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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-K/A
Amendment No. 2 to
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
----- THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1995
or
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
----- THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from _________ to _________
Commission File No. 0-24436
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PAGEMART, INC.
(Exact name of registrant as specified in charter)
DELAWARE 75-2283921
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6688 NORTH CENTRAL EXPRESSWAY, SUITE 800
DALLAS, TEXAS 75206
(Address of principal executive offices)
(Registrant's telephone number, including area code): (214) 750-5809
-----------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
-----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
There is no established market for the registrant's common stock.
Accordingly, the registrant is unable to estimate the value of shares held by
non-affiliates. See Item 5 entitled "Market for the Registrant's Common Equity
and Related Stockholder Matters" for additional information concerning the
market for the registrant's common stock.
As of March 1, 1996, 100 shares of the Registrant's Common Stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
The registrant meets the conditions set forth in General Instruction
(J)(1)(a) and (b) of Form 10-K and is therefore filing this Form with the
reduced disclosure format.
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PART I
ITEM 1. BUSINESS
PageMart, Inc. (the "Company") offers local, multi-city, regional and
nationwide paging and other one-way wireless services in all 50 states, covering
90% of the population of the United States. The Company also provides services
in Puerto Rico, the U.S. Virgin Islands and the Bahamas, and has recently
initiated nationwide services in Canada. The Company employs a digital, state of
the art transmission network that is 100% FLEX[Registered] enabled, allowing
the use of high speed messaging technology thereby providing increased
transmission capacity.
The Company is the principal operating subsidiary of PageMart Wireless,
Inc. ("Wireless"), the Company's parent. For information concerning the
business of PageMart Wireless, Inc. and its subsidiaries, including the
Company, see Wireless' Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1995.
ITEM 2. PROPERTIES
The principal tangible assets of the Company are its paging network
equipment. Paging network equipment utilized by the Company includes paging
switching terminals, paging transmitters and a host of related equipment such
as satellite and digital link controllers, satellite dishes, antennas, cable,
etc. The Company continues to add equipment as it expands to new service
areas. To date, it has not experienced any difficulty or delay in obtaining
equipment as needed.
The Company generally leases the locations used for its transmission
facilities under operating leases. These leases, which are generally for five
years or less, currently provide for aggregate annual rental charges of
approximately $4.7 million. The Company does not anticipate difficulty in
renewing these leases or finding equally suitable alternate facilities on
acceptable terms. The Company also leases approximately 130,238 square feet of
office space for its corporate headquarters in Dallas, Texas, at an annual cost
of approximately $1.1 million and varying lesser amounts for local offices at
other locations. Aggregate annual rental charges under the Company's local
office leases are approximately $1.8 million.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various lawsuits arising in the normal course
of business. In management's opinion, the ultimate outcome of these lawsuits
will not have a material adverse effect on the results of operations or
financial condition of the Company.
On July 8, 1994, an action against the Company was filed in the United
States District Court for the Eastern District of New York by Universal Contact
Communications Inc., a former reseller of the Company's wireless messaging
devices. The Company terminated the reseller relationship due to a monetary
default by plaintiff. The Company subsequently contacted plaintiff's
customers in an effort to provide continued service directly through the
Company, and discontinued plaintiff's paging services. In the complaint,
plaintiff alleges, among other things, that the Company violated federal law by
making unsolicited advertisements, breached its contract with plaintiff,
slandered plaintiff, converted certain confidential information and trade
secrets, tortiously interfered with plaintiff's business and contractual
relations, and engaged in unfair competition. Plaintiff seeks, among other
things, compensatory damages of $500,000 with respect to each of the nine
causes of action included in the complaint, punitive damages of $5,000,000, and
various forms of injunctive relief. The Company is vigorously defending the
action. In management's opinion, the ultimate outcome of this lawsuit is not
expected to have a material adverse effect on the results of operations or
financial condition of the Company.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is currently no public market for the Company's common stock. As of
March 1, 1996, all of the Company's common stock was held by Wireless.
The Company has never declared or paid cash dividends on its common stock
and does not anticipate paying cash dividends to the holder of its common stock
in the foreseeable future. Under Section 4.05 of the Indenture (the "12 1/4 %
Indenture") related to the 12 1/4 % Senior Discount Notes due 2003 (the "12 1/4
% Notes") issued by the Company, neither the Company nor its subsidiaries are
permitted to pay dividends on their respective capital stock. The payment of
dividends on the Company's capital stock is also restricted by a financing
agreement with a vendor.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company for the three years ended December 31, 1995. This
discussion should be read in conjunction with the Company's Consolidated
Financial Statements and the notes thereto included elsewhere in this report.
GENERAL
The Company has constructed and operates a wireless messaging and
communications network and provides paging and other one-way wireless messaging
services to its subscribers. In addition, the Company sells and distributes
wireless messaging equipment to subscribers, retailers and resellers. The
Company earns recurring revenues from each subscriber in the form of fixed
periodic fees and incurs substantial operating expenses in offering its
services, including technical, customer service and general and administrative
expenses. See "-- Management's Presentation of Results of Operations."
Since commencing operations in 1990, the Company has invested heavily in
its wireless communications network and administrative infrastructure in order
to establish nationwide coverage, sales offices in major metropolitan areas,
customer service call centers and centralized administrative support functions.
The Company incurs substantial fixed operating costs related to its one-way
wireless communications infrastructure, which is designed to serve a much
larger subscriber base than the Company currently serves in order to
accommodate growth. In addition, the Company incurs substantial costs
associated with new subscriber additions. As a result, the Company has
generated significant net operating losses for each year of its operations.
See " --Management's Presentation of Results of Operations."
The Company's strategy is to expand its subscriber base as rapidly as
possible to increase cash flow through greater utilization of its nationwide
wireless communications network. From January 1, 1992 to December 31, 1995, the
number of units in service increased from 52,125 to 1,240,024. None of the
Company's growth is attributable to acquisitions. Given its growth strategy and
the substantial associated selling and marketing expenses, the Company expects
to continue to generate operating losses in 1996 from its one-way wireless
communications business. In addition, the Company plans to begin development
and implementation of two-way wireless messaging services during 1996, and
expects to incur additional operating losses during the start-up phase for such
services. The Company does not anticipate any significant revenues from
two-way services during 1996 or 1997, however it expects to generate
significant revenues with respect to two-way services in 1998. The Company's
ability to generate operating income is primarily dependent on its ability to
attain a sufficiently large installed subscriber base that generates recurring
revenues which offset the fixed operating costs of its wireless networks,
administration and selling and marketing expenses. The Company intends to
achieve this growth by promoting its customized paging and other wireless
messaging services through its national sales offices, retail distribution
channels, private brand strategic alliances with GTE Corporation,
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Southwestern Bell Mobile Systems, AT&T Wireless Services, Ameritech Mobile
Services, Inc. and long distance reseller EXCEL Telecommunications, Inc., and
international expansion.
Unlike most other paging carriers, the Company sells, rather than leases,
substantially all of the messaging equipment used by its subscribers. As a
result, the Company has much less capital invested in messaging equipment than
other paging carriers since it recoups a substantial portion of messaging
equipment costs upon sale to retailers and subscribers. This results in
significantly lower capital expenditures, depreciation and amortization than if
the Company leased such equipment to its subscribers. In addition, the
Company's financial results are much different than other paging carriers that
lease messaging equipment to subscribers because the Company recognizes the
cost of messaging equipment sold in connection with adding new subscribers at
the time of sale rather than capitalizing and depreciating the cost of
messaging equipment over periods ranging from three to five years as occurs
with paging carriers that lease messaging equipment to subscribers. However,
the Company expects to lease rather than sell a portion of its two-way
messaging units. In addition, the Company's retail distribution strategy
results in the recognition of expenses associated with messaging equipment
sales and other sales and marketing expenses in advance of new subscribers
being added to the base and generating revenues (as retailers carry inventory).
The Company sells its messaging equipment through multiple distribution
channels including direct sales, third party resellers, private brand strategic
alliances and local and national retail stores. Selling and marketing expenses
are primarily attributable to compensation paid to the Company's sales force,
advertising and marketing costs and to losses resulting from the fact that, for
competitive and marketing reasons, the Company generally sells each new unit
for less than its acquisition cost. The Company's accounting practices result
in selling and marketing expenses, including loss on sale of equipment, being
recorded at the time a unit is sold. Units sold by the Company during a given
month may exceed units activated and in service due to inventory stocking and
distribution strategies of the retailers. As a result, selling and marketing
expenses per net subscriber addition may fluctuate from period to period. In
general, the Company anticipates that, based on its recent experience, 90% of
its units sold through retail distribution channels will be activated and in
service within 75 days of shipment.
The Company derives its recurring revenue primarily from fixed periodic
fees for services that are not generally dependent on usage. Consequently, the
Company's ability to recoup its initial selling and marketing costs, to meet
operating expenses and to achieve profitability is dependent on the average
length of each customer's subscription period. As long as a subscriber
continues to utilize the Company's service, operating results benefit from the
recurring payments of the fixed fees without the incurrence of additional
selling expenses by the Company. Conversely, operating results are adversely
affected by customer disconnections. Each month a percentage of the Company's
existing customers have their service terminated for a variety of reasons,
including failure to pay, dissatisfaction with service and switching to a
competing service provider. The Company's average monthly disconnection rates
for the years ended December 31, 1993, 1994 and 1995 were 3.7%, 3.4% and 2.5%,
respectively.
More than 90% of the Company's Average Revenue Per Unit ("ARPU") is
attributable to fixed fees for airtime, coverage options and features. A
portion of the remainder of additional ARPU is dependent on usage.
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RESULTS OF OPERATIONS
The Company's principal operations to date are its one-way domestic
wireless messaging division. The following discussion of results of operations
analyzes the results of the Company's one-way wireless messaging operations,
unless otherwise indicated.
Certain of the following financial information is presented on a per unit
basis. Management of the Company believes that such a presentation is useful in
understanding the Company's results because it is a meaningful comparison
period to period given the Company's growth rate and the significant
differences in the number of subscribers of other paging companies.
FISCAL YEARS 1993, 1994 AND 1995
Units in Service
Units in service were 327,303, 772,730 and 1,240,024 as of December 31,
1993, 1994 and 1995, respectively. This represents a growth rate of 136% and
60% in 1994 and 1995, respectively. The Company has experienced strong growth
in units in service due primarily to the success of its sales and marketing
strategies in the direct sales, national retail and third-party reseller
channels, as well as from private brand strategic alliance programs. According
to industry sources, the paging industry in general has experienced growth
rates of 29%, 38% and 25% for 1993, 1994 and 1995, respectively.
Revenues
Revenues for the fiscal years 1993, 1994 and 1995 were $50.7 million,
$109.8 million and $159.2 million, respectively. Recurring revenues for
airtime, voicemail and other services for the same periods were $24.2 million,
$56.6 million and $101.5 million, respectively. Revenues from equipment sales
and activation fees for 1993, 1994 and 1995 were $26.5 million, $53.2 million
and $57.7 million, respectively. The increases in recurring revenues and
revenues from equipment sales and activation fees were primarily due to rapid
growth in the number of units in service. The increase in equipment sales
during 1995 was somewhat offset by a decline in the average price per unit
sold.
The Company's ARPU was $9.81, $8.64 and $8.62 in the final quarter of
1993, 1994 and 1995, respectively. The Company's ARPU declined in 1994 and 1995
primarily as a result of an increase in subscribers added through third-party
resellers and distribution through private brand strategic alliance programs,
both of which yield lower ARPU. ARPU is lower for subscribers added through
third-party resellers and private brand strategic alliances because these are
generally high volume customers that are charged reduced airtime rates.
However, because third-party resellers and private brand strategic alliance
partners are responsible for selling and marketing costs to the end-user, and
billing, collection and other administrative costs associated with end-users,
the Company does not incur these costs with respect to such subscribers. The
decrease in 1995 was slightly offset by a higher mix of multi-city, regional
and nationwide services as well as increased sales of other value-added
services such as voicemail and toll free numbers.
Cost of Equipment Sold
The cost of equipment sold in 1993, 1994 and 1995 was $28.2 million, $57.8
million and $64.0 million, respectively. The increase was directly related to
the increase in the number of units sold partially offset by lower average
pager prices paid to suppliers.
Operating Expenses
Technical expenses were $9.5 million, $16.2 million and $25.5 million in
1993, 1994 and 1995, respectively. The increase resulted primarily from the
expansion of the Company's nationwide network infrastructure, which resulted in
greater expenses associated with the addition of new transmitter sites,
transmitter
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and terminal equipment and telecommunications expenses. On an
average monthly cost per unit in service basis, technical expenses were $3.55,
$2.45 and $2.11 in 1993, 1994 and 1995, respectively. The per unit decreases
were the result of increased operating efficiencies and economies of scale
experienced with the growth of the Company's subscriber base.
Selling expenses in 1993, 1994 and 1995 were $17.3 million, $31.3 million
and $36.1 million, respectively. This increase resulted from greater marketing
and advertising costs related to the significant growth in units sold as well
as from increased sales compensation because of the addition of sales personnel
in new and existing operating markets. During the years ended December 31,
1993, 1994 and 1995, the Company added 210,269, 445,427 and 467,294 net new
units in service, respectively. Sales and marketing employees increased from
305 at December 31, 1993 to 450 at December 31, 1994 and then decreased to 445
at December 31, 1995. Management believes the net loss on equipment sold to be
a component of selling and marketing expenses incurred to add new subscribers.
See "--Management's Presentation of Results of Operations." Selling and
marketing expenses per net subscriber addition (including loss on equipment
sales) were $91, $81 and $91 for the years ended December 31, 1993, 1994 and
1995, respectively. The increase in 1995 was due to the addition of new sales
offices, expansion of existing sales offices and an increase in the number of
retail stores supported by the Company's marketing organization.
General and administrative expenses (including costs associated with
customer service, field administration and corporate headquarters) in 1993,
1994 and 1995 were $15.6 million, $29.8 million and $43.4 million,
respectively. This increase was attributable to the Company's expansion of its
customer service call centers and continued expansion into new markets to
support the growing subscriber base which required additional office space,
administrative personnel and customer service representatives. The Company
increased the number of representatives in its customer service call centers
from 69 on December 31, 1993 to 389 on December 31, 1994 and to 600 on December
31, 1995, and believes it operates one of the most extensive of such facilities
in the paging industry. On an average cost per month per unit in service basis,
general and administrative expenses were $5.84, $4.52 and $3.59 in 1993, 1994
and 1995, respectively. The per unit decreases were a result of increased
operating efficiencies and economies of scale achieved through the growth of
the Company's subscriber base.
Depreciation and amortization in 1993, 1994 and 1995 was $5.1 million,
$8.1 million and $13.3 million, respectively. The increases resulted from the
expansion of the Company's network infrastructure including transmitter and
terminal equipment, as well as the purchase and development of a new
centralized administrative system in 1995. As an average cost per month per
unit in service, depreciation and amortization was $1.91, $1.23 and $1.10 for
the years ended December 31, 1993, 1994 and 1995, respectively.
Interest Expense
Interest expense increased from $6.5 million in 1993 to $12.9 million in
1994 and $15.2 million in 1995. The increase in 1994 was due to interest
related to the 12 1/4% Notes, partially offset by decreased borrowings under
vendor financing agreements. The increase in 1995 was primarily the result of
increased interest related to the 12 1/4% Notes, as well as increased
borrowings under vendor financing agreements. Interest expense related to the
12 1/4% Notes was $2.0 million, $10.8 million and $11.8 million in 1993, 1994
and 1995, respectively.
Net Loss
The Company sustained net losses in 1993, 1994 and 1995 of $31.1 million,
$45.8 million and $38.5 million, respectively, principally due to the cost of
funding the growth rate of the Company's subscriber base which resulted in an
increase in units sold, selling and marketing expenses, operating expenses and
interest expense.
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MANAGEMENT'S PRESENTATION OF RESULTS OF OPERATIONS
COMPARISON WITH GAAP PRESENTATION
The Company's audited Consolidated Financial Statements for the years
ended December 31, 1993, 1994 and 1995, included elsewhere in this report, have
been prepared in accordance with generally accepted accounting principles
("GAAP"). For internal management purposes the Company prepares statements of
operations that are derived from the Company's GAAP financial statements but
are reordered in a format that management uses for its internal review of the
Company's performance and that management believes are useful in understanding
the Company's results.
Management believes that operating profit before selling expenses is a
meaningful indicator of the profitability of the Company's installed base of
units in service because it measures the recurring revenues received for
services less the costs (including depreciation and amortization) associated
with servicing that installed base. Operating profit before selling expenses
per subscriber per month for the Company's one-way operations has grown from
$(.46) during the first quarter of 1994 to $2.11 during the fourth quarter of
1995 due primarily to the Company's increase in subscribers, operating
efficiency and resulting benefits in economies of scale.
Separately, selling and marketing expenses (including loss on equipment
sold) provide a measure of the costs associated with obtaining new subscribers
that the Company needs to generate the incremental recurring revenue necessary
to achieve profitability. Under the GAAP presentation, recurring revenues and
equipment and activation revenues are aggregated and are not separately
compared to the costs associated with each.
The items included in management's presentation of the results of
operations and their derivation from financial information presented in
accordance with GAAP are described below.
Recurring Revenues. Recurring revenues include periodic fees for
airtime, voicemail, customized coverage options, toll free numbers, excess
usage fees and other recurring revenues and fees associated with the
subscriber base. Recurring revenues do not include equipment sales revenues
or initial activation fees. Recurring revenues are the same under both the
management and GAAP presentations.
Service Expenses. Service expenses under the management presentation
include technical, customer service, general and administrative and
headquarters expenses, but do not include selling and marketing expenses,
depreciation or amortization.
Depreciation and Amortization. This item is the same under the
management and GAAP presentations.
Operating Profit Before Selling Expenses. Operating profit before
selling expenses under the management presentation is equal to recurring
revenues less service expenses and depreciation and amortization.
Operating profit before selling expenses is not derived pursuant to GAAP.
Selling Expenses. Selling expenses under the management presentation
represent the cost to the Company of selling pagers and other messaging
units to a customer, and are equal to selling costs (sales compensation,
advertising, marketing, etc.) plus costs of units sold less revenues from
equipment sales and activation fees. As described above, the Company sells
rather than leases substantially all of the one-way messaging equipment
used by subscribers. Selling expenses under the management presentation are
not derived pursuant to GAAP. Net loss on equipment sales is not included
in the GAAP presentation of selling expenses.
Operating Income (Loss). This item is the same under the management
and GAAP presentations.
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EBITDA. EBITDA represents earnings (loss) before interest, taxes,
depreciation and amortization. EBITDA is a financial measure commonly used
in the paging industry. EBITDA is not derived pursuant to GAAP and
therefore should not be construed as an alternative to operating income, as
an alternative to cash flows from operating activities (as determined in
accordance with GAAP) or as a measure of liquidity. The calculation of
EBITDA does not include the commitments of the Company for capital
expenditures and payment of debt and should not be deemed to represent
funds available to the Company. In the fourth quarter of 1995, the
Company's EBITDA from its one-way operations became positive for the first
time.
SELECTED QUARTERLY RESULTS OF OPERATIONS
The table below sets forth management's presentation of results of one-way
domestic operations and other data on a quarterly basis for the eight most
recent fiscal quarters. This presentation should be read in conjunction with
the Consolidated Financial Statements of the Company and the notes thereto
included elsewhere in this report, and should not be considered in isolation or
as an alternative to results of operations that are presented in accordance
with GAAP.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1994 1994 1994 1994 1995
--------- -------- ------------- ------------ ----------
(unaudited)
(IN THOUSANDS, EXCEPT OTHER DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Recurring revenues..................... $ 10,639 $ 12,946 $ 15,161 $ 17,902 $ 20,464
Service expenses....................... 9,485 10,632 12,160 13,688 15,157
Depreciation and amortization.......... 1,658 1,876 2,217 2,354 2,802
-------- -------- -------- -------- --------
Operating profit before
selling expenses..................... (504) 438 784 1,860 2,505
Selling expenses(1).................... 7,047 7,543 9,580 11,732 9,704
-------- -------- -------- -------- --------
Operating income (loss)................ $ (7,551) $ (7,105) $ (8,796) $ (9,872) $ (7,199)
======== ======== ======== ======== ========
EBITDA................................. $ (5,893) $ (5,229) $ (6,579) $ (7,518) $ (4,397)
======== ======== ======== ======== ========
OTHER DATA:
Units in service(2).................... 402,017 495,605 608,427 772,730 874,944
Net subscriber additions............... 74,314 93,588 112,822 164,303 102,214
ARPU(3)................................ $ 9.73 $ 9.62 $ 9.15 $ 8.64 $ 8.28
Operating profit before selling
expenses per subscriber
per month(4)......................... (.46) .33 .47 .90 1.01
Selling expense per
net subscriber addition(1)(5)........ 95 81 85 71 95
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31,
1995 1995 1995
--------- ------------- ------------
(unaudited)
(IN THOUSANDS, EXCEPT OTHER DATA)
<S> <C> <C> <C>
OPERATING DATA:
Recurring revenues..................... $ 23,387 $ 26,994 $ 30,658
Service expenses....................... 16,208 18,192 19,258
Depreciation and amortization.......... 3,091 3,469 3,910
-------- -------- --------
Operating profit before
selling expenses..................... 4,088 5,333 7,490
Selling expenses(1).................... 10,614 10,889 11,181
-------- -------- --------
Operating income (loss)................ $ (6,526) $ (5,556) $ (3,691)
======== ======== ========
EBITDA................................. $ (3,435) $ (2,087) $ 219
======== ======== ========
OTHER DATA:
Units in service(2).................... 1,008,683 1,131,464 1,240,024
Net subscriber additions............... 133,739 122,781 108,560
ARPU(3)................................ $ 8.28 $ 8.41 $ 8.62
Operating profit before selling
expenses per subscriber
per month(4)......................... 1.45 1.66 2.11
Selling expense per
net subscriber addition(1)(5)........ 79 89 103
</TABLE>
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(1) Includes loss on sale of equipment.
