3. New Sections 10(j) and 10(k). Section 10 of the Standby Commitment
----------------------------
Letter is hereby amended to add the following subsections (j) and (k) at the end
thereof:
(j) Year-End Financial Statements. As promptly as practicable after
-----------------------------
they become available (and, in any event, at least two business days prior
to the Closing Date), Arch will deliver to the Standby Purchaser the
audited consolidated balance sheet of Arch and the Buyer Subsidiaries as of
December 31, 1998 and the related audited consolidated statements of
operations, stockholders' equity or deficit and cash flows for the year
ended December 31, 1998 (collectively, the "Arch 1998 Audited Financial
Statements"), accompanied by:
(i) an audit report (that is unqualified and contains no explanatory
paragraphs) of Arthur Andersen LLP ("AA"), Arch's independent
public accountants, relating to the Arch 1998 Audited Financial
Statements stating that, in the opinion of AA, the Arch 1998
Audited Financial Statements present fairly, in all material
respects, the consolidated financial position of Arch and the
Buyer Subsidiaries as of December 31, 1998 and the results of
their operations for the year ended December 31, 1998, in
conformity with GAAP (the "AA 1998 Audit Report"); and
(ii) a certificate (the "1998 Financial Statement Certificate") signed
by the chief financial officer of Arch, on behalf of Arch:
(A) stating that (I) the Arch 1998 Audited Financial Statements
were prepared in accordance with GAAP and present fairly the
consolidated financial position of Arch and the Buyer
Subsidiaries as of December 31, 1998 and the consolidated
results of operations and cash flows for the year ended
December 31, 1998, and (II) neither Arch nor any Buyer
Subsidiary has any liability (whether known or unknown,
whether absolute or contingent, whether liquidated or
unliquidated, whether due or to become due), except for (x)
liabilities separately shown or expressly reserved on the
balance sheet included in the Arch 1998 Audited Financial
Statements, (y) liabilities that have arisen since December
31, 1998 in the Ordinary Course of Business of Arch or any
Buyer Subsidiary and that are similar in nature and amount
to the liabilities that arose during the comparable period
of time in the immediately preceding fiscal period, and (z)
liabilities incurred in the Ordinary Course of Business of
Arch or any Buyer
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
Subsidiary that are not required by GAAP to be reflected on
the balance sheet included in the Arch 1998 Audited
Financial Statements and that are not in the aggregate
material; and
(B) setting forth (I) Arch's earnings before interest, taxes,
depreciation and amortization (net of restructuring charges,
write-off of capitalized software, equity in loss of
affiliates, income tax benefit, interest and non-operating
expenses (net) and extraordinary items) ("Arch 1998 Adjusted
EBITDA") for the fiscal year ended December 31, 1998, as
derived from the Arch 1998 Audited Financial Statements and
(II) the calculation thereof.
(k) AA Letter. As promptly as practicable (and, in any event, at
---------
least two business days prior to the Closing Date), Arch will cause AA to
deliver to the Standby Purchaser a letter dated as of a date on or after
February 8, 1999 and on or prior to the date which is two business days
prior to the Closing Date, addressed to the Standby Purchaser (the "AA
Letter"), which letter shall be either:
(i) if the Standby Purchaser provides to AA a representation letter
(substantially in the form of the letter attached hereto as
Exhibit L), together with an opinion of counsel and any other
---------
documentation required to be provided by an addressee of a so-
called "comfort letter" under applicable accounting guidelines,
including without limitation Statement on Auditing Standards No.
72, as amended by Statements on Auditing Standards Nos. 76 and
86, and AU Section 634 (collectively, the "AA-Required
Documentation"), in form, scope and substance substantially
similar to the letter expected to be delivered by AA to the
underwriters, placement agents or initial purchasers of
securities in connection with the issuance of debt securities by
Arch as part of its financing for the transactions contemplated
by the Merger Agreement, a draft of which is attached hereto as
Exhibit M, except that such letter shall refer to the
---------
Registration Statement on Form S-4 (File No. 333-62211) rather
than the offering memorandum relating to such issuance of debt;
or
(ii) if the Standby Purchaser does not provide to AA the AA-Required
Documentation, in substantially the form of the letter attached
hereto as Exhibit N; provided that the Standby Purchaser shall
---------
have provided to AA a letter substantially in the form of the
letter attached hereto as Exhibit O.
---------
4. Continuation of Standby Commitment Letter. Except as specifically
-----------------------------------------
amended hereby and subject to paragraph 6 below, the Standby Commitment Letter
shall continue in full force and effect and is hereby certified and confirmed in
all respects.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
5. Consent to Amendments. The Standby Purchaser hereby (a) consents to
---------------------
the amendments to the Other Standby Purchase Commitments to be effected by the
letter agreements attached as Exhibit C-3 hereto, which amendments shall be
-----------
entered into simultaneously herewith, (b) consents to the Third Amendment dated
as of February 8, 1999 to the Merger Agreement and each of the exhibits,
schedules and annexes, if any, attached thereto, and (c) agrees that the form
and substance thereof are reasonably satisfactory to the Standby Purchaser.
6. No Waiver. Nothing herein shall be deemed to constitute a waiver by
---------
any party of any default, misrepresentation or breach of warranty or covenant or
any failure to satisfy any condition (including, without limitation, the
conditions set forth in Sections 5 and 6 of the Standby Commitment Letter) that
may exist under the Standby Commitment Letter.
7. Governing Law. This letter agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard to
its principles of conflicts of law.
8. Counterparts. This letter agreement may be executed in counterparts
------------
which, taken together, shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
If the foregoing accurately reflects your understanding with respect to the
matters set forth herein, please confirm by executing and returning a copy of
this letter to the undersigned, whereupon this letter will become a valid and
binding obligation of each party hereto.
Very truly yours,
W. R. Huff Asset Management Co., L.L.C.
By: /s/ Bryan E. Bloom
------------------------------
Name: Bryan E. Bloom, Esq.
Its: Attorney-in-Fact
Address: 67 Park Place, 9th Floor
Morristown, NJ 07960
Attention: Cathy Markey, Esq.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
ACCEPTED AND AGREED TO:
Arch Communications Group, Inc.
By: /s/ J. Roy Pottle
---------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
Subject to entry of the Confirmation Order:
MobileMedia Communications, Inc.
By: /s/ Joseph A. Bondi
---------------------------------
Name: Joseph A. Bondi
Its: Chairman-Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman-Restructuring
With a copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, NY 10022
Attn: James D. Johnson
<PAGE>
NORTHWESTERN MUTUAL SERIES FUND, INC.
for the High Yield Bond Portfolio
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
February 8, 1999
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Amendment to Commitment
-----------------------
Gentlemen:
Reference is made to the letter agreement, dated August 18, 1998 (as
amended pursuant to the letter agreements dated September 3, 1998 and December
1, 1998, the "Standby Commitment Letter"), among Arch Communications Group,
Inc., MobileMedia Communications, Inc. and Northwestern Mutual Series Fund, Inc.
for the High Yield Bond Portfolio. Terms used herein with initial capital
letters that are not otherwise defined shall have the meanings ascribed to such
terms in the Standby Commitment Letter.
The parties hereto hereby agree as follows:
1. New Sections 5(m) and 5(n). Section 5 of the Standby Commitment
--------------------------
Letter is hereby amended (i) to replace the period at the end of subsection (l)
of Section 5 thereof with a semicolon and (ii) to add the following subsections
(m) and (n) at the end of Section 5 thereof:
(m) Arch shall have delivered to the Standby Purchaser (i) the Arch
1998 Audited Financial Statements (as defined in Section 10(j) below),
accompanied by the AA 1998 Audit Report (as defined in Section 10(j) below)
and the 1998 Financial Statement Certification (as defined in Section 10(j)
below), in accordance with Section 10(j) and (ii) the AA Letter (as defined
in Section 10(k) below) in accordance with Section 10(k); and
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
(n) Arch 1998 Adjusted EBITDA (as defined in Section 10(j) below)
shall have been not less than $136.5 million.
