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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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<C> <S>
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
---- THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
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 ------------
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COMMISSION FILE NO. 0-28196
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PAGEMART WIRELESS, INC.
(Exact name of registrant as specified in charter)
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<S> <C>
DELAWARE 75-2575229
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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3333 LEE PARKWAY, SUITE 100
DALLAS, TEXAS 75219
(Address of principal executive offices)
(Registrant's telephone number, including area code): (214) 765-4000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS
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Class A Common Stock, par value $0.0001 per share
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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
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]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the closing sale price of the Common Stock on January
31, 1998 as reported on the Nasdaq National Market System, was approximately
$76,430,161. Shares of Common Stock held by each executive officer and director
and by each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status for this purpose is not necessarily a conclusive
determination for other purposes.
As of January 31, 1998, 34,150,907 shares of the Registrant's Class A
Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Proxy Statement for its Annual Meeting of
Stockholders scheduled to be held on April 8, 1998 are incorporated by reference
into Part III (items 11, 12 and 13) hereof.
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PART I
ITEM 1. BUSINESS
Unless the context otherwise requires, references to "the Company" are to
PageMart Wireless, Inc. and its subsidiaries on a consolidated basis. References
to "PageMart Wireless" are to PageMart Wireless, Inc. on a non-consolidated
basis. References to "PageMart" are to PageMart, Inc., a wholly-owned subsidiary
of PageMart Wireless that was merged into PageMart Wireless on January 28, 1998.
FORWARD LOOKING STATEMENTS
This Annual Report contains statements that constitute forward-looking
statements. The words "estimate," "project," "plan," "expect," "believe" and
similar expressions are intended to identify forward-looking statements. Readers
are cautioned that such forward-looking statements involve risks and
uncertainties, and are subject to change based on various important factors. The
factors set forth in other filings with the Securities Exchange Commission and
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 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
outstanding indebtedness; 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; the timely development and acceptance of new products;
changes in regulation by the Federal Communications Commission ("FCC") and
various state regulatory agencies; and the ability of the Company to fully
finance the construction and operation of the transmission network for advanced
messaging services.
GENERAL
The Company is one of the fastest growing providers of wireless messaging
services in the United States. The Company is the sixth largest paging carrier
in the United States, based on 2,530,737 subscribers at December 31, 1997. The
Company's number of subscribers has increased at annual growth rates of 60%, 50%
and 36% in 1995, 1996, and 1997, respectively. The Company has made no
acquisitions, and all subscriber growth has been internally generated.
The Company offers local, multi-city, statewide, 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 paging services to
the countries that are parties to NAFTA and beyond, including Canada, Puerto
Rico, the U.S. Virgin Islands and the Bahamas. In October 1997, the Company
expanded services into Mexico through its network affiliation with Buscatel, a
subsidiary of Telefonos de Mexico ("TelMex"), Mexico's largest
telecommunications company, and into Panama and El Salvador through network
affiliation agreements with leading telecommunications companies in those
countries. In January 1998, the Company expanded services into Guatemala and
Costa Rica, and expects to expand services into Nicaragua and Honduras in the
first half of 1998.
RECENT EVENTS
On January 28, 1998 PageMart Wireless completed the offering (the
"Offering") of its 11 1/4% Senior Subordinated Discount Notes due 2008 (the
"11 1/4% Notes"), raising approximately $249.7 million in gross proceeds.
Simultaneously with the closing of the Offering, the Company refinanced certain
of its outstanding indebtedness (the "Refinancing"), and modified its corporate
structure. The Refinancing consisted of: (i) purchasing all of the outstanding
12 1/4% Senior Discount Notes due 2003 (the "12 1/4% Notes") of PageMart ($136.5
million principal amount at maturity); (ii) amending certain terms of the
covenants and agreements in the indenture relating to the 15% Senior Discount
Exchange Notes due 2005 (the 15% Notes") of PageMart Wireless; and (iii) merging
PageMart into PageMart Wireless with PageMart Wireless as the surviving
corporation. Approximately $130.7 million of the net proceeds of the Offering of
11 1/4% Notes was
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used to finance the purchase of the 12 1/4% Notes. The proceeds remaining after
offering expenses and refinancing were approximately $107.8 million, which will
be used to construct the Company's narrowband personal communications services
network and for other general corporate purposes.
ADVANCED MESSAGING SERVICES
The Company has experienced increased demand for alphanumeric and wide area
coverage services and believes that its nationwide narrowband personal
communications services ("NPCS") spectrum may present significant future growth
opportunities. NPCS spectrum will provide additional capacity, as well as the
opportunity to introduce a new generation of wireless messaging services,
including advanced alphanumeric messaging with guaranteed message delivery,
automatic confirmation of receipt of messages and subscriber response to and
origination of messages. The Company believes that initially the majority of
demand for advanced messaging services will be from corporate and business users
seeking reasonably priced, wide area communication and information services.
Alphanumeric and wide area coverage services use significantly more network
resources than numeric paging. The Company believes that growth in subscribers
and increased demand for alphanumeric and wide area coverage services will
create a shortage of industry capacity on existing one-way networks. However,
NPCS networks will be designed to efficiently deliver alphanumeric messaging and
wide area coverage services at lower operating costs relative to the current
costs of delivering similar one-way alphanumeric messages at comparable network
utilization levels. Therefore, the Company expects strategies employing NPCS
networks to capture significant amounts of the projected industry growth because
of their anticipated ability to deliver greater network capacity, higher quality
and improved reliability compared to existing one-way networks.
The Company believes it is well positioned to take advantage of these
factors. In the NPCS auctions conducted by the FCC, the Company acquired
licenses for a total of 100kHz of forward frequency and 50kHz of return
frequency nationwide (the "NPCS Licenses"), becoming one of four companies in
the United States with 150kHz or more of NPCS frequency nationwide. The Company
has constructed NPCS networks in two cities in order to test several advanced
messaging technologies. Based on successful test results, the Company has
decided to employ ReFLEX25(TM) protocol in its NPCS network, which is a second
generation ReFLEX(TM) technology developed by Motorola, Inc. ("Motorola") that
is compatible with the FLEX(TM) protocol employed in the Company's existing
one-way network. This will permit the Company to integrate its NPCS network with
its existing one-way network, allowing the Company to build its NPCS network
rapidly and substantially increase its network capacity in the most cost
effective manner. The Company's objective is to ultimately have its NPCS network
cover the same "footprint", or geographic coverage area, as its existing one-way
network.
The Company anticipates investing approximately $100 million in 1998 (which
will be funded primarily with the proceeds from the Offering) to construct and
deploy a NPCS network, which the Company expects to enable it to market advanced
messaging services nationwide by the end of 1998. The Company believes that its
operations will then comprise a highly efficient national one-way network and a
state of the art NPCS network delivering advanced messaging services, in each
case supported by common systems and infrastructure.
NPCS networks employ both radio transmission and receiving equipment
throughout the network. Subscriber units will contain a transmitter that
broadcasts its identity and other data to the network receivers. As a result,
the network knows the subscriber's approximate location and is able to broadcast
messages from a limited number of transmitters in a zone rather than from all
transmitters in the subscriber's coverage area, which results in higher network
capacity due to efficient use of spectrum. The network can also determine
whether a subscriber is within range. If a subscriber travels outside the range
of the network, the network can store the message until the subscriber returns
within range and then transmit the message, thereby guaranteeing delivery. The
subscriber unit can provide simple automatic acknowledgment of receipt of a
message and can also be used by the subscriber to send messages through the
network ranging from a menu of predetermined responses to user created messages.
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In contrast, a one-way network only has radio transmitters at its base
stations. One-way subscriber units have no ability to send messages to the
network. When a message is sent to a subscriber, the one-way network broadcasts
the message simultaneously over all transmitters in the subscriber's coverage
area. This results in inefficient use of spectrum and limits the capacity of the
network to provide enhanced services, such as alphanumeric messaging. Because
the subscriber unit cannot communicate with the network, there is no ability to
confirm receipt of messages or determine whether the subscriber is actually
within range of the network when the message is sent.
The Company expects that NPCS subscriber units will have dimensions,
battery life and building penetration capability similar to existing one-way
alphanumeric units. Based on its successful test results, the Company believes
that the superior technology and efficient use of spectrum of its NPCS network
will enable it to offer high quality, reliable, cost-effective nationwide
alphanumeric services.
OPERATING STRATEGY
The Company attributes the significant growth of its existing paging
business to the successful implementation of its six operating principles: (i)
diversified distribution channels, (ii) nationwide and NAFTA-wide common
frequency, (iii) efficient network architecture, (iv) spectrum-rich frequency
position, (v) centralized administration, and (vi) customer service
capabilities. The Company expects these principles to be equally important in
the development of the market for advanced messaging services.
DIVERSIFIED DISTRIBUTION CHANNELS. The Company utilizes a number of
distribution channels to market its current products and services, including
retail marketing, private brand strategic alliances and national sales offices.
Retail Marketing. The Company believes that it is a leading
supplier of paging units to consumers through nationwide retail
distribution channels. The Company has been selected as the pager
supplier for a number of leading retail chains, including Eckerd Drug;
Office Depot, Inc; OfficeMax, Inc.; RadioShack, a division of Tandy
Corporation; Southland (7-Eleven); Target Stores, Inc. and Best Buy,
Inc.
Private Brand Strategic Alliances. The Company was one of the first
paging companies to broaden its distribution reach by establishing
strategic relationships with large communications providers. The Company
has established strategic relationships with GTE Corporation,
Southwestern Bell Mobile Systems, AT&T Wireless Services, WorldCom
Network Services, Inc., Ameritech Mobile Services, Inc., EXCEL
Communications, Inc., ALLTEL Communications, Inc. ("ALLTEL"), Bluegrass
Cellular and First Cellular of Southern Illinois.
National Sales Offices. The Company's national sales offices sell
and lease equipment and services through four distribution channels:
direct sales, agents, third-party resellers and local retailers. At
December 31, 1997, the Company had a direct sales force presence
covering approximately 80 of the top 100 Metropolitan Statistical Areas
("MSAs"), through 58 sales offices.
The Company intends to use its existing distribution channels and sales and
marketing organizations as the basis for marketing and sales of advanced
messaging services. The Company expects that sales of advanced messaging
services will initially be dominated by business and corporate customers because
of the growing need of business customers for mobile, reasonably priced
communication and information services with wide area coverage and the higher
cost of advanced messaging subscriber units compared to one-way units. As a
result, the Company believes that its national sales offices and private brand
strategic alliance distribution channels will initially be best suited for
marketing and selling these services.