(2) Stated as of the end of each period.
(3) Calculated by dividing recurring revenues for the quarter by the average
number of units in service during that quarter. Stated as the monthly
average for the quarter.
(4) Calculated by dividing operating profit before selling expenses (selling
expenses include loss on sale of equipment) for the quarter by the average
number of units in service during that quarter. Stated as the monthly
average for the quarter.
(5) Calculated by dividing selling expenses, including loss on sale of
equipment, for the quarter by the net subscriber additions for the quarter.
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PageMart, Inc. cautions readers that any forward-looking statements
contained in this Form 10-K or made by management of the Company involve risks
and uncertainties, and are subject to change based on various important
factors. The following factors, among others, in some cases have affected and
in the future could affect the Company's financial performance and actual
results, and could cause actual results for 1996 and beyond to differ
materially from those expressed in any such forward-looking statements --
economic conditions generally in the United States and consumer confidence; the
ability of the Company to manage its high debt levels; the impact of
technological change in the telecommunications industry; the future cost of
network infrastructure and subscriber equipment; the impact of competition and
pricing of paging and wireless services; changes in regulation by the Federal
Communications Commission and various state regulatory agencies; and the
ability of the Company to obtain financing to construct the transmission
network for two-way services.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are included in this
report beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this 10-K:
(1) Financial Statements. See Index to Consolidated Financial
Statements and Financial Statement Schedule on Page F-1 hereof.
(2) Financial Statement Schedule. See Index to Consolidated Financial
Statements and Financial Statement Schedule on Page F-1 hereof.
(3) Exhibits Required by Item 601 of Regulation S-K.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
3(i)** Restated Certificate of Incorporation of PageMart, Inc.
3(ii)* By-laws of PageMart, Inc.
4.1** Indenture, dated as of October 19, 1993, between PageMart,
Inc. and United States Trust Company of New York, as Trustee,
relating to the 12 1/4% Senior Discount Notes due 2003
10.1** Warrant Agreement, dated as of October 19, 1993, between
PageMart, Inc. and United States Trust Company of New York, as
Warrant Agent, relating to the Warrants to purchase Common Stock
of the Company.
10.2** Telecommunications Service Agreement, dated May 29, 1992,
between PageMart, Inc. and WilTel, Inc.
10.3** Equipment Lease Agreement, dated May 20, 1992, between
PageMart, Inc. and Glenayre Electronics, Inc.
10.4** First Addendum to Equipment Lease Agreement, dated May 20,
1992, between PageMart, Inc. and Glenayre Electronics, Inc.
10.5** Amendment No. 2 to Equipment Lease Agreement, dated
October 18, 1993, between PageMart, Inc. and Glenayre
Electronics, Inc.
10.6** Lease Agreement and Addendum, dated January 10, 1990,
between Kingston Houston Partners I, Ltd. and PageMart, Inc.
10.7** Expansion and Extension of Lease Agreement, dated April 7,
1993, between Kingston Houston Partners I, Ltd. and PageMart,
Inc.
10.8** Office Lease Agreement, dated January 29, 1992, between
Dallas Central Development Corp. and PageMart, Inc.
10.9** First Amendment to Office Lease Agreement, dated July 29,
1992, between Fulcrum Central Ltd., as successor in interest to
Dallas Central Development Corp., and PageMart, Inc.
10.10** Second Amendment to Office Lease Agreement, dated December 1,
1992, between Fulcrum Central Ltd., as successor in interest
to Dallas Central Development Corp., and PageMart, Inc.
10.11** Third Amendment to Office Lease Agreement, dated December 29,
1992, between Fulcrum Central Ltd., as successor in interest
to Dallas Central Development Corp., and PageMart, Inc.
10.12** Fourth Amendment to Office Lease Agreement, dated July 21,
1993, between Fulcrum Central Ltd., as successor in interest to
Dallas Central Development Corp., and PageMart, Inc.
10.13** License Agreement, dated May 12, 1994, between PageMart,
Inc., licensee, and International Business Machines Corporation,
licensor.
10.14** Sales Contract, dated January 21, 1994, between PageMart, Inc.,
buyer, and Mitsui Comtek Corporation, seller.
10.15** Resale Agreement, dated November 1, 1993, between PageMart, Inc.,
licensor, and GTE Service Corporation, licensee.
</TABLE>
9
<PAGE> 11
<TABLE>
<S> <C>
10.16** Financing and Security Agreement between Motorola and
Pagemart, Inc. dated May 18, 1994.
10.17** Subscription Agreement, dated June 9, 1994, between
PageMart, Inc. and Fomento Empresarial Regiomontano, S.A.
de C.V.
10.18** Letter of Intent, dated June 9, 1994, between PageMart,
Inc. and Fomento Empresarial Regiomontano, S.A. de C.V.
10.19* Strategic Alliance Agreement No. 1, dated September 15,
1994, between GTE Service Corporation and PageMart, Inc.
10.20* Strategic Alliance Agreement No. 2, dated October 13,
1994, between GTE Service Corporation and PageMart, Inc.
10.21* Secured promissory note of John D. Beletic, as Maker, in
favor of PageMart, Inc. dated January 28, 1994, in the amount of
$97,800.
10.22* Secured promissory note of John D. Beletic, as Maker, in
favor of PageMart, Inc. dated November 29, 1994, in the amount of
$200,000.
10.23* Agreement of Reorganization and Plan of Merger, dated as of
December 5, 1994, between PageMart, Inc., PageMart Nationwide,
Inc. and PM Merger Corp.
10.24+ Receivables Purchase Agreement between PageMart, Inc. and
PageMart Nationwide, Inc., dated as of May 11, 1995.
10.25+ Inventory Sale Agreement between PageMart, Inc. and
PageMart Nationwide, Inc., dated as of May 11, 1995.
10.26+ Satellite Services and Space Segment Lease Agreement, dated
January 2, 1995, between PageMart, Inc. and SpaceCom Systems,
Inc.
10.27*** Secured promissory note of John D. Beletic, as Maker, in
favor of PageMart Nationwide, Inc. dated May 11, 1995, in the
amount of $21,000.
10.28*** Subscription Agreement dated as of July 7, 1995 among
PageMart Nationwide, Inc., PageMart Canada Holding Corporation
and TD Capital Group Ltd.
10.29*** Agreement Among Stockholders among PageMart Nationwide,
Inc., PageMart International, Inc., TD Capital Group Ltd.,
PageMart Canada Holding Corporation and PageMart Canada Limited.
10.30**** Equipment Purchase Agreement between Motorola, Inc. and
PageMart Wireless, Inc. (1)
10.31**** Technology Asset Agreement dated as of December 1, 1995
between Motorola, Inc. and PageMart Wireless, Inc. (1)
21.1* PageMart, Inc. Subsidiaries.
27.1*** Financial Data Schedule for the year ended December 31, 1995.
</TABLE>
* Each of these exhibits is hereby incorporated by reference to the Form 10-K
of the Company for the fiscal year ended December 31, 1994.
** Each of these exhibits is hereby incorporated by reference to the
Registration Statement on Form S-1 of the Company (Reg. No. 33-78054).
*** Previously filed.
**** Filed herewith.
+ Each of these exhibits is hereby incorporated by reference to the
Registration Statement on Form S-1 of the Company (Reg. No. 33-81084).
(1) The Company has requested confidential treatment for certain portions of
this agreement.
(B) REPORTS ON FORM 8-K
A current report on Form 8-K dated October 6, 1995 was filed with the
Securities and Exchange Commission on October 17, 1995 and disclosed that the
Certificate of Incorporation of the Company's parent had been amended. No
financial statements were filed therewith.
10
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: May 21, 1996
PAGEMART INC.
(Registrant)
By: /s/ JOHN D. BELETIC
-----------------------------------------------
John D. Beletic
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ John D. Beletic Chairman, President and Chief Executive Officer
- --------------------------- (Principal Executive Officer) May 21, 1996
John D. Beletic
/s/ G. Clay Myers Vice President, Finance, Chief Financial Officer
- --------------------------- and Treasurer (Principal Financial and
G. Clay Myers Accounting Officer) May 21, 1996
/s/ Frank V. Sica Director May 21, 1996
- ---------------------------
Frank V. Sica
/s/ Guy L. de Chazal Director May 21, 1996
- ---------------------------
Guy L. de Chazal
/s/ Arthur Patterson Director May 21, 1996
- ---------------------------
Arthur Patterson
Director
- ---------------------------
Andrew C. Cooper
/s/ Roger D. Linquist Director May 21, 1996
- ---------------------------
Roger D. Linquist
/s/ Leigh J. Abramson Director May 21, 1996
- ---------------------------
Leigh J. Abramson
/s/ Alejandro Perez Elizondo Director May 21, 1996
- ----------------------------
Alejandro Perez Elizondo
Director
- ---------------------------
Pamela D. A. Reeve
</TABLE>
11
<PAGE> 13
PAGEMART, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants ............................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 ........... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1993, 1994 and 1995 ..................................... F-4
Consolidated Statements of Stockholder's Equity (Deficit) for the Years
Ended December 31, 1993, 1994 and 1995 ............................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1993, 1994 and 1995 .................................................. F-6
Notes to Consolidated Financial Statements ............................. F-7
Report of Independent Public Accountants on Financial Statement Schedule S-1
Schedule II -- Valuation and Qualifying Accounts for the Years Ended
December 31, 1993, 1994 and 1995 ..................................... S-2
</TABLE>
F-1
<PAGE> 14
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholder of PageMart, Inc.:
We have audited the accompanying consolidated balance sheets of PageMart,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1994 and
1995, and the related consolidated statements of operations, stockholder's
equity (deficit) and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PageMart, Inc. and
subsidiaries as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
February 12, 1996
(except with respect to the matter
discussed in Note 12, as to which
the date is April 1, 1996)
F-2
<PAGE> 15
PAGEMART, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................. $ 14,507 $9,897
Accounts receivable (net of allowance for doubtful accounts of $1,388
and $4,534 in 1994 and 1995, respectively).......................... 15,584 10,079
Inventories........................................................... 12,809 11,179
Prepaid expenses and other current assets............................. 1,497 3,202
-------- --------
Total current assets............................................. 44,397 34,357
RESTRICTED INVESTMENTS.................................................. 500 500
PROPERTY AND EQUIPMENT (net of accumulated depreciation
of $16,491 and $29,163 in 1994 and 1995, respectively)................ 31,697 51,810
NARROWBAND LICENSES..................................................... 58,885 38,210
DEFERRED DEBT ISSUANCE COSTS (net of accumulated
amortization of $959 and $2,011 in 1994 and 1995, respectively)....... 3,041 2,695
OTHER ASSETS............................................................ 3,539 6,054
-------- --------
Total assets..................................................... $142,059 $133,626
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable...................................................... $ 16,451 $ 23,094
Deferred revenue...................................................... 13,962 21,409
Current maturities of long-term debt.................................. 3,513 5,479
Other current liabilities............................................. 4,040 6,166
-------- --------
Total current liabilities........................................ 37,966 56,148
LONG-TERM DEBT.......................................................... 92,632 104,499
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY (DEFICIT):
Preferred stock, $.0001 par value per share;
10,000,000 shares authorized and none issued and outstanding at
December 31, 1994 and December 31, 1995............................. -- --
Common stock, $.0001 par value per share, 88,500,000 shares
authorized and 29,529,525 and 100 issued at December 31, 1994
and December 31, 1995, respectively................................. 3 --
Additional paid-in capital............................................ 124,694 124,438
Accumulated deficit................................................... (112,977) (151,459)
Stock subscriptions receivable........................................ (243) --
Treasury stock, 200,000 shares of common stock at December 31, 1994,
and none at December 31, 1995, at cost.............................. (16) --
-------- --------
Total stockholder's equity (deficit)............................. 11,461 (27,021)
-------- --------
Total liabilities and stockholder's equity (deficit)............. $142,059 $133,626
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated financial statements.
F-3
<PAGE> 16
PAGEMART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
REVENUES:
Recurring revenue ..................... $ 24,184 $ 56,648 $ 101,503
Equipment sales and activation fees ... 26,483 53,185 57,688
--------- --------- ---------
Total revenues ................... 50,667 109,833 159,191
COST OF EQUIPMENT SOLD .................. 28,230 57,835 63,982
OPERATING EXPENSES:
Technical ............................. 9,470 16,155 25,457
Selling ............................... 17,319 31,252 36,094
General and administrative ............ 15,578 29,810 43,358
Depreciation and amortization ......... 5,081 8,105 13,272
--------- --------- ---------
Total operating expenses ......... 47,448 85,322 118,181
--------- --------- ---------
Operating loss ................... (25,011) (33,324) (22,972)
OTHER (INCOME) EXPENSE:
Interest expense ...................... 6,538 12,933 15,199
Interest income ....................... (428) (858) (731)
Other ................................. -- 414 1,042
--------- --------- ---------
Total other (income) expense ..... 6,110 12,489 15,510
--------- --------- ---------
NET LOSS ................................ $ (31,121) $ (45,813) $ (38,482)
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated financial statements.
F-4
<PAGE> 17
PAGEMART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
-------------------------- -------------------------- ADDITIONAL
NUMBER OF NUMBER OF PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992 .... 10,033,332 $ 1 2,500,000 $ -- $ 27,017
Issuance of 5,277,611 shares of
Series C Preferred Stock
at $3.26 per share .......... 5,277,611 1 -- -- 17,034
Issuance of 627,900 common
stock warrants at $5.50
per warrant ................. -- -- -- -- 3,453
171,074 shares of common
stock issued under the stock
option/stock issuance plan .. -- -- 171,074 -- 19
Net loss ...................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1993 .... 15,310,943 2 2,671,074 -- 47,523
11,242,857 shares of common
stock issued in the 1994
Stock Offerings ............. -- -- 11,242,857 1 76,902
Conversion of convertible
preferred stock to common
stock ....................... (15,310,943) (2) 15,310,943 2 --
304,651 shares of common
stock issued under the stock
option/stock issuance plan .. -- -- 304,651 -- 269
Repayment of stock
subscriptions receivable .... -- -- -- -- --
Net loss ...................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1994 .... -- -- 29,529,525 3 124,694
Retirement of treasury stock .. -- -- (200,000) -- (16)
Reorganization of
PageMart, Inc. as a
wholly owned subsidiary
of PageMart Wireless, Inc. .. -- -- (29,329,425) (3) (240)
Net loss ...................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1995 .... -- $ -- 100 $ -- $ 124,438
=========== =========== =========== =========== ===========
<CAPTION>
STOCK
ACCUMULATED SUBSCRIPTIONS TREASURY
DEFICIT RECEIVABLE STOCK TOTAL
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1992 .... $ (36,043) $ -- $ (16) $ (9,041)
Issuance of 5,277,611 shares of
Series C Preferred Stock
at $3.26 per share .......... -- (125) -- 16,910
Issuance of 627,900 common
stock warrants at $5.50
per warrant ................. -- -- -- 3,453
171,074 shares of common
stock issued under the stock
option/stock issuance plan .. -- (4) -- 15
Net loss ...................... (31,121) -- -- (31,121)
----------- ----------- ----------- -----------
BALANCE, December 31, 1993 .... (67,164) (129) (16) (19,784)
11,242,857 shares of common
stock issued in the 1994
Stock Offerings ............. -- -- -- 76,903
Conversion of convertible
preferred stock to common
stock ....................... -- -- -- --
304,651 shares of common
stock issued under the stock
option/stock issuance plan .. -- (216) -- 53
Repayment of stock
subscriptions receivable .... -- 102 -- 102
Net loss ...................... (45,813) -- -- (45,813)
----------- ----------- ----------- -----------
BALANCE, December 31, 1994 .... (112,977) (243) (16) 11,461
Retirement of treasury stock .. -- -- 16 --
Reorganization of
PageMart, Inc. as a
wholly owned subsidiary
of PageMart Wireless, Inc. .. -- 243 -- --
Net loss ...................... (38,482) -- -- (38,482)
----------- ----------- ----------- -----------
BALANCE, December 31, 1995 .... $ (151,459) $ -- $ -- $ (27,021)
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated financial statements.
F-5
<PAGE> 18
PAGEMART, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss .......................................................... $(31,121) $(45,813) $(38,482)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ................................... 5,081 8,105 13,272
Provision for bad debt .......................................... 1,273 6,590 6,135
Accretion of discount on Senior Discount Exchange Notes ......... 1,885 10,034 11,458
Changes in certain assets and liabilities:
Increase in accounts receivable ................................ (6,541) (14,629) (630)
(Increase) decrease in inventories ............................. (5,024) (4,497) 1,630
Increase in prepaid expenses and other current assets .......... (58) (1,091) (1,705)
(Increase) decrease in other assets ............................ (134) 254 (592)
Increase in accounts payable ................................... 6,860 8,491 6,643
Increase in deferred revenue ................................... 2,602 6,780 7,447
Increase in other current liabilities .......................... 1,992 248 2,126
-------- -------- --------
Net cash used in operating activities ........................ (23,185) (25,528) 7,302
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments ............................... (8,616) (2,480) --
Proceeds from sales of short-term investments ..................... 1,044 11,096 --
Proceeds from transfer of Narrowband Licenses ..................... -- -- 20,649
Purchases of Narrowband Licenses .................................. -- (58,885) --
Purchases of property and equipment ............................... (10,810) (16,719) (32,486)
Investment in international ventures .............................. -- (1,902) (2,174)
Purchases of intangible assets .................................... (224) (195) (276)
-------- -------- --------
Net cash used in investing activities ........................ (18,606) (69,085) (14,287)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock ......................... 16,910 -- --
Proceeds from issuance of common stock ............................ -- 76,903 --
Proceeds from issuance of common stock under the stock option/stock
issuance Plan ................................................... 15 53 --
Proceeds from issuance of Senior Discount Notes, net .............. 67,575 -- --
Payment of stock subscriptions receivable ......................... -- 102 --
Proceeds from issuance of common stock warrants ................... 3,453 -- --
Borrowings from vendor credit facilities .......................... 20,111 8,540 6,777
Payments on vendor credit facilities .............................. (46,281) (2,052) (4,402)
-------- -------- --------
Net cash provided by financing activities .................... 61,783 83,546 2,375
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................ 19,992 (11,067) (4,610)
CASH AND CASH EQUIVALENTS, beginning of period ...................... 5,582 25,574 14,507
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of period ............................ $ 25,574 $ 14,507 $ 9,897
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ........................................................ $ 3,886 $ 998 $ 2,269
Income taxes .................................................... $ -- $ -- $ --
NONCASH TRANSACTIONS:
Series C Preferred Stock issued in exchange for stock subscriptions
receivable ...................................................... $ 125 $ -- $ --
Common stock issued in exchange for stock subscriptions
receivable ...................................................... $ 4 $ 216 $ --
In August 1994, 15,310,943 shares of preferred stock were converted
into 15,310,943 shares of common stock .......................... $ -- $ -- $ --
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated financial statements.
F-6
<PAGE> 19
PAGEMART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
PageMart, Inc. ("PageMart"), a wholly-owned subsidiary of PageMart
Wireless, Inc. ("Wireless"), was incorporated as a Delaware corporation on May
8, 1989, to provide wireless messaging products and services. PageMart and its
subsidiaries are referred to herein as the "Company." Wireless was incorporated
in Delaware on November 29, 1994 as a wholly-owned subsidiary of PageMart.
Effective January 15, 1995, PageMart merged with a wholly-owned subsidiary of
Wireless, pursuant to which PageMart was the surviving corporation (the
"Reorganization"). As part of the Reorganization, each share of outstanding
common stock of PageMart was converted into the right to receive one share of
common stock of Wireless. Upon consummation of the Reorganization, the
stockholders of PageMart had the same ownership interest in Wireless as they
had in PageMart, and Wireless owned all of the capital stock of PageMart.
The consolidated financial statements of PageMart include the accounts of
PageMart II, Inc., PageMart Operations, Inc., PageMart of California, Inc.,
PageMart of Virginia, Inc. and PageMart International, Inc. Each of these
companies is a wholly-owned subsidiary of PageMart. PageMart II, Inc. and
PageMart Operations, Inc. hold certain Federal Communications Commission
("FCC") licenses. PageMart International, Inc., which has had no significant
operations to date, holds certain investments in an international venture in
Canada. Other than these licenses and international investments, the
subsidiaries of PageMart have no significant assets or liabilities.
The Company has incurred substantial losses from operations and negative
cash flows from operations since inception and is highly leveraged. Management
expects to continue to incur operating losses in 1996. These losses are driven
by the Company's investment in the growth of its subscriber base and continued
expansion into additional markets. The Company's business plan calls for
substantial growth in its subscriber base in order for the Company to achieve
operating profitability and positive cash flows from operations. There can be
no assurance that the Company will meet its business plan, achieve operating
profitability, or achieve positive cash flows from operations. If the Company
cannot achieve operating profitability, it may not be able to make the required
payments on existing or future obligations.
The Company and Wireless have made significant investments in Narrowband
Personal Communications Services ("NPCS") licenses through participation in
auctions conducted by the FCC. The Company plans to utilize these assets in
connection with two-way wireless messaging services. The Company's success in
implementing two-way services is dependent primarily upon market acceptance of
proposed two-way services and the ability of the Company to successfully
develop and construct a transmission network and market two-way services.
There can be no assurance that two-way services offered will be accepted by the
market or that the Company will be successful in developing and constructing a
transmission network or marketing two-way services.
During 1993, the Company received net proceeds of approximately $17
million from the issuance of Series C Preferred Stock and net proceeds of
approximately $71 million from the issuance of 12 1/4% Senior Discount Notes
due 2003 and common stock warrants (see Note 5). During 1994, the Company
received net proceeds of approximately $76.9 million from the issuance of
common stock (the "1994 Stock Offerings"). In conjunction with the 1994 Stock
Offerings, each outstanding share of preferred stock was converted into one
share of common stock (see Note 8).