2. Amendment to Section 10(f). Section 10(f) of the Standby Commitment
--------------------------
Letter is hereby amended to delete the reference to "$100,000" and to substitute
therefor a reference to "$150,000".
3. New Sections 10(j) and 10(k). Section 10 of the Standby Commitment
----------------------------
Letter is
hereby amended to add the following subsections (j) and (k) at the end thereof:
(j) Year-End Financial Statements. As promptly as practicable after
-----------------------------
they become available (and, in any event, at least two business days prior
to the Closing Date), Arch will deliver to the Standby Purchaser the
audited consolidated balance sheet of Arch and the Buyer Subsidiaries as of
December 31, 1998 and the related audited consolidated statements of
operations, stockholders' equity or deficit and cash flows for the year
ended December 31, 1998 (collectively, the "Arch 1998 Audited Financial
Statements"), accompanied by:
(i) an audit report (that is unqualified and contains no
explanatory paragraphs) of Arthur Andersen LLP ("AA"),
Arch's independent public accountants, relating to the
Arch 1998 Audited Financial Statements stating that, in
the opinion of AA, the Arch 1998 Audited Financial
Statements present fairly, in all material respects, the
consolidated financial position of Arch and the Buyer
Subsidiaries as of December 31, 1998 and the results of
their operations for the year ended December 31, 1998, in
conformity with GAAP (the "AA 1998 Audit Report"); and
(ii) a certificate (the "1998 Financial Statement Certificate")
signed by the chief financial officer of Arch, on behalf
of Arch:
(A) stating that (I) the Arch 1998 Audited Financial
Statements were prepared in accordance with GAAP and
present fairly the consolidated financial position of
Arch and the Buyer Subsidiaries as of December 31,
1998 and the consolidated results of operations and
cash flows for the year ended December 31, 1998, and
(II) neither Arch nor any Buyer Subsidiary has any
liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated,
whether due or to become due), except for (x)
liabilities separately shown or expressly reserved on
the balance sheet included in the Arch 1998 Audited
Financial Statements, (y) liabilities that have
arisen since December 31, 1998 in the Ordinary Course
of Business of Arch or any Buyer
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
Subsidiary and that are similar in nature and amount
to the liabilities that arose during the comparable
period of time in the immediately preceding fiscal
period, and (z) liabilities incurred in the Ordinary
Course of Business of Arch or any Buyer Subsidiary
that are not required by GAAP to be reflected on the
balance sheet included in the Arch 1998 Audited
Financial Statements and that are not in the
aggregate material; and
(B) setting forth (I) Arch's earnings before interest,
taxes, depreciation and amortization (net of
restructuring charges, write-off of capitalized
software, equity in loss of affiliates, income tax
benefit, interest and non-operating expenses (net)
and extraordinary items) ("Arch 1998 Adjusted
EBITDA") for the fiscal year ended December 31, 1998,
as derived from the Arch 1998 Audited Financial
Statements and (II) the calculation thereof.
(k) AA Letter. As promptly as practicable (and, in any event, at
---------
least two business days prior to the Closing Date), Arch will cause AA to
deliver to the Standby Purchaser a letter dated as of a date on or after
February 8, 1999 and on or prior to the date which is two business days
prior to the Closing Date, addressed to the Standby Purchaser (the "AA
Letter"), which letter shall be either:
(i) if the Standby Purchaser provides to AA a representation letter
(substantially in the form of the letter attached hereto as
Exhibit L), together with an opinion of counsel and any other
---------
documentation required to be provided by an addressee of a so-
called "comfort letter" under applicable accounting guidelines,
including without limitation Statement on Auditing Standards No.
72, as amended by Statements on Auditing Standards Nos. 76 and
86, and AU Section 634 (collectively, the "AA-Required
Documentation"), in form, scope and substance substantially
similar to the letter expected to be delivered by AA to the
underwriters, placement agents or initial purchasers of
securities in connection with the issuance of debt securities by
Arch as part of its financing for the transactions contemplated
by the Merger Agreement, a draft of which is attached hereto as
Exhibit M, except that such letter shall refer to the
---------
Registration Statement on Form S-4 (File No. 333-62211) rather
than the offering memorandum relating to such issuance of debt;
or
(ii) if the Standby Purchaser does not provide to AA the AA-Required
Documentation, in substantially the form of the letter attached
hereto as Exhibit N; provided that the Standby Purchaser shall
---------
have provided to AA a letter substantially in the form of the
letter attached hereto as Exhibit O.
---------
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
4. Continuation of Standby Commitment Letter. Except as specifically
-----------------------------------------
amended hereby and subject to paragraph 6 below, the Standby Commitment Letter
shall continue in full force and effect and is hereby certified and confirmed in
all respects.
5. Consent to Amendments. The Standby Purchaser hereby (a) consents to
---------------------
the amendments to the Other Standby Purchase Commitments to be effected by the
letter agreements attached as Exhibit C-3 hereto, which amendments shall be
-----------
entered into simultaneously herewith, (b) consents to the Third Amendment dated
as of February 8, 1999 to the Merger Agreement and each of the exhibits,
schedules and annexes, if any, attached thereto, and (c) agrees that the form
and substance thereof are reasonably satisfactory to the Standby Purchaser.
6. No Waiver. Nothing herein shall be deemed to constitute a waiver by
---------
any party of any default, misrepresentation or breach of warranty or covenant or
any failure to satisfy any condition (including, without limitation, the
conditions set forth in Sections 5 and 6 of the Standby Commitment Letter) that
may exist under the Standby Commitment Letter.
7. Governing Law. This letter agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard to
its principles of conflicts of law.
8. Counterparts. This letter agreement may be executed in counterparts
------------
which, taken together, shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
If the foregoing accurately reflects your understanding with respect to the
matters set forth herein, please confirm by executing and returning a copy of
this letter to the undersigned, whereupon this letter will become a valid and
binding obligation of each party hereto.
Very truly yours,
Northwestern Mutual Series Fund, Inc.
for the High Yield Bond Portfolio
By: /s/ Steven P. Swanson
-----------------------------------
Name: Steven P. Swanson
Its: Vice President
Address: c/o The Northwestern Mutual Life
Insurance Company
720 E. Wisconsin Avenue
Milwaukee, WI 53202
Attention: Securities Department
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
ACCEPTED AND AGREED TO:
Arch Communications Group, Inc.
By: /s/ J. Roy Pottle
------------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
Subject to entry of the Confirmation Order:
MobileMedia Communications, Inc.
By: /s/ Joseph A. Bondi
------------------------------------
Name: Joseph A. Bondi
Its: Chairman-Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman-Restructuring
With a copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, NY 10022
Attn: James D. Johnson
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
February 8, 1999
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Amendment to Commitment
-----------------------
Gentlemen:
Reference is made to the letter agreement, dated August 18, 1998 (as
amended pursuant to the letter agreements dated September 3, 1998 and December
1, 1998, the "Standby Commitment Letter"), among Arch Communications Group,
Inc., MobileMedia Communications, Inc. and The Northwestern Mutual Life
Insurance Company. Terms used herein with initial capital letters that are not
otherwise defined shall have the meanings ascribed to such terms in the Standby
Commitment Letter.