Management believes that a diversified approach to distribution is
important to sustain growth as paging services more deeply penetrate the United
States population, especially the consumer market. This diversification is a key
element of the Company's strategy of expanding its subscriber base to increase
profitability and cash flow through greater utilization of its nationwide
wireless communication network.
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NATIONWIDE AND NAFTA-WIDE COMMON FREQUENCY. The Company has constructed its
nationwide one-way messaging network on a common frequency and its nationwide
NPCS network will also be constructed on common frequencies. Use of common
frequencies provides the Company with a number of important strategic advantages
not available to many of its competitors, which operate on multiple frequencies
across markets. The use of a common frequency across the United States enables
the Company's customers to travel throughout the United States while continuing
to use the same subscriber unit. In addition, the use of a common one-way
frequency has been expanded NAFTA-wide and beyond, into Canada, Puerto Rico, the
U.S. Virgin Islands and the Bahamas. In October 1997, the Company expanded
services into Mexico, Panama and El Salvador through network affiliation
agreements with leading telecommunications companies in those countries. In
January 1998, the Company expanded services into Guatemala and Costa Rica, and
expects to expand services into Nicaragua and Honduras in the first half of
1998. As a result, through the use of joint venture arrangements or network
affiliation agreements, the Company is able to provide multi-city coverage
customized to accommodate the customer's needs throughout North and Central
America ("coverage on demand").
The common frequency also provides a competitive advantage to the Company
when marketing its services to regional and national retailers and private brand
strategic alliance partners. Because the Company's subscriber units operate on a
common nationwide frequency, they can be sold in any retail store located in the
Company's nationwide coverage area. By contrast, competitors that use multiple
frequencies across markets require retailers to maintain many more stock keeping
units to serve each local market that utilizes a different frequency.
EFFICIENT NETWORK ARCHITECTURE. The Company is an industry leader in the
implementation of advanced telecommunications technologies, including pioneering
the use of direct broadcast satellite ("DBS") technology for paging. The
Company's nationwide one-way wireless transmission network is 100% controlled by
DBS technology, which gives the Company a flexible, highly reliable and
efficient network architecture. The use of DBS technology eliminates the need
for expensive terrestrial radio frequency ("RF") control links and repeater
equipment while enabling the Company to provide a wide range of coverage
options. The Company's efficient one-way network will be used as the outbound
transmission infrastructure for the NPCS network, allowing the Company to build
its NPCS network rapidly and substantially increase its network capacity in the
most cost effective manner. The Company will implement very small aperture
satellite terminal ("VSAT") equipment during construction of the NPCS network in
order to permit two-way communication using DBS technology.
The Company's one-way network covers the top 300 MSAs across the United
States, or approximately 90% of the total population in the United States. The
Company's one-way network is 100% FLEX(R) enabled, allowing the use of the high
speed FLEX(R) protocol to transmit messages and maximize system capacity. The
one-way networks included in the Company's NAFTA-wide coverage are also 100%
FLEX(R) enabled.
SPECTRUM-RICH FREQUENCY POSITION. The Company ranks among the top four
paging carriers in the United States in licensed nationwide frequencies. The
Company's exclusive frequency licenses include two nationwide one-way paging
frequencies and 150 kHz of nationwide NPCS frequency. The Company believes that
this frequency position has important strategic value because it enables the
Company to grow its one-way subscriber base and introduce advanced messaging and
other value-added services to its subscribers. As a result, the Company believes
its spectrum-rich frequency position enables it to attract and retain national
retail and private brand strategic alliance partners.
CENTRALIZED ADMINISTRATION. The Company has centralized information
systems, inventory control and distribution, finance and marketing functions,
which can support both the Company's existing one-way network and, in the
future, its NPCS network. This centralized administration has enabled the
Company to become one of the lowest cost providers of paging and other wireless
communications services in the United States relative to the services it
provides. In addition, the administrative infrastructure is designed to support
a significantly larger customer base than that currently served by the Company,
which will allow it to realize additional operating efficiency as the Company
continues to grow.
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CUSTOMER SERVICE CAPABILITIES. Management has focused on developing
industry-leading customer service capabilities which are designed to be used for
both one-way and advanced messaging services and can be expanded as the customer
base grows. At December 31, 1997, the Company employed approximately 950 highly
trained customer service personnel operating in state of the art call center
facilities. Management believes that these services are an important factor in
supporting and retaining its strategic partners, retailers and subscribers.
ONE-WAY MESSAGING SERVICES
The Company charges subscribers a fee which covers the paging and messaging
services subscribed for and any additional services purchased by the subscriber.
The amount of the fee varies primarily based on the type of service provided and
the geographic area covered. The Company charges higher rates for service
options providing more than local coverage.
The Company currently offers the following two basic types of one-way
paging and messaging services.
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SERVICE FUNCTIONS
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<S> <C>
Numeric paging........................ Provides the subscriber with the telephone number of
the person who is seeking to contact the subscriber.
Numeric pagers can store and retrieve up to 40
numeric messages, which are displayed on a liquid
crystal display.
Alphanumeric paging................... Offers the subscriber the ability to receive a text
message rather than simply a numeric message.
Alphanumeric pagers can store and retrieve up to 40
messages of up to 80 characters each, which are
displayed on a liquid crystal display.
</TABLE>
NUMERIC PAGING SERVICES. Although most subscribers select local coverage,
the number of subscribers who select multi-city coverage has been increasing.
Monthly fees for regional and national paging coverage are substantially higher
than the fees charged for single local area coverage.
ALPHANUMERIC PAGING SERVICES. The Company provides alphanumeric paging
services under the tradenames InfoPage(R) and InfoNowSM , and the number of
subscribers utilizing the service represented 5.4% of the Company's total
subscribers at December 31, 1997. The Company has not focused a significant
portion of its selling and marketing efforts on alphanumeric paging service,
primarily because technology has inhibited the Company's ability to deliver the
service in a cost-effective manner. With the Company's introduction of high
speed FLEX(R) protocols, the Company anticipates alphanumeric paging service
will continue to become a larger portion of its subscriber base and its selling
and marketing efforts. The ability of alphanumeric pagers to receive text
messages, in addition to numeric messages, allows the Company to charge higher
monthly fees for its InfoPage(R) and InfoNowSM services than for numeric display
paging services.
ROAMING SERVICES. infoRoamSM and OmniRoamSM services allow customers the
flexibility to change their local coverage through a simple phone call. Using a
touch-tone phone, the customer needs only to enter the area code of the city to
which he or she is traveling and the local coverage is changed. Numeric and text
messages are automatically sent to the customer's "roaming" city until coverage
is moved back to the "home" city. With these services, the customer does not pay
for paging coverage that is not needed (i.e., nationwide). These services are
available due to the Company's unique network architecture. These products give
the Company's customers the ability to take local coverage with them when they
travel to major communities in the United States, Canada, Mexico, El Salvador,
Panama, U.S. Virgin Islands, Puerto Rico and the Bahamas.
ADDITIONAL VALUE-ADDED SERVICES. In addition to paging services, the
Company offers subscribers a number of additional value-added services,
including voice mail services that allow subscribers to retrieve voice messages
from persons attempting to contact the subscriber. In addition, the Company
offers a numeric message retrieval service which allows a subscriber to retrieve
messages that were sent at a time when the subscriber was outside of his or her
service area. Other optional services include a nationwide toll-free
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800 access number for paging subscribers, a customized voice prompt that allows
subscribers to record a personal greeting, maintenance agreements and loss
protection programs. During 1997, approximately 24% of the Company's recurring
revenues are derived from these additional services.
The Company also offers wireless connectivity to the Internet for message
transfer and information requests through the "PageMart Wireless Web" service
utilizing the Company's wireless communications network. These services include
electronic mail, news and other information delivered to subscriber units.
COAM STRATEGY
The Company's operating model for one-way wireless messaging emphasizes a
strategy of selling rather than leasing subscriber units. As of December 31,
1997, approximately 96% of the Company's subscriber units were customer owned
and maintained ("COAM"), which compares to an industry average of approximately
62% at December 31, 1996. The Company believes that by following a COAM strategy
for one-way wireless messaging it can achieve significantly better capital
efficiency than if it were to follow a lease strategy, which is reflected in its
relatively low capital employed per subscriber of $34 at December 31, 1997.
Capital employed per subscriber represents total assets, less NPCS assets, cash,
non-debt current liabilities and international investments divided by domestic
units in service. The Company believes that its COAM strategy for one-way
wireless messaging provides additional benefits, including reduced risk of
technological obsolescence and avoidance of the credit risk associated with
leasing subscriber units to end-users. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
SALES AND MARKETING
The Company's customers include individuals, corporations and other
organizations that desire affordable communication services offering substantial
mobility, accessibility and the ability to receive timely information. The
Company utilizes a number of distribution channels to market its products and
services, including retail marketing, private brand strategic alliances and
national sales offices. Management believes that a diversified approach to
distribution is important to sustain growth as demand for paging services more
deeply penetrates the United States population, especially the consumer market.
This diversification is a key element of the Company's strategy of expanding its
subscriber base to increase profitability and cash flow through greater
utilization of its nationwide wireless communication network. There is no single
customer to which sales are made in an amount equal to 10% or more of the
Company's consolidated revenues.
RETAIL MARKETING. Since early 1993, the Company has been an industry
pioneer in developing the national retail distribution channel through sales
arrangements with regional and national retail chains that sell electronic and
business equipment or consumer goods. The Company provides equipment to a
retailer who then sells the equipment to potential users. Once the unit is
purchased, the customer can activate it and subscribe for local, multi-city,
statewide, regional or nationwide paging coverage with the Company by simply
calling the toll-free number identified on the unit. Because the Company's
pagers operate on a common nationwide frequency, they can be sold in any retail
store located in the Company's nationwide coverage area. By contrast,
competitors that use multiple frequencies across markets require retailers to
maintain many more stock keeping units to serve each local market that utilizes
a different frequency.
The Company has entered into sales arrangements with a number of large
national retail chains such as Eckerd Drug; Office Depot, Inc.; OfficeMax, Inc.;
RadioShack, a division of Tandy Corporation; Southland (7-Eleven); Target
Stores, Inc. and Best Buy, Inc. Retail distribution also allows the Company to
sell pagers in markets that would not support a direct sales office but in which
it has installed the necessary equipment required for providing paging services.
The Company can thus enter new markets by capitalizing on its existing
infrastructure of transmitters with the only incremental expense being the
procurement of local access phone lines. The Company expects retail sales to
continue to be an important channel of distribution for pagers. The number of
retail store locations has increased to 12,924 stores at December 31, 1997 from
5,530 stores, 3,411 stores and 2,200 stores at December 31, 1996, 1995 and 1994,
respectively. At December 31, 1997, approximately 26% of the Company's units in
service are represented by the national retail channel.