In management's opinion, the Company's current working capital combined
with anticipated support from Wireless will be sufficient to support the
planned growth for its one-way wireless communications operations through 1996.
As the Company begins implementation and development of two-way services, the
Company anticipates requiring additional sources of capital to fund the
construction and operation of a two-way messaging network.
F-7
<PAGE> 20
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The accompanying financial statements include the accounts of PageMart and
its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
CASH AND CASH EQUIVALENTS
The Company includes as cash and cash equivalents cash on hand, cash in
banks and highly liquid investments with original maturities of three months or
less.
SHORT-TERM INVESTMENTS
Short-term investments consist of investments in high-grade commercial
paper with original maturities of more than three months for which market value
approximates cost. The Company's short-term investments are made in reputable,
creditworthy companies and government issues and do not generate significant
credit risk to the Company.
INVENTORIES
Inventories consist of pagers held for resale and are stated at the lower
of cost or market. Cost is determined by using the specific identification
method, which approximates the first-in, first-out method. The Company
purchases a majority of its pagers from Motorola, Inc.
RESTRICTED INVESTMENTS
Restricted investments represent certificates of deposit in the amount of
$500,000 pledged as collateral on the Company's notes payable to a vendor.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated using the
straight-line method for financial reporting purposes and accelerated methods
for tax reporting purposes over estimated useful lives ranging from three to
seven years. Depreciation expense totaled approximately $4,860,000, $7,824,000
and $12,683,000 for the years ended December 31, 1993, 1994 and 1995,
respectively. The Company purchases a majority of its network equipment from
Motorola, Inc. and Glenayre Technologies, Inc. Maintenance and repair costs are
charged to expense as incurred.
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1995
-------- --------
<S> <C> <C>
Network equipment ............................ $ 40,224 $ 57,387
Computer equipment ........................... 5,067 16,829
Furniture and equipment ...................... 2,897 6,757
-------- --------
48,188 80,973
Less: Accumulated depreciation .............. (16,491) (29,163)
-------- --------
$ 31,697 $ 51,810
======== ========
</TABLE>
F-8
<PAGE> 21
REVENUE RECOGNITION
The Company recognizes equipment revenue immediately upon the shipment of
pagers adjusted by allowances for normal returns. Recurring revenue, including
revenue from airtime charges and fees for other services such as voicemail,
customized coverage options and toll-free numbers are recognized in the month
in which the service is provided. All expenses related to the sale of
equipment are recognized at the time of sale. Deferred revenue represents
advance billings for services not yet performed. Such revenue is deferred and
recognized in the month in which the service is provided. Patent licensing
revenues are recognized on a straight-line basis over the term of the related
agreement (see Note 6). Patent licensing revenues of $383,000 are included in
recurring revenues in fiscal 1995.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
ADVERTISING EXPENSES
Advertising expenses are expensed as incurred.
RECLASSIFICATIONS
Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform with the current year presentation.
ACCOUNTING FOR LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" ("SFAS 121"). The Company will adopt SFAS
121 for the fiscal year ending December 31, 1996. SFAS 121 establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used and for long-lived assets and certain identifiable intangibles to be
disposed of. SFAS 121 requires that those assets to be held and used be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable through future cash
flows. SFAS 121 requires that those assets to be disposed of be reported at
the lower of the carrying amount or the fair value less cost to sell. Adoption
of SFAS 121 is not expected to have a material effect on the financial
statements of the Company.
3. NARROWBAND PERSONAL COMMUNICATIONS SERVICES LICENSES
During July and December 1994, the Company and Wireless participated in
auctions of NPCS frequencies conducted by the FCC. As a result of the
auctions, the Company was awarded a narrowband license for a 50 kHz unpaired
nationwide frequency for a purchase price of approximately $38 million, and
Wireless was awarded five 50/50 kHz paired regional narrowband licenses for a
purchase price of approximately $95 million. Amortization of the NPCS licenses
will commence when placed in service. The NPCS licenses will be amortized over
a period not to exceed 40 years. The Company intends to follow the provisions
of Statement of Financial Accounting Standards No. 34 "Capitalization of
Interest Cost" with respect to its NPCS licenses and the related construction
of its two-way messaging network.
4. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
Effective November 15, 1995 PageMart International, Inc. owns 200,000
shares of common stock of PageMart Canada Limited ("PageMart Canada") which
represents 20% of the ownership of PageMart Canada. The remaining 800,000
shares (representing 80% of the ownership) is held by PageMart Canada Holding
Corporation ("Canada Holding"). Canada Holding is owned 50% (1,000,000 shares
of Class A Common Stock) by third-party Canadian investors unrelated to
PageMart and 50% (1,000,000 shares of Class B Common Stock) by PageMart
International, Inc. The common shares have identical economic rights.
However, voting control of Canada Holding is held by the Class A Common
Stockholders as the Class A shares have two votes per share.
F-9
<PAGE> 22
The Company accounts for its investments in PageMart Canada and Canada Holding
under the equity method. Such investments are included in Other Assets in the
Consolidated Balance Sheet.
The agreement among stockholders contains provisions which restrict the
transfer of Canada Holding shares and PageMart Canada shares for periods
ranging from three to five years. During the two years following the third
anniversary of the transactions, the third-party Canadian investors may
exchange the 1,000,000 Class A common shares they hold in Canada Holding to
714,286 shares of voting common stock of Wireless, subject to certain U.S. and
Canadian ownership requirements. Wireless is ultimately responsible for
effectuating the exchange within the U.S. and Canadian ownership regulations.
Such exchange may be accelerated in the event Wireless enters into an agreement
to be acquired. After the third anniversary of the transactions, Wireless will
have the right to purchase the shares held by the third-party Canadian
investors at their fair market value provided regulatory ownership requirements
permit such purchase.
5. LONG-TERM DEBT
Long-term debt, including capital lease obligations, consisted of the
following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1995
--------- ---------
<S> <C> <C>
12 1/4% Senior Discount Notes due November 1,
2003, at accreted value ........................ $ 83,494 $ 94,952
Vendor Purchase Financing Facility of $8
million, bearing interest at prime plus 4%
based upon the rate quoted by The Wall Street
Journal from time to time (rates on existing
indebtedness were 12.5% at December 31, 1994,
and 12.75% at December 31, 1995), secured by
equipment purchased. Principal and interest is
payable over 36 months from date of purchase.... 4,756 5,138
Capital lease obligations to a vendor up to $15
million, bearing interest at 7 1/2% plus the
weekly average U.S. Treasury Constant
Maturities for 3-year Treasury Notes for the
calendar week immediately preceding funding of
the equipment financing (rates on existing
indebtedness ranged from 11.84% -- 15.13% at
December 31, 1994 and 1995), secured by
equipment and cash with principal and interest
payable over 60 months from date of financing.. 7,895 9,888
--------- ---------
Total debt ................................. 96,145 109,978
Less: Current maturities ................ (3,513) (5,479)
--------- ---------
Long-term debt ............................. $ 92,632 $ 104,499
========= =========
</TABLE>
During the fourth quarter of 1993, the Company completed an offering in
which it issued $136.5 million principal amount (at maturity) of 12 1/4% Senior
Discount Notes due 2003 (the "12 1/4% Notes") with an initial accreted value of
$71.6 million together with warrants to purchase 627,900 shares of its common
stock for $3.26 per share. From and after May 1, 1999, interest on the 12 1/4%
Notes will be payable semiannually in cash at the rate of 12 1/4% per annum.
The 12 1/4% Notes represent senior indebtedness of the Company and are
redeemable at the option of the Company, in whole or in part, at any time after
November 1, 1998, at $136.5 million plus accrued interest. In addition, at any
time prior to November 1, 1996, up to 35% of the accreted value of the 12 1/4%
Notes are redeemable at the option of the Company with the proceeds of a Public
Equity Offering (as defined) at 111% of accreted value plus accrued and unpaid
interest, if any.
In July 1994, the Company commenced an exchange offer pursuant to an
effective registration statement whereby all outstanding 12 1/4% Notes were
exchanged for the Company's 12 1/4% Senior Discount Exchange Notes due 2003.
F-10
<PAGE> 23
The 12 1/4% Notes carry certain restrictive covenants that, among other
things, limit the ability of the Company to incur indebtedness, pay dividends,
prepay subordinated indebtedness, repurchase capital stock, create liens, sell
assets, engage in mergers and consolidations, and enter into transactions with
any holder of 5% or more of any capital stock of the Company or any of its
affiliates. The Company is in compliance with all such restrictive covenants.
Maturities of long-term debt and capital lease obligations are as follows
(in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR
ENDING DECEMBER 31,
-------------------
<S> <C>
1996 ......................................... $ 5,479
1997 ......................................... 5,047
1998 ......................................... 2,359
1999 ......................................... 1,719
2000 ......................................... 422
Thereafter ................................... 94,952
--------
$109,978
========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
The Company has entered into various operating lease agreements for office
space, office equipment and transmission equipment sites. Total rent expense
for 1993, 1994 and 1995 was $4,246,000, $6,084,000 and $8,471,000,
respectively.
Included in network equipment is equipment held under capital leases with
capitalized costs of $10,357,000 and $14,617,000 less accumulated depreciation
of $2,632,000 and $5,054,000 at December 31, 1994 and 1995, respectively.
Future minimum lease payments related to the Company's capital and
operating leases are as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR CAPITAL OPERATING
ENDING DECEMBER 31, LEASES LEASES
- ------------------- ------- ---------
<S> <C> <C>
1996 .............................................. $ 3,989 $ 7,093
1997 .............................................. 3,626 6,169
1998 .............................................. 2,533 4,175
1999 .............................................. 1,902 2,936
2000 .............................................. 438 1,911
Thereafter ........................................ -- 1,726
------- -------
Total minimum lease payments ...................... $12,488 $24,010
=======
Less: amounts representing interest .............. 2,600
-------
Present value of future minimum lease payments .... $ 9,888
=======
</TABLE>
The Company is party to various legal proceedings arising out of the
ordinary course of business. The Company believes, based on the advice of
legal counsel, that there is no proceeding, either threatening or pending,
against the Company that could result in a material adverse effect on the
results of operations or financial condition of the Company.
In December 1995, the Company transferred certain intellectual property to
a significant vendor in exchange for certain benefits which will be recognized
over a forty-seven month period. The Company also committed to
F-11
<PAGE> 24
purchase $40 million in network infrastructure equipment over a forty-seven
month period as part of this transaction.
7. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating the fair value disclosures for its financial instruments. For cash
and cash equivalents, the carrying amounts reported in the Consolidated Balance
Sheets are equal to fair value. For debt, management estimated the fair value
based upon quoted market prices for publicly traded debt and based on the
appropriate interest rate at year-end for all other debt.
The carrying amounts and fair values of the Company's financial
instruments at December 31, 1994 and 1995, are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents ...... $ 14,507 $ 14,507 $ 9,897 $ 9,897
Long-term debt ................. $ 96,145 $ 95,548 $109,978 $104,955
</TABLE>
8. STOCKHOLDER'S EQUITY (DEFICIT)
PREFERRED STOCK
On August 5, 1994 in conjunction with the 1994 Stock Offerings and the
related stockholders agreement, each outstanding share of previously issued
preferred stock converted into one share of common stock. In September 1994
the Company's Certificate of Incorporation was amended to reduce the number of
authorized shares of preferred stock to 10,000,000. At December 31, 1994 and
1995, none of the authorized shares of preferred stock were issued and
outstanding.
Under the Company's Certificate of Incorporation, the board of directors
has the power to authorize the issuance of one or more classes or series of
preferred stock and to fix the designations, powers, preferences and relative,
participating, optional or other rights, if any, and the qualifications,
limitations or restrictions thereof, if any, with respect to each such class or
series of preferred stock.
COMMON STOCK
During the fourth quarter 1993 in connection with issuance of the 12 1/4%
Notes (see Note 5), the Company issued warrants to purchase 627,900 shares of
its common stock for $3.26 per share. The warrants were valued at $5.50 per
share at the date issued. In connection with the Reorganization (see Note 1),
the warrants became exercisable for Wireless common stock.
During the third quarter of 1994, the Company issued an aggregate of
11,242,857 shares of common stock in the 1994 Stock Offerings at a purchase
price of $7.00 per share. The aggregate net proceeds (after expenses) of the
1994 Stock Offerings were approximately $76.9 million. Of the total shares
issued, 714,287 shares were convertible non-voting common stock and the
remaining 10,528,570 shares were common stock. In connection with the
Reorganization (see Note 1), all shares of common stock of PageMart were
converted into the right to receive one share of common stock of Wireless.
At December 31, 1995, of the 88,500,000 authorized shares of PageMart
common stock, 100 shares were issued.
F-12
<PAGE> 25
9. STOCK OPTION/STOCK ISSUANCE PLAN
The Company had a stock option/stock issuance plan (the "Plan") under
which it granted common stock or options to purchase common stock. Effective
with the Reorganization, the plan was transferred to Wireless. The Plan is
administered by the board of directors.
The stock options vest over 60 months and are exercisable for periods not
to exceed 10 years from the date of grant. Vested options outstanding at
December 31, 1993 and 1994 were approximately 268,000 and 237,000,
respectively, with exercise prices ranging from $.08 to $1.50 at December 31,
1993 and $.08 to $3.26 at December 31, 1994. As of December 31, 1994, 1,774,275
shares of common stock were reserved for the Plan. The stock option activity
was as follows:
<TABLE>
<CAPTION>
SHARES PRICE PER SHARE
--------- ---------------
<S> <C> <C>
Options outstanding at December 31, 1992 ........ 886,500 $ .08-1.50
Options granted ................................ 646,250 1.50-3.26
Options exercised .............................. (171,074) .08-1.00
Options canceled ............................... (214,458) .08-3.26
---------
Options outstanding at December 31, 1993 ........ 1,147,218 .08-3.26
Options granted ................................ 866,300 5.00-9.00
Options exercised .............................. (304,651) .08-3.26
Options canceled ............................... (112,158) .08-9.00
---------
Options outstanding at December 31, 1994 ........ 1,596,709 $ .08-9.00
=========
</TABLE>
Under the provisions of the Plan, the Company may also issue stock to
employees. The stock vests over a period not to exceed forty-eight months.
Additional vesting occurs upon death or disability. Upon the termination of an
officer, the Company can repurchase the unvested stock at cost. Under the Plan,
the Company issued 300,000 shares to an officer during 1992, at $.326 per
share. All awards under the Plan have been made at a price at or above the
estimated fair value of the Company's common stock at the date of grant.
10. FEDERAL INCOME TAXES
PageMart files a consolidated income tax return with its parent, Wireless.
PageMart has a tax sharing arrangement with Wireless, whereby PageMart's taxes
are provided on a stand-alone basis.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard No. 109 ("SFAS 109"), "Accounting for Income Taxes." SFAS
109 requires an asset and liability approach which requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events which have been recognized in the Company's financial statements. The
Company had approximately $104.7 million and $126.8 million of net operating
loss carryforwards for federal income tax purposes at December 31, 1994 and
1995, respectively. The net operating loss carryforwards will expire in the
years 2004 through 2010 if not previously utilized. The utilization of these
carryforwards is subject to certain limitations. Of the net operating loss
carryforwards at December 31, 1995, management has estimated that approximately
$34.1 million is subject to an annual utilization limit of $4.8 million.
In connection with the adoption of SFAS 109, the Company has recorded a
valuation reserve equal to its net deferred tax asset at each reporting period,
due to historical and anticipated future operating losses. Accordingly, the
adoption of SFAS 109 did not have an effect on the Company's financial position
or results of operations. Management will evaluate the appropriateness of the
reserve in the future based upon historical and operating results of the
Company.
F-13
<PAGE> 26
Deferred income taxes reflect the tax consequences on future years of
temporary differences between the tax basis of assets and liabilities and their
financial reporting basis and the potential benefits of certain tax
carryforwards. The significant deferred tax assets and liabilities, as
determined under the provisions of SFAS 109, and the change in those assets and
liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1994 CHANGE DECEMBER 31, 1995
----------------- ------ -----------------
<S> <C> <C> <C>
Gross deferred tax asset:
Net operating loss carryforwards ...... $ 35,593 $ 7,535 $ 43,128
Bad debt reserve ...................... 472 1,626 2,098
Inventory reserve ..................... 542 286 828
Accretion of Senior Discount Notes .... 4,052 3,896 7,948
Other ................................. 341 602 943
-------- -------- --------
41,000 13,945 54,945
Gross deferred tax liability:
Depreciation .......................... (2,647) (1,047) (3,694)
-------- -------- --------
38,353 12,898 51,251
Valuation allowance ................. (38,353) (12,898) (51,251)
-------- -------- --------
Net deferred tax asset .............. $ 0 $ 0 $ 0
======== ======== ========
</TABLE>
11. RELATED PARTY TRANSACTIONS
In connection with the offering of the 12 1/4% Notes completed in 1993
(see Note 5), the Company incurred $2,626,000 in fees to an affiliate of a
shareholder.
Wireless has entered into a receivables purchase agreement with PageMart
pursuant to which PageMart may sell receivables to Wireless from time to time
at book value less a reserve for normal bad debt. As of December 31, 1995,
Wireless owned $11.4 million in receivables purchased from PageMart.
PageMart is obligated to provide certain managerial and administrative
services to PageMart Canada at PageMart Canada's request at agreed upon rates.
Under a technology license agreement, PageMart licenses PageMart Canada to
use, in Canada, the intellectual property used by PageMart in its business in
the U.S. The license is perpetual, irrevocable, and royalty-free. The
agreement also permits PageMart Canada to purchase the license of new
technology developed by PageMart for a royalty. The royalty is a portion of
the cost of developing the technology, with the amount to be paid by PageMart
Canada to be the portion of these costs equal to the ratio of PageMart Canada's
revenue stream to that of PageMart.
Under an intercompany rate agreement, the rates which the U.S. and
Canadian companies will charge each other when customers of one travel into the
other's jurisdiction are specified. Such rates approximate fair market value.
12. SUBSEQUENT EVENT
Wireless has filed a Registration Statement on Form S-1 with the
Securities and Exchange Commission in the contemplation of an initial public
offering of Wireless' Class A Common Stock.
F-14
<PAGE> 27
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholder of PageMart, Inc.
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of PageMart, Inc. and subsidiaries
included in this Form 10-K and have issued our report thereon dated February
12, 1996 (except with respect to the matter discussed in Note 12, as to which
the date is April 1, 1996). Our audit was made for the purpose of forming an
opinion on those financial statements taken as a whole. Schedule II is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Dallas, Texas,
February 12, 1996
S-1
<PAGE> 28
PAGEMART, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
ADDITIONS
--------------------
BALANCE AT CHARGED TO CHARGED
BEGINNING COSTS AND TO OTHER BALANCE AT
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
- ----------- ---------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts
Year Ended 12/31/95 ................. $1,388 $6,135 $0 $2,989(a) $4,534
Year Ended 12/31/94 ................. $1,172 $6,590 $0 $6,374(a) $1,388
Year Ended 12/31/93 ................. $ 708 $1,273 $0 $ 809(a) $1,172
</TABLE>
- ---------------
(a) Accounts written off as uncollectible, net of recoveries.
S-2
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
- ------- ----------------------
<S> <C>
10.30 Equipment Purchase Agreement between Motorola, Inc. and
PageMart Wireless, Inc.
10.31 Technology Asset Agreement dated as of December 1, 1995
between Motorola, Inc. and PageMart Wireless, Inc.
</TABLE>
<PAGE> 1
CONFIDENTIAL INFORMATION ON 27, 32 AND 35
HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION
[LOGO] MOTOROLA
ADVANCED MESSAGING SYSTEMS DIVISION
EQUIPMENT PURCHASE AGREEMENT
<TABLE>
<S> <C>
Between MOTOROLA, INC.
Advanced Messaging Systems Division
5401 North Beach Street
Fort Worth, Texas 76137
and PAGEMART WIRELESS, INC.
668 North Central Expressway
Suite 800
Dallas, Texas 75206
</TABLE>
MOTOROLA PROPRIETARY CONFIDENTIAL 1
<PAGE> 2
CONFIDENTIAL INFORMATION ON PAGES 27, 32 AND 35 HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION
[MOTOROLA LOGO]
ADVANCED MESSAGING SYSTEMS DIVISION
EQUIPMENT PURCHASE AGREEMENT
<TABLE>
<S> <C>
between MOTOROLA, INC.
Advanced Messaging Systems Division
5401 North Beach Street
Fort Worth, Texas 76137
and PAGEMART WIRELESS, INC.