The parties hereto hereby agree as follows:
1. New Sections 5(m) and 5(n). Section 5 of the Standby Commitment
--------------------------
Letter is hereby amended (i) to replace the period at the end of subsection (l)
of Section 5 thereof with a semicolon and (ii) to add the following subsections
(m) and (n) at the end of Section 5 thereof:
(m) Arch shall have delivered to the Standby Purchaser (i) the Arch
1998 Audited Financial Statements (as defined in Section 10(j) below),
accompanied by the AA 1998 Audit Report (as defined in Section 10(j) below)
and the 1998 Financial Statement Certification (as defined in Section 10(j)
below), in accordance with Section 10(j) and (ii) the AA Letter (as defined
in Section 10(k) below) in accordance with Section 10(k); and
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
(n) Arch 1998 Adjusted EBITDA (as defined in Section 10(j) below)
shall have been not less than $136.5 million.
2. Amendment to Section 10(f). Section 10(f) of the Standby Commitment
--------------------------
Letter is hereby amended to delete the reference to "$100,000" and to substitute
therefor a reference to "$150,000".
3. New Sections 10(j) and 10(k). Section 10 of the Standby Commitment
----------------------------
Letter is hereby amended to add the following subsections (j) and (k) at the end
thereof:
(j) Year-End Financial Statements. As promptly as practicable after
-----------------------------
they become available (and, in any event, at least two business days prior
to the Closing Date), Arch will deliver to the Standby Purchaser the
audited consolidated balance sheet of Arch and the Buyer Subsidiaries as of
December 31, 1998 and the related audited consolidated statements of
operations, stockholders' equity or deficit and cash flows for the year
ended December 31, 1998 (collectively, the "Arch 1998 Audited Financial
Statements"), accompanied by:
(i) an audit report (that is unqualified and contains no explanatory
paragraphs) of Arthur Andersen LLP ("AA"), Arch's independent
public accountants, relating to the Arch 1998 Audited Financial
Statements stating that, in the opinion of AA, the Arch 1998
Audited Financial Statements present fairly, in all material
respects, the consolidated financial position of Arch and the
Buyer Subsidiaries as of December 31, 1998 and the results of
their operations for the year ended December 31, 1998, in
conformity with GAAP (the "AA 1998 Audit Report"); and
(ii) a certificate (the "1998 Financial Statement Certificate") signed
by the chief financial officer of Arch, on behalf of Arch:
(A) stating that (I) the Arch 1998 Audited Financial Statements
were prepared in accordance with GAAP and present fairly the
consolidated financial position of Arch and the Buyer
Subsidiaries as of December 31, 1998 and the consolidated
results of operations and cash flows for the year ended
December 31, 1998, and (II) neither Arch nor any Buyer
Subsidiary has any liability (whether known or unknown,
whether absolute or contingent, whether liquidated or
unliquidated, whether due or to become due), except for (x)
liabilities separately shown or expressly reserved on the
balance sheet included in the Arch 1998 Audited Financial
Statements, (y) liabilities that have arisen since December
31, 1998 in the Ordinary Course of Business of Arch or any
Buyer Subsidiary and that are similar in nature and amount
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
to the liabilities that arose during the comparable period
of time in the immediately preceding fiscal period, and (z)
liabilities incurred in the Ordinary Course of Business of
Arch or any Buyer Subsidiary that are not required by GAAP
to be reflected on the balance sheet included in the Arch
1998 Audited Financial Statements and that are not in the
aggregate material; and
(B) setting forth (I) Arch's earnings before interest, taxes,
depreciation and amortization (net of restructuring charges,
write-off of capitalized software, equity in loss of
affiliates, income tax benefit, interest and non-operating
expenses (net) and extraordinary items) ("Arch 1998 Adjusted
EBITDA") for the fiscal year ended December 31, 1998, as
derived from the Arch 1998 Audited Financial Statements and
(II) the calculation thereof.
(k) AA Letter. As promptly as practicable (and, in any event, at
---------
least two business days prior to the Closing Date), Arch will cause AA to
deliver to the Standby Purchaser a letter dated as of a date on or after
February 8, 1999 and on or prior to the date which is two business days
prior to the Closing Date, addressed to the Standby Purchaser (the "AA
Letter"), which letter shall be either:
(i) if the Standby Purchaser provides to AA a representation letter
(substantially in the form of the letter attached hereto as
Exhibit L), together with an opinion of counsel and any other
---------
documentation required to be provided by an addressee of a so-
called "comfort letter" under applicable accounting guidelines,
including without limitation Statement on Auditing Standards No.
72, as amended by Statements on Auditing Standards Nos. 76 and
86, and AU Section 634 (collectively, the "AA-Required
Documentation"), in form, scope and substance substantially
similar to the letter expected to be delivered by AA to the
underwriters, placement agents or initial purchasers of
securities in connection with the issuance of debt securities by
Arch as part of its financing for the transactions contemplated
by the Merger Agreement, a draft of which is attached hereto as
Exhibit M, except that such letter shall refer to the
---------
Registration Statement on Form S-4 (File No. 333-62211) rather
than the offering memorandum relating to such issuance of debt;
or
(ii) if the Standby Purchaser does not provide to AA the AA-Required
Documentation, in substantially the form of the letter attached
hereto as Exhibit N; provided that the Standby Purchaser shall
---------
have provided to AA a letter substantially in the form of the
letter attached hereto as Exhibit O.
---------
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
4. Continuation of Standby Commitment Letter. Except as specifically
-----------------------------------------
amended hereby and subject to paragraph 6 below, the Standby Commitment Letter
shall continue in full force and effect and is hereby certified and confirmed in
all respects.
5. Consent to Amendments. The Standby Purchaser hereby (a) consents to
---------------------
the amendments to the Other Standby Purchase Commitments to be effected by the
letter agreements attached as Exhibit C-3 hereto, which amendments shall be
-----------
entered into simultaneously herewith, (b) consents to the Third Amendment dated
as of February 8, 1999 to the Merger Agreement and each of the exhibits,
schedules and annexes, if any, attached thereto, and (c) agrees that the form
and substance thereof are reasonably satisfactory to the Standby Purchaser.
6. No Waiver. Nothing herein shall be deemed to constitute a waiver by
---------
any party of any default, misrepresentation or breach of warranty or covenant or
any failure to satisfy any condition (including, without limitation, the
conditions set forth in Sections 5 and 6 of the Standby Commitment Letter) that
may exist under the Standby Commitment Letter.
7. Governing Law. This letter agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard to
its principles of conflicts of law.
8. Counterparts. This letter agreement may be executed in counterparts
------------
which, taken together, shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
If the foregoing accurately reflects your understanding with respect to the
matters set forth herein, please confirm by executing and returning a copy of
this letter to the undersigned, whereupon this letter will become a valid and
binding obligation of each party hereto.
Very truly yours,
The Northwestern Mutual Life
Insurance Company
By: /s/ Steven P. Swanson
------------------------------
Name: Steven P. Swanson
Its: Authorized Representative
Address: 720 E. Wisconsin Avenue
Milwaukee, WI 53202
Attention: Securities Department
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
ACCEPTED AND AGREED TO:
Arch Communications Group, Inc.
By: /s/ J. Roy Pottle
--------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
Subject to entry of the Confirmation Order:
MobileMedia Communications, Inc.
By: /s/ Joseph A. Bondi
--------------------------------
Name: Joseph A. Bondi
Its: Chairman-Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman-Restructuring
With a copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, NY 10022
Attn: James D. Johnson
<PAGE>
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
for its Group Annuity Separate Account
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
February 8, 1999
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Amendment to Commitment
-----------------------
Gentlemen:
Reference is made to the letter agreement, dated August 18, 1998 (as
amended pursuant to the letter agreements dated September 3, 1998 and December
1, 1998, the "Standby Commitment Letter"), among Arch Communications Group,
Inc., MobileMedia Communications, Inc. and The Northwestern Mutual Life
Insurance Company for its Group Annuity Separate Account. Terms used herein
with initial capital letters that are not otherwise defined shall have the
meanings ascribed to such terms in the Standby Commitment Letter.