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PRIVATE BRAND STRATEGIC ALLIANCES. The Company has established numerous
strategic relationships with large communications providers. These companies
utilize their brand awareness and billing and distribution efficiencies to
market private brand pagers and services using the Company's transmission
network. At December 31, 1997, approximately 33% of the Company's units in
service had been added through private brand strategic alliances, and the
Company expects this proportion to increase over the next several years.
GTE Corporation ("GTE"). Since 1993, the Company and GTE have signed a
series of agreements providing for the sale and marketing through GTE of
GTE-labeled services throughout the United States. In addition, several of these
agreements provide for joint cooperation in the deployment of paging network
facilities for the provision of wireless messaging and data transmission in the
United States. Pursuant to the terms of one of the agreements, GTE purchased
approximately 250 new transmitters which have been deployed throughout the
Company's nationwide network. The Company leases, operates and maintains the
transmitters and will provide wireless services to GTE customers, as well as
customers of the Company via the Company's nationwide network. The Company's
services are sold across the United States through GTE Phone Mart Stores and
certain GTE affiliates and authorized agents.
Southwestern Bell Mobile Systems ("SBMS"). In May 1995, the Company and
SBMS signed an agreement for SBMS' sale and marketing of SBMS-labeled services
in all SBMS markets.
AT&T Wireless Services ("AT&T Wireless"). In November 1995, the Company and
AT&T Wireless entered into a three-year agreement for AT&T Wireless' sale and
marketing of AT&T Wireless-labeled services. AT&T has recently announced an
intention to sell its paging operations. No assurance can be given that the
Company's arrangement with AT&T Wireless will continue if such sale occurs.
Ameritech Mobile Services, Inc. ("Ameritech"). In February 1996, the
Company and Ameritech signed an agreement for Ameritech's sale and marketing of
Ameritech-labeled services.
EXCEL Communications, Inc. ("EXCEL"). In March 1996, the Company and EXCEL,
a long distance reseller, signed an agreement for EXCEL's sale and marketing of
EXCEL-labeled services.
ALLTEL, Bluegrass Cellular and First Cellular of Southern Illinois ("First
Cellular"). In 1997, the Company signed separate agreements with each of ALLTEL,
Bluegrass Cellular and First Cellular for their sale and marketing of private
branded services. These agreements provide for each of ALLTEL, Bluegrass
Cellular and First Cellular to purchase new transmitters to be deployed in their
respective areas of operation. The Company will operate and maintain the
transmitters as part of its nationwide network and will provide wireless
services to ALLTEL, Bluegrass Cellular and First Cellular customers as well as
customers of the Company via the Company's nationwide network.
WorldCom Network Services, Inc. ("WorldCom"). In November 1997, the Company
and WorldCom signed an agreement for WorldCom's sale and marketing of
WorldCom-labeled services.
NATIONAL SALES OFFICES. The Company's national sales offices sell and lease
equipment and services through four distribution channels: direct sales, agents,
third-party resellers and local retailers. At December 31, 1997, approximately
41% of the Company's units had been added through the national sales offices. At
December 31, 1997, the Company had a direct sales force of approximately 500
persons covering approximately 80 of the top 100 MSAs through 58 offices.
Direct Sales. The Company markets its equipment and services through its
direct sales force and related marketing activities such as telemarketing and
advertisements in radio, print media and telephone company yellow pages. Direct
sales representatives are paid in part by commission (which varies depending on
the type of service subscribed for and other factors) for each unit sold or
placed in service.
Agents. The Company markets its equipment and services through agents.
Agents establish customers which are billed directly by the Company. Agents earn
a markup or margin on the initial sale and a share of future revenues for the
customers they establish.
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Third-Party Resellers. In addition to offering paging and messaging
services directly to end-users, the Company also offers third-party resellers
paging services in bulk quantities at wholesale monthly rates that are lower
than the Company's regular retail rates.
Local Retailers. The Company markets its services under sales arrangements
with local retailers located in the MSAs where national sales offices are
present.
ONE-WAY TRANSMISSION NETWORK
The Company developed an innovative satellite-based transmission network
that gives the Company a flexible, highly reliable network architecture and an
efficient operating structure. The Company began using DBS technology in 1990
and was the first one-way wireless communications carrier to use DBS technology
to control all of its transmitters. With a DBS paging system, the satellite
broadcasts messages directly to each transmitter in the Company's paging system,
which then broadcasts the messages to pagers on the Company's nationwide
broadcast frequency. DBS eliminates the expensive terrestrial radio link and
repeater equipment that many paging companies have employed to control simulcast
transmissions in large metropolitan markets. In addition, the satellite system
can selectively address one or any combination of the Company's transmitters,
thereby providing a wide range of coverage options and permitting efficient use
of paging frequencies in each market.
The Company's numeric and alphanumeric paging services can be accessed via
local telephone numbers or 800 numbers using a touch-tone key pad or personal
computer messaging software. Local numbers are provided by regional telephone
companies and 800 number service is provided by long distance telecommunications
services providers. The Company uses a nationwide data network to carry all
paging traffic from local telephone markets to its satellite uplink facilities
in Illinois. This network configuration allows the Company to add new lines
quickly and efficiently and provides the Company with back-up power, fire
protection and diverse routing capabilities.
The Company leases satellite services pursuant to agreements with AvData
Systems, Inc. ("AvData") and SpaceCom Systems, Inc. ("SpaceCom"). The agreements
subject the Company to monthly service charges based on the amount and types of
services used and expire on July 1, 2001 and January 31, 2002 respectively. The
agreements may be terminated upon certain failures of the Company to pay monthly
service fees. The agreements do not include any renewal provisions. Management
believes that the services provided by AvData and SpaceCom are sufficient to
meet the Company's foreseeable needs and that there are alternative satellite
sources available to the Company on comparable terms and conditions. As a
result, the Company does not believe the loss of its relationship with its
current satellite suppliers would have a material adverse long-term effect on
its business and operations.
ADVANCED MESSAGING OPERATIONS
One of the Company's principal objectives is to become a leading provider
of advanced messaging services in the United States utilizing its NPCS
technology and spectrum. Management believes that the introduction of advanced
messaging services may present significant future growth opportunities to the
Company by enabling it to offer a new generation of services presenting
sophisticated solutions for business and personal messaging needs, and by
providing it the opportunity to place more units in service because of
significantly increased network capacity.
The Company expects that NPCS technology and spectrum will permit delivery
of a new generation of wireless messaging services, including acknowledgment of
receipt of messages, guaranteed delivery of messages, and subscriber response to
and origination of messages. The Company believes NPCS networks will deliver
higher network capacity, quality and reliability than existing one-way networks.
Advanced messaging services will be delivered to a subscriber unit
containing a transmitter, enabling it to send signals to the network that
identifies its location and transmits other data. Advanced messaging services
use the location identification capabilities of the NPCS network to
automatically identify, without any action on the part of the subscriber, the
network zone in which to transmit the subscriber's messages. Messages can
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be transmitted from a limited number of transmitters rather than every
transmitter in the subscriber's coverage area, permitting frequency reuse
resulting in increased system capacity and reduced operating costs. Depending on
the design of the subscriber unit, the subscriber will be able to respond to or
originate messages with varying levels of sophistication when the network is
fully developed.
RESEARCH AND PLANNING
After the Company acquired the NPCS Licenses in 1994 and 1995, the Company
began a technical and market research program to evaluate the opportunities for
advanced messaging services. Based on its research, the Company expects that the
initial advanced messaging services offered will be designed to capitalize on
the market trends toward alphanumeric messaging and wide area coverage. See
"-- Planned Advanced Messaging Services."
The Company's technical research focused on the identification and
development of equipment and protocols that would be best suited to constructing
a network to deliver the company's planned advanced messaging services at a
reasonable capital cost. Paging networks use various "protocols" to provide
seamless communications between the components which make up a paging network.
Protocols regulate the format and flow of messages which are transmitted over
the network. Motorola has developed several protocols, including FLEX(TM),
ReFLEX25(TM), ReFLEX50(TM) and InFLEXion(TM) Voice. Of these protocols,
ReFLEX25(TM) and ReFLEX50(TM) support advanced messaging, including two-way
alphanumeric messaging, and InFLEXion(TM) Voice supports stored voice messaging.
In 1996 and 1997, the Company constructed and tested two NPCS networks, one
in Dallas and one in Austin, Texas. Each network is based on the network
infrastructure equipment of a different vendor using subscriber units supplied
by Motorola. The test networks were developed not only to evaluate the
performance of the infrastructure equipment, but to evaluate factors such as
terrain topography, building penetration, population density, protocol
stability, equipment interfaces, and antennae technologies which the vendors
were unable to adequately test independently. Test results from one of these
networks indicated that an NPCS network using ReFLEX25(TM) protocols can be
integrated with the Company's existing FLEX(TM) network.
As a result of its technical evaluation, the Company determined to base its
NPCS network on the ReFLEX25(TM) protocol technology. Unlike other NPCS
protocols, ReFLEX25(TM) permits cost-effective sharing of equipment with its
existing FLEX(TM) network and efficient use of the Company's spectrum to
accommodate a greater number of subscribers.
NPCS NETWORK BUILDOUT
Using the proceeds of the Offering, the Company expects to deploy receivers
and other equipment on a city-by-city basis. The Company expects to begin
commercial operation of local coverage in the Austin/San Antonio and Dallas-Fort
Worth areas in the second quarter of 1998. The Company plans to add other cities
to the network during 1998 until there are a sufficient number to begin
marketing nationwide coverage, which the Company expects to occur by the end of
1998. The Company plans to continue to build out its network and expand its
coverage area during 1999. There is no assurance however, that the buildout will
proceed as planned or be successfully completed. The key elements of the network
buildout are as follows:
DESIGN. The design of the Company's nationwide NPCS network is based
upon Motorola's ReFLEX25(TM) technology. Existing transmitters and
transmitter sites will be used for the outbound portion of the network. The
Company's engineers have tested the outbound characteristics of
ReFLEX25(TM) and have determined that they are sufficiently similar to
FLEX(TM) that the existing transmitter infrastructure will successfully
deliver ReFLEX25(TM) outbound services. The inbound or receive side of the
network requires that new infrastructure equipment (i.e., receivers) be
added to both existing sites and to new sites. The exact number of new
receive sites required beyond those to be located on existing sites is a
function of the amount of available space on existing sites and the local
RF characteristics of the particular market being built out. As part of the
design process, the Company's engineers are identifying sites using the
Company's database (as well as other sources), which contains specific
information about available sites throughout the nation. Sites are chosen
on the basis of their coverage and on frequency propagation
characteristics, such as terrain, topography, building penetration and
population density.