6688 North Central Expressway
Suite 800
Dallas, Texas 75206
</TABLE>
Motorola, Inc. ("Motorola") and PageMart Wireless, Inc. ("PageMart") agree
that the following terms and conditions will govern the sale by Motorola to
PageMart of the conventional one-way paging infrastructure equipment, the
advanced two-way messaging radio paging communications equipment and subscriber
units, and the services covered by this Agreement. Any attachments or schedules
referenced herein, including any to be negotiated (TBN), which are or shall be
appended to this Agreement, are also incorporated into the terms of this
Agreement.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C> <C>
PROJECT OVERVIEW 5
ARTICLE I: GENERAL PROVISIONS 6
Section 1. Scope of the Agreement 6
1.1 Definitions
1.2 General Scope of the Agreement
1.3 Contract Documents
Section 2. Term 7
Section 3. Purchase and Sale of the System, Products and Services 7
3.1 Purchase of the Equipment
3.2 Licensing the Software
3.3 Purchase Orders
Section 4. Statements of Work 8
4.1 Delivery of Statements of Work
4.2 Approval of Statements of Work
Section 5. Delivery, Title and Risk of Loss 8
5.1 Delivery
5.2 Delivery Dates
</TABLE>
MOTOROLA PROPRIETARY CONFIDENTIAL 2
<PAGE> 3
<TABLE>
<C> <S> <C> <C>
5.3 Title and Risk of Loss
Section 6. Acceptance and Training 8
6.1 System Acceptance Date
6.2 Immaterial Defects Will Not Bar Acceptance
6.3 Training
Section 7. Payment of the Purchase Price 9
7.1 Payment Term
7.2 Delinquencies
Section 8. Taxes and Other Additional Charges 10
Section 9. Equipment 10
9.1 Equipment Acceptance
9.2 Product Life
9.3 Equipment Modifications
9.4 Refurbished Parts
Section 10. Software, Firmware and Documentation 10
10.1 Firmware
10.2 Software License
10.3 Software Maintenance
10.4 Protection of Source Code
10.5 Republication of Service Materials
Section 11. Project Coordination and Changes 11
11.1 Appointment of Project Coordinators
11.2 Requests for Changes
11.3 Unforeseen Delays
Section 12. Warranties and Disclaimers 12
12.1 Title to the Equipment
12.2 Limited Equipment Warranty
12.3 Disclaimer of Other Equipment Warranties
12.4 Software Warranty
Section 13. Patent and Copyright Indemnity 12
Section 14. Limitation of Liability and Remedies 13
14.1 Remedies are Exclusive
14.2 Limitation on Damages
14.3 Maximum Liability
Section 15. Default and Termination 13
15.1 Force Majeure
15.2 Elements of Default
15.3 Additional Rights Upon Default
Section 16. Proprietary Information 14
16.1 General
16.2 Prohibition Against Unauthorized Use or Disclosure
16.3 Exclusions
16.4 No Manufacturing Rights
Section 17. Compliance with Export Controls 14
Section 18. Dispute Resolution 14
18.1 Choice of Law
18.2 Mediation
18.3 Litigation
Section 19. Relationship of the Parties 15
Section 20. Prohibition Against Improper Gifts or Payments 15
Section 21. Assignment and Subcontracting 15
Section 22. General 15
22.1 Amendments to Agreement
22.2 Notices
22.3 Public Announcements
</TABLE>
MOTOROLA PROPRIETARY CONFIDENTIAL 3
<PAGE> 4
<TABLE>
<C> <S> <C> <C>
22.4 Beta System Demonstration
22.5 Headings
22.6 Entire Agreement
22.7 Invalidity of Provisions
22.8 Acknowledgment
ARTICLE II: SOFTWARE 17
Section 1. Paging Infrastructure Software License Agreement 17
Section 2. Software Maintenance Policy 21
ARTICLE III: ADVANCED MESSAGING SUBSCRIBER EQUIPMENT 26
Section 1. Seller Free Equipment Commitment 27
Section 2. Equipment Warranty 28
Section 3. Equipment Pricing 30
ARTICLE IV: INFRASTRUCTURE EQUIPMENT 31
Section 1. Commitments for Purchase, Equipment Credits, and Additional 32
Infrastructure Credit
1.1 Buyer Purchase Commitment
1.2 Credit for Infrastructure Equipment
1.3 Credit for Advanced Messaging Subscriber Units
1.4 Additional Infrastructure Credit
Section 2. Equipment Warranty 33
Section 3. Equipment Pricing 35
ARTICLE V: GENERAL SYSTEMS ENGINEERING, INSTALLATION, SERVICES & MAINTENANCE 36
</TABLE>
MOTOROLA PROPRIETARY CONFIDENTIAL 4
<PAGE> 5
PROJECT OVERVIEW
The purpose of this document is to define the systems, products, services,
and agreements between Motorola and PageMart pursuant to continued support of
PageMart's one-way paging network and a successful implementation of an advanced
two-way messaging radio paging system. Toward this end, the following Articles
will provide these definitions, as applicable to system and product development
and to the design and implementation of the network(s).
MOTOROLA PROPRIETARY CONFIDENTIAL 5
<PAGE> 6
ARTICLE I: GENERAL PROVISIONS
SECTION 1. SCOPE OF THE AGREEMENT
1.1 Definitions. In this Agreement:
(a) The word "PageMart" means the Customer, PageMart Wireless, Inc.,
its successors and subsidiaries, collectively.
(b) The word "Motorola" means the Seller, Motorola, Inc., acting
through its Advanced Messaging Systems Division. The terms "the parties" and
"both parties" may also be used on occasion to refer to Motorola and PageMart
collectively when it is clear from the context that the term means the two
parties together.
(c) "Affiliate" means, with respect to a party, any corporation or
other entity (i) which is directly or indirectly controlled by such party; (ii)
which controls such party (the "Controlling Party"); and (iii) which the
Controlling Party controls. For the purpose of this definition, "control" means
the right to vote more than 50% of the shares or other securities of a
corporation or other entity, or to contractually control the operations of a
corporation or other entity.
(d) "Contract Documents" means the documents which are specified in
paragraph 1.3.
(e) "Delivery Points" means the PageMart addresses to which the
Products are to be delivered.
(f) "Documentation" means the operating manuals, specifications and
other documentation which are to be provided by Motorola to PageMart under the
terms of this Agreement, as well as any other documentation which Motorola may
provide to PageMart under this Agreement. At a minimum, the term "Documentation"
will include all operating manuals, specifications and other documentation which
Motorola customarily provides to customers who purchase the Products and
Services contemplated by this Agreement.
(g) "Effective Date" of this Agreement means 1 December 1995.
(h) "Equipment" means the one-way and two-way paging infrastructure
equipment and advanced messaging (two-way) paging subscriber equipment which is
to be purchased by PageMart from Motorola, or provided to PageMart by Motorola,
under the terms of this Agreement. Subscriber equipment includes but is not
limited to the Tenor(TM) and "Pegasus" advanced messaging units. Infrastructure
Equipment includes but is not limited to the Nucleus(R) transmitter, the
Nucleus(R)-Orchestra! linear transmitter, the WMG(TM) Wireless Messaging
Gateway(TM) terminal, the RF-Audience!(TM) inbound base receiver, the
RF-Baton!(TM) controller, the RF-Conductor!(TM) controller, the RF-Arranger!(TM)
controller, and associated parts and accessories. Equipment also will be deemed
to mean any equipment commercially released by Motorola during the term of this
Agreement which performs functions similar to the functions performed by the
foregoing named equipment items.
(i) "Functional Specifications" means the functional specifications
for the Equipment and the Software which are set out in applicable Motorola
Marketing Product Description (MPD) documents. Motorola shall provide these MPDs
to PageMart as soon as reasonably practical. MPDs shall be generally applicable
to customers of Motorola.
(j) "Products" means the Equipment, the Software and the
Documentation.
(k) "Purchase Price" means the purchase price which PageMart is to
pay for the System, Products, and/or Services, as specified in the individual
Articles.
(l) "Services" means any program management, engineering,
installation, or other technical services which PageMart may order from
Motorola under this Agreement.
MOTOROLA PROPRIETARY CONFIDENTIAL 6
<PAGE> 7
(m) "Software" means the computer-based programs which are to be
licensed by PageMart from Motorola under the terms of the Software License
Agreement. The term includes any updates, modifications, enhancements and
extensions of such programs which are received by PageMart from Motorola from
time to time under the Software License Agreement or any System Support
Agreement. Software will also be deemed to include all computer-based programs
Motorola customarily provides to customers who purchase the Equipment
contemplated by this Agreement.
(n) "Software License Agreement" means the form of software license
agreement, located at Section 1 of Article II, which is to be entered into by
both parties in connection with the licensing to PageMart of the Software and
the Documentation. (See the definition of "Functional Specifications in Section
1.1(i) above.)
(o) "System" means the advanced messaging paging communications
system which is comprised of the Products and which will have the qualities and
be capable of performing the functions set forth in Motorola Marketing Product
Description (MPD) documents.
(p) "Acceptance Date" means the date on which PageMart accepts or is
deemed to have accepted the System, Products, or Services, as described in the
individual Articles.
(q) "System Support Agreement" means any agreement between the
parties by which Motorola agrees to provide support and maintenance Services to
PageMart for Equipment and/or Software.
1.2 General Scope of the Agreement. Under the terms of this Agreement,
Motorola will sell and PageMart will buy the Equipment and may purchase
Services, and Motorola will license to PageMart the Software, for PageMart's
advanced two-way messaging project and conventional one-way paging network.
1.3 Contract Documents. The following documents collectively and
exclusively constitute the entire agreement between us with respect to the sale
and purchase of paging infrastructure Equipment, advanced messaging subscriber
Equipment, the Dallas-Fort Worth (DFW) Beta System, Software and Services;
Articles I-V, covering the general provisions; software; advanced messaging
subscriber Equipment; infrastructure Equipment; and general systems engineering,
installation, Services & maintenance, respectively.
This Agreement will include any amendments and schedules to it. Motorola
will not, pursuant to this Agreement, be responsible for providing any Services
or delivering any Equipment, Software, Documentation or any other item which is
not specifically required by the Contract Documents. These General Provisions
control over any conflicting or ambiguous term in another Article or Contract
Document.
SECTION 2. TERM
2.1 This Agreement will begin on December 1, 1995, and will continue for
a period of forty-seven (47) months thereafter ("the Term"), unless either
party terminates the Agreement earlier under its provisions. At the end of the
Term, this Agreement shall automatically renew on a year-to-year basis until
either party, ninety (90) days prior to the expiration of the Term or of any
subsequent one-year renewal term, provides written notice to the other party
that it elects not to renew the Agreement. However, any such renewal of the
Agreement shall not have the effect of extending any deadline or increasing any
purchase commitment under the Agreement.
SECTION 3. PURCHASE AND SALE OF THE SYSTEM, PRODUCTS AND SERVICES
3.1 Purchase of the Equipment. Motorola will sell to PageMart and
PageMart will purchase from Motorola the Equipment which is to be purchased by
PageMart from Motorola under the terms of this Agreement.
3.2 Licensing the Software. Motorola will grant PageMart a non-exclusive
license to use the object code version of the Software and a non-exclusive
license to use the Documentation which accompanies that Software. The licenses
to the Software and the Documentation will be governed by the terms and
conditions of
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the Software License Agreement located at Section 1 of Article II, which will
specify the royalty rates (if any) for such Software code or Documentation.
3.3 Purchase Orders. Motorola and PageMart agree that, except as noted in
the last sentence of this paragraph, the Contract Documents (and any other
documents incorporated into this Agreement by its terms) are to be the sole
legal documents governing PageMart's purchase of the System, Products and
Services. PageMart will issue one or more purchase orders in connection with
this Agreement, and each purchase order (P.O.) will incorporate the terms of
this Agreement, whether or not this Agreement is specifically mentioned. Such
P.O.s shall specify delivery times, dates, quantities, and locations consistent
with the terms of this Agreement. Motorola shall invoice PageMart with reference
to each P.O. generated.
As stated in paragraph 22.6, this Agreement supersedes any conflicting
terms or conditions contained on printed forms submitted as, or with, purchase
orders, sales acknowledgments or invoices. If PageMart's purchase order
introduces either a term or condition which is inconsistent with the terms of
this Agreement or one which is not covered by this Agreement, then Motorola will
not be bound by any such term or condition unless Motorola expressly consents in
writing to such term or condition.
SECTION 4. STATEMENTS OF WORK
4.1 Delivery of Statements of Work. Motorola will develop and deliver to
PageMart Statements of Work (SOWs) which will set out in detail those matters
which are associated with and required for the implementation of the System.
Motorola will prepare the final acceptance test procedures for SOW deliverables.
4.2 Approval of Statements of Work. Following the receipt of a SOW,
PageMart will have thirty (30) days to notify Motorola in writing of PageMart's
approval or disapproval of such document or the acceptance test procedures
therein, or to request in writing any specific clarifications, additions or
modifications to the duties or specifications set out in the SOW. PageMart
agrees, however, not to unreasonably withhold its approval of a SOW. In
addition, if PageMart does not notify Motorola within such thirty-day period
that PageMart disapproves of the SOW, PageMart will be deemed to have approved
it.
SECTION 5. DELIVERY, TITLE AND RISK OF LOSS
5.1 Delivery. Motorola will pack the Products for shipment and storage to
meet commercial standards. Terms of delivery will be F.O.B. Motorola's facility
in Fort Worth, Texas. PageMart will be responsible for all transportation
charges, insurance expenses, and other charges relating to the Products, unless
otherwise specified in an individual Article.
5.2 Delivery Dates. Motorola will use best efforts to meet the agreed-to
delivery dates in the P.O.s. Motorola will promptly notify PageMart when any
delivery will be delayed. Motorola will not be liable to PageMart for any
expenses or damages because of any delay in delivery, unless Motorola fails to
use best efforts to meet scheduled delivery dates.
5.3 Title and Risk of Loss. Unless otherwise specified in an individual
Article, with the exception of Software and Documentation, title and risk of
loss or damage to Products will pass to PageMart upon delivery of Products
ordered hereunder to PageMart's designated carrier at Motorola's Fort Worth,
Texas facility. PageMart must arrange for transportation of the Products, which
transportation will be at PageMart's risk. Therefore, any loss or damage not
caused by Motorola, after Motorola's delivery to the carrier, will be PageMart's
responsibility and will not relieve PageMart of its payment obligations to
Motorola. Title to the intellectual property rights related to the Software and
Documentation will at all times remain with Motorola.
SECTION 6. ACCEPTANCE AND TRAINING
6.1 Acceptance Date. PageMart will be deemed to have accepted the
Products or Services on the earliest of the following dates (the "Acceptance
Date"):
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(a) forty-five (45) days after delivery; or
(b) the date that PageMart signs and delivers to Motorola a
certificate of acceptance prepared by Motorola for this purpose; or
(c) the date when the Products have been installed and PageMart is
using the Products for the purpose of generating revenues.
6.2 Immaterial Defects Will Not Bar Acceptance. PageMart agrees that it
will not refuse to accept the DFW Beta System, Equipment, or Services unless
they fail to conform with one or more material specifications, requirements or
functions set out in the Agreement, applicable MPDs or Documentation.
6.3 Training. Motorola will make available training classes and materials
on the Equipment and Software to PageMart technicians specified by PageMart.
Classes will be conducted in Fort Worth at Motorola's standard training rates.
SECTION 7. PAYMENT OF THE PURCHASE PRICE
7.1 Payment for Beta System Products.
(a) Down Payment. Within 30 days of submitting to Motorola each
purchase order for the DFW Beta System pursuant to this Agreement. PageMart
shall make a down payment to Motorola in the amount of twenty-five percent (25%)
of the purchase price therein.
(b) Payment of Balance. Upon delivery of Products, Motorola shall
invoice PageMart for seventy-five percent (75%) of the purchase price of such
Products, which PageMart shall pay within 30 days of its receipt of Motorola's
invoices.
7.2 Payment for Services and non-Beta-System Products. Motorola shall
invoice PageMart monthly for delivered infrastructure and two-way subscriber
Equipment and for Services completed by Motorola. Within 30 days of the date of
receipt of the invoice, PageMart shall pay all amounts due Motorola under this
Agreement for such Equipment and Services, without deduction or offset. Payment
shall be delivered at the address stated on the invoice.
7.3 Delinquencies. Any undisputed amount invoiced, or any amount which is
later determined to be owed to Motorola, which is not paid within the terms and
conditions of this Agreement will be considered delinquent. Based on accepted
credit and collection practices, Motorola is entitled to a late-payment charge
on the delinquent balance outstanding, in the amount of 1.5% per month. Any past
due interest or late-payment charge will become due and payable immediately at
Motorola's discretion. PageMart shall reimburse Motorola for legal fees and
expenses reasonably incurred in collecting any amounts due hereunder.
SECTION 8. TAXES AND OTHER ADDITIONAL CHARGES
8.1 PageMart will pay all sales, use, excise, value-added, and other
taxes on the Products (except those on Motorola's net income or net worth)
unless PageMart furnishes Motorola with a valid resale or exemption
certificate. PageMart will also be responsible for reporting the Products for
personal property tax purposes and for paying all transportation costs,
insurance charges, customs duties, and loss or damage settlements from and
after the date title to such Products passes to PageMart. The Purchase Price
(and Motorola's prices for any add-on Products) do not include such taxes or
charges; where applicable, they will be added to PageMart's total invoice
amount.
SECTION 9. EQUIPMENT
9.1 Equipment Acceptance. Before shipping any unit of Equipment
(including an add-on unit) to PageMart, Motorola will perform its standard
factory inspection and acceptance tests on the unit. PageMart will
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have the right to conduct its own incoming inspection and testing of the
Equipment, but if Motorola has furnished PageMart with written specifications
for an item of Equipment, PageMart may reject such item only if it fails to
conform to its written specifications and PageMart gives Motorola written notice
of the rejection. PageMart will be deemed to have accepted the unit unless,
within 45 days after its receipt of its shipment, PageMart notifies Motorola in
writing that PageMart is rejecting it for failure to conform to such
specifications or criteria. PageMart's notice must advise Motorola of PageMart's
specific reason for rejection. The act of payment for a unit will not be
construed as acceptance, and PageMart's acceptance of the Equipment will not
waive any of its warranty rights. Any Equipment which PageMart rejects must be
returned to Motorola in the same condition as when PageMart received it, and
only after Motorola has reviewed PageMart's notice and authorized the return.
Any Equipment which PageMart returns must be shipped freight prepaid, but
Motorola will then credit those charges to PageMart's account and pay the return
freight charges to ship the repaired or replacement Equipment to PageMart.
9.2 Product Life.
(a) Motorola does not represent that it will continue to manufacture
any particular Equipment indefinitely or for any specific period. Motorola
specifically reserves the right to remove any Equipment from the market and/or
to cease manufacturing or supporting it. Notwithstanding the foregoing, Motorola
warrants that it will make available the Products or their equivalent to
PageMart for a minimum period of three years from the Effective Date, and will
provide PageMart with at least 180 days written notice before dropping any
Equipment from Motorola's product line. This notice is intended to allow
PageMart to make an end-of-life purchase of the item before Motorola stops
manufacturing it.
(b) Notwithstanding Sections 9.2(a) and/or 9.3, but subject to the
availability of parts from Motorola's suppliers, Motorola will sell PageMart
parts and provide repair services for, or will replace, each Product at
reasonable prices and lead times for at least seven years after the shipment of
the last Product items purchased under this Agreement. Motorola's commitment to
do so does not obligate PageMart to purchase such parts or services from
Motorola during that period.
9.3 Equipment Modifications. Motorola also reserves the right to modify
any of the specifications or characteristics of its Products, but no such
modification will apply to Products for which a PageMart order has been
accepted by Motorola prior to the modification of such specifications, without
PageMart's written consent. As soon as is reasonably possible, Motorola will
notify PageMart in advance of modifications.
9.4 Refurbished Parts. Some of the Equipment may contain re-manufactured
parts, but those parts will be subject to the same specifications and quality
control standards Motorola applies to new materials and will be warranted as if
they were new.
SECTION 10. SOFTWARE, FIRMWARE AND DOCUMENTATION
10.1 Firmware. Some of the Equipment to be sold to PageMart under this
Agreement may contain computer programs built into their circuitry. PageMart's
purchase of the Equipment includes a non-exclusive, paid-up license to use such
firmware as part of the Equipment. The terms and conditions of the license for
firmware related to infrastructure Equipment are set out in the Software License
Agreement at Article II, Section 1.
10.2 Software License. Any Software program or Documentation related to
infrastructure Equipment that Motorola furnishes to PageMart under this
Agreement will be governed by the terms of the Software License Agreement
located at Section 1 of Article II, to be executed by the parties before the
Software is supplied to PageMart. Motorola reserves the right to modify any of
the specifications, functions or features of any Software program (but no such
modification will apply to a Software program for which a PageMart order has
been accepted by Motorola prior to the modification of such Software, without
PageMart's written consent), issue new release levels, or cease supporting a
particular program or release level at any time.
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10.3 Software Maintenance. Installation, support and maintenance of
Software related to infrastructure Equipment shall be performed by Motorola in
accordance with the terms and conditions of the Software Maintenance Policy
(SMP) located at Section 2 of Article II, to be executed by the parties before
the Software is supplied to PageMart.
10.4 Protection of Source Code. PageMart acknowledges its obligation to
protect the confidentiality and security of any Software source code disclosed
to PageMart by Motorola, in accordance with Section 5, "Protection and
Security," of the Software License Agreement.
10.5 Republication of Service Materials. PageMart may republish material
from Motorola's standard service manual into PageMart's own manuals or other
materials. But if PageMart does so, ita agrees to protect Motorola's underlying
copyright in any of the materials which originate with Motorola. If PageMart
reproduces any portion of materials for which Motorola or its supplier may hold
a copyright, PageMart will annotate the material with an appropriate legend
(which Motorola must approve) denoting the copyright. For materials copyrighted
by Motorola, PageMart will either retain the existing Motorola notice or else
substitute the following legend in its place:
(C) COPYRIGHT [Name of appropriate PageMart entity], All Rights
Reserved, 19 . Portions reprinted with permission of Motorola, Inc. [or
Motorola's licensor, as the case may be].
Materials supplied by Motorola's licensors may require a different
annotation. PageMart also agrees that it will not remove any proprietary
notices, including those on the media or log-on presentations, from any
products, user manuals or other material originating from Motorola or from any
of its software licensors or suppliers, unless Motorola has given PageMart prior
written authorization.
SECTION 11. PROJECT COORDINATION AND CHANGES.
11.1 Appointment of Program Manager. Each party will appoint a Program
Manager for this Agreement. The Program Manager will be responsible for
maintaining technical liaison between the parties and for representing his or
her company in such matters as periodic performance reviews, the formulation of
specifications and acceptance criteria under the Agreement, and the processing
of engineering change requests in accordance with Section 11.2. The Program
Manager will also be responsible for maintaining any administrative liaison
between the parties on such issues as proposed changes to this Agreement.