The parties hereto hereby agree as follows:
1. New Sections 5(m) and 5(n). Section 5 of the Standby Commitment
--------------------------
Letter is hereby amended (i) to replace the period at the end of subsection (l)
of Section 5 thereof with a semicolon and (ii) to add the following subsections
(m) and (n) at the end of Section 5 thereof:
(m) Arch shall have delivered to the Standby Purchaser (i) the Arch
1998 Audited Financial Statements (as defined in Section 10(j) below),
accompanied by the AA 1998 Audit Report (as defined in Section 10(j) below)
and the 1998 Financial Statement Certification (as defined in Section 10(j)
below), in accordance with Section 10(j) and (ii) the AA Letter (as defined
in Section 10(k) below) in accordance with Section 10(k); and
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
(n) Arch 1998 Adjusted EBITDA (as defined in Section 10(j) below)
shall have been not less than $136.5 million.
2. Amendment to Section 10(f). Section 10(f) of the Standby Commitment
--------------------------
Letter is hereby amended to delete the reference to "$100,000" and to substitute
therefor a reference to "$150,000".
3. New Sections 10(j) and 10(k). Section 10 of the Standby Commitment
----------------------------
Letter is hereby amended to add the following subsections (j) and (k) at the end
thereof:
(j) Year-End Financial Statements. As promptly as practicable after
-----------------------------
they become available (and, in any event, at least two business days prior
to the Closing Date), Arch will deliver to the Standby Purchaser the
audited consolidated balance sheet of Arch and the Buyer Subsidiaries as of
December 31, 1998 and the related audited consolidated statements of
operations, stockholders' equity or deficit and cash flows for the year
ended December 31, 1998 (collectively, the "Arch 1998 Audited Financial
Statements"), accompanied by:
(i) an audit report (that is unqualified and contains no
explanatory paragraphs) of Arthur Andersen LLP ("AA"),
Arch's independent public accountants, relating to the
Arch 1998 Audited Financial Statements stating that, in
the opinion of AA, the Arch 1998 Audited Financial
Statements present fairly, in all material respects, the
consolidated financial position of Arch and the Buyer
Subsidiaries as of December 31, 1998 and the results of
their operations for the year ended December 31, 1998, in
conformity with GAAP (the "AA 1998 Audit Report"); and
(ii) a certificate (the "1998 Financial Statement Certificate")
signed by the chief financial officer of Arch, on behalf
of Arch:
(A) stating that (I) the Arch 1998 Audited Financial
Statements were prepared in accordance with GAAP and
present fairly the consolidated financial position of
Arch and the Buyer Subsidiaries as of December 31,
1998 and the consolidated results of operations and
cash flows for the year ended December 31, 1998, and
(II) neither Arch nor any Buyer Subsidiary has any
liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated,
whether due or to become due), except for (x)
liabilities separately shown or expressly reserved on
the balance sheet included in the Arch 1998 Audited
Financial Statements, (y) liabilities that have
arisen since December 31, 1998 in the Ordinary Course
of Business of Arch or any Buyer
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
Subsidiary and that are similar in nature and amount
to the liabilities that arose during the comparable
period of time in the immediately preceding fiscal
period, and (z) liabilities incurred in the Ordinary
Course of Business of Arch or any Buyer Subsidiary
that are not required by GAAP to be reflected on the
balance sheet included in the Arch 1998 Audited
Financial Statements and that are not in the
aggregate material; and
(B) setting forth (I) Arch's earnings before interest,
taxes, depreciation and amortization (net of
restructuring charges, write-off of capitalized
software, equity in loss of affiliates, income tax
benefit, interest and non-operating expenses (net)
and extraordinary items) ("Arch 1998 Adjusted
EBITDA") for the fiscal year ended December 31, 1998,
as derived from the Arch 1998 Audited Financial
Statements and (II) the calculation thereof.
(k) AA Letter. As promptly as practicable (and, in any event, at
---------
least two business days prior to the Closing Date), Arch will cause AA to
deliver to the Standby Purchaser a letter dated as of a date on or after
February 8, 1999 and on or prior to the date which is two business days
prior to the Closing Date, addressed to the Standby Purchaser (the "AA
Letter"), which letter shall be either:
(i) if the Standby Purchaser provides to AA a representation
letter (substantially in the form of the letter attached
hereto as Exhibit L), together with an opinion of counsel
---------
and any other documentation required to be provided by an
addressee of a so-called "comfort letter" under applicable
accounting guidelines, including without limitation
Statement on Auditing Standards No. 72, as amended by
Statements on Auditing Standards Nos. 76 and 86, and AU
Section 634 (collectively, the "AA-Required
Documentation"), in form, scope and substance
substantially similar to the letter expected to be
delivered by AA to the underwriters, placement agents or
initial purchasers of securities in connection with the
issuance of debt securities by Arch as part of its
financing for the transactions contemplated by the
Merger Agreement, a draft of which is attached hereto as
Exhibit M, except that such letter shall refer to the
---------
Registration Statement on Form S-4 (File No. 333-62211)
rather than the offering memorandum relating to such
issuance of debt; or
(ii) if the Standby Purchaser does not provide to AA the AA-
Required Documentation, in substantially the form of the
letter attached hereto as Exhibit N; provided that the
---------
Standby Purchaser shall have provided to AA a letter
substantially in the form of the letter attached hereto as
Exhibit O.
---------
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
4. Continuation of Standby Commitment Letter. Except as specifically
-----------------------------------------
amended hereby and subject to paragraph 6 below, the Standby Commitment Letter
shall continue in full force and effect and is hereby certified and confirmed in
all respects.
5. Consent to Amendments. The Standby Purchaser hereby (a) consents to
---------------------
the amendments to the Other Standby Purchase Commitments to be effected by the
letter agreements attached as Exhibit C-3 hereto, which amendments shall be
-----------
entered into simultaneously herewith, (b) consents to the Third Amendment dated
as of February 8, 1999 to the Merger Agreement and each of the exhibits,
schedules and annexes, if any, attached thereto, and (c) agrees that the form
and substance thereof are reasonably satisfactory to the Standby Purchaser.
6. No Waiver. Nothing herein shall be deemed to constitute a waiver by
---------
any party of any default, misrepresentation or breach of warranty or covenant or
any failure to satisfy any condition (including, without limitation, the
conditions set forth in Sections 5 and 6 of the Standby Commitment Letter) that
may exist under the Standby Commitment Letter.
7. Governing Law. This letter agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard to
its principles of conflicts of law.
8. Counterparts. This letter agreement may be executed in counterparts
------------
which, taken together, shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
If the foregoing accurately reflects your understanding with respect to the
matters set forth herein, please confirm by executing and returning a copy of
this letter to the undersigned, whereupon this letter will become a valid and
binding obligation of each party hereto.
Very truly yours,
The Northwestern Mutual Life
Insurance Company
for its Group Annuity Separate Account
By: Northwestern Investment
Management Company
By: /s/ Steven P. Swanson
--------------------------------------
Name: Steven P. Swanson
Its: Managing Director
Address: 720 E. Wisconsin Avenue
Milwaukee, WI 53202
Attention: Securities
Department
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
ACCEPTED AND AGREED TO:
Arch Communications Group, Inc.