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EQUIPMENT. The infrastructure of the Company's network will consist of
a home terminal, encoders, satellite access controllers ("SAC's"), radio
transmitters and receivers, switches, RF controllers and ancillary
equipment, such as coaxial cable and antennas.
The home terminal is a key component of a network that defines and
controls the types of services that can be provided by the network. The
Company purchased the paging terminals for its one-way transmission network
from an outside vendor. When the Company wanted to add or change a feature
of its service offerings, the Company had to request the vendor to make the
required modifications to the terminals. If the vendor agreed to make the
modifications, the time required to implement the modifications was often
unacceptable to the Company. Once the modifications were made, the Company
had no proprietary interest in them so they were usually released to
competitors. As a result, the Company is developing the home terminal that
will be used in its NPCS network.
The advanced messaging services that can be provided on the NPCS
network are more varied and complex than services provided on the Company's
one-way network. In addition, because the market for advanced messaging
services is relatively immature and undeveloped, the Company cannot predict
with certainty how the market will adopt and use the advanced messaging
services that are potentially available for commercial development. The
Company believes that the ability to react quickly to developing market
demand for advanced messaging services will be a critical element in
successfully implementing its advanced messaging services strategy. As a
result, the Company developed its proprietary home terminal, called the
Advanced Cross Media Information Server ("AXIS(TM)"). As of December 31,
1997, the Company had invested approximately $6.3 million in the
development of AXIS(TM) over a period of two years.
AXIS(TM) contains an object-oriented software system that the Company
believes will enable it to more rapidly develop new services as the market
for them emerges, and more easily integrate wireless messaging into all
types of information systems such as the Internet, intranets, e-mail, voice
mail, fax in-boxes and other wireless communications systems. AXIS(TM) is
currently being beta-tested for one-way messaging applications. The Company
expects AXIS(TM) support for the planned local alphanumeric advanced
messaging service to be ready for commercial release in the second quarter
of 1998.
The Company plans to purchase infrastructure equipment (other than the
home terminal, SAC's and ancillary equipment) from industry leading
equipment suppliers, Motorola and Glenayre Technologies, Inc. ("Glenayre").
The Company believes that currently these are the only two qualified
suppliers of such infrastructure equipment and subscriber units and, as a
result, the Company is dependent on these two suppliers for much of its
infrastructure equipment and subscriber unit needs. The Company understands
that Motorola and Glenayre have cross-licensed the relevant protocols. The
Company expects to purchase infrastructure equipment from Motorola under an
existing volume purchase agreement, and from Glenayre under a recently
signed volume purchase agreement. The Company expects to purchase
subscriber units from Motorola under a volume purchase agreement that the
Company expects to amend in 1998 to cover advanced messaging subscriber
units, and from Wireless Access, a subsidiary of Glenayre, under a recently
signed supply agreement. The Company has entered into a volume purchase
agreement with AvData to purchase VSAT and related equipment for its NPCS
network. The Company believes that the satellite services available under
its agreement with AvData are sufficient for both the one-way and advanced
messaging services networks. The Company would be adversely affected if it
were unable to obtain the infrastructure equipment and subscriber units on
satisfactory terms by planned delivery dates.
DEVELOPMENT OF TECHNOLOGY. The ReFLEX25(TM) technology has operated
successfully in the test network environment and the Company is prepared to
implement this technology throughout its existing network. However, the
Company must complete the development of its AXIS(TM) terminal and the
integration of the terminal with Glenayre equipment before commercial
operations can begin. In addition, the Company, Motorola and Glenayre are
still developing and conducting testing of ReFLEX25(TM) technology,
infrastructure equipment and subscriber units to improve operational
efficiency. The Company does not believe that any of these issues will
affect the ultimate ability of the network to operate
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in a commercially viable manner, although there can be no assurance of
this. If any of these issues are not resolved on a timely basis, the
Company's scheduled commercial introduction of advanced messaging services
could be delayed, which could adversely affect the Company's results of
operations.
PLANNED ADVANCED MESSAGING SERVICES
The Company's planned service offerings are expected to be delivered to a
pocket-sized subscriber unit containing a transmitter, enabling it to send a
signal to the Company's network that identifies its location and transmits other
data. Advanced messaging subscriber units are currently available from Motorola
and Wireless Access. These subscriber units make possible the following five
levels of advanced messaging service:
POTENTIAL ADVANCED MESSAGING SERVICE LEVELS
<TABLE>
<CAPTION>
DESCRIPTION BENEFIT
----------- -------
<S> <C> <C>
Guaranteed Delivery............... Passive acknowledgment between the Identifies location of subscriber
subscriber unit and the network. unit, guarantees message delivery and
ensures message integrity.
Message Acknowledgment............ When the message is received and/or Lets the sender know the message has
read, an alert is triggered and sent been received and/or read.
back through the network.
Multiple-choice Response.......... Presents subscriber with a choice of Eliminates need for a return phone
responses embedded in message. Sender call and complete the messaging loop.
can create custom response on a PC,
embed it in the message, and transmit
it to the device.
Preprogrammed Response............ Presents subscriber with a list of Provides a simple response method.
preprogrammed messages for response.
Message Origination............... Subscriber can create custom Allows messages to be sent and
responses or initiate messages, also information to be requested on
known as free form messaging. demand.
</TABLE>
Reported industry growth rates for alphanumeric service significantly
exceed the growth rate for traditional local numeric service. The Company's
initial advanced messaging services are designed to take advantage of these
trends. However, there can be no assurance that advanced messaging services will
be commercially viable or that the advanced messaging service levels will be
possible, and the success of advanced messaging service could be affected by
matters beyond the Company's control.
The Company's advanced messaging service offerings are expected to include
the following:
LOCAL ALPHANUMERIC MESSAGING. When the NPCS network is completed and
tested in each city, the Company plans to introduce local alphanumeric
messaging service in the city. The Company's local alphanumeric messaging
service will enable the subscriber to receive alphanumeric messages up to
several hundred characters in length (compared to the approximately 80
characters in traditional one-way alphanumeric messaging) which will be
input by either (i) a computer or other software enabled device and a modem
that can access the Company's network directly or via the Internet or (ii)
a dispatch operator.
This service will also provide store-and-forward delivery of messages
so that messages are delivered later if the subscriber unit cannot be
reached by the network on the initial attempt. The service takes
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advantage of the positive receipt acknowledgment of the ReFLEX25(TM)
protocol and the ability of two-way subscriber units to register and
transmit positive acknowledgment.
AUTO-ROAM ALPHANUMERIC MESSAGING. When the Company's networks are
operating commercially in a sufficient number of cities, the Company plans
to introduce auto-roam alphanumeric messaging service. Auto-roam
alphanumeric messaging service allows a subscriber to receive an
alphanumeric message anywhere within the coverage of the Company's network
in the U.S. The service uses the location identification capabilities of
the ReFLEX25(TM) network to automatically identify, without any action on
the part of the subscriber, the network zone in which to transmit the
subscriber's messages. The messages can be transmitted from a limited
number of transmitters rather than from every transmitter in the
subscriber's requested coverage area, as is required in the one-way
transmission network. An auto-roam alphanumeric message service subscriber
will have nationwide service at a lower price than can be offered on the
Company's current one-way paging network.
The Company believes that penetration of alphanumeric service on a
regional and nationwide basis has been limited to date due to the
reluctance of many one-way paging operators to promote the service because
of its relatively high use of system capacity during transmission. The NPCS
Licenses and the ReFLEX25(TM) technology should offer significant increases
in capacity over the one-way spectrum and technology currently delivering
alphanumeric messaging services. The Company believes that its auto-roam
alphanumeric service will improve upon traditional service by permitting
longer messages and guaranteed delivery. Management believes that these
service enhancements, along with its competitive pricing, will appeal to
subscribers of traditional alphanumeric messaging services and to
cost-conscious customers who have not previously subscribed to such
nationwide services. The Company expects many current one-way alphanumeric
service subscribers to migrate to auto-roam alphanumeric service, which
will create additional capacity for numeric service on the Company's
one-way network, a service that can be very efficiently delivered on that
network.
MESSAGE ACKNOWLEDGMENT MESSAGING. When market demand has reached a
commercially viable level and the technical requirements for message
acknowledgment have been implemented in the Company's network, the Company
plans to introduce message acknowledgment service. This service will
provide the sender of a message confirmation that the message was delivered
accurately to the subscriber unit. The sender can receive the
acknowledgment through the same mechanism which was used to create the
original message or by designating another communication path for the
acknowledgment.
RESPONSE AND TWO-WAY MESSAGING. When market demand has reached a
commercially viable level and the technical requirements for full two-way
messaging have been implemented in the Company's network, the Company plans
to introduce response and two-way messaging services. Response messaging
allows a subscriber to respond back to the sender of a message. Depending
on the subscriber's unit, a subscriber can:
- Select from a custom set of multiple choice responses sent with the
message,
- Send a response chosen from a set of predefined responses stored in
his unit,
- Create a free form text response.
Multiple responses can be made to the same message. The sender is
expected to be able to receive responses through the same mechanism which
was used to create the original message or by designating another
communication path for the response.
Two-way messaging will allow a subscriber to originate and receive
messages and other communications. Subscribers could be notified of the
receipt of electronic mail, voice mail and faxes. Similarly, subscribers
can originate messages which are delivered to a target recipient over
several alternative communications networks.
Using two-way messaging, a subscriber is expected to be able to stay
in touch while mobile, using a portable and relatively inexpensive device
and service. In addition to these benefits, this service will also
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<PAGE> 14
have the traditional benefits of one-way paging: broad geographic coverage;
good building penetration; small disposable-battery powered subscriber
units, which allows the device to be carried continuously; long battery
life, which allows the device to be used continuously without servicing;
and low costs of ownership and usage.
OTHER SERVICES. Over time, the Company intends to participate in the
growth of wireless data messaging services through new and existing
strategic alliances, wireless data alliances with software companies and
electronic equipment manufacturers to develop additional text messaging
services. In addition to pocket-sized pagers, the Company believes that
wireless text and data transmissions will be received by computers,
organizers or a personal digital assistant equipped with two-way RF modems
or built-in RF capability. It is anticipated that a limited response by the
device will be possible.
The Company will continue to monitor voice paging opportunities and
technologies and may introduce one-way and/or two-way stored voice
messaging service depending on market demand for such services. If the
Company decides to introduce stored voice service, the Company expects to
enter into agreements to provide the ability to resell the service of other
wireless messaging service providers rather than incur the cost of
developing its own network for stored voice messaging.