Initially, the following individuals will serve as Program Managers for this
Agreement:
<TABLE>
<CAPTION>
PAGEMART PROGRAM MANAGER MOTOROLA PROGRAM MANAGER
<S> <C>
John Talbot, Manager, PCS Implementation Phillip Garret
PageMart Wireless, Inc. Motorola Advanced Messaging Systems
6688 North Central Expressway, Suite 800 Division
Dallas, Texas 75206 5401 North Beach Street
Fort Worth, Texas 76137
</TABLE>
11.2 Requests for Changes. PageMart will deliver to Motorola in writing
any requests for additions, modifications or changes to this Agreement or to
subsequent purchase orders hereunder. Provided the request is within the
general scope of the Contract Documents, Motorola will, within a reasonable
period of time from receipt of the request, issue to PageMart a written
quotation detailing the effect, if any, on the implementation schedule and the
purchase price. If PageMart does not accept the quotation within five business
days of its receipt by providing Motorola with written notice of such
acceptance, the quotation will be deemed to have been withdrawn. If PageMart
accepts the quotation, this Agreement will be amended by way of a written
amendment signed by both parties which incorporates the agreed upon additions,
modifications and changes. Any requests for changes to this Agreement (or any
of its Articles) will be sent to the other party's Program Manager.
11.2 Unforeseen Delays. PageMart and Motorola each recognize that
unforeseen technical problems may preclude Motorola from being able to meet
precisely the milestone dates specified in the quotations
MOTOROLA PROPRIETARY CONFIDENTIAL 11
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referenced in Section 11.2. In the event of such a delay, subsequent milestone
dates will be postponed accordingly.
SECTION 12. WARRANTIES AND DISCLAIMERS
12.1 Title to the Equipment. Motorola warrants that it is the owner of
the Equipment and has the right to transfer title to the Equipment to PageMart.
12.2 Limited Equipment Warranty. Motorola warrants the Equipment under
the terms of the Limited Product Warranty attached at Section 2 of Article III
for advanced messaging subscriber Equipment, and at Section 2 of Article IV for
paging infrastructure Equipment.
12.3 Non-Infringement of Patents and Copyrights. Motorola warrants that
Products will not infringe a United States patent, copyright or other
intellectual property right of a third party, subject to the remedies in Section
13 below.
12.4 Conformance with MPDs. Motorola warrants that the capabilities of
the Products will be consistent with the Functional Specifications contained in
the Motorola Marketing Product Descriptions.
12.5 Disclaimer of Other Equipment Warranties. THE WARRANTIES REFERENCED
IN THIS SECTION ARE THE ONLY WARRANTIES FOR THE EQUIPMENT. MOTOROLA EXPRESSLY
DISCLAIMS ALL OTHER WARRANTIES, GUARANTEES OR REPRESENTATIONS, WHETHER EXPRESS,
IMPLIED, OR STATUTORY, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. MOTOROLA ALSO DISCLAIMS ANY IMPLIED WARRANTY
ARISING OUT OF TRADE USAGE OR OUT OF A COURSE OF DEALING OR COURSE OF
PERFORMANCE.
12.6 Software Warranty. Motorola's warranties for any of the Software
programs are set out in the Software License Agreement at Section 1 of Article
II.
SECTION 13. PATENT AND COPYRIGHT INDEMNITY
Motorola will defend and indemnify PageMart in the event of any allegation
of infringement directed at PageMart with respect to its use of any Products
purchased or provided hereunder as follows:
13.1 Motorola shall, at its expense, defend, indemnify and hold PageMart
harmless against any claim alleging that the Products supplied hereunder
infringe a United States patent or copyright, provided that PageMart promptly
notifies Motorola in writing of the claim, that PageMart does not retain counsel
without the prior written consent of Motorola, that Motorola has sole control of
the instructing of such counsel and sole control of the defense and all related
settlement negotiations, and that PageMart gives Motorola, at Motorola's
request, information and assistance for the defense. Subject to the limitation
of liability for incidental and consequential damages of this Agreement,
Motorola will pay all resulting costs and damages finally awarded by a court of
competent jurisdiction or settled by Motorola. Motorola will not be responsible
for any settlement made without its written consent, or for any costs, expenses
or fees incurred by PageMart without Motorola's prior written consent.
13.2 If PageMart becomes enjoined from using or selling the Products
supplied hereunder by Motorola, Motorola, at its option and expense, will either
procure the right for continued use of such Products, or replace or modify the
same so that they become non-infringing. If neither of the foregoing
alternatives is available on terms which are reasonable in Motorola's judgment,
PageMart can return such Products to Motorola for credit or refund, at
PageMart's option, of such Product's full depreciated value.
13.3 Motorola has no liability for any claim of parent or copyright
infringement based upon adherence to specifications, designs or instructions
furnished by PageMart or its customers, nor for any claim based upon the
combination, operation or use of any Motorola products or components thereof
with equipment of others, nor for any claim based upon Products which have been
altered by PageMart or PageMart's customers.
MOTOROLA PROPRIETARY CONFIDENTIAL 12
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13.4 If Motorola becomes enjoined from manufacturing, using or selling
Products supplied pursuant to PageMart's specifications or requirements,
PageMart, at its option and expense, will either procure the right for continued
use of such Products, or change or modify their specifications or requirements
so that non-infringing Products can be made, used and sold by Motorola.
13.5 Motorola's total liability under this Section for patent and
copyright infringement claims shall not exceed the lesser of (a) the actual
funds paid to Motorola by PageMart for the Products purchased hereunder, or (b)
$1 million U.S.
SECTION 14. LIMITATION OF LIABILITY AND REMEDIES
14.1 Remedies are Exclusive. PageMart's exclusive remedies concerning
Motorola's performance or nonperformance are those expressly stated in this
Agreement.
14.2 Limitation on Damages. Except with respect to breaches of Section
16 and Motorola's obligations pursuant to Section 13, UNDER NO CIRCUMSTANCES
WILL MOTOROLA OR PAGEMART BE LIABLE TO THE OTHER FOR LOSS OF USE, DAMAGE TO OR
LOSS OF PRODUCTS OR SERVICES, LOSS OF DATA, FAILURE TO REALIZE EXPECTED
SAVINGS, FRUSTRATION OF ECONOMIC OR BUSINESS EXPECTATIONS, LOST REVENUE OR
PROFITS, OR FOR ANY OTHER SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, EVEN IF THEY WERE FORESEEABLE OR MOTOROLA OR PAGEMART WAS INFORMED OF
THEIR POTENTIAL. And neither party will be liable to the other for claims by
third parties, with the exception of claims regarding a party's intellectual
property rights, as described in Section 13 hereof.
14.3 Maximum Liability. Each party's total liability to the other party
for damages under this Agreement will not exceed (a) the price paid for the
Products at issue in a claim regarding defective Products, or (b) the value of
the Products at issue in the claim in all other instances. This limitation will
apply regardless of the form of action (i.e., whether the lawsuit is in
contract or in tort, including negligence).
SECTION 15. DEFAULT AND TERMINATION
15.1 Force Majeure. Neither Motorola nor PageMart will be liable to the
other for any delay or failure to perform if that delay or failure results from
a cause beyond its reasonable control. Such causes include but are not limited
to strikes or other labor disturbances, acts of God, acts of the other party,
interruptions of transportation or inability to obtain necessary labor,
materials, or facilities, default of any supplier, or delays in relevant
telecommunications authorities in frequency authorization or license grant. The
delivery and installation schedule shall be considered extended by a period of
time equal to the time lost because of any excusable delay. In the event
Motorola is unable to wholly or partially perform for a period greater than one
hundred and eighty (180) days because of any cause beyond its control, either
party may terminate any delayed order without any liability.
15.2 Elements of Default. Either party will be considered to be in
default of this Agreement if any of the following occurs: (a) it assigns this
Agreement or any of its rights under this Agreement in violation of Section 21;
(b) it fails to perform any material obligation under this Agreement or the
Technology Asset Agreement, including the obligation to pay amounts when due;
(c) it makes an assignment for the benefit of its creditors, or a receiver,
trustee in bankruptcy or similar officer is appointed to take charge of its
assets; or (d) it files for relief under state or federal bankruptcy laws. In
that event, the non-defaulting party may terminate this Agreement if the other
has failed to take corrective action within 30 days after its receipt of a
notice of default and intent to terminate.
15.3 Additional Rights upon Default. If PageMart fails to comply with
any of the material terms of this Agreement, Motorola may, prior to terminating
this Agreement, upon notification and provision of a 10-day cure period to
PageMart, withhold its performance until PageMart's default is cured and pursue
its other remedies. Motorola may also seek injunctive relief if PageMart's
actions threaten Motorola's (or its supplier's) proprietary rights. These
remedies are in addition to any other legal remedies Motorola may have.
MOTOROLA PROPRIETARY CONFIDENTIAL
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SECTION 16. PROPRIETARY INFORMATION
16.1 General. During the course of the parties' relationship under this
Agreement, each party may be given access to certain confidential or proprietary
information of the other. Motorola and PageMart will each exercise due diligence
to maintain in confidence any such information disclosed by one to the other, if
the information is furnished on a confidential basis and marked or identified as
confidential or proprietary when first disclosed ("Proprietary Information").
Proprietary Information may include information furnished during oral
presentations or discussions, if it is conspicuously identified as proprietary
at the time and then confirmed in writing within 30 days, specifically
describing what is considered to be proprietary. As used here, the term "due
diligence" means the same precaution and standard of care which the receiving
party uses to safeguard its own proprietary information, but in no event less
than reasonable care.
16.2 Prohibition Against Unauthorized Use or Disclosure. The party
receiving Proprietary Information from the other will use due diligence to
prevent any unauthorized use, disclosure, publication or dissemination by it or
its Affiliates. The receiving party may not reproduce, distribute or disclose
any of the other's Proprietary Information to a third party, or use it for any
commercial purpose outside this Agreement, without first obtaining written
permission from the party which furnished it. In particular, Motorola and
PageMart will each ensure that any of its employees who are given access to the
Proprietary Information of the other will have a need to know and will be
required to hold that Information in confidence and to use it only in the course
of their employer's business.
16.3 Exclusions. This section does not impose any obligation on either
party if the information is: (1) publicly known at the time of disclosure
without breach of this Agreement; (2) already known to the receiving party at
the time of disclosure; (3) independently developed by the receiving party
without use of the Proprietary Information; or (4) disclosed pursuant to court
or administrative order. Unless the parties agree otherwise, the obligations
under this Section will expire five years after the date of Motorola's last
shipment to PageMart under this Agreement.
16.4 No Manufacturing Rights. This Agreement does not grant PageMart any
license under any patents or other industrial property rights that Motorola may
own, control, or be licensed to use, except the right to buy, sell, and deal in
the Products furnished by Motorola. In particular, PageMart acknowledges that
this Agreement does not grant it any right to manufacture the Products under any
circumstances.
SECTION 17. COMPLIANCE WITH EXPORT CONTROLS
17.1 PageMart will not export from the U.S. any Equipment, Software,
Documentation or other products or technical data furnished under this Agreement
without first obtaining the necessary export licenses from the United States
Government. PageMart further warrants that it will not resell, transfer or
export any of the Equipment, Software, Documentation or other products or
technical data in violation of any laws, regulations, transaction or export
controls or economic sanctions imposed by the United States Government regarding
any other country, government or political entity. PageMart's obligations under
this Section will continue even after this Agreement ends.
SECTION 18. DISPUTE RESOLUTION
18.1 Choice of Law. This Agreement is governed by the laws of the State
of Illinois.
18.2 Mediation. Motorola and PageMart will attempt to settle any claim
or dispute arising out of this Agreement through consultation and negotiation
in good faith and a spirit of mutual cooperation. If those attempts fail, then
the dispute will be mediated by a mutually-acceptable mediator to be chosen by
Motorola and PageMart within 45 days after written notice by one of both
parties demanding mediation. Neither party may unreasonably withhold consent to
the selection of a mediator, and Motorola and PageMart will share the costs of
the mediation equally. By mutual agreement, however, Motorola and PageMart may
postpone mediation until each has completed some specified but limited
discovery about the dispute. The parties may also agree to MOTOROLA PROPRIETARY
CONFIDENTIAL
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replace mediation with some other form of non-binding alternative dispute
resolution (ADR), such as neutral fact-finding or a minitrial. The use of any
ADR procedure will not be construed under the doctrines of laches, waiver or
estoppel to affect adversely the rights of either party and shall toll the
statute of limitations period while the ADR procedure is ongoing.
18.3 Litigation. Any dispute which the parties cannot resolve between
them through negotiation or mediation within six months of the date of the
initial demand for it by a party may then be submitted to the courts within the
State of Illinois for resolution. Each party agrees to submit to the
jurisdiction of those courts. Nothing in this paragraph will prevent either
party from resorting to judicial proceedings if (a) good faith efforts to
resolve the dispute under these procedures have been unsuccessful, or (b)
interim relief from a court is necessary to prevent serious and irreparable
injury to one party or to others. The parties knowingly, voluntarily and
intentionally waive the right each may have to a jury for any such judicial
proceedings.
SECTION 19. RELATIONSHIP OF THE PARTIES
19.1 Each party will be deemed to be an independent contractor, and not
an agent, joint venturer, or representative of the other. Neither party may
create any obligations or responsibilities on behalf of or in the name of the
other.
19.2 The personnel performing installation and other services on behalf
of Motorola under this Agreement shall at all times be under Motorola's
exclusive direction and control and shall be employees of (or subcontractors
to) Motorola and not employees of PageMart. Motorola shall pay all wages,
salaries and other amounts due its employees in connection with this Agreement,
and shall be responsible, in compliance with applicable laws relating to
worker's compensation and employer's liability insurance, for insuring all of
its employees who perform services under this Agreement.
SECTION 20. PROHIBITION AGAINST IMPROPER GIFTS OR PAYMENTS
20.1 No official, employee or agent of any government, governmental
agency or political party shall be given any benefit, share in any proceeds
from this Agreement, or receive any item of value related to this Agreement.
The parties each warrant that they have not and will not, in connection with
this Agreement, pay, donate, give or promise anything of value to any such
person or entity on behalf of Motorola or PageMart.
SECTION 21. ASSIGNMENT AND SUBCONTRACTING
21.1 Except as follows, neither party may assign this Agreement or
delegate its performance under it without the prior written consent of the
other, but such consent will not be unreasonably withheld. PageMart agrees,
however, that Motorola may appoint subcontractors to perform certain of its
obligations under this Agreement, including (but not limited to) those relating
to the Software. In addition, Motorola may assign this entire Agreement to one
of its affiliates, or sell, transfer or assign to a financing institution its
right to receive payment from PageMart. Motorola will remain primarily liable
for its performance under this Agreement notwithstanding any assignment or
appointment.
21.2 This Agreement will be binding upon any successor or permitted
assignee of either party.
SECTION 22. GENERAL
22.1 Amendments to Agreement. Amendments to this Agreement may only be
made in writing and signed by an officer or other authorized representative of
each party.
22.2 Notices. Notices under this Agreement must be in writing and sent by
facsimile, courier, or registered or certified mail to the appropriate party at
its address stated on the first page of this Agreement (or to a new address if
the other party has been properly notified of the change). A notice will not be
effective until the person to whom it is addressed actually receives it.
MOTOROLA PROPRIETARY CONFIDENTIAL 15
<PAGE> 16
22.3 Public Announcements. PageMart and Motorola agree that the terms of
this Agreement are confidential and cannot be disclosed by either party outside
its respective organization without the other's written consent, with the
following exceptions: 1) as may be required by law or regulatory agency; 2) for
the purposes of a securities offering or financing; 3) to accountants, financial
advisors, and their counsel, under the terms of a confidentiality agreement; or
4) to establish their rights under this Agreement. However, prior to PageMart's
disclosure of such terms under the above exceptions, Motorola shall be given an
opportunity to review the material to be disclosed. The parties agree to work
together to produce such press releases and other public announcements as are
acceptable to both parties, including a joint press release announcing only (1)
the dismissal of PageMart's lawsuit against MobileMedia, and (2) the transfer of
PageMart's parent portfolio to Motorola.
22.4 Beta System Demonstration. PageMart agrees to the reasonable use of
the DFW Beta System for Motorola's product demonstration purposes.
22.5 Headings. The section headings in this Agreement are for convenience
only and will not be considered part of, nor affect the construction or
interpretation of, any provision of this Agreement.
22.6 Entire Agreement. The Technology Asset Agreement and Contract
Documents of this Agreement represent the entire agreement between the parties
regarding the transfer of PageMart patents and the sale and purchase of the
System, Products and any Services. Their terms and conditions supersede any
terms or conditions contained on printed forms submitted with purchase orders,
sales acknowledgments or invoices, and all previous oral or written
communications between the parties regarding the subject, except for the factual
information on the front of that form regarding such matters as model numbers
and quantities of equipment, prices, requested delivery date and time, and
delivery instructions.
22.7 Invalidity of Provisions. If any provision of this Agreement is held
illegal, invalid or unenforceable, such invalidity will not affect the
enforceability of any other provision not held to be invalid.
22.8 Acknowledgment. Both parties acknowledge that they have read this
Agreement, have had the opportunity to review it with an attorney if desired,
understand it, and agree to be bound by its terms.
All of which is signed on behalf of Motorola and PageMart by their
authorized representatives.
MOTOROLA, INC. PAGEMART WIRELESS, INC.
By: /s/ LARRY CONLEE By: /s/ G. CLAY MYERS
---------------------------- ----------------------------
Print Name: Larry Conlee Print Name: G. Clay Myers
-------------------- ---------------------
Title: Corporate VP Title: V.P. Finance & CFO
------------------------- -------------------------
Date: 1/26/96 Date: 1/26/96
-------------------------- --------------------------
MOTOROLA PROPRIETARY CONFIDENTIAL 16
<PAGE> 17
ARTICLE II: SOFTWARE
SECTION 1. PAGING INFRASTRUCTURE SOFTWARE LICENSE AGREEMENT
MOTOROLA PAGING INFRASTRUCTURE
SOFTWARE LICENSE AGREEMENT
(C) Motorola, Inc. 1995
This Paging Infrastructure Software License Agreement ("License Agreement")
is made and entered into by and between MOTOROLA, INC. ("Motorola") and PAGEMART
WIRELESS, INC., and its Affiliates ("Licensee"). In accordance with the
following terms and conditions, Motorola agrees to grant to Licensee and
Licensee agrees to accept from Motorola, a limited license for Motorola's Paging
Infrastructure object code Software and related Documentation used in connection
with items of Equipment purchased under this Agreement, including any
supplements or updates to any such Software or Documentation item delivered to
the Licensee from Motorola under the terms of either the initial purchase of the
Software or according to the terms of a Software Maintenance Policy (SMP).
In that regard, Motorola and Licensee specifically agree that, for as long
as the Equipment Purchase Agreement ("the Agreement") is in effect, the Licensee
may obtain from Motorola such items of Software offered by Motorola's Advanced
Messaging Systems Division. Unless Motorola and Licensee execute a separate
agreement specifically licensing a particular item of software, the Licensee's
use of all Software purchased under this Agreement shall be subject to the terms
and conditions of this License Agreement, and Motorola may supply such items of
Software to Licensee subject to the terms and conditions of this License
Agreement.
1. EFFECTIVE DATE OF LICENSE. This License Agreement is an offer to license by
Licensee, and will become effective:
(A) after the Licensee, or an authorized agent of the Licensee, has signed
this Agreement and returned it to Motorola at the address below; and
(B) either (i) an authorized agent of Motorola has acknowledged receipt of
this Agreement in writing; or (ii) Motorola ships to the Licensee at its
address below, an item or items of Software requested by the Licensee.
2. LICENSE. Motorola hereby grants to Licensee a personal, nonexclusive,
nontransferable, limited license to use the Software, subject to the conditions
and limitations contained in this License Agreement, solely for the purpose of
operating or testing Motorola paging infrastructure Equipment in which the
Software is initially installed.
Licensee understands and agrees to each of the following:
A. Each item of Software obtained by Licensee from Motorola pursuant to
this License Agreement shall only be used by the Licensee upon Motorola
hardware, or upon third-party hardware purchased through Motorola.
B. Use of an item of Software at one location shall not include the right
to access use of that Software through remote access from any other
location.
C. Licensee acknowledges and agrees that any material breach of this
License Agreement or any unauthorized use, dissemination, distribution, or
modification of software and programming information contained within
Motorola infrastructure Equipment will likely cause Motorola substantial
and irreparable harm.
MOTOROLA PROPRIETARY CONFIDENTIAL 17
<PAGE> 18
3. CHARGES AND PAYMENTS. For each item of Software licensed, Licensee agrees
to pay a nonrefundable, lump-sum, per-Equipment-item charge. Each such charge
shall be due and payable within thirty (30) days of receipt of invoice. Service
charges at the maximum rate permitted by applicable law may be invoiced on
accounts more than ten (10) days past due and shall be due and payable upon
receipt of invoice.
4. TAXES. Licensee shall pay all sales, use and excise taxes, and any other
assessments in the nature of taxes however designated, on the Software or its
license or use, on any amount payable or any Services furnished under the
License Agreement, or otherwise related to or resulting from the License
Agreement.
5. PROTECTION AND SECURITY. Title to and ownership of any item of Software
delivered hereunder and to any copies made by Licensee is, and shall at all
times remain, in Motorola. Licensee acknowledges Motorola's claim that the
Software contains valuable proprietary information and trade secrets and that
unauthorized dissemination, distribution, modification, reverse engineering,
disassembly, or unauthorized use of the Software could cause irreparable harm to
Motorola. Therefore, Licensee agrees not to disclose, transfer, provide, or
otherwise make available in any form whatsoever the Software, the information
therein, or any portion thereof, to any person or organization other than
Licensee's employees, without the prior written consent of Motorola. Licensee
will take appropriate action, by instruction, agreement or otherwise, with any
persons permitted access to the Software so as to enable Licensee to hold the
Software in confidence and otherwise to satisfy its obligations under this
License Agreement.