By: /s/ J. Roy Pottle
------------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
Subject to entry of the Confirmation Order:
MobileMedia Communications, Inc.
By: /s/ Joseph A. Bondi
------------------------------------
Name: Joseph A. Bondi
Its: Chairman-Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman-Restructuring
With a copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, NY 10022
Attn: James D. Johnson
<PAGE>
WHIPPOORWILL ASSOCIATES, INC.
11 Martine Avenue
White Plains, New York 10606
February 8, 1999
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Amendment to Commitment
-----------------------
Gentlemen:
Reference is made to the letter agreement, dated August 18, 1998 (as
amended pursuant to the letter agreements dated September 3, 1998 and December
1, 1998, the "Standby Commitment Letter"), among Arch Communications Group,
Inc., MobileMedia Communications, Inc. and Whippoorwill Associates, Inc. Terms
used herein with initial capital letters that are not otherwise defined shall
have the meanings ascribed to such terms in the Standby Commitment Letter.
The parties hereto hereby agree as follows:
1. New Sections 5(m) and 5(n). Section 5 of the Standby Commitment
--------------------------
Letter is hereby amended (i) to replace the period at the end of subsection (l)
of Section 5 thereof with a semicolon and (ii) to add the following subsections
(m) and (n) at the end of Section 5 thereof:
(m) Arch shall have delivered to the Standby Purchaser (i) the Arch
1998 Audited Financial Statements (as defined in Section 10(j) below),
accompanied by the AA 1998 Audit Report (as defined in Section 10(j) below)
and the 1998 Financial Statement Certification (as defined in Section 10(j)
below), in accordance with Section 10(j) and (ii) the AA Letter (as defined
in Section 10(k) below) in accordance with Section 10(k); and
(n) Arch 1998 Adjusted EBITDA (as defined in Section 10(j) below)
shall have been not less than $136.5 million.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
2. Amendment to Section 10(f). Section 10(f) of the Standby Commitment
--------------------------
Letter is hereby amended to delete the reference to "$100,000" and to substitute
therefor a reference to "$150,000".
3. New Sections 10(j) and 10(k). Section 10 of the Standby Commitment
----------------------------
Letter is hereby amended to add the following subsections (j) and (k) at the end
thereof:
(j) Year-End Financial Statements. As promptly as practicable after
-----------------------------
they become available (and, in any event, at least two business days prior
to the Closing Date), Arch will deliver to the Standby Purchaser the
audited consolidated balance sheet of Arch and the Buyer Subsidiaries as of
December 31, 1998 and the related audited consolidated statements of
operations, stockholders' equity or deficit and cash flows for the year
ended December 31, 1998 (collectively, the "Arch 1998 Audited Financial
Statements"), accompanied by:
(i) an audit report (that is unqualified and contains no explanatory
paragraphs) of Arthur Andersen LLP ("AA"), Arch's independent
public accountants, relating to the Arch 1998 Audited Financial
Statements stating that, in the opinion of AA, the Arch 1998
Audited Financial Statements present fairly, in all material
respects, the consolidated financial position of Arch and the
Buyer Subsidiaries as of December 31, 1998 and the results of
their operations for the year ended December 31, 1998, in
conformity with GAAP (the "AA 1998 Audit Report"); and
(ii) a certificate (the "1998 Financial Statement Certificate") signed
by the chief financial officer of Arch, on behalf of Arch:
(A) stating that (I) the Arch 1998 Audited Financial Statements
were prepared in accordance with GAAP and present fairly the
consolidated financial position of Arch and the Buyer
Subsidiaries as of December 31, 1998 and the consolidated
results of operations and cash flows for the year ended
December 31, 1998, and (II) neither Arch nor any Buyer
Subsidiary has any liability (whether known or unknown,
whether absolute or contingent, whether liquidated or
unliquidated, whether due or to become due), except for (x)
liabilities separately shown or expressly reserved on the
balance sheet included in the Arch 1998 Audited Financial
Statements, (y) liabilities that have arisen since December
31, 1998 in the Ordinary Course of Business of Arch or any
Buyer Subsidiary and that are similar in nature and amount
to the liabilities that arose during the comparable period
of time in the immediately preceding fiscal period, and (z)
liabilities incurred in the Ordinary Course of Business of
Arch or any Buyer
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
Subsidiary that are not required by GAAP to be reflected on
the balance sheet included in the Arch 1998 Audited
Financial Statements and that are not in the aggregate
material; and
(B) setting forth (I) Arch's earnings before interest, taxes,
depreciation and amortization (net of restructuring charges,
write-off of capitalized software, equity in loss of
affiliates, income tax benefit, interest and non-operating
expenses (net) and extraordinary items) ("Arch 1998 Adjusted
EBITDA") for the fiscal year ended December 31, 1998, as
derived from the Arch 1998 Audited Financial Statements and
(II) the calculation thereof.
(k) AA Letter. As promptly as practicable (and, in any event, at
---------
least two business days prior to the Closing Date), Arch will cause AA to
deliver to the Standby Purchaser a letter dated as of a date on or after
February 8, 1999 and on or prior to the date which is two business days
prior to the Closing Date, addressed to the Standby Purchaser (the "AA
Letter"), which letter shall be either:
(i) if the Standby Purchaser provides to AA a representation letter
(substantially in the form of the letter attached hereto as
Exhibit L), together with an opinion of counsel and any other
---------
documentation required to be provided by an addressee of a so-
called "comfort letter" under applicable accounting guidelines,
including without limitation Statement on Auditing Standards No.
72, as amended by Statements on Auditing Standards Nos. 76 and
86, and AU Section 634 (collectively, the "AA-Required
Documentation"), in form, scope and substance substantially
similar to the letter expected to be delivered by AA to the
underwriters, placement agents or initial purchasers of
securities in connection with the issuance of debt securities by
Arch as part of its financing for the transactions contemplated
by the Merger Agreement, a draft of which is attached hereto as
Exhibit M, except that such letter shall refer to the
---------
Registration Statement on Form S-4 (File No. 333-62211) rather
than the offering memorandum relating to such issuance of debt;
or
(ii) if the Standby Purchaser does not provide to AA the AA-Required
Documentation, in substantially the form of the letter attached
hereto as Exhibit N; provided that the Standby Purchaser shall
---------
have provided to AA a letter substantially in the form of the
letter attached hereto as Exhibit O.
---------
4. Continuation of Standby Commitment Letter. Except as specifically
-----------------------------------------
amended hereby and subject to paragraph 6 below, the Standby Commitment Letter
shall continue in full force and effect and is hereby certified and confirmed in
all respects.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
5. Consent to Amendments. The Standby Purchaser hereby (a) consents to
---------------------
the amendments to the Other Standby Purchase Commitments to be effected by the
letter agreements attached as Exhibit C-3 hereto, which amendments shall be
-----------
entered into simultaneously herewith, (b) consents to the Third Amendment dated
as of February 8, 1999 to the Merger Agreement and each of the exhibits,
schedules and annexes, if any, attached thereto, and (c) agrees that the form
and substance thereof are reasonably satisfactory to the Standby Purchaser.
6. No Waiver. Nothing herein shall be deemed to constitute a waiver by
---------
any party of any default, misrepresentation or breach of warranty or covenant or
any failure to satisfy any condition (including, without limitation, the
conditions set forth in Sections 5 and 6 of the Standby Commitment Letter) that
may exist under the Standby Commitment Letter.
7. Governing Law. This letter agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard to
its principles of conflicts of law.
8. Counterparts. This letter agreement may be executed in counterparts
------------
which, taken together, shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
If the foregoing accurately reflects your understanding with respect to the
matters set forth herein, please confirm by executing and returning a copy of
this letter to the undersigned, whereupon this letter will become a valid and
binding obligation of each party hereto.