SALES AND MARKETING
Consistent with its strategy of utilizing existing resources to control the
cost of its network and service expansion, the Company intends to use its
existing distribution channels and sales and marketing organizations as the
basis for marketing and sales of advanced messaging services. The Company
expects that sales of advanced messaging services will initially be dominated by
business and corporate customers because of the growing need of business
customers for mobile, reasonably priced access to communication and information
services with wide area coverage, the higher cost of advanced messaging
subscriber units compared to one-way messaging units, and the lack of sales
personnel in retail stores trained to sell the new services. As a result, the
Company believes that its national sales offices and private brand strategic
alliance distribution channels will initially be best suited for marketing and
selling these services. Because of the higher cost of advanced messaging
subscriber units compared to one-way messaging units and because the initial
demand for advanced messaging services will likely be dominated by business and
corporate customers, the Company expects to lease a substantial portion of its
advanced messaging subscriber units.
The Company expects that initially the strongest market demand for advanced
messaging services will be from large, geographically dispersed corporate
accounts. In preparation for the introduction of these services in 1998, the
Company has divided the direct sales force of its national sales offices into a
unit focusing on national accounts and a unit focusing on local markets. This
enables the direct sales force personnel to personalize and specialize their
approach to their target market. The national accounts unit will emphasize sales
of advanced messaging services as a solution to business messaging needs. The
Company has embarked on a program to hire and train sales personnel for its
national accounts unit.
As market demand for advanced messaging services develops, the Company
expects its private brand strategic alliance distribution channel to grow in
significance. The Company believes that a limited number of NPCS networks will
be built nationwide. The Company believes that its NPCS network will be a low
cost, high functionality network compared to the networks of its initial
competitors, which will make reselling of the Company's services attractive to
other paging companies and communications providers. These companies will resell
such services under their own brand names.
As the advanced messaging services become more prevalent, the Company
expects the price of subscriber units to decrease. As this happens, the
Company's retail distribution channel is expected to gain importance.
INTERNATIONAL STRATEGY
The Company plans to provide messaging services in selected countries on a
seamless international network. The Company expects to pursue international
opportunities through foreign related entities, interests in joint venture
arrangements, or network affiliation agreements between the Company and the
owners of
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<PAGE> 15
foreign networks. Network affiliation agreements provide, with minimal
incremental capital investments by the Company, interconnection between the
Company's network and the foreign network and roaming capabilities for the
Company's and the foreign owner's subscribers. In each country in which the
Company plans to offer paging and messaging services, the Company will seek the
ability to offer such services on a nationwide frequency common to at least one
of the nationwide frequencies it holds in the United States in order to allow a
single messaging device to be used in multiple countries. There can be no
assurance, however, that in each country in which the Company seeks to expand
that a frequency will be available that is common to one of the Company's U.S.
nationwide frequencies.
The Company's international strategy is initially to pursue opportunities
in North America, Central America and South America. One of the Company's
related companies, PageMart Canada, obtained a nationwide license in Canada in
1995 based on a frequency common to one of its frequencies in the United States.
PageMart Canada began providing service in the largest metropolitan areas in
Canada to United States and Canadian subscribers beginning in April 1996. The
Company also provides paging coverage on the Company's nationwide frequency in
the Bahamas, Puerto Rico and the U.S. Virgin Islands through affiliation
agreements. In October 1997, the Company expanded services in Mexico, Panama and
El Salvador.
The Company has entered into an exclusive ten-year network affiliation
agreement with TelMex through its wholly owned subsidiary, Buscatel. TelMex has
acquired in Mexico the same nationwide frequency the Company uses nationwide in
the United States and Canada and has installed it in all 33 markets where
Buscatel operates. Under the terms of the agreement, the Company and Buscatel
will integrate networks to enable efficient, user transparent messaging. The
companies will jointly expand coverage, concentrating initially on major cities
located along the 2,000-mile United States/Mexico border. The two companies will
also jointly market services and co-brand pagers where appropriate. With the
addition of Mexico via the TelMex agreement, PageMart offers true NAFTA-wide
coverage.
PageMart has also signed network affiliation agreements with leading paging
companies in El Salvador, Nicaragua, Guatemala, Honduras, Costa Rica and Panama.
As in the case of Mexico, the same nationwide 900MHz frequency used by the
Company has been licensed by the Company's network affiliates in each country.
The extension of the companies' services, including roaming, to these areas will
allow the PageMart network to offer paging from Canada to the Panama Canal. The
Company expanded services into Guatemala and Costa Rica in January 1998, and
expects to launch services in Nicaragua, and Honduras in the first half of 1998.
The common frequency allows the Company and its network affiliates in each
country to provide customized coverage that extends beyond the borders of the
serving country, using the same pager. For example, a subscriber in New York
could choose New York and Toronto or Mexico City coverage.
COMPETITION
The Company competes primarily on the basis of the price of its equipment
and wireless services, quality of service, and its coverage capability. Its
competitors include both companies which provide paging or other mobile
communications services in local markets in which the Company operates and
regional and nationwide paging service providers. These include regional
telephone companies and both small and large paging service providers, such as
Paging Network, Inc., Metrocall, Inc., AirTouch Communications, Inc., Arch
Communications Group, Inc. and Mobile Telecommunications Technologies Corp.
Certain of these companies have substantially greater financial, technical and
other resources than the Company. In addition, a number of telecommunications
carriers (including providers of broadband PCS) have constructed or are in the
process of constructing nationwide wireless networks that will compete with the
Company's services, including the provision of advanced messaging services.
Management believes that the Company's low cost structure and service offerings
will enable it to continue to compete effectively.
A number of competing technologies, including cellular telephone service,
broadband and narrowband personal communication services, specialized mobile
radio, low speed data networks and mobile satellite services, are used in, or
projected to be used for, advanced messaging services. Cellular telephone
technology provides an alternative communications system for customers who are
frequently away from fixed-wire
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<PAGE> 16
communications systems (i.e., ordinary telephones). Compared to cellular
telephone service, paging service is generally less expensive, offers longer
battery life, provides better in-building penetration, extends over wider
coverage areas, and is more transportable. For those cellular customers for whom
convenience and price are considerations, paging can compete successfully by
complementing their cellular usage. Management believes that paging will remain
one of the lowest-cost forms of wireless messaging due to the low cost
infrastructure associated with paging systems, as well as advances in technology
that are expected to reduce paging costs. Broadband personal communications
services technologies are currently being offered commercially in some cities,
are under development in other areas of the United States, are similar to
cellular technology and offer paging services in a single handset. This
technology will offer greater capacity for advanced messaging services and,
accordingly, is expected to result in greater competition.
Technological advances in the telecommunications industry have created, and
are expected to continue to create, new services and products competitive with
the wireless services currently provided by the Company. In addition, certain
companies are developing one-way and advanced messaging services which may
compete with the one-way and advanced messaging services which the Company
expects to provide. There can be no assurance that the Company will not be
adversely affected as new competitive technologies become available and are
implemented in the future. In addition, the Company may be adversely affected if
cellular telephone companies or broadband personal communications service
providers begin to provide other wireless services or enter into partnerships
with other companies to provide wireless services that complement cellular or
broadband PCS services.
GOVERNMENT REGULATION
Wireless messaging operations are subject to regulation by the FCC under
the Communications Act of 1934, as amended (the "Communications Act"), including
recent amendments contained in the Telecommunications Act of 1996 (the "1996
Act").
The Company provides one-way messaging services directly to subscribers
over its own transmission facilities. The Company (through subsidiaries) holds
two exclusive nationwide one-way licenses, as well as exclusive licenses on
various one-way frequencies in certain metropolitan areas, including New York,
Los Angeles and Chicago. Additionally, the Company holds a 50 kHz unpaired
nationwide NPCS license (the "Nationwide Narrowband License") and five 50/50 kHz
paired regional NPCS licenses (the "Regional Narrowband Licenses"); the latter
five licenses authorize the Company to operate regional narrowband systems on
the same frequencies throughout the continental United States. The Nationwide
Narrowband License was granted on September 29, 1994, and the Regional
Narrowband Licenses were granted on January 27, 1995. The Nationwide Narrowband
License and the Regional Narrowband Licenses will be utilized in connection with
its NPCS networks.
Under FCC rules governing regulation of commercial mobile radio services
("CMRS"), licensees such as the Company must provide interconnection upon
reasonable request, must not engage in any unreasonably discriminatory practices
and are subject to complaints regarding any unlawful practices. The Company is
also subject to provisions that authorize the FCC to provide remedial relief to
an aggrieved party upon finding a violation of the Communications Act and
related customer protection provisions.
The Company's CMRS Licenses (the "Licenses") authorize the Company to use
the radio frequencies necessary to conduct its paging operations. The Licenses
prescribe the technical parameters, such as power output and tower height, under
which the Company is authorized to use those frequencies. The Licenses are for
varying terms of up to 10 years, at the end of which time renewal applications
must be submitted to the FCC for approval. Several of the Company's Licenses
expire in 1998 and 1999. In order to be granted the exclusive use of a
frequency, the Company is required to construct and maintain a specified minimum
number of transmission sites, depending upon the breadth of the exclusivity,
each of which is licensed by the FCC (the "Operating Licenses"). Of the
Company's approximately 1,800 Operating Licenses, approximately 320 require
renewal in 1998. The Nationwide Narrowband License will expire on September 29,
2004 unless renewed by the Company. The Regional Narrowband Licenses will expire
on January 27, 2005 unless otherwise renewed. FCC renewals are routinely granted
in most cases upon a demonstration of compliance
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with FCC regulations and adequate service to the public. Although the Company is
unaware of the existence of any circumstances which would prevent the grant of
any pending or future renewal applications, no assurance can be given that the
Licenses will be renewed by the FCC in the future. Furthermore, although
revocation and involuntary modification of licenses are extraordinary regulatory
measures, the FCC has the authority to restrict the operation of licensed
facilities or to revoke or modify licenses. No License of the Company has ever
been revoked or modified involuntarily.
The Company has complied with FCC requirements with respect to the buildout
of its existing one-way messaging network. There are separate FCC buildout
requirements with respect to the Company's NPCS Licenses. As a nationwide NPCS
licensee, the Company must construct base stations that provide coverage to a
composite area of 750,000 square kilometers or serve 37.5% of the United States
population within five years of the initial license grant date and must
construct base stations that provide coverage to a composite area of 1,500,000
square kilometers or serve 75% of the United States population within ten years
of the initial license grant date. Additionally, as a regional NPCS licensee,
the Company must construct base stations that provide coverage to a composite
area of 150,000 square kilometers or serve 37.5% of the population of the
service area within five years of its initial license grant date and must
construct base stations that provide coverage to a composite area of 300,000
square kilometers or serve 75% of its service area population within ten years
of the initial license grant date. Failure to meet the construction requirements
will result in forfeiture of the license and ineligibility to regain it.