Since unauthorized use of such Motorola software can greatly diminish the
value of such trade secrets and cause irreparable harm to Motorola, Licensee
also agrees that Motorola, in addition to any other remedies it may have, shall
be entitled to equitable relief to protect such trade secrets, including without
limitation, temporary and permanent injunctive relief, without the proving of
amount of damage by Motorola.
Licensee shall make no copies of the Software except those working or
back-up copies necessary to enable Licensee's operation and testing in the
specified licensed Equipment. A backup copy may be made for the Equipment
licensed herein.
Licensee will provide to Motorola, upon Motorola's request, the actual
location of all copies of the Software.
Licensee will reproduce and include all copyright and trademark notices and
other proprietary legends, on all copies in accordance with Motorola's
instructions.
Licensee acknowledges and agrees that the existence of any copyright notice
on any item of Software shall not be construed as an admission or presumption
that publication of such item of Software has occurred.
Licensee agrees that any breach of the terms of this Section 5 shall be
considered by the parties hereto to be a substantial and material breach of this
Agreement, which breach shall be grounds for Motorola to terminate Licensee's
license hereunder pursuant to the terms of Section 9(a).
The terms of this Section shall survive the termination of this License
Agreement and any license hereunder.
6. MAINTENANCE. Motorola shall not be responsible for field support or field
service of Software under this License Agreement. Any maintenance by Motorola,
if available, shall be by separate agreement on Motorola's then current terms
and conditions and at Motorola's then current prevailing rates for such
maintenance.
7. SOFTWARE WARRANTY DISCLAIMER. LICENSEE ACCEPTS THE SOFTWARE LICENSED UNDER
THE LICENSE AGREEMENT "AS IS." OTHER THAN AS WARRANTED IN SECTION 12 OF ARTICLE
I, MOTOROLA EXTENDS NO WARRANTIES ON THE SOFTWARE, EITHER EXPRESS OR IMPLIED,
AND SPECIFICALLY EXCLUDES WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
MOTOROLA PROPRIETARY CONFIDENTIAL 18
<PAGE> 19
8.1 TERMINATION OF LICENSE. Any license granted under this License Agreement
is effective until terminated as set forth below. Licensee may terminate a
license for an item of Software at any time by returning to Motorola all
originals and all copies of the Software (including documentation and
materials). Licensee agrees that the termination of a license by Licensee or
Motorola does not entitle Licensee to the refund of any license charge.
Motorola may terminate a license for an item of Software, or terminate this
entire License Agreement, if Licensee fails to comply with any material term or
condition of this License Agreement. (See Section 9. Default.) Upon
termination, Licensee agrees to return all copies of the Software to Motorola
and delete all copies of the Software from any mass storage device.
8.2 TERMINATION FOR CAUSE. This Agreement may be terminated by Motorola
immediately, and without notice to the Licensee, upon the occurrence of any of
the following events:
(a) Any material default by the Licensee as set forth in Section 9 below.
(b) Licensee ceases to function as a going concern, declares bankruptcy, or
otherwise becomes insolvent.
9. DEFAULT. Default includes, but is not limited to, any of the following acts
or omissions:
(a) Licensee fails to perform any of its obligations under Section 5,
"Protection and Security," and such failure remains uncured for a period of ten
(10) days after Licensee's receipt of written notice thereof from Motorola.
(b) Licensee fails to perform any of its material obligations under this
License Agreement, and such failure remains uncured for a period of thirty (30)
days after Licensee's receipt of written notice thereof from Motorola.
10. REMEDIES. In the event of any material default by Licensee under this
License Agreement, Licensee acknowledges that in addition to any other rights
and remedies available to Motorola under law or in equity, Motorola may:
- withhold performance hereunder; or,
- terminate the license for any item of Software at any time; or,
- terminate this entire License Agreement; or,
- demand and be entitled to the immediate return of all copies of any or
all items of Software.
In any such event, Motorola's remedies shall be cumulative. There shall be no
obligation upon Motorola to exercise a particular remedy.
11. LIMITATION OF LIABILITY. Motorola's entire liability to Licensee for
Motorola's performance or nonperformance under this License Agreement shall be
limited to a refund by Motorola of an amount not to exceed the total license
charge paid by Licensee for the item of Software and the Equipment item in which
it is contained that are directly related to such claim.
UNDER NO CIRCUMSTANCES WILL MOTOROLA OR PAGEMART BE LIABLE TO THE OTHER FOR LOSS
OF USE, DAMAGE TO OR LOSS OF PRODUCTS OR SERVICES, LOSS OF DATA, FAILURE TO
REALIZE EXPECTED SAVINGS, FRUSTRATION OF ECONOMIC OR BUSINESS EXPECTATIONS, LOST
REVENUE OR PROFITS, OR FOR ANY OTHER SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, EVEN IF THEY WERE FORESEEABLE OR MOTOROLA OR PAGEMART WAS
INFORMED OF THEIR POTENTIAL.
12. ASSIGNMENT. Licensee is prohibited from assigning, transferring or
sublicensing the Software without the prior written consent of Motorola.
However, Licensee may sublicense a joint venturer with Motorola's written
approval, such approval not to be unreasonably withheld. Any prohibited
assignment, transfer or sub-license shall be null and void. Motorola reserves
the right to assign the License Agreement, encumber or sell the Software, or
subcontract any of its obligations hereunder, either in whole or in part,
without notice to or the consent of
MOTOROLA PROPRIETARY CONFIDENTIAL 19
<PAGE> 20
Licensee, although Motorola shall be ultimately responsible for the performance
of its obligations hereunder.
13. NOTICES. All formal notices and other communications required or permitted
under the License Agreement shall be in writing to the addresses indicated in
this License Agreement.
14. ENTIRE AGREEMENT. THIS LICENSE AGREEMENT CONSTITUTES THE COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN MOTOROLA AND LICENSEE, AND
SUPERSEDES ALL ORAL OR WRITTEN PROPOSALS, PRIOR AGREEMENTS, AND OTHER PRIOR
COMMUNICATIONS BETWEEN THE PARTIES, CONCERNING THE SUBJECT MATTER OF THE LICENSE
AGREEMENT.
15. GENERAL TERMS AND CONDITIONS. This License Agreement shall be governed by
and construed in accordance with the laws of the State of Illinois. No amendment
of this License Agreement or representation or promise relating thereto shall be
binding unless it is in writing and signed by both parties. Notwithstanding any
variance with the terms and conditions of any order submitted by Licensee, the
terms and conditions of this License Agreement shall prevail. No waiver by a
party of any breach of any provision of this License Agreement shall constitute
a waiver of any other breach of that or any other provision of this License
Agreement. Licensee recognizes that applicable Federal Communications Act and
other statutes, laws, ordinances, rules and regulations may change from time to
time. Accordingly, without liability and in its sole discretion, Motorola has
the right to modify this License Agreement to comply with such changes. In the
event that any of the provisions contained in this License Agreement are held to
be unenforceable, this License Agreement shall be construed without such
provisions. No action, regardless of form, arising out of this License Agreement
may be brought by Licensee more than one (1) year after the cause of action has
arisen.
ACCEPTED AND APPROVED BY MOTOROLA AS OF 26 JANUARY, 1996.
<TABLE>
<S> <C>
LICENSOR LICENSEE
MOTOROLA, INC. PAGEMART WIRELESS, INC.
BY: /s/ LARRY CONLEE BY: /s/ CLAY MYERS
----------------------------- ---------------------------
(Authorized Signature) (Authorized Signature)
Please type the following: Please type the following:
NAME: LARRY CONLEE NAME: G. CLAY MYERS
--------------------------- -------------------------
TITLE: CORP VP TITLE: V.P. FINANCE & CFO
-------------------------- ------------------------
DATE: 1/26/96 DATE: 1/26/96
-------------------------- ------------------------
Address for Formal Notices: Address for Formal Notices:
MOTOROLA, INC. PAGEMART WIRELESS, INC.
Attn: SMP Dept. 6688 North Central Expressway
Advanced Messaging Systems Division Suite 800
5401 North Beach Street Dallas, Texas 75206
Fort Worth, Texas 76137 Attn: /s/ TODD BERGWALL
-------------------------
</TABLE>
MOTOROLA PROPRIETARY CONFIDENTIAL 20
<PAGE> 21
ARTICLE II: SOFTWARE
SECTION 2. SOFTWARE MAINTENANCE POLICY
[MOTOROLA LOGO]
ADVANCED MESSAGING SYSTEMS DIVISION
SOFTWARE MAINTENANCE POLICY
TERMS AND CONDITIONS
This is a Software Maintenance Policy (SMP) # , by and
between PAGEMART WIRELESS, INC. ("PAGEMART"), located at 6688 North Central
Expressway, Suite 800, Dallas, Texas 75206; and MOTOROLA, INC. ("MOTOROLA"), by
and through its Advanced Messaging Systems Division (AMSD), located at 5401
North Beach Street, Fort Worth, Texas 76137.
WHEREAS, MOTOROLA and PAGEMART have entered into a MOTOROLA PAGING
INFRASTRUCTURE SOFTWARE LICENSE AGREEMENT having an effective date of
, 1996, which grants PAGEMART certain rights relating to licensed
Software operating on a Paging System installed or to be installed at PAGEMART
locations as per the list in Attachment A, as the parties may amend from time to
time.
MOTOROLA and PAGEMART agree that software installation and maintenance services
("Services") provided by MOTOROLA to PAGEMART on the Software ("Software") and
Documentation shall be performed exclusively pursuant to the fees, terms and
conditions set forth in this SMP. This Software Maintenance Policy shall cover
software residing in MOTOROLA-supplied paging infrastructure hardware purchased
or provided pursuant to Articles I, III and IV of the Agreement.
MOTOROLA will support only the current system software release and the
immediately preceding system release for PAGEMART's market. Support for earlier
releases will be available only on a time and materials basis.
SUPPORT FEATURES:
a. Telephone Technical Support: MOTOROLA will provide hotline
support during the hours of 7 am - 7 pm, Central U.S. time,
Monday through Friday, except MOTOROLA holidays. PAGEMART shall
use the hotline for assistance in problem identification,
problem solving, and configuration questions.
b. 24 Hour, Emergency Telephone Technical Support: In addition
to its regular phone support, MOTOROLA will provide 24-hour
emergency telephone technical support, 365 days-a-year.
(Non-emergency calls, as determined by MOTOROLA, other than
between 7am - 7pm, will be billed at the standard MOTOROLA
rates.)
c. Updates: PAGEMART will receive new system Software and
Documentation updates at no additional charge. Updates include
fixes and debugs, and may include software enhancements at
MOTOROLA's discretion.
d. Existing Coverage Extended to Same-Year Purchases: Once a
system is covered by this SMP, all qualifying equipment
purchased and placed in service during the annual SMP term shall
automatically receive coverage under the SMP. See Attachment A
for a representative list of equipment covered by this SMP.
e. Access To MOTOROLA's Customer Service Bulletin Board: As an
SMP subscriber, PAGEMART can receive technical information from
the AMSD Customer Service Bulletin Board, including updates on
software-related issues, operation tips, trouble shooting
advice, insight on using new software-based products to fullest
advantage, and key features and enhancements of new software
releases.
MOTOROLA PROPRIETARY CONFIDENTIAL 21
<PAGE> 22
1. Maintenance Response and Support: In the event MOTOROLA is unable to
resolve a software failure through telephone support, then MOTOROLA
shall use prompt and reasonable efforts to respond to PAGEMART's request
for service.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
FEATURE WITHOUT SMP WITH SMP
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Telephone Support (During Business Hours) Standard Rates Apply Included
- --------------------------------------------------------------------------------------------------
Emergency Telephone Technical Support Standard Rates Apply Included
- --------------------------------------------------------------------------------------------------
Software Updates Standard Software Pricing Applies Included
- --------------------------------------------------------------------------------------------------
Access To Bulletin Board None Included
- --------------------------------------------------------------------------------------------------
Maintenance Response and Support Standard Rates Apply Included
- --------------------------------------------------------------------------------------------------
</TABLE>
SMP ADVANTAGES: Cost savings, software updates provided, better support, quicker
response time, reduced labor expense, downtime limited to a minimum in order to
protect revenue.
DURATION AND RENEWAL
This SMP has a one-year term that is renewed annually. Since the SMP is based on
equipment in service, PAGEMART shall report to MOTOROLA any change in location
of MOTOROLA hardware in service in PAGEMART's system, in order to determine the
SMP fee for the following SMP term, PAGEMART will receive an invoice for the
renewed SMP at least thirty (30) days before the start of the next SMP term.
At least ninety (90) days before any renewal period, and upon prior written
notice to PAGEMART, MOTOROLA reserves the right to increase or decrease
maintenance prices for the immediately following annual period.
PAGEMART OBLIGATIONS UNDER THE SMP
PAGEMART agrees to:
[X] PROVIDE CURRENT EQUIPMENT LIST. Supply complete listing of system components
indicating equipment serial numbers, software versions and equipment
locations.
[X] PERFORM FIRST-LEVEL DIAGNOSTICS. Carefully monitor its system and equipment
for any indication of problems. If PAGEMART needs assistance with these
first-level diagnostics, the hotline is available for help.
[X] REPORT ANY PROBLEMS. PAGEMART shall report problems immediately to the
One-Call-Support(TM) Center in order to set the correction process in
motion.
[X] MAINTAIN CURRENT SOFTWARE. Under this SMP, MOTOROLA supports only the
current system software release and the immediately preceding system
software release. MOTOROLA strongly recommends that all products operate on
the latest releases. Support for releases other than the current system
software release and the immediately preceding software release will be
provided on a time and materials basis only.
[X] PURCHASE HARDWARE IF NECESSARY. From time to time, PAGEMART may need to add
or upgrade hardware to accommodate a new software release. MOTOROLA will
notify PAGEMART of such hardware enhancements thirty (30) days prior to
making a new software release available. This SMP does not include the costs
of any required hardware upgrades.
[X] SUPPLY REMOTE DIAL-IN PHONE LINE(S). In order to ensure the best possible
support, PAGEMART must supply a direct dial-in phone line, to all supported
equipment modems. If no phone line is available, it is PAGEMART'S
responsibility to relay the appropriate information to MOTOROLA.
[X] PRICES: Subject to the foregoing terms of this Agreement. PAGEMART shall pay
MOTOROLA for the services to be rendered under this SMP at the prices and
rates set forth in the Price Book. All sales tax, use taxes, or value-added
taxes payable in connection with the Service to be provided by Motorola
pursuant to this SMP shall be paid by PAGEMART.
EXCLUSION
MOTOROLA PROPRIETARY CONFIDENTIAL 22
<PAGE> 23
MOVEMENT OF EQUIPMENT/SOFTWARE - Movement of equipment/software to new sites by
organizations or persons not authorized by MOTOROLA, and reinstallation of
equipment by anyone not authorized by MOTOROLA, shall void any obligation of
MOTOROLA under this SMP with regard to equipment/software so moved or
reinstalled. Provided PAGEMART notifies MOTOROLA in advance of its intention to
move equipment/software and seeks authorization to do so, such authorization by
MOTOROLA will not be unreasonably withheld.
MOTOROLA shall have no obligation under this SMP to repair or replace items when
such repair or replacement is necessitated by the following:
(a) Forte Majeure. Neither party shall be liable for delay or failure in
performance when such delay or failure is caused by any of the following that
are beyond the actual control of the delayed party: acts of God, acts of the
public enemy, acts or failures to act by the other party, acts of civil or
military authority, governmental priorities, strikes or other labor
disturbances, hurricanes, earthquakes, lightning, fires or floods, epidemics,
embargoes, wars or riots, delays in transportation, loss or damage to goods in
transit (subject to such goods being packed within the suppliers' specifications
for such transit, and to the availability of necessary materials, components,
services or facilities), or any other cause which the delayed party could not
have prevented or for which the delayed party is not responsible.
However, MOTOROLA agrees, upon PAGEMART's request, to participate with
PAGEMART and make an assessment with respect to the damage as a result of any
Force Majeure, and then to provide PAGEMART a quotation with respect to the
repair and/or replacement of the items damaged as a result of the Force Majeure.
(b) Acts of vandalism or any deliberate act or attempt to modify, remove,
or obliterate a part's bar-coded serial number or other identifying marks.
(c) Attempts to repair or modify the software by personnel not authorized
or approved by MOTOROLA.
(d) Misuse of the software.
(e) Failure to maintain prescribed environmental conditions or external
electrical parameters.
(f) Damage which occurs during shipment from PAGEMART to MOTOROLA.
(g) Failure to take any action required by MOTOROLA through its published
Customer Service Report (CSR) or Bulletin Board, which shall be made available
to PAGEMART.
DEFAULT AND TERMINATION
MOTOROLA AMSD shall have the right to immediately terminate this SMP, and to
suspend its performance hereunder, upon notification and provision of a 10-day
cure period to PAGEMART if PAGEMART:
(a) makes any unauthorized modifications to the Software;
(b) assigns or transfers PAGEMART's rights or obligations under this SMP
without the prior written consent of MOTOROLA;
(c) becomes bankrupt or insolvent, or is put into receivership; or
(d) fails to pay any charge for services supplied under this SMP or any
additional charges when due.
MOTOROLA may also terminate this SMP if PAGEMART, on written notice from
MOTOROLA, does not pay MOTOROLA all amounts then due within thirty (30) days of
such notice.
Notwithstanding such termination of the SMP to PAGEMART, PAGEMART shall remain
responsible for all amounts then due.
LIMITATION OF DAMAGES
UNDER NO CIRCUMSTANCES WILL MOTOROLA OR PAGEMART BE LIABLE TO THE OTHER FOR LOSS
OF USE, DAMAGE TO OR LOSS OF PRODUCTS OR SERVICES, LOSS OF DATA, FAILURE TO
REALIZE EXPECTED SAVINGS, FRUSTRATION OF ECONOMIC OR BUSINESS EXPECTATIONS, LOST
REVENUE OR PROFITS, OR FOR ANY OTHER SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, EVEN IF THEY WERE FORESEEABLE OR MOTOROLA OR PAGEMART WAS
INFORMED OF THEIR POTENTIAL.
Each party's total liability under or in connection with this SMP shall not
exceed the total sums paid by PAGEMART to MOTOROLA with respect to such
Software, Supplies, or Services provided hereunder.
MOTOROLA PROPRIETARY CONFIDENTIAL 23
<PAGE> 24
SEVERABILITY
If any provision of this SMP is held to be illegal, invalid, or unenforceable,
such invalidity will not affect the enforceability of any other provisions not
held to be invalid.
ENTIRE POLICY
Article I and this SMP constitutes the entire understanding between the parties
concerning the subject matter hereof and supersedes all prior discussions,
policies and representations, whether oral or written and whether or not
executed by MOTOROLA and PAGEMART. No modification, amendment, or other change
may be made to this SMP or any part hereof unless made in writing and executed
by authorized signing officers of MOTOROLA and PAGEMART. The terms and
conditions of this SMP supersedes the terms and conditions contained on any
purchase order or sales acknowledgments between the parties.
The obligations of the parties hereto are obligations of the corporate entities
executing this SMP alone. These obligations are neither the obligations of, nor
are they implied or otherwise guaranteed by, any individual who signs this SMP
or who is otherwise associated with the parties.
I have read this SMP and agree to be bound by its terms.
PAGEMART Signature
Name (please print) __________________________________________________
Title ________________________________________________________________
Date _________________________________________________________________
MOTOROLA Signature ___________________________________________________
Name (please print) __________________________________________________
Title ________________________________________________________________
Date _________________________________________________________________
* See Attachment "A" for a representative list of Equipment covered by this SMP.
11/95
MOTOROLA PROPRIETARY CONFIDENTIAL 24
<PAGE> 25
ATTACHMENT A
MOTOROLA'S ADVANCED MESSAGING SYSTEMS DIVISION
SOFTWARE MAINTENANCE POLICY (SMP) # ____________________
EQUIPMENT LISTING AND MAINTENANCE FEES
This is Attachment A to the MOTOROLA System Equipment Software and Maintenance
Policy dated ________________ by and between PAGEMART WIRELESS, INC. and
MOTOROLA, INC.
Maintenance for the period:________________, 199_ thru ____________, 199_.
<TABLE>
<CAPTION>
SITE NO. SITE NAME ST DESCRIPTION MODEL/SERIAL # MFG./RELEASE DATE SMP FEE
- --------- ---------- ---- ------------ --------------- ------------------ --------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
MOTOROLA PROPRIETARY CONFIDENTIAL 25
<PAGE> 26
ARTICLE III: ADVANCED MESSAGING SUBSCRIBER EQUIPMENT -TABLE OF CONTENTS
SECTION 1. CREDIT FOR EQUIPMENT
SECTION 2. EQUIPMENT WARRANTY
SECTION 3. EQUIPMENT PRICING
MOTOROLA PROPRIETARY CONFIDENTIAL 26
<PAGE> 27
CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM SECTION 1 BELOW
ARTICLE III: ADVANCED MESSAGING SUBSCRIBER EQUIPMENT
SECTION 1. CREDIT FOR EQUIPMENT
As described here and in Article IV, Section 1.3, as additional consideration
for the transfer of the PageMart Patents to Motorola in accordance with the
Technology Asset Agreement between the parties. Motorola agrees to furnish
MOTOROLA PROPRIETARY CONFIDENTIAL 27
<PAGE> 28
ARTICLE III: ADVANCED MESSAGING SUBSCRIBER EQUIPMENT
SECTION 2. EQUIPMENT WARRANTY
LIMITED WARRANTY FOR MOTOROLA ONE-WAY & TWO-WAY PAGERS
I. WARRANTY STATEMENT
Motorola warrants the pager against defects in material and workmanship under
normal use and service for the period of time specified below. This express
warranty is extended by Motorola, Inc., 1301 E. Algonquin Road, Schaumburg, IL
60195, to the original and end user purchasers only and is not assignable or
transferable to any other party. An optional extended warranty is available as
specified below.