Very truly yours,
Whippoorwill Associates, Inc.,
as general partner of and/or agent for,
each Whippoorwill Account
By: /s/ David Strumwasser
-----------------------------
Name: David Strumwasser
Its: Managing Director
Address: 11 Martine Avenue
White Plains, NY 10606
Attention: David Strumwasser
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
ACCEPTED AND AGREED TO:
Arch Communications Group, Inc.
By: /s/ J. Roy Pottle
--------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
Subject to entry of the Confirmation Order:
MobileMedia Communications, Inc.
By: /s/ Joseph A. Bondi
--------------------------------
Name: Joseph A. Bondi
Its: Chairman-Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman-Restructuring
With a copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, NY 10022
Attn: James D. Johnson
<PAGE>
CREDIT SUISSE FIRST BOSTON CORPORATION
11 Madison Avenue, Fourth Floor
New York, New York 10010
February 8, 1999
Arch Communications Group, Inc.
1800 West Park Drive
Suite 250
Westborough, Massachusetts 01581
MobileMedia Communications, Inc.
Fort Lee Executive Park
One Executive Drive
Suite 500
Fort Lee, New Jersey 07024
Re: Amendment to Commitment
-----------------------
Gentlemen:
Reference is made to the letter agreement, dated August 18, 1998 (as
amended pursuant to the letter agreements dated September 3, 1998 and December
1, 1998, the "Standby Commitment Letter"), among Arch Communications Group,
Inc., MobileMedia Communications, Inc. and Credit Suisse First Boston
Corporation. Terms used herein with initial capital letters that are not
otherwise defined shall have the meanings ascribed to such terms in the Standby
Commitment Letter.
The parties hereto hereby agree as follows:
1. New Sections 5(m) and 5(n). Section 5 of the Standby Commitment
--------------------------
Letter is hereby amended (i) to replace the period at the end of subsection (l)
of Section 5 thereof with a semicolon and (ii) to add the following subsections
(m) and (n) at the end of Section 5 thereof:
(m) Arch shall have delivered to the Standby Purchaser (i) the Arch
1998 Audited Financial Statements (as defined in Section 10(j) below),
accompanied by the AA 1998 Audit Report (as defined in Section 10(j) below)
and the 1998 Financial Statement Certification (as defined in Section 10(j)
below), in accordance with Section 10(j) and (ii) the AA Letter (as defined
in Section 10(k) below) in accordance with Section 10(k); and
(n) Arch 1998 Adjusted EBITDA (as defined in Section 10(j) below)
shall have been not less than $136.5 million.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 2
2. Amendment to Section 10(f). Section 10(f) of the Standby Commitment
--------------------------
Letter is hereby amended to delete the reference to "$100,000" and to substitute
therefor a reference to "$150,000".
3. New Sections 10(j) and 10(k). Section 10 of the Standby Commitment
----------------------------
Letter is hereby amended to add the following subsections (j) and (k) at the end
thereof:
(j) Year-End Financial Statements. As promptly as practicable after
-----------------------------
they become available (and, in any event, at least two business days prior
to the Closing Date), Arch will deliver to the Standby Purchaser the
audited consolidated balance sheet of Arch and the Buyer Subsidiaries as of
December 31, 1998 and the related audited consolidated statements of
operations, stockholders' equity or deficit and cash flows for the year
ended December 31, 1998 (collectively, the "Arch 1998 Audited Financial
Statements"), accompanied by:
(i) an audit report (that is unqualified and contains no
explanatory paragraphs) of Arthur Andersen LLP ("AA"),
Arch's independent public accountants, relating to the
Arch 1998 Audited Financial Statements stating that, in
the opinion of AA, the Arch 1998 Audited Financial
Statements present fairly, in all material respects, the
consolidated financial position of Arch and the Buyer
Subsidiaries as of December 31, 1998 and the results of
their operations for the year ended December 31, 1998, in
conformity with GAAP (the "AA 1998 Audit Report"); and
(ii) a certificate (the "1998 Financial Statement Certificate")
signed by the chief financial officer of Arch, on behalf
of Arch:
(A) stating that (I) the Arch 1998 Audited Financial
Statements were prepared in accordance with GAAP and
present fairly the consolidated financial position of
Arch and the Buyer Subsidiaries as of December 31,
1998 and the consolidated results of operations and
cash flows for the year ended December 31, 1998, and
(II) neither Arch nor any Buyer Subsidiary has any
liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated,
whether due or to become due), except for (x)
liabilities separately shown or expressly reserved on
the balance sheet included in the Arch 1998 Audited
Financial Statements, (y) liabilities that have
arisen since December 31, 1998 in the Ordinary Course
of Business of Arch or any Buyer Subsidiary and that
are similar in nature and amount to the liabilities
that arose during the comparable period of time in
the immediately preceding fiscal period, and (z)
liabilities incurred in the Ordinary Course of
Business of Arch or any Buyer Subsidiary that are not
required by GAAP to be reflected on the balance sheet
included in the Arch 1998 Audited Financial
Statements and that are not in the aggregate
material; and
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 3
(B) setting forth (I) Arch's earnings before interest,
taxes, depreciation and amortization (net of
restructuring charges, write-off of capitalized
software, equity in loss of affiliates, income tax
benefit, interest and non-operating expenses (net)
and extraordinary items) ("Arch 1998 Adjusted
EBITDA") for the fiscal year ended December 31, 1998,
as derived from the Arch 1998 Audited Financial
Statements and (II) the calculation thereof.
(k) AA Letter. As promptly as practicable (and, in any event, at
---------
least two business days prior to the Closing Date), Arch will cause AA to
deliver to the Standby Purchaser a letter dated as of a date on or after
February 8, 1999 and on or prior to the date which is two business days
prior to the Closing Date, addressed to the Standby Purchaser (the "AA
Letter"), which letter shall be either:
(i) if the Standby Purchaser provides to AA a representation
letter (substantially in the form of the letter attached
hereto as Exhibit L), together with an opinion of counsel
---------
and any other documentation required to be provided by
an addressee of a so-called "comfort letter" under
applicable accounting guidelines, including without
limitation Statement on Auditing Standards No. 72, as
amended by Statements on Auditing Standards Nos. 76 and
86, and AU Section 634 (collectively, the "AA-Required
Documentation"), in form, scope and substance
substantially similar to the letter expected to be
delivered by AA to the underwriters, placement agents or
initial purchasers of securities in connection with the
issuance of debt securities by Arch as part of its
financing for the transactions contemplated by the Merger
Agreement, a draft of which is attached hereto as
Exhibit M, except that such letter shall refer to the
---------
Registration Statement on Form S-4 (File No. 333-62211)
rather than the offering memorandum relating to such
issuance of debt; or
(ii) if the Standby Purchaser does not provide to AA the AA-
Required Documentation, in substantially the form of the
letter attached hereto as Exhibit N; provided that the
---------
Standby Purchaser shall have provided to AA a letter
substantially in the form of the letter attached hereto as
Exhibit O.
---------
4. Continuation of Standby Commitment Letter. Except as specifically
-----------------------------------------
amended hereby and subject to paragraph 6 below, the Standby Commitment Letter
shall continue in full force and effect and is hereby certified and confirmed in
all respects.
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 4
5. Consent to Amendments. The Standby Purchaser hereby (a) consents to
---------------------
the amendments to the Other Standby Purchase Commitments to be effected by the
letter agreements attached as Exhibit C-3 hereto, which amendments shall be
-----------
entered into simultaneously herewith, (b) consents to the Third Amendment dated
as of February 8, 1999 to the Merger Agreement and each of the exhibits,
schedules and annexes, if any, attached thereto, and (c) agrees that the form
and substance thereof are reasonably satisfactory to the Standby Purchaser.