The Communications Act requires licensees such as the Company to obtain
prior approval from the FCC for the assignment of any station license or the
transfer of control of any entity holding such licenses. The FCC has approved
each transfer of control for which the Company has sought approval. The
Communications Act also requires prior approval by the FCC of acquisitions of
paging companies. The Company also regularly applies for FCC authority to use
frequencies, modify the technical parameters of existing licenses, expand its
service territory and provide new services. Although there can be no assurance
that any requests for approval or applications filed by the Company will be
approved or acted upon in a timely manner by the FCC, or that the FCC will grant
the relief requested, the Company has no reason to believe any such requests,
applications or relief will not be approved or granted.
The Omnibus Budget Reconciliation Act of 1993 (the "Budget Act") imposed a
structure of regulatory fees which the Company is required to pay with respect
to its Licenses. The FCC increased these fees for fiscal year 1997. The Company
believes that these regulatory fees will not have a material adverse effect on
the Company's business.
The FCC, on April 23, 1997, released a Report and Order establishing
competitive bidding rules for the remaining NPCS spectrum as well as a Further
Notice of Proposed Rulemaking seeking commentary on a proposal to license NPCS
spectrum that had previously been held in reserve and on a proposal to modify
the existing spectrum allocation plan to aggregate smaller geographic license
areas and create additional nationwide NPCS licenses. Adoption of either of
these two proposals would increase the amount of nationwide NPCS spectrum
available to the public and might negatively impact the value of the nationwide
NPCS licenses held by the Company.
On February 24, 1997, the FCC released its Second Report and Order, which
sets a system of competitive bidding ("auctions") to issue licenses for
frequencies for which there are mutually exclusive applications. Under the FCC
proposal, licenses for individual paging channels for which there are mutually
exclusive applications would be auctioned on a geographic basis. In defining the
area within which existing users would be protected from interference from the
auction winners or neighboring licensees (an area known as an "interference
contour"), the FCC created a new methodology that in many instances reduces the
size of the area within existing licensees' interference contours. This change,
however, does not have an impact on licensees with nationwide exclusivity (such
as the Company), because no other operator has the right to apply for such
licensees' exclusive frequencies.
The FCC's Second Report and Order contains a Further Notice of Proposed
Rulemaking in which the FCC seeks commentary on whether it should impose
coverage requirements on licensees with nationwide exclusivity (such as the
Company), whether these coverage requirements should be imposed on a nationwide
17
<PAGE> 18
or regional basis, and whether -- if such requirements are imposed -- failure to
meet the requirements should result in a revocation of the entire nationwide
license or just a portion of the license. If the FCC were to impose stringent
coverage requirements on licensees with nationwide exclusivity, the Company
might have to accelerate the build-out of its system in certain areas.
In a rulemaking proceeding pertaining to interconnection between local
exchange carriers ("LECs") and CMRS providers, the FCC has concluded that LECs
are required to compensate CMRS providers for the reasonable costs incurred by
such providers in terminating traffic that originates at LEC facilities, and
vice versa. With regard to the negotiation of these mutual compensation
arrangements, the FCC has concluded that states have the authority under certain
circumstances to mandate a "bill and keep" arrangement on negotiating parties
(i.e., the LEC and the CMRS provider would charge each other a rate of zero for
the termination of the other's traffic). The Company believes that "bill and
keep" arrangements, if applied to paging services, would not have a material
adverse effect on the Company's business.
Consistent with this ruling mandating compensation for carriers terminating
LEC-originated traffic, the FCC has determined that LECs may not charge a CMRS
provider or other carrier for terminating LEC-originated traffic. Some LECs have
been reluctant to comply with the FCC orders and have threatened to terminate
interconnection arrangements with the Company if it does not agree to pay for
dedicated facilities used to terminate LEC-originated traffic. The Company has
made certain payments to the LECs under protest and has maintained reserves for
payments that the LECs were claiming were due. The FCC's staff recently made it
clear that under the FCC's current rules, LECs may not charge CMRS providers for
such facilities, although these rules are being reconsidered and may be modified
in the near future.
As a result of the enactment of the 1996 Act, the Company will face
additional financial obligations. In November 1996, in response to a directive
in the 1996 Act, the FCC adopted new rules that govern compensation to be paid
to pay phone providers. After these rules were vacated by the U.S. Court of
Appeals for the D.C. Circuit, the FCC released an order mandating that long
distance carriers compensate pay phone providers 28.4c for each 800 number,
similar toll-free-to-the-caller number and access code (collectively, "800
Number") call during a two-year interim period. The long distance carriers are
expected either to pass this cost through to the paging companies that provide
800 Number service to their subscribers or to block pay phone calls to 800
Numbers. This could increase the cost of providing certain 800 Number messaging
services or limit the utility of 800 Number service. Petitions for review and
stay of this order have been filed with a federal appellate court. Also, in
response to changes made by the 1996 Act, the FCC has adopted new rules
regarding payments by telecommunications firms into a revamped fund that will
provide for the widespread availability of telecommunications services,
including to low-income consumers ("Universal Service"). Prior to the
implementation of the 1996 Act, Universal Service obligations largely were met
by local telephone companies. Under the new rules, all telecommunications
carriers, including paging companies, are required to contribute to the
Universal Service Fund. Payments into the fund will likely increase the cost of
doing business and could make the Company's service less competitive with the
other services.
From time to time, legislation and regulations which could potentially
adversely affect the Company are proposed by federal and state legislators and
regulators. Legislation is currently in effect in Texas requiring paging
companies to contribute a portion of their taxable telecommunications revenues
to a Telecommunication Infrastructure Fund created by the state legislature.
Management does not believe that the Texas law will have a material adverse
effect on the Company's operations and is not aware of any other currently
pending legislation or regulations which will have a material adverse impact on
the Company's operations. However, there can be no assurance that Federal or
other state legislation will not be adopted, or that the FCC or the various
state agencies will not adopt regulations or take other actions that would
adversely affect the business of the Company.
INTELLECTUAL PROPERTY
The Company has established an intellectual property program to protect its
investment in its messaging services and related proprietary technologies.
18
<PAGE> 19
The Company has obtained a United States service mark registration for its
PAGEMART word mark. The Company owns registrations for 14 of its other marks in
the United States. These federal registrations may be renewed as long as the
marks continue to be used in interstate commerce. At December 31, 1997, the
Company had 55 service mark/trademark applications pending before the United
States Patent and Trademark Office. The Company has also obtained, or is in
various stages of applying for, registrations for the PAGEMART mark and several
of its other marks in approximately 28 other countries or jurisdictions where
the Company conducts or anticipates expanding its international business. The
Company has also taken steps to reserve corporate names in certain foreign
countries where the Company anticipates expanding its international business.
At December 31, 1997, the Company had three United States patent
applications pending. The inventions claimed in those patent applications cover
aspects of the Company's current and possible future messaging systems and
related proprietary technologies. The Company is in the process of preparing
other United States patent applications. The Company's present intention is not
to rely primarily on intellectual property rights to protect or establish
further its market position; however, the Company is committed to developing a
portfolio of patents that it anticipates may be of value in negotiating
intellectual property rights with others in the industry. The Company does not
currently intend to broadly license its intellectual property rights.
EMPLOYEES
At December 31, 1997, the Company had 2,249 full-time employees. No
employees of the Company are covered by a collective bargaining agreement, and
management believes the Company's relationship with its employees is good.
19
<PAGE> 20
EXECUTIVE OFFICERS AND DIRECTORS OF REGISTRANT
The Company's Board of Directors currently consists of seven members, which
number may be increased or decreased from time to time so long as there are no
fewer than three nor more than twelve members. The directors, executive officers
and other key officers of the Company, their positions with the Company, and
their ages as of January 31, 1998 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John D. Beletic............... 46 Chairman and Chief Executive Officer
N. Ross Buckenham............. 40 President
Douglas H. Kramp.............. 36 Executive V.P., Strategic Business Units
Douglas S. Glen............... 40 Executive V.P., Strategic Alliances Business
Unit and President, Carrier Services Division
Sandra D. Neal................ 49 Executive V.P., Strategic Projects
Frederick G. Anderson......... 46 V.P., General Counsel and Secretary
Allan D. Angus................ 47 V.P., Technology
Todd A. Bergwall.............. 34 V.P., Law and Assistant General Counsel
Bo Bernard.................... 52 V.P., Core Markets Sales
Stephen D. Hansberry.......... 50 V.P., Information Systems Operations
Jack D. Hanson................ 54 V.P., Network Operations
Frances W. Hopkins............ 57 V.P., Customer Advocacy
Thomas C. Keys................ 39 V.P., Market Development
Bradley W. Kinzbach........... 42 V.P., Inventory and Distribution
G. Clay Myers................. 38 V.P., Finance, Chief Financial Officer and
Treasurer
Richard S. Nelson............. 49 V.P., International and President of PageMart
International
W. Wayne Stargardt............ 45 V.P., Marketing
Paul L. Turner................ 39 V.P., Customer Service
Robert H. Niehaus............. 42 Director
Guy L. de Chazal(1)........... 50 Director
Arthur Patterson(1)........... 54 Director
Alejandro Perez Elizondo(2)... 48 Director
Leigh J. Abramson(1)(2)....... 29 Director
Pamela D.A. Reeve(1)(2)....... 48 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
John D. Beletic, Chairman and Chief Executive Officer. Mr. Beletic joined
the Company as President and a director in March 1992. Mr. Beletic became Chief
Executive Officer of the Company in February 1994 and Chairman of the Company's
Board of Directors in August 1994. In November 1997, Mr. Beletic became the
Chairman and Chief Executive Officer when Mr. Buckenham assumed the position of
President. Prior to joining the Company, Mr. Beletic spent a year in venture
capital, and he served for five years as President and Chief Executive Officer
of The Tigon Corporation ("Tigon"), a leading voice mail service provider. Tigon
was acquired by Ameritech Development Corporation, a wholly-owned subsidiary of
American Information Technologies Corporation in 1988. Before joining Tigon, Mr.
Beletic was Senior Vice President of Operations and Chief Financial Officer for
five years with VMX, Inc. ("VMX"), a manufacturer of voice mail systems. Mr.
Beletic earned his bachelor's degree in finance from Cincinnati's Xavier
University and his master's degree in business administration from the Harvard
Business School. Mr. Beletic currently serves as a director of Digital Sound
Corporation. Within the paging industry, Mr. Beletic currently serves as a
director of PCIA, the industry trade association, and President of the Paging
Leadership Association.