II. GENERAL PROVISIONS
This warranty sets forth the full extent of Motorola's responsibilities
regarding the pager. Repair, replacement, or refund of the purchase price, at
Motorola's option, is the exclusive remedy. This warranty is given in lieu of
all other express warranties. Implied warranties, including without limitation
implied warranties of merchantability and fitness for a particular purpose, are
limited to the duration of this limited warranty. In no event shall Motorola be
liable for damages in excess of the purchase price of the Motorola pager, for
any loss of use, loss of time, inconvenience, commercial loss, lost profits or
savings or other incidental, special or consequential damages arising out of the
use or inability to use such product to the full extent such may be disclaimed
by law.
III. WHAT THIS WARRANTY COVERS
In the event of a defect, malfunction, or failure to conform to specifications
contained in MPDs during the warranty period, Motorola will, at its option,
either repair, replace or refund the purchase price of the pager. Repair may, at
Motorola's option, include the replacement of parts or boards with functionally
equivalent reconditioned or new parts or boards. Replaced parts and boards are
warranted for the greater of (i) 90 days or (ii) the balance of the original
warranty period. All parts and boards removed in the replacement process shall
become the property of Motorola. This warranty does not cover defects,
malfunctions, performance failures or damages to the unit resulting from use in
other than its normal and customary manner; misuse, accident or neglect, the use
of nonconforming parts; or improper alterations or repairs. This warranty does
not cover batteries, internal physical or water damage, wear and tear on covers
or housings, and coverage or range over which the pager will receive signals.
IV. LENGTH AND TYPE OF WARRANTY
Motorola ________ pagers are shipped from the factory with a standard warranty
or an optional extended warranty. The standard warranty period is for one year
on parts and 120 days on labor from the date of purchase based on proof of
purchase. The optional extended warranty is provided in lieu of the standard
warranty for a consideration over and above the price of the pager. This
extended warranty covers parts and labor for the number of years chosen starting
at the date of purchase of the pager by the end user. The type and length of
warranty of the pager may be determined by the first and third characters of the
pagers 10-character serial number as follows:
- A number in the first position of the serial number denotes a standard
warranty of 120 days for labor and one year for parts.
- A letter in the first position of the serial number denotes extended
warranty coverage.
- If an extended warranty, then the number in the third position denotes the
number of years of the warranty.
Example: The number __ in the third position denotes warranty coverage
of ____ years.
The number __ in the third position denotes warranty coverage
of ____ years.
V. HOW TO RECEIVE SERVICE
All pagers covered by standard warranty and extended warranty that require
service must be sent or taken to one of the following Motorola Pager Care
facilities only. All inbound shipping or transportation charges to Motorola must
be paid by the purchaser. Motorola will pay for outbound shipping to the
purchaser.
Motorola
AMDS
5401 North Beach Street
Fort Worth, Texas 76137
(800) 520-7243
VI. STATE LAW RIGHTS
Some states do not allow the exclusion or limitation of incidental or
consequential damages, or a limitation on how long an implied warranty lasts, so
the above limitations or exclusions may not apply. This warrant gives you
specific legal rights and you may also have other rights which vary from state
to state.
VII. OUT-OF-WARRANTY REPAIR
Replacement housings and out-of-warranty repairs are available at the above
listed Motorola Pager Care facilities. Complete replacement housings cost $____
each. Out-of-warranty electrical repair costs $____. These prices include return
shipping.
VIII. HOW TO PURCHASE ADDITIONAL YEARS OF PAGER WARRANTY
If this pager was purchased with only the standard warranty coverage, then at
your option, additional years of extended warranty are available for an
additional charge during the first ____ days following purchase of the pager.
This extended warranty is in lieu of the standard warranty, and is available for
one, three, or five full years from the date of purchase of the pager, subject
to the above-stated terms and conditions. This extended warranty covers parts
and labor for the number of years chosen.
To purchase this optional extended warranty, please copy and fill out the
section below, and along with your check made payable to Motorola, mail (within
____ days of pager purchase) to: Motorola, Boynton Beach Pager Care, 3020 High
Ridge Road, Suite 600, Boyman Beach, FL 32426.
MOTOROLA PROPRIETARY CONFIDENTIAL 28
<PAGE> 29
FILL OUT AND MAIL ONLY IF YOU ARE PURCHASING ADDITIONAL YEARS OF WARRANTY.
<TABLE>
<S> <C>
Customer Information (Please Print) Prices for extended warranty
1 full year 3 full years 5 full years
Name ___________________________________________________ ----------- ------------ ------------
Address_________________________________________________
City, State, Zip________________________________________
Serial Number___________________________________________ Purchase __ additional years of extended warranty for a total of $________
(__ characters - starting with __ letters or a number.)
Example:__________________________ Applicable sales taxes (state, city, country) $________
Daytime Phone # (Not pager #) __________ Total Amount Enclosed: $________
</TABLE>
NOTE: All purchases of extended warranty are final. There are no refunds.
Extended warranty is not transferable from one pager to another.
MOTOROLA PROPRIETARY CONFIDENTIAL 29
<PAGE> 30
ARTICLE III: ADVANCED MESSAGING SUBSCRIBER EQUIPMENT
SECTION 3. EQUIPMENT PRICING
MOTOROLA PROPRIETARY CONFIDENTIAL 30
<PAGE> 31
ARTICLE IV: INFRASTRUCTURE EQUIPMENT - TABLE OF CONTENTS
SECTION 1. COMMITMENTS FOR PURCHASE, EQUIPMENT CREDITS, AND ADDITIONAL
INFRASTRUCTURE CREDIT
SECTION 2. EQUIPMENT WARRANTY
SECTION 3. EQUIPMENT PRICING
MOTOROLA PROPRIETARY CONFIDENTIAL 31
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CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM SECTION 1 BELOW
ARTICLE IV: INFRASTRUCTURE EQUIPMENT
SECTION 1. COMMITMENTS FOR PURCHASE, EQUIPMENT CREDITS, AND ADDITIONAL
INFRASTRUCTURE CREDIT
1.1 Buyer Purchase Commitment. PageMart agrees to purchase from Motorola,
of conventional one-way and two-way infrastructure Equipment over
the forty-seven (47) month period beginning December 1, 1995 and ending October
31, 1999. In the event PageMart fails to order and take delivery from Motorola
of of infrastructure Equipment prior to September 1, 1999,
provided any failure to take delivery is not due to Force Majeure as described
in Section 15.1 of Article I, or to Motorola's failure to meet reasonable
scheduled delivery dates, then on September 1, 1999, Motorola may prepare an
invoice for, and ship, infrastructure Products chosen at Motorola's sole
discretion, with a total price (priced at the purchase prices of this Agreement)
equivalent to the difference between and the amount of
infrastructure Equipment previously ordered by PageMart and delivered under this
Agreement. PageMart agrees to accept such Products and to pay such invoice
within thirty (30) days of its receipt.
1.2 Credit for Infrastructure Equipment. As additional consideration for
the transfer of the PageMart Patents to Motorola in accordance with the
Technology Asset Agreement between the parties, Motorola agrees to furnish
.
1.3 Credit for Advanced Messaging Subscriber Units. As described here and
in Article III, Section 1, as additional consideration for the transfer of the
PageMart Patents to Motorola in accordance with the Technology Asset Agreement
between the parties, Motorola agrees to furnish
.
1.4 Additional Infrastructure Credit. As additional consideration for the
transfer of the PageMart Patents to Motorola in accordance with the Technology
Asset Agreement between the parties, Motorola agrees to furnish
.
MOTOROLA PROPRIETARY CONFIDENTIAL
<PAGE> 33
ARTICLE IV: INFRASTRUCTURE EQUIPMENT
SECTION 2. EQUIPMENT WARRANTY
[MOTOROLA LOGO]
ADVANCED MESSAGING SYSTEMS DIVISION
INFRASTRUCTURE LIMITED PRODUCT WARRANTY
GENERAL TERMS
1.1 Motorola Advanced Messaging Systems Division (AMSD)-manufactured
infrastructure Equipment is warranted to be free from defects in material and
workmanship to the original purchaser only as set forth herein.
1.2 This Warranty covers Equipment that is used in the manner and for the
purpose intended.
1.3 This Warranty specifically excludes any and all software products from any
source. Motorola AMSD software products are the subject of the AMSD Software
Maintenance Policy (SMP), addressed separately.
1.4 This Warranty shall commence on the date of shipment of the AMSD
Equipment.
1.5 The term of Warranty for all AMSD infrastructure Equipment, except for
base stations and Alphamate 250 paging entry terminal products, is one (1) year
parts and labor. The Warranty term for Nucleus base stations is three (3) years
parts and one (1) year labor. The Warranty term for Alphamate 250 paging entry
terminals is one (1) year parts and 120 days labor in AMSD-authorized service
centers. In-field labor, which is only available for base station warranty
claims, is to be provided by AMSD-authorized service centers during the hours
of 8:00 AM - 5:00 PM, Monday - Friday, excluding Motorola holidays.
LIMITATIONS AND QUALIFICATIONS OF WARRANTY
2.1 LIMITATION - THE WARRANTIES SET OUT IN THIS SECTION ARE THE ONLY
WARRANTIES FOR THE EQUIPMENT. MOTOROLA EXPRESSLY DISCLAIMS ALL OTHER
WARRANTIES, GUARANTEES OR REPRESENTATIONS, WHETHER EXPRESS, IMPLIED, OR
STATUTORY, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. MOTOROLA ALSO DISCLAIMS ANY IMPLIED WARRANTY ARISING OUT OF
TRADE USAGE OR OUT OF A COURSE OF DEALING OR COURSE OF PERFORMANCE.
2.2 This Warrant does not cover, nor include a remedy for, damages, defects or
failure caused by:
(a) the equipment of any part of it NOT having been installed, modified,
adapted, repaired, maintained, transported or relocated in accordance with
Motorola technical specifications and instructions;
(b) storage not conforming to the applicable Motorola Equipment Manual's
Shipping, Receiving and Installation section.
(c) environmental characteristics not conforming to the applicable
Motorola Equipment Manual.
(d) nonconformance with the Equipment Operating Instructions in the
applicable Motorola Equipment Manual.
(e) external causes including, without limitation, used in conjunction
with incompatible equipment, unless such use was with or under Motorola's prior
written consent;
(f) cosmetic damages;
(g) damages caused by external electrical stress;
(h) lightning;
(i) accidental damage;
(j) negligence, neglect, mishandling, abuse or misuse by any party other
than Motorola;
(k) Force Majeure; and
(l) damage caused by Shipper(s)
RETURN OF EQUIPMENT
3 If an item of AMSD equipment malfunctions or fails in normal use within
the Warranty Period:
(a) PageMart shall promptly notify its nearest Motorola Paging
One-Call-Support(TM) Center of the problem and provide the serial number of the
defective item. Motorola shall, at its option, either resolve the problem over
the telephone or issue a Return Authorization Number to PageMart. PageMart
shall, at its cost, ship the item to the Motorola Paging One-Call-Support(TM)
Center location designated at the time the Return Authorization Number is
issued;
MOTOROLA PROPRIETARY CONFIDENTIAL 33
<PAGE> 34
(b) the Return Authorization Number must be shown on the label attached to
each returned item. A description of the fault must accompany each returned
item. The returned item must be properly packed, and the insurance and shipping
charges prepaid;
(c) Motorola shall either repair or replace the returned item. When a
returned item is replaced by Motorola, the returned item shall become the
property of Motorola;
(d) Subject to all the terms of this Warranty, Motorola shall complete the
repair or exchange of Motorola-manufactured equipment returned under Warranty
within ten (10) working days of receipt of the equipment;
(e) Motorola shall, at its cost, ship the repaired or replaced item to
PageMart. If PageMart requests Express Shipping, PageMart shall pay Motorola an
expedite fee; and
(f) Equipment which is repaired or replaced by Motorola shall be free of
defects in material and workmanship for the remainder of the original Warranty,
or for 90 days from the date of repair or replacement, whichever is longer. All
other terms of this Warranty shall apply to such repairs or replacements.
ADVANCE REPLACEMENT
4.1 During the Warranty Period:
(a) At the request and for the convenience of PageMart, Motorola may supply
PageMart with Advance Replacement Parts (parts furnished in advance of
Motorola's receipt of defective items). Motorola's provision of such parts will
be contingent on part availability and on PageMart maintaining a satisfactory
credit standing with Motorola's Paging Products Group.
(b) Motorola shall ship the Advance Replacement Parts requested by
PageMart within 48 hours of Motorola's determination that such service is
justified under the circumstances, if stock is available at the Motorola
service location. If stock is not available, Motorola will make every
reasonable effort to locate and provide it to PageMart within ten (10) working
days.
(c) PageMart shall return defective items to Motorola within thirty (30)
days of shipment of the Advance Replacement Parts; failing which, Motorola shall
bill and PageMart shall pay the full current list price of the Advance
Replacement Parts.
4.2 To secure payment of the list price of Advance Replacement Parts if the
defective items are not returned to Motorola, PageMart hereby grants to Motorola
a purchase money security interest in any Advance Replacement Parts.
TELEPHONE TECHNICAL ASSISTANCE
5 During the Warranty Period, Motorola will provide PageMart with
over-the-telephone technical fault analysis free of labor charges. For warranty
calls exceeding 15 per location per month, or for non-warranty calls, Motorola
shall charge PageMart per Motorola's then-current labor rates.
EXCLUDED EQUIPMENT
6 The following equipment is excluded from this Warranty, covered instead by
the original manufacturer's warranty:
(a) equipment which is not an integral part of a basic system configuration
and is not manufactured by Motorola:
(b) peripheral equipment such as printers, modems, data loggers and video
display terminals; and
(c) equipment which is not listed in Motorola's Price Book.
FORCE MAJEURE
7 Motorola shall not be responsible for failure to discharge its obligations
under this Warranty due to causes beyond its reasonable control such as delays
by suppliers, material shortages; strikes, lockouts or other labor disputes;
disturbances; government regulations, floods, lightning, fires, wars, accidents,
and acts of God.
DEFAULT AND TERMINATION
8.1 Motorola shall have the right to immediately terminate this Warranty, and
to suspend its performance under this Warranty, upon notification to PageMart if
PageMart:
(a) assigns or transfers PageMart's rights or obligations under this
Warranty without Motorola's prior written consent; or
(b) within thirty (30) days of written demand by Motorola, fails to pay any
charge for Advance Replacement Parts supplied under this Warranty, if PageMart
has not timely returned the defective item(s).
8.2 Notwithstanding termination of the Warranty to PageMart, PageMart shall
remain responsible for all amounts then due.
LIMITATION OF LIABILITY
9 UNDER NO CIRCUMSTANCES WILL MOTOROLA OR PAGEMART BE LIABLE TO THE OTHER FOR
LOSS OF USE, DAMAGE TO OR LOSS OF PRODUCTS OR SERVICES, LOSS OF DATA, FAILURE TO
REALIZE EXPECTED SAVINGS, FRUSTRATION OF ECONOMIC OR BUSINESS EXPECTATIONS, LOST
REVENUE OR PROFITS, REPROCUREMENT COSTS, OR FOR ANY OTHER SPECIAL, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF THEY WERE FORESEEABLE OR MOTOROLA
OR PAGEMART WAS INFORMED OF THEIR POTENTIAL.
MOTOROLA PROPRIETARY CONFIDENTIAL 34
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CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM SECTIONS BELOW
ARTICLE IV: INFRASTRUCTURE EQUIPMENT
SECTION 3. EQUIPMENT PRICING
(a) Motorola's prices to PageMart for infrastructure Equipment,
including related Software, shall
(b)
(c)
MOTOROLA PROPRIETARY CONFIDENTIAL 35
<PAGE> 36
ARTICLE V: GENERAL SYSTEMS ENGINEERING, INSTALLATION, SERVICES &
MAINTENANCE
Motorola may provide the following services to PageMart for the implementation
of the advanced messaging System(s):
ENGINEERING SERVICES
Site or System Propagation Studies
RF Coverage Verification
Site Survey
System Designs
System Test Plans
System Documentation
Block Diagrams / Installation Drawings
As-Built Information
System Manuals
System Staging and Testing
INSTALLATION SERVICES
Supervised Subcontracts
Inventory Control Plans
Warehousing Options
Optimization Plans
Regional or Nationwide Installation Plans
Statements of Work
PROGRAM MANAGEMENT SERVICES
Project Task List
Contract Management Plan
Project Schedule
Subcontract Plan with Statement of Work
Site Survey Report
Documentation Package
Periodic Progress Reports
System Test Plan
Commissioning and Acceptance Plan
MAINTENANCE
Tailored Service Agreement
Maintenance and Service Pricing
Single Source Service Dispatch/Contact
Centralized Repair Depot
Centralized Region or Nationwide Billing
Mixed Product Contracts
MOTOROLA PROPRIETARY CONFIDENTIAL 36
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CONFIDENTIAL INFORMATION ON PAGE 4, APPENDICES A AND C HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION
MOTOROLA CONFIDENTIAL PROPRIETARY
TECHNOLOGY ASSET AGREEMENT
THIS AGREEMENT is effective as of the 1st day of December, 1995, by and between
Motorola, Inc., a Delaware corporation having an office at 1303 East Algonquin
Road, Schaumburg, IL 60196 U.S.A., (hereinafter called "MOTOROLA"), and PageMart
Wireless, Inc., its successors, subsidiaries, and affiliates, including, but not
limited to PageMart, Inc. and PageMart PCS, Inc. (hereinafter collectively
called "PAGEMART").
WHEREAS, PAGEMART owns and has or may have intellectual property assets (set
forth below in Section 1.2 through Section 1.3) relating to advanced messaging
and paging technology in various countries of the world; and
WHEREAS, MOTOROLA has an interest in acquiring all PAGEMART's rights and
ownership in certain of PAGEMART's intellectual property assets owned or
controlled by PAGEMART;
NOW, THEREFORE, in consideration of the mutual covenants and undertakings set
out herein and other good and valuable consideration, the, receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
Section 1 - DEFINITIONS
1.1 The PURCHASE AGREEMENT means that certain agreement by and between PAGEMART
and MOTOROLA being concurrently executed with this Agreement detailing the
purchasing commitments by PAGEMART with respect to one-way and two-way
infrastructure equipment and two-way wireless subscriber equipment.
1.2 The PAGEMART PATENTS means any PAGEMART owned or controlled patents or
pending patent applications including all world-wide: divisions, continuations,
continuations-in-part, reissues, renewals, and extensions thereof, any
counterparts claiming priority therefrom or the benefit of the filing date
thereto, a list of which is attached hereto and marked Appendix A. Additionally,
PAGEMART PATENTS shall further mean and include inventions conceived before
January 1, 1997 by employees (of PAGEMART) or others under an obligation to
assign to PAGEMART. Additionally, PAGEMART PATENTS means or includes the
PAGEMART INVENTION INFORMATION (defined below).
1.3 PAGEMART INVENTION INFORMATION means all notes, reports, analysis, designs,
schematics, processes, data, and like information owned, controlled, or created
by PAGEMART relating to the PAGEMART PATENTS.
1
<PAGE> 2
MOTOROLA CONFIDENTIAL PROPRIETARY
Such PAGEMART INVENTION INFORMATION may be attached herein as Appendix B.
1.4 AFFILIATE of a party means any legal entity whose majority or controlling
ownership interest representing the right to vote for or manage the affairs of
the entity is, during the term of this Agreement, owned or controlled (but only
so long as such ownership or control exists), directly or indirectly, by that
party. For the purpose of this definition, "control" means the right to vote 50%
or more of the shares or other securities of a U.S. corporation or other U.S.
entity or the right to vote 20% or more of the shares or other securities of a
foreign corporation or other foreign entity.
1.4.1 In the event that PAGEMART chooses to reduce their "control" in a foreign
corporation or other foreign entity below the 20% voting rights described in
sec.1.4, MOTOROLA agrees to negotiate a license agreement in good faith with the
new controlling party with respect to its loss of any rights due to PAGEMART's
loss of "control".
1.5 EFFECTIVE DATE is December 1, 1995.
Section 2 - RELEASES
2.1 PAGEMART hereby releases, acquits and forever discharges MOTOROLA (and
MOTOROLA's AFFILIATEs as of the EFFECTIVE DATE of this Agreement) from any and
all claims or liability for infringement or alleged infringement of THE PAGEMART
PATENTS by the fielding of any products or services, or acts in preparation of
providing products or services, prior to the EFFECTIVE DATE of this Agreement.
2.2 PAGEMART hereby agrees to dismiss with prejudice the pending lawsuit against
MobileMedia (Case No. 3-95CV1048-P, In the US District Court for the
Northeastern District of Texas, Dallas Division) relating to infringement of
U.S. Patent No. 5,239,671. PAGEMART further releases all rights to bring further
suit against MOTOROLA or any third party based on infringement of the PAGEMART
PATENTS.
Section 3 - GRANTS AND OBLIGATIONS
3.1 PAGEMART, for itself and on behalf of its AFFILIATEs, heirs, successors, or
assigns, hereby assigns to MOTOROLA all right, title, and interest to the
PAGEMART PATENTS as evidenced by the assignment documents of Appendix C and
other assignment documents that are
2
<PAGE> 3
MOTOROLA CONFIDENTIAL PROPRIETARY
reasonably required or requested by MOTOROLA from time to time that may be
further recorded by MOTOROLA.
3.2 MOTOROLA, for itself and on behalf of its AFFILIATEs, heirs, successors, or
assigns, hereby grants to PAGEMART and its AFFILIATES, a perpetual, fully paid,
non-exclusive, non-transferable, non-sublicensable right-to-use and sell
services license under the PAGEMART PATENTS (assigned to MOTOROLA under Section
3). AFFILIATEs of PAGEMART are licensed under this section so long as they meet
the requirements of Section 1.4.