6. No Waiver. Nothing herein shall be deemed to constitute a waiver by
---------
any party of any default, misrepresentation or breach of warranty or covenant or
any failure to satisfy any condition (including, without limitation, the
conditions set forth in Sections 5 and 6 of the Standby Commitment Letter) that
may exist under the Standby Commitment Letter.
7. Governing Law. This letter agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard to
its principles of conflicts of law.
8. Counterparts. This letter agreement may be executed in counterparts
------------
which, taken together, shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 5
If the foregoing accurately reflects your understanding with respect to the
matters set forth herein, please confirm by executing and returning a copy of
this letter to the undersigned, whereupon this letter will become a valid and
binding obligation of each party hereto.
Very truly yours,
Credit Suisse First Boston Corporation
By: /s/ Alex Lagetko
--------------------------------------
Name: Alex Lagetko
Its: Director
Address: 11 Madison Avenue
New York, NY 10010
Attention: David J. Matlin
Alex Lagetko
With a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attn: Michael J. Sage
<PAGE>
Arch Communications Group, Inc.
MobileMedia Communications, Inc.
Page 6
ACCEPTED AND AGREED TO:
Arch Communications Group, Inc.
By: /s/ J. Roy Pottle
------------------------------
Name: J. Roy Pottle
Its: Executive Vice President and
Chief Financial Officer
Address: 1800 West Park Drive, Suite 250
Westborough, MA 01581
Attn: Chairman and Chief
Executive Officer
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Jay E. Bothwick
Subject to entry of the Confirmation Order:
MobileMedia Communications, Inc.
By: /s/ Joseph A. Bondi
------------------------------
Name: Joseph A. Bondi
Its: Chairman-Restructuring
Address: Fort Lee Executive Park
One Executive Drive, Suite 500
Fort Lee, NJ 07024
Attn: Chairman-Restructuring
With a copy to: Sidley & Austin
875 Third Avenue, Suite 1400
New York, NY 10022
Attn: James D. Johnson
<PAGE>
EXHIBIT 99.5
NEWS RELEASE
================================================================================
For Immediate Release Contact: Robert W. Lougee, Jr. (508) 870-6771
- --------------------- -------
Tuesday, March 2, 1999 Vice President
Corporate Communications & Investor Relations
Arch Reports Higher Operating Results for Fourth Quarter
--------------------------------------------------------
EBITDA Exceeds $36 Million; Net Unit Additions Total 65,000
Westborough, MA (March 2, 1999) --- Arch Communications Group, Inc.
(Nasdaq:APGR) today announced improved operating results and total units in
service for the fourth quarter and year ended December 31, 1998, compared to the
year-earlier periods.
Arch said fourth quarter operating cash flow, or Earnings Before Interest,
Taxes, Depreciation and Amortization (EBITDA), increased six percent to
$36,054,000, compared to $33,901,000 reported in the fourth quarter of 1997,
despite the negative impact from the sale of Arch's site management business.
The Company's EBITDA margin (EBITDA divided by net revenues) increased to 37.6
percent for the fourth quarter, compared to 36.0 percent in year-earlier
quarter.
Net revenues for the fourth quarter rose to $95,908,000, compared to $94,128,000
reported in the fourth quarter a year ago. Service revenues for the fourth
quarter of 1998 totaled $93,328,000, compared to $90,374,000 in the same quarter
of 1997. Equipment margin (product sales less cost of goods sold) was
$2,580,000, compared to $3,754,000 in the year-earlier quarter as essentially
flat product sales were adversely impacted by higher costs.
"We are pleased with Arch's overall operating performance for the quarter and
1998," said C. Edward Baker, Jr., chairman and chief executive officer. "While
the sector continued to shift its focus from traditional to advanced messaging,
we experienced improved operating and financial results from our traditional
paging operations despite the negative impact from the sale of our site
management business."
<PAGE>
Baker added that the Company's organizational restructuring program initiated
last June gained substantial momentum during the quarter, resulting in a
significant reduction in operating expenses. "We are tremendously encouraged by
our restructuring efforts to date," he said, "and anticipate further progress as
we continue to implement this program throughout 1999." Baker also noted that
free cash flow from operations increased more than 90 percent during 1998 to
$51,911,000 from $27,296,000 in 1997.
Arch added 65,000 net paging units in service during the fourth quarter,
bringing total units in service at yearend 1998 to 4,276,000, a 10 percent gain
from yearend 1997. Arch added 386,000 net units in service during 1998, all
through internal growth.
For the full year 1998, Arch reported net revenues of $383,682,000, an increase
of four percent from the $367,683,000 reported in 1997. EBITDA for 1998
increased nine percent to $141,587,000 from $130,332,000 in the prior year.
EBITDA margin for the full year improved to 36.9 percent from 35.4 percent.
Fourth quarter net loss to common stockholders was $48,736,000, compared to
$39,024,000 a year earlier. Similar to other paging companies, net losses are
largely the result of high levels of interest on debt used to finance growth as
well as depreciation and amortization expenses associated with network
equipment, pagers and acquisitions.
Baker said Arch's pending acquisition of MobileMedia Corporation, announced last
August, is expected to close in the second quarter. The combination with
MobileMedia will make Arch the second largest paging and wireless messaging
company in the United States and expand its sales and service operations to all
50 states. Baker added: "The transaction also will significantly strengthen
Arch's balance sheet and create substantial opportunities for growth, especially
in the rapidly growing area of advanced messaging."
Separately, Arch's Board of Directors has set May 18, 1999 as the date of the
Company's annual meeting of shareholders.
<PAGE>
Arch Communications Group, Inc., Westborough, MA, is the third largest paging
company in the United States. Founded in 1986, it provides narrowband wireless
messaging services, principally paging, and has more than four million units in
service nationwide. Arch's 2,600 employees operate from approximately 175
offices and Company-owned stores nationwide. Additional information on Arch is
available on the Internet at www.arch.com.
------------
Safe harbor statement under the Private Securities Litigation Reform Act of
1995: Statements contained in this news release which are not historical fact,
such as forward-looking statements concerning future financial performance and
growth, involve risks and uncertainties, including those described in Arch's
most recent Annual Report on Form 10-K. Although Arch believes the expectations
reflected in any forward-looking statements are based on reasonable assumptions,
it can give no assurance that its expectations will be attained. Factors that
could cause actual results to differ materially from its expectations include
the challenges of integrating the businesses of Arch and MobileMedia Corporation
which Arch has agreed to acquire by merger, the future capital needs following
the merger, the uncertainty of additional funding, and other risks. Any forward-
looking statements represent the best judgment of the Company as of the date of
this release. Arch disclaims any intent or obligation to update any forward-
looking statements.