N. Ross Buckenham, President. Mr. Buckenham joined the Company in January
1996 as Vice President, PCS Strategy, was promoted to Vice President and General
Manager, PCS in September 1996, was promoted
20
<PAGE> 21
to Executive Vice President, General Manager, PCS in May 1997 and was promoted
to President in November 1997. Prior to joining the Company, Mr. Buckenham was
President of Touchtone Solutions, Inc., a telecommunications and interactive
voice response software and services company from 1992 to 1996. From 1984 to
1991, Mr. Buckenham was with Aquanautics Corporation, initially as Vice
President of Development then as its President. From 1981 to 1984, Mr. Buckenham
was with Bain & Co. as a senior consultant to companies in the voice processing,
technology, finance and health care industries. Mr. Buckenham holds an MBA
degree from Harvard Business School and a BS degree in Chemical Engineering from
Canterbury University, New Zealand.
Douglas H. Kramp, Executive Vice President, Strategic Business Units. Mr.
Kramp joined the Company as a Vice President in August 1993, was promoted to
Executive Vice President, National Retail Business Unit in May 1997, and was
promoted to Executive Vice President, Strategic Business Units in November 1997.
Before joining PageMart, Mr. Kramp was President and co-founder of Artificial
Linguistics Inc. ("ALI"), a text management software company, from 1988 to 1993.
Before co-founding ALI, Mr. Kramp was responsible for starting up and managing
high technology companies for the Hart Group from 1984 to 1988.
Douglas S. Glen, Executive Vice President, Strategic Alliances Business
Unit and President, Carrier Services Division. Mr. Glen has been a Vice
President since July 1989 and was promoted to Executive Vice President,
Strategic Alliances Business Unit in May 1997, and to President of the newly
organized Carrier Services Division of the Company in December 1997. Formerly,
Mr. Glen was Regional Manager and Director of Finance and Administration for
Multicom, Inc., a subsidiary of PacTel Personal Communications, for three years.
Additionally, Mr. Glen was manager of financial control with PepsiCola Bottling
Group and a consultant with Arthur Andersen & Co. Mr. Glen served as a director
of PCIA, the industry trade association, and Chairman of the Paging and
Narrowband PCS Alliance from 1995 to 1997.
Sandra D. Neal, Executive Vice President, Strategic Projects. Ms. Neal
joined the Company as Vice President in July 1992. She was promoted to Executive
Vice President, Administration in January 1996 and became Executive Vice
President, Strategic Projects in January 1998. Prior to joining the Company, Ms.
Neal was Vice President of Customer Service for Tigon, a voice messaging service
provider, from 1989 to 1992. Previously, Ms. Neal held the positions of Vice
President of Finance and Controller at Tigon from 1986 to 1989. Before joining
Tigon, Ms. Neal was a practicing certified public accountant from 1979 to 1986.
Frederick G. Anderson, Vice President, General Counsel and Secretary. Mr.
Anderson joined the Company in August 1997 as Vice President, General Counsel
and Secretary. Prior to joining the Company, Mr. Anderson was Senior Vice
President, General Counsel and Secretary of American Eagle Group, Inc. from
March 1992 through July 1997. American Eagle Group, Inc. is a public specialty
property and casualty insurance holding company, and its principal subsidiary,
American Eagle Insurance Company, was placed in receivership by the Texas
Department of Insurance in December 1997. Prior to joining American Eagle Group,
Inc., Mr. Anderson was a partner in the corporate and securities section of
Akin, Gump, Strauss, Hauer & Feld, L.L.P., an international law firm.
Allan D. Angus, Vice President, Technology. Mr. Angus joined the Company in
March 1996 as Director of Technology, and was promoted to Director of PCS
Technology in September, 1996. He was promoted to Vice President, Technology in
December 1997. Prior to joining the Company, Mr. Angus was Manager of Regulatory
and Standards for JRC International, Inc. and its predecessor, NovAtel
Communications, Ltd., for more than five years, where he served as a
representative to American and Canadian technology standards organizations and
was instrumental in developing many cellular standards.
Todd A. Bergwall, Vice President, Law and Assistant General Counsel. Mr.
Bergwall joined the Company as Corporate Counsel in June 1994. Mr. Bergwall was
also Secretary of the Company from April 1995 through August 1997. Mr. Bergwall
was named Vice President, Law and Assistant General Counsel in August 1997. From
August 1989 until joining the Company, Mr. Bergwall was engaged in private
practice with the Dallas, Texas law firm Winstead Sechrest & Minick, P.C.
specializing in corporate and securities law.
21
<PAGE> 22
Bo Bernard, Vice President, Core Markets Sales. Mr. Bernard joined the
Company in February 1997 as Vice President, Sales. In July 1997, he was promoted
to Vice President, Core Markets Sales. Prior to joining the Company, Mr. Bernard
was Executive Vice President and co-founder of ProNet, Inc., a formerly publicly
traded paging company, from August 1982 to December 1996.
Stephen D. Hansberry, Vice President, Information Systems Operations. Mr.
Hansberry joined the Company in May 1997 as Vice President, Information Systems,
and became Vice President Information Systems Operations in January 1998. Prior
to joining the Company, Mr. Hansberry was Assistant Store Manager of K-Mart
Corporation from December 1995 until May 1997 and Senior Vice President of
Systems Development of Citicorp Diners Club from April 1993 until October 1994.
Mr. Hansberry was Senior Vice President of Systems Development of Citibank from
February 1990 until April 1993.
Jack D. Hanson, Vice President, Network Operations. Mr. Hanson joined the
Company in October 1993. Prior to joining the Company in October 1993, Mr.
Hanson was Director of Engineering for Spectradyne, Inc. from June 1992 to
October 1993. Previously, he held senior engineering positions with VMX from
December 1984 to June 1992, the most recent being Vice President of National
Account Support.
Frances W. Hopkins, Co-founder, Vice President, Customer Advocacy. Ms.
Hopkins co-founded the Company in 1989 and was Executive Vice President, Chief
Operations Officer until she left the Company in September 1990 to pursue other
business interests. Upon returning in July 1991, she was named Vice President,
Division General Manager. In 1995, Ms. Hopkins became Vice President, Customer
Advocacy. Before co-founding the Company, Ms. Hopkins was President of Multicom,
Inc., a subsidiary of PacTel Personal Communications for six years; President of
Gencell, the cellular subsidiary of Communications Industries; and founded
TelPage, a regional paging company.
Thomas C. Keys, Vice President, Market Development. Mr. Keys was named Vice
President in September 1994. Previously, Mr. Keys was Sales Director and General
Manager from April 1994 to August 1994. Previously, Mr. Keys was the Area
Manager for the Company's largest West Coast market for over one year. Before
joining the Company, Mr. Keys held the position of Vice President of Sales at
S.I.P., Inc., an industrial equipment manufacturer, from December 1991 to
December 1992. Previously, Mr. Keys held several key management positions at
Metromedia Corporation from August 1990 to December 1991.
Bradley W. Kinzbach, Vice President, Inventory and Distribution. Mr.
Kinzbach joined the Company in February 1994 as Manager, Inventory and
Distribution, and was promoted to Vice President, Inventory and Distribution in
December 1996. Prior to joining the Company, Mr. Kinzbach was President of BKCM
Corporation, a distributor of bottled water, from March 1992 until December 1993
and was Director of Distribution for Blockbuster Entertainment Corporation and
held various management positions from February 1986 to February 1992.
G. Clay Myers, Vice President, Finance, Chief Financial Officer and
Treasurer. Mr. Myers joined the Company in April 1993 as Vice President of
Finance and Chief Financial Officer. Prior to joining the Company, Mr. Myers was
Senior Operations Manager for Dell Computer Corporation from 1991 to 1993. Prior
to joining Dell Computer Corporation, Mr. Myers was with Ernst & Young from 1982
to 1991. Mr. Myers is a certified public accountant.
Richard S. Nelson, Vice President, International and President of PageMart
International. Mr. Nelson was named Vice President, International in March 1996.
Formerly, Mr. Nelson was Vice President, Marketing of the Company since June
1992. Before joining the Company, Mr. Nelson was Vice President of Marketing for
American Eagle, at American Airlines, where he held various staff positions from
1972 to May 1992.
W. Wayne Stargardt, Vice President, Marketing. Mr. Stargardt joined the
Company in May 1996 as Vice President, Marketing. Prior to joining the Company,
Mr. Stargardt served as Vice President of Marketing for Pinpoint Communications
Inc., a venture-funded start-up company developing a wireless
radiolocation-based mobile data network, from 1991 to January 1996. Pinpoint
Communications, Inc. filed a petition in bankruptcy in January 1996 and was
subsequently liquidated.
22
<PAGE> 23
Paul L. Turner, Vice President, Customer Service. Mr. Turner has been Vice
President, Customer Service of the Company since March 1994. Before joining the
Company, Mr. Turner was with MCI from 1984 to 1994 in positions of increasing
responsibility. From 1990 to 1994 he held various management positions, the most
recent being Senior Manager, MCI Consumer Markets.
Robert H. Niehaus, Director. Mr. Niehaus has been a Director of the Company
since February 1998. He has been a Managing Director of Morgan Stanley & Co.
Incorporated ("Morgan Stanley") since 1990. He serves as a director of numerous
companies including American Italian Pasta Company, Silgan Holdings, Inc., Fort
James Corporation, Waterford Wedgwood UK, plc (of which he is Chairman) and
several private companies. He is a Managing Director and a director of the
general partner of The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF
II") and the managing general partner of the general partner of Morgan Stanley
Capital Partners III, L.P. ("MSCP III"). Mr. Niehaus was designated by MSLEF II
pursuant to the Amended and Restated Stockholders Agreement among the Company
and certain stockholders of the Company dated as of May 10, 1996, as amended
(the "Stockholders Agreement").
Guy L. de Chazal, Director. Mr. de Chazal has been a Director of the
Company since June 1989. Mr. de Chazal is President and a director of the
managing general partner of the general partner of Morgan Stanley Venture
Capital Fund, L.P. ("MSVCF") and Morgan Stanley Venture Capital Fund II, L.P.
("MSVCF II") and is a Managing Director of Morgan Stanley. Mr. de Chazal is also
a director of several private companies. Mr. de Chazal was designated by MSVCF
pursuant to the Stockholders Agreement.
Arthur Patterson, Director. Mr. Patterson has been a Director of the
Company since June 1989 and a Managing Partner of Accel Partners, a venture
capital company since 1984. Mr. Patterson is also a director of VIASOFT and the
G.T. Global Group of Investment Companies as well as several private software
and telecommunications companies. Mr. Patterson was designated by Accel Partners
pursuant to the Stockholders Agreement.
Alejandro Perez Elizondo, Director. Mr. Perez has been a Director of the
Company since August 1994. Since 1987, Mr. Perez has been associated with
Pulsar, a diversified Mexican company with interests in the insurance,
agriculture, telecommunications, finance and other industries, and is currently
Vice President of Diversification of Pulsar Internacional, S.A. de C.V. Mr.