3.3 PAGEMART, for itself and on behalf of its AFFILIATEs, heirs, successors, or
assigns, hereby assigns to MOTOROLA all right and title in all other patentable
subject matter now known or later discovered as being conceived before January
1, 1997 and agrees to execute such documents to transfer such rights in the
PAGEMART PATENTS to MOTOROLA and/or to aid in MOTOROLA's registration,
maintenance, or perfection of such rights. PAGEMART shall pay for all reasonable
expenses incurred in obtaining for MOTOROLA the appropriate assignment
signatures from Roger D. Linquist, Malcolm M. Lorang, any PAGEMART employees, or
any others who are under obligation to assign to PAGEMART the PAGEMART PATENTS.
Expenses that may be incurred beyond obtaining assignment signatures described
above (such as consulting fees to Mr. Lorang and Mr. Lindquist, if required)
will be paid by MOTOROLA.
3.4 PAGEMART shall have a continuing obligation to notify or report to MOTOROLA
regarding all information concerning all patents issued, pending patent
applications filed, or inventions conceived by employees (of PAGEMART) or others
under an obligation to assign to PAGEMART before January 1, 1997.
3.5 For the term of five (5) years from the EFFECTIVE DATE of this AGREEMENT,
PAGEMART grants to MOTOROLA the right to inspect at MOTOROLA's expense all of
PAGEMART's INVENTION INFORMATION relating to the conception of inventions
(conceived before January 1, 1997) to determine whether such inventions shall be
included as one of the PAGEMART PATENTS, provided that MOTOROLA gives PAGEMART
30 days prior written notice of their intent to inspect.
3.5.1 MOTOROLA's right to inspect PAGEMART's INVENTION INFORMATION is limited to
three (3) inspections every twelve-month period.
3.5.2 MOTOROLA shall treat PAGEMART's INVENTION INFORMATION and other PAGEMART
information received pursuant to Section 3.5.1 which is identified by PAGEMART
as proprietary ("IDENTIFIED PROPRIETARY INFORMATION") as proprietary information
and agrees for a period of five
3
<PAGE> 4
CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM SECTION 4.3 BELOW
MOTOROLA CONFIDENTIAL PROPRIETARY
years from receipt of the INVENTION INFORMATION or the IDENTIFIED PROPRIETARY
INFORMATION not to divulge any PAGEMART INVENTION INFORMATION or the IDENTIFIED
PROPRIETARY INFORMATION it receives from PAGEMART to any other person, firm, or
corporation without prior written consent from PAGEMART and shall use the same
degree of care to avoid disclosure of such information as MOTOROLA employs with
respect to its own proprietary information of like importance. This provision
does not apply to PAGEMART's INVENTION INFORMATION that becomes the subject
matter of a U.S. patent application filed by MOTOROLA.
3.6 PAGEMART has the right to file patent application(s) conceived by PAGEMART
before January 1, 1997, which would otherwise be considered a PAGEMART PATENT
assigned to MOTOROLA under this Agreement, provided that MOTOROLA is given a
right of first refusal to file such patent application(s) on its own behalf and
further provided that MOTOROLA receives a perpetual, fully paid, royalty-free
license with the right to sublicense such patent application(s) in the event
PAGEMART files patent application(s) under this paragraph. PAGEMART shall give
written notice of its intent to file application(s) under this paragraph to
allow MOTOROLA to determine whether to exercise its right of first refusal and
MOTOROLA shall provide PAGEMART with its decision within 30 days. The
requirements of paragraph 4.3 apply to any royalty revenues received by MOTOROLA
under this paragraph. Patent applications filed by PAGEMART under this provision
are PAGEMART property subject to MOTOROLA's rights herein.
Section 4 - PAYMENT
4.1 A portion of the consideration for the transfer of the PAGEMART PATENTS to
MOTOROLA is outlined in Articles 3 and 4 of the PURCHASE AGREEMENT.
4.2 This TECHNOLOGY ASSET AGREEMENT shall survive any breach by PAGEMART of the
PURCHASE AGREEMENT and shall further survive termination by MOTOROLA of the
PURCHASE AGREEMENT for such breach by PAGEMART.
4.3 In the event that MOTOROLA expressly licenses the PAGEMART PATENTS to third
parties, such gross royalty revenues will be shared with
PAGEMART Royalty revenue shall only include actual licensing revenue
and shall exclude implied licenses.
4
<PAGE> 5
MOTOROLA CONFIDENTIAL PROPRIETARY
4.4 PAGEMART shall bear all costs including, but not limited to filing
fees, attorney fees, and maintenance fees incurred for all issued and pending
PAGEMART PATENTS (including foreign counterparts) as of the EFFECTIVE DATE.
MOTOROLA shall bear costs associated with the PAGEMART PATENTS that are due (if
no already incurred and paid for by PAGEMART) after the EFFECTIVE DATE.
SECTION 5 - TERM
The term of this Agreement shall be from the EFFECTIVE DATE until the expiration
of the last of the PAGEMART PATENTS.
SECTION 6 - WARRANTIES, REPRESENTATIONS, & INDEMNITIES
6.1 Each party warrants that it has the requisite authority to convey
the rights granted herein and that no commitments exist or shall be entertained
for the duration of this Agreement which would restrict its right to grant the
releases contemplated herein.
6.2 PAGEMART, warrants that:
6.2.1 PAGEMART is the owner of the full right and title to the PAGEMART
PATENTS and the PAGEMART INVENTION INFORMATION, and that to PAGEMART's
knowledge and belief, each of the foregoing are free and clear of all pledges,
liens, or encumbrances, and that the grants herein shall be binding on its
heirs, successors, and assigns.
6.2.2 There are no licensees or options to acquire licenses under the
PAGEMART PATENTS as of the EFFECTIVE DATE of this Agreement except for those
granted to PageMart Canada, Ltd., PageMart Latino America, S.A. de C.V., and
PageMart Asia, which have been previously granted licenses or options to
license the currently issued PAGEMART PATENTS. The present existence of these
licenses will not be deemed to be a breach of this Agreement.
6.3 PAGEMART warrants that it will provide MOTOROLA all originals
(ribbon copies) of the PAGEMART PATENTS that are issued as of the EFFECTIVE
DATE or that subsequently issue.
SECTION 7 - PUBLICITY AND CONFIDENTIALITY
7.1 MOTOROLA and PAGEMART agree to issue a mutually approved press
release announcing only (1) the dismissal of the MobileMedia lawsuit,
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MOTOROLA CONFIDENTIAL PROPRIETARY
and (2) the transfer of PAGEMART PATENTS to MOTOROLA. Except as expressly
granted herein, nothing in this Agreement shall be construed as conferring upon
either party the right to include in advertising, packaging or other commercial
activity any reference to the other party, its trademarks, trade names, service
marks, or other trade identity in a manner likely to cause confusion, except
that the parties shall have the right to acknowledge the existence of this
Agreement.
7.2 Except as otherwise herein provided, the parties hereto shall keep the
terms of this Agreement and the PURCHASE AGREEMENT confidential and shall not
now or hereafter divulge any part thereof to any third party except:
7.2.1 with the prior written consent of the other party; or
7.2.2 to any governmental body having jurisdiction to request and to read the
same; or
7.2.3 as otherwise may be required by law or legal processes; or
7.2.4 to legal counsel representing either party; or
7.2.5 to accountants for the preparation of required tax documents; or
7.2.5.1 to accountants for the preparation of required financial statements
provided such parties agree to use best efforts to treat the content of this
Agreement as confidential; or
7.2.6 to accountants, financial advisors, and their counsel provided such
parties agree to treat the content of this Agreement as confidential; or
7.2.7 to regulatory agencies provided the parties hereto use their best
efforts to obtain confidential treatment and further provided that the
non-disclosing party is given an opportunity to review the material to be
disclosed before disclosure to such regulatory agency.
7.3 PageMart and Motorola agree that the terms of this Agreement, and the
terms of the PURCHASE AGREEMENT are confidential and cannot be disclosed by
either party outside its respective organization without the other's written
consent, except as may be required by law or for the purposes of securities
offerings or financings or to establish their rights under such agreements. The
parties agree, however, to work together to produce such press releases and
other public announcements as are acceptable to both parties.
6
<PAGE> 7
MOTOROLA CONFIDENTIAL PROPRIETARY
SECTION 8 - MISCELLANEOUS PROVISIONS
8.1 Nothing contained in this Agreement shall be construed as:
8.1.1 imposing on either party any obligation to institute any suit or
action for infringement of any patent or know-how, or to defend any suit or
action brought by a third party which challenges or concerns the validity or
enforceability or infringement of any patent; or
8.1.2 an obligation by either party to defend, indemnify or hold harmless
the other party or its AFFILIATEs from any suits, actions or claims alleging
infringement of any third party's patent or know-how, and neither party nor its
AFFILIATEs shall have any liability therefor; or
8.1.3 imposing on either party any obligation to file any patent
application or to secure any patent or maintain any patent in force or to seek
reissue, reexamination, or an extension of any patent or trademark; or
8.1.4 an obligation on either party to enforce its patents against third
parties; or
8.1.5 making either party the partner, joint venturer, agent, or
employer/employee of the other. Neither party shall have the authority to make
any statements, representations or commitments of any kind, or to take any
action, which shall be binding on the other, except as provided for herein or
authorized in writing by the party to be bound.
8.1.6 granting any party a sub-license under technology or intellectual
property licenses currently held by either party except for those identified
for the PAGEMART PATENTS.
8.2 No express or implied waiver by either of the parties to this
Agreement of any breach of any term, condition or obligation of this Agreement
by the other party shall be construed as a waiver of any subsequent breach of
that term, condition or obligation or of any other term, condition or
obligation of this Agreement of the same or of a different nature.
8.3 Anything contained in this Agreement to the contrary
notwithstanding, the obligations of the parties hereto shall be subject to all
laws, both present and future, of any Government having jurisdiction over
either party hereto, and to orders or regulations of any such Government, or
any department, agency, or court thereof, and to any contingencies resulting
from acts of war, acts of public enemies, strikes, or other labor disturbances,
fires, floods, acts of God, or any causes of like or different kind beyond the
control of the parties, and the parties hereto shall be excused from any
failure to perform any obligation hereunder to the extent such failure is
caused by
7
<PAGE> 8
MOTOROLA CONFIDENTIAL PROPRIETARY
any such law, order, regulation, or contingency, but only so long as said law,
order, regulation or contingency continues.
8.4 The captions used in this Agreement are for convenience only, and are
not to be used in interpreting the obligations of the parties under this
Agreement.
8.5 With respect to matters of contract construction and interpretation,
the substantive law of the state of Illinois, United States of America shall
apply. However, with respect to matters of infringement and validity of
intellectual property rights, the substantive law of the nation having
jurisdiction over such property or over matters affecting such intellectual
property rights shall be applied.
8.6 In no event shall either party be liable to the other party by reason
of breach or termination of this Agreement for any loss of prospective profits
or incidental or consequential damages.
8.7 The provisions of Sections 2, 3, 4, 6, and 7 shall survive the
expiration or termination of this Agreement for any cause.
8.8 If any term, clause, or provision of this Agreement shall be judged to
be invalid, the validity of any other term, clause, or provision shall not be
affected; and such invalid term, clause, or provision shall be deemed deleted
from this Agreement.
8.9 This Agreement and the PURCHASE AGREEMENT set forth the entire
Agreement and understanding between the parties as to the subject matter hereof
and merges all prior discussions between them, and neither of the parties shall
be bound by any conditions, definitions, warranties, understandings or
representations with respect to such subject matter other than as expressly
provided herein or as duly set forth on or subsequent to the date hereof in
writing and signed by a proper and duly authorized officer or representative of
the party to be bound thereby.
8.10 MOTOROLA and PAGEMART will attempt to settle any claim or dispute
arising out of this Agreement through consultation and negotiation in good
faith and a spirit of mutual cooperation. If those attempts fail, then the
dispute will be mediated by a mutually-acceptable mediator to be chosen by
Motorola and PageMart within 45 days after written notice by one of both
parties demanding mediation. Neither party may unreasonably withhold consent to
the selection of a mediator, and Motorola and PageMart will share the costs of
the mediation equally. By mutual agreement, however, Motorola and PageMart may
postpone mediation until each has completed some specified but limited
discovery about the dispute.
8
<PAGE> 9
MOTOROLA CONFIDENTIAL PROPRIETARY
8.10.1 The parties may also agree to replace mediation with some other form
of non-binding alternative dispute resolution (ADR), such as neutral
fact-finding or a minitrial.
8.10.2 Any dispute which the parties cannot resolve between them through
negotiation or mediation within six months of the date of the initial demand for
it by a party may then be submitted to the courts within the State of Texas for
resolution. Each party agrees to submit to the jurisdiction of those courts. The
use of any alternative dispute resolution procedure will not be construed under
the doctrines of laches, waiver or estoppel to affect adversely the rights of
either party and shall toll the statute of limitations period while the
alternative dispute resolution procedure(s) are ongoing. And nothing in this
paragraph will prevent either party from resorting to judicial proceedings if
(a) good faith efforts to resolve the dispute under these procedures have been
unsuccessful, or (b) interim relief from a court is necessary to prevent serious
and irreparable injury to one party or to others. Motorola and Pagemart
knowingly, voluntarily and intentionally waive the right each may have to a jury
for any such judicial proceedings including any claim, counterclaim, setoff or
defense relating in any way to this Agreement.
8.11 All notices, requests, demands, and other communications required or
permitted to be given hereunder shall be in writing and shall be valid and
sufficient if dispatched by registered or certified mail, postage prepaid and
addressed as set forth below, in any post office in the United States, or sent
via facsimile to the party identified below (provided that a confirmation cost
is mailed within ten (10) days thereafter by registered mail or certified
airmail). Either party may change its address and/or person to receive notice
under this Agreement by giving written notice of the change(s) to the other
party.
8.11.1 If to MOTOROLA:
Motorola Inc.
1303 East Algonquin Road
Schaumburg, Illinois 60196
Fax: (708) 576-3750
Attention: Vice President for Patents, Trademarks & Licensing
with a copy to:
Senior Credit Manager
Motorola Inc.
Pan American Paging Subscriber Group
1500 Gateway Boulevard
Boynton Beach, Florida 33426-8292
Phone: (407) 739-2991, Fax: (407) 739-8790
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<PAGE> 10
MOTOROLA CONFIDENTIAL PROPRIETARY
8.11.2 If to PAGEMART:
PageMart Wireless, Inc.
6688 N. Central Expressway
Dallas, Tx 75206
Fax: (214) 373-6676
Attention: Legal Department
8.11.3 The date of actual receipt of such a notice shall be the date for
the commencement of the running of the period provided for in such notice, or
the date at which such notice takes effect, as the case may be. Any such
notice, request, demand, or other communication shall be deemed to have been
duly received fifteen (15) days after being mailed by registered or certified
airmail in a postage-paid properly addressed envelope, or the date when sent
via facsimile to the party intended (provided that a confirmation copy is
mailed within ten (10) days thereafter by registered mail or certified
airmail).
IN WITNESS WHEREOF, each party hereto has caused this Agreement to
be executed in duplicate originals by its duly authorized representative:
MOTOROLA, INC. PAGEMART WIRELESS, INC.
By; /s/ LARRY CARTER By: /s/ G. CLAY MYERS
---------------------------- ---------------------------
Title: Corporate V. P. Title: V.P. Finance & CFO
------------------------- ------------------------
Date: 1/26/96 Date: 1/26/96
------------------------- ------------------------
10
<PAGE> 11
CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM APPENDIX A BELOW
MOTOROLA CONFIDENTIAL PROPRIETARY
APPENDIX A
"PAGEMART PATENTS"
ISSUED PATENTS
U.S. PATENT NO. 5,239,671
U.S. PATENT NO. 5,355,529
U.S. PATENT NO. 5,361,399
U.S. PATENT NO. 5,423,056
As of the EFFECTIVE DATE, counterparts of U.S. Patent Nos. 5,239,671, 5,361,399,
and 5,423,056 were known to be filed in other countries and are also included
herein.
ALLOWED PENDING PATENT APPLICATIONS
1. U.S. PATENT APPLICATION NO.
Attorney Docket No.
2. U.S. PATENT APPLICATION NO.
Attorney Docket NO.
3. U.S. PATENT APPLICATION NO.
Attorney Docket NO.
PENDING PATENT APPLICATIONS
1. U.S. PATENT APPLICATION NO.
Attorney Docket NO.
2. U.S. PATENT APPLICATION NO.
Attorney Docket NO.
11
<PAGE> 12
CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM APPENDIX A BELOW
MOTOROLA CONFIDENTIAL PROPRIETARY
3. U.S. PATENT APPLICATION NO.
Attorney Docket NO.
4. U.S. PATENT APPLICATION NO.
Attorney Docket NO.
5. U.S. PATENT APPLICATION NO.
Attorney Docket NO.
6. U.S. PATENT APPLICATION NO.
Attorney Docket NO.
7. U.S. PATENT APPLICATION NO.
Attorney Docket NO.
8. U.S. PATENT APPLICATION NO.
Attorney Docket NO.
9. U.S. PATENT APPLICATION NO.
Attorney Docket NO.
10. U.S. PATENT APPLICATION NO.
Attorney Docket NO.
11. U.S. PATENT APPLICATION NO.
Attorney Docket NO.
(continuation of U.S. PATENT APPLICATION NO.
Attorney Docket No.
INVENTIONS CONCEIVED BEFORE JANUARY 1, 1997
TBD
12
<PAGE> 13
MOTOROLA CONFIDENTIAL PROPRIETARY
APPENDIX B
THE PAGEMART INVENTION INFORMATION LISTING
13
<PAGE> 14
MOTOROLA CONFIDENTIAL PROPRIETARY
APPENDIX C
PATENT ASSIGNMENT AND AGREEMENT
FOLLOWS ON NEXT PAGE
14
<PAGE> 15
CONFIDENTIAL INFORMATION HAS BEEN OMITTED FROM APPENDIX C BELOW
PATENT ASSIGNMENT AND AGREEMENT
For and in consideration of good and valuable consideration, the receipt of
which is hereby acknowledged, PageMart, Inc., PageMart Wireless, Inc., and
PageMart PCS, Inc., (hereinafter collectively called "PAGEMART") have sold,
assigned and transferred, and do hereby sell, assign and transfer effective
December 1st, 1995, unto MOTOROLA, INC., a corporation of the State of Delaware,
having its principal office in Schaumburg, State of Illinois, United States of
America, and its successors, assigns, and legal representatives, the entire
right, title and interest for the United States of America in and to certain
inventions described, illustrated and claimed in numerous U.S. Patent
Applications and Letters Patent of the United State of America, in particular:
U.S. PATENT NO. 5,239,671, U.S. PATENT NO. 5,355,529, U.S. PATENT NO. 5,361,399,
and U.S. PATENT NO. 5,423,056; U.S. PATENT APPLICATION NO. U.S. PATENT
APPLICATION NO. U.S. PATENT APPLICATION NO. U.S. PATENT
APPLICATION NO. U.S. PATENT APPLICATION NO. U.S. PATENT
APPLICATION NO. U.S. PATENT APPLICATION NO. U.S. PATENT
APPLICATION NO. U.S. PATENT APPLICATION NO. U.S. PATENT
APPLICATION NO. U.S. PATENT APPLICATION NO. U.S. PATENT
APPLICATION NO. U.S. PATENT APPLICATION NO. and Attorney Docket
No. and upon any division, extension, continuation, reexamination, or
reissue thereof.
PAGEMART hereby also sells, assigns and transfers unto MOTOROLA, INC. the
entire right, title and interest in and to said inventions and Letters Patent
therefor in all countries foreign to the United States of America, including all
rights under any and all international conventions and treaties in respect of
said inventions and said applications for Letters Patent in foreign countries
that claim priority of the filing date of said Letters Patent under provisions
of any and all international conventions and treaties.
PAGEMART hereby authorizes and requests the Commissioner of Patents of the
United States of America to issue Letters Patent upon any division, extension,
continuation, reexamination, or reissue, to MOTOROLA, INC., for the sole use and
behalf of MOTOROLA, INC., its successors, assigns and legal representatives, to
the full end of the term for which said Letters Patent may be granted, the same
as they would have been held and enjoyed by PAGEMART had this assignment not
been made, and PAGEMART hereby authorizes and requests the equivalent
authorities in foreign countries to similarly issue the patents of their
respective countries to MOTOROLA, INC.
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<PAGE> 16
PAGEMART agrees that, when requested, will, without charge to MOTOROLA,
INC., but at its expense, sign all papers, take all rightful oaths, and do all
acts which may be reasonably necessary, desirable or convenient for securing and
maintaining patents for said inventions in any and all countries and for vesting
title thereto in MOTOROLA, Inc., its successors, assigns and legal
representatives or nominees.
PAGEMART covenants with MOTOROLA, INC., its successors, assigns and legal
representatives, that the interest and property hereby conveyed is free from all
prior assignment, grant, mortgage, license or other encumbrance and is binding
upon my its heirs, successors, and assigns.
/s/ G. CLAY MYERS
Date: 1/26/96 ----------------------------------
---------- Print Name: G. CLAY MYERS
Title: V.P. FINANCE & CFO, PAGEMART
STATE OF TEXAS
COUNTY OF TARRANT
Before me, the undersigned, a Notary Public, on this day personally appeared G.
Clay Myers, known to me to be the person and officer whose name is subscribed to
the foregoing instrument, and acknowledged to me that the same was the act of
PAGEMART, and that he/she has executed the same as the act of PAGEMART for the
purposes and consideration therein expressed, and in the capacity therein
stated.
Given under my hand and notarial seal this 26th day of January, 1996.
STEPHANIE L. MORAN
Notary Public
Commission Number ____________
My commission expires: STEPHANIE L. MORAN
Notary Public, State of Texas
My Commission Expires 11-01-99
(SEAL)
2