Tables to Follow
<PAGE>
Financial Highlights
(In thousands, except for subscriber units, share and per share data)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
1998 1997 1998 1997
----------------- ------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net revenues (1) $ 95,908 $ 94,128 $ 383,682 $ 367,683
Total EBITDA (2) $ 36,054 $ 33,901 $ 141,587 $ 130,332
Margin (3) 37.6% 36.0% 36.9% 35.4%
Net income (loss) before extraordinary
charge $ (48,221) $ (39,024) $ (204,331) $ (181,874)
Extraordinary charge from early
extinguishment of debt (4) $ - $ - $ (1,720) $ -
Accretion of redeemable preferred stock $ - $ - $ - $ (32)
Preferred stock dividend (515) - (1,030) -
Net income (loss) to common stockholders $ (48,736) $ (39,024) $ (207,081) $ (181,906)
EBITDA per common share $ 1.71 $ 1.63 $ 6.74 $ 6.28
Net income (loss) per share before
extraordinary charge $ (2.31) $ (1.88) $ (9.78) $ (8.77)
Extraordinary charge per share $ - $ - $ (0.08) $ -
Net income (loss) per common share $ (2.31) $ (1.88) $ (9.86) $ (8.77)
Weighted average shares outstanding 21,067,110 20,777,427 20,993,192 20,746,240
Other Data:
Total shares outstanding, end of period 21,215,583 20,863,563 21,215,583 20,863,563
EBITDA from equipment sales (5) $ 2,580 $ 3,754 $ 12,528 $ 15,739
EBITDA from service (6) $ 33,474 $ 30,147 $ 129,059 $ 114,593
Margin on service (7) 35.9% 33.4% 34.8% 32.6%
Capital expenditures excluding deferred
financing costs $ 24,575 $ 26,773 $ 90,257 $ 103,036
Free cash flow from operations (8) $ 11,479 $ 7,128 $ 51,330 $ 27,296
Cash interest payable $ 15,281 $ 16,282 $ 64,624 $ 63,215
True free cash flow(9) $ (3,802) $ (9,154) $ (13,294) $ (35,919)
Beginning subscriber base 4,211,000 3,781,000 3,890,000 3,295,000
----------- ----------- ----------- -----------
Internal subscriber growth 65,000 109,000 386,000 595,000
Subscribers acquired - - - -
----------- ----------- ----------- -----------
Total subscriber additions 65,000 109,000 386,000 595,000
----------- ----------- ----------- -----------
Ending subscriber base 4,276,000 3,890,000 4,276,000 3,890,000
=========== =========== =========== ===========
</TABLE>
(1) Net revenues are the sum of service, rental and maintenance revenues, plus
product sales, less cost of products sold.
(2) EBITDA is Earnings Before Interest, Taxes, Depreciation and Amortization
and restructuring charge.
(3) Margin is EBITDA divided by net revenues.
(4) The extraordinary charge from early extinguishment of debt arose as a result
of a new credit facility.
(5) EBITDA from equipment sales is product sales less cost of products sold.
(6) EBITDA from service is EBITDA, less equipment margin.
(7) Margin on service is EBITDA from service, divided by service, rental and
maintenance revenues.
(8) Free cash flow from operations is EBITDA less capital expenditures excluding
deferring financing costs.
(9) True free cash flow is free cash flow from operations less cash interest
payable.
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 1,633 $ 3,328
Accounts receivable, net 30,753 30,147
Inventories 10,319 12,633
Prepaid expenses and other 8,007 4,917
---------- ----------
Total current assets 50,712 51,025
---------- ----------
Property and equipment, at cost 428,173 388,035
Less accumulated depreciation and amortization (209,128) (146,542)
---------- ----------
Property and equipment, net 219,045 241,493
---------- ----------
Intangible and other assets, net 634,528 728,202
---------- ----------
$ 904,285 $1,020,720
========== ==========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current maturities of long-term debt $ 1,250 $ 24,513
Accounts payable 25,683 22,486
Accrued restructuring 11,909 -
Accrued interest 20,997 11,249
Accrued expenses and other liabilities 27,175 26,831
---------- ----------
Total current liabilities 87,014 85,079
---------- ----------
Long-term debt, less current maturities 1,003,499 968,896
---------- ----------
Other long-term liabilities 27,235 -
---------- ----------
Stockholders' equity (deficit):
Preferred stock - $.01 par 3 -
Common stock - $.01 par 212 209
Additional paid-in capital 378,077 351,210
Accumulated deficit (591,755) (384,674)
---------- ----------
Total stockholders' equity (deficit) (213,463) (33,255)
---------- ----------
$ 904,285 $1,020,720
========== ==========
</TABLE>
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three and Twleve Months Ended December 31, 1998 and 1997
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
------------------------------------ -------------------------------------
1998 1997 1998 1997
----------------- ----------------- ----------------- ------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Service, rental, and maintenance
revenues $ 93,328 $ 90,374 $ 371,154 $ 351,944
Product sales 10,670 10,868 42,481 44,897
----------- ----------- ----------- -----------
Total revenues 103,998 101,242 413,635 396,841
Cost of products sold (8,090) (7,114) (29,953) (29,158)
----------- ----------- ----------- -----------
95,908 94,128 383,682 367,683
----------- ----------- ----------- -----------
Operating expenses:
Service, rental, and maintenance 19,970 20,609 80,782 79,836
Selling 12,230 12,455 49,132 51,474
General and administrative 27,654 27,163 112,181 106,041
Depreciation and amortization 56,326 52,430 221,316 232,347
Restructuring charge (1,400) - 14,700 -
----------- ----------- ----------- -----------
Total operating expenses 114,780 112,657 478,111 469,698
----------- ----------- ----------- -----------
Operating income (loss) (18,872) (18,529) (94,429) (102,015)
Interest expense, net (25,879) (24,723) (104,213) (97,159)
Equity in earnings (loss) of affiliate (3,470) (1,044) (5,689) (3,872)
----------- ----------- ----------- -----------
Income (loss) before income tax benefit
and extraordinary charge (48,221) (44,296) (204,331) (203,046)
Benefit from income taxes - 5,272 - 21,172
----------- ----------- ----------- -----------
Income (loss) before extraordinary
charge (48,221) (39,024) (204,331) (181,874)
Extraordinary charge from early
extinguishment of debt - - (1,720) -
----------- ----------- ----------- -----------
Net income (loss) (48,221) (39,024) (206,051) (181,874)
Accretion of redeemable preferred stock - - - (32)
Preferred stock dividend (515) - (1,030) -
----------- ----------- ----------- -----------
Net loss to common stockholders $ (48,736) $ (39,024) $ (207,081) $ (181,906)
=========== =========== =========== ===========
Net income (loss) before extraordinary
charge per common share $ (2.31) $ (1.88) $ (9.78) $ (8.77)
Extraordinary charge per common share - - (0.08) -
----------- ----------- ----------- -----------
Net income (loss) per common share $ (2.31) $ (1.88) $ (9.86) $ (8.77)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 21,067,110 20,777,427 20,993,192 20,746,240
=========== =========== =========== ===========
</TABLE>
<PAGE>
ARCH COMMUNICATIONS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve Months Ended December 31, 1998 and 1997
(unaudited and in thousands)
<TABLE>
<CAPTION>
1998 1997
------------------ -------------------
<S> <C> <C>
Net cash provided by operating activities $ 81,105 $ 63,590
--------- ---------
Cash flows from investing activities:
Net proceeds from tower site sale 30,316 -
Additions to property and equipment, net (79,249) (87,868)
Additions to intangible and other assets (33,935) (14,901)
--------- ---------
Net cash used for investing activities (82,868) (102,769)
--------- ---------
Cash flows from financing activities:
Issuance of long-term debt 460,964 91,000
Repayment of long-term debt (486,739) (49,046)
Repayment of redeemable preferred stock - (3,744)
Net proceeds from sale of common stock 25,000 -
Net proceeds from sale of common stock 843 800
--------- ---------
Net cash provided by financing activities 68 39,010
--------- ---------
Net (decrease) increase in cash and cash equivalents (1,695) (169)
Cash and cash equivalents, beginning of period 3,328 3,497
--------- ---------
Cash and cash equivalents, end of period $ 1,633 $ 3,328
========= =========
Supplemental disclosure:
Interest paid $ 57,151 $ 62,231
Accretion of discount on senior notes $ 37,115 $ 33,259
Accretion of redeemable preferred stock $ - $ 32
</TABLE>