Perez is also a director of Ionica L3 Ltd. (a public telephone services company
located in U.K.), Novaweb Technologies, Inc. (a California modem manufacturing
company), Encanto Networks Inc. (a California internet company), Fomento
Empresarial Regiomontano, S.A. de C.V. (a Mexico-based holding company with
investments in telecommunications companies), and Merkafon (a Mexico-based
communications engineering company). Mr. Perez was designated by Pulsar pursuant
to the Stockholders Agreement.
Leigh J. Abramson, Director. Mr. Abramson has been a Director of the
Company since August 1994. He is currently a Vice President of Morgan Stanley
and an officer of the general partner of MSLEF II and of the general partner of
the general partner of MSCP III. Mr. Abramson has been with Morgan Stanley since
1990, first in the Corporate Finance Division and, since 1992, in the Merchant
Banking Division. Mr. Abramson is also a Director of Silgan Holdings and
Jefferson Smurfit Corporation. Mr. Abramson was designated by MSCP III pursuant
to the Stockholders Agreement.
Pamela D. A. Reeve, Director. Ms. Reeve was elected Director of the Company
in April 1996. Ms. Reeve is currently President, Chief Executive Officer and
Director of Lightbridge, Inc. ("Lightbridge") and has been with Lightbridge
since 1989. Lightbridge develops and manages software used by wireless
telecommunications companies across the United States to support sales and
marketing applications. Prior to joining Lightbridge, Ms. Reeve spent eleven
years at The Boston Consulting Group, with senior operating responsibility for
the firm's Boston office. Prior to joining The Boston Consulting Group, Ms.
Reeve worked with the National Endowment for the Humanities managing educational
projects and with real estate development and manufacturing firms, primarily in
operations and marketing. Ms. Reeve is also a director of Natural Microsystems,
Inc.
CORPORATE STRUCTURE
PageMart Wireless was incorporated in Delaware on November 29, 1994 as a
wholly-owned subsidiary of PageMart. Effective January 19, 1995, PageMart merged
with a wholly-owned subsidiary of PageMart
23
<PAGE> 24
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 one share of common stock of
PageMart Wireless. Upon consummation of the Reorganization, the stockholders of
PageMart had the same ownership interest in PageMart Wireless as they had in
PageMart, and PageMart Wireless owned all of the capital stock of PageMart. On
December 28, 1995, the name of PageMart Wireless was changed from PageMart
Nationwide, Inc. to PageMart Wireless, Inc. On January 28, 1998, PageMart was
merged into PageMart Wireless, which was the surviving corporation in the
merger.
ITEM 2. PROPERTIES
The principal tangible assets of the Company are its paging network
equipment, which 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 and begins the buildout of its NPCS network.
To date, it has not experienced any material difficulty or delay in obtaining
equipment as needed.
The Company acquired the NPCS Licenses in auctions held by the FCC. The
NPCS Licenses permit the nationwide operation of NPCS networks with 100kHz of
outbound capacity and 50kHz of response capacity.
The Company generally leases the locations used for its transmission and
receiving facilities under operating leases. These leases, which are generally
for five years or less, provide for aggregate annual rental charges of
approximately $12.2 million as of December 31, 1997. The Company does not
anticipate material difficulty in renewing these leases or finding equally
suitable alternate facilities on acceptable terms.
The Company leases approximately 140,000 square feet of office space for
its corporate headquarters in Dallas, Texas with an additional 30,000 square
feet to be added by May 1998. The lease will have an annual cost of
approximately $2.9 million in 1998, and is subject to annual escalations during
the term of the lease. The lease expires on January 31, 2008, and the Company
has the option to renew it for an additional five year term. The Company leases
varying amounts of space for local offices, call centers and other facilities at
various locations. Aggregate annual rental charges under these leases were
approximately $4.7 million as of December 31, 1997.
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 October 27, 1997, an action against PageMart and Paging Network, Inc.
was filed in Superior Court of the State of California, County of San Francisco,
by two customers of EconoPage, Inc. ("EconoPage"), a reseller of the Company's
services that had resold PageMart's paging services to approximately 38,000
customers. PageMart terminated the reseller agreement due to monetary default by
EconoPage. In the complaint, plaintiffs have requested class action status on
behalf of EconoPage customers and allege that EconoPage was an agent of
PageMart, that PageMart was aware that EconoPage's pricing would not permit it
to sustain its business and PageMart permitted EconoPage to continue to enter
into service contracts with customers while EconoPage was having serious
financial difficulties. The complaint alleges violation of statute, fraud and
negligent misrepresentation by PageMart, and requests injunctive relief as well
as compensatory, punitive, special and incidental damages in an unspecified
amount. PageMart denies all claims and will vigorously defend itself. The
Company does not expect the ultimate outcome of this suit to have a material
adverse effect on its results of operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
24
<PAGE> 25
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
The Company's Class A Common Stock, $0.0001 par value, is listed on the
Nasdaq National Market System under the symbol PMWI. There currently is no
public market for the Company's Class B, Class C or Class D Common Stock. Class
A Common Stock is convertible by certain holders thereof into either Class B or
C Common Stock. Classes B, C and D Common Stock are convertible to Class A
Common Stock. The following table indicates the high and low sales prices for
shares of the Company's Class A Common Stock for the periods from June 13, 1996,
the date of the company's initial public offering:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1996:
Second Quarter (from June 13, 1996)............... $13 1/4 $10
Third Quarter..................................... $11 7/8 $ 8 1/4
Fourth Quarter.................................... $10 1/8 $ 6
1997:
First Quarter..................................... $ 7 5/8 $ 4 3/8
Second Quarter.................................... $ 9 1/2 $ 4 7/8
Third Quarter..................................... $11 3/8 $ 7
Fourth Quarter.................................... $13 1/4 $ 7 1/2
</TABLE>
As of January 31, 1998, the Company's Class A, Class B, Class C and Class D
Common Stock was held by approximately 216, 8, 2 and 2 holders of record,
respectively.
The Company has not paid dividends on the common stock since its
organization in 1989. The Company currently intends to retain future earnings
for the development of its business and does not anticipate paying cash
dividends on its common stock in the foreseeable future. The Company's future
dividend policy will be determined by its Board of Directors on the basis of
various factors, including the Company's results of operations, financial
condition, capital requirements and investment opportunities. In addition, the
Company's debt instruments substantially restrict (and currently prohibit) the
payment of cash dividends.
25
<PAGE> 26
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth-summary historical financial information and
operating data for each of the five fiscal years ended December 31, 1997. The
financial information and operating data were derived from, and should be read
in conjunction with, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
of the Company and the notes thereto included elsewhere in this Report.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1993 1994 1995 1996 1997
---------- ---------- ------------ ------------ ------------
(IN THOUSANDS, EXCEPT UNIT, ARPU, PER SUBSCRIBER AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Recurring revenues............................. $ 24,184 $ 56,648 $ 101,503 $ 153,041 $ 206,907
Equipment sales and activation fees............ 26,483 53,185 57,688 68,551 70,871
-------- -------- ---------- ---------- ----------
Total revenues................................. 50,667 109,833 159,191 221,592 277,778
Cost of equipment sold......................... 28,230 57,835 63,982 78,896 86,175
Operating expenses............................. 47,448 85,322 118,557 155,265 194,194
-------- -------- ---------- ---------- ----------
Operating loss................................. (25,011) (33,324) (23,348) (12,569) (2,591)
Interest expense............................... (6,538) (12,933) (30,720) (35,041) (38,499)
Interest income................................ 428 858 1,997 1,140 501
Other.......................................... -- (414) (1,042) (2,128) (3,298)
-------- -------- ---------- ---------- ----------
Net loss....................................... $(31,121) $(45,813) $ (53,113) $ (48,598) $ (43,887)
======== ======== ========== ========== ==========
Net loss per common share...................... $ (1.51) $ (1.72) $ (1.53) $ (1.30) $ (1.10)
Weighted average number of common shares and
share equivalents outstanding................ 20,627 26,574 34,653 37,462 39,922
BALANCE SHEET DATA (AT PERIOD END):
Current assets................................. $ 51,279 $ 44,397 $ 62,535 $ 70,572 $ 84,133
Total assets................................... 78,773 142,059 263,829 313,620 361,876
Current liabilities............................ 20,198 37,966 56,508 62,503 104,973
Long-term debt, less current maturities........ 78,359 92,632 219,364 240,687 289,344
Stockholders' equity (deficit)................. (19,784) 11,461 (12,043) 10,430 (32,441)
OTHER DATA:
Units in service (at period end)............... 327,303 772,730 1,240,024 1,859,407 2,530,737
Net subscriber additions....................... 210,269 445,427 467,294 619,383 671,330
ARPU(1)........................................ $ 9.81 $ 8.64 $ 8.62 $ 8.04 $ 7.80
Operating profit (loss) before selling expenses
per domestic subscriber per month(2)......... (0.98) 0.90 2.11 2.25 2.54
Selling expenses per net domestic subscriber
addition(3).................................. 91 81 91 87 100
EBITDA(4)...................................... (19,930) (25,219) (10,076) 8,623 27,261
Capital expenditures........................... 10,810 16,719 33,503 63,804 67,506
Dividends paid/declared........................ -- -- -- -- --
Depreciation and amortization.................. 5,081 8,105 13,272 21,192 29,852
Deficiency of earnings to fixed charges(5)..... (31,121) (45,813) (53,113) (48,598) (43,887)
</TABLE>
- ---------------
(1) Average monthly revenue per unit ("ARPU") is calculated by dividing (i)
domestic recurring revenues, consisting of fees for airtime, voice mail,
customized coverage options, excess usage fees and other recurring revenues
and fees associated with the subscriber base for the quarter by (ii) the
average number of domestic units in service for the quarter. ARPU is stated
as the monthly average for the final quarter of the period.
(2) Operating profit (loss) before selling expenses (selling expenses include
loss on sale of equipment) per subscriber for the Company's domestic one-way
messaging operations is calculated by dividing (i) recurring revenue less
technical expenses, general and administrative expenses, and depreciation
and amortization for the final quarter of the period by (ii) the average
number of domestic units in service for the final quarter of the period.
Stated as the monthly average for the final quarter of the period.
(3) Selling expenses per net domestic subscriber addition for the Company's
domestic one-way messaging operations is calculated by dividing (i) selling
expenses, including loss on sale of equipment, for the period by (ii) the
net domestic subscriber additions for the period.
(4) 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 generally accepted accounting
principles ("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. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
for a discussion of the financial operations and liquidity of the Company as
determined in accordance with GAAP.
(5) For purposes of calculating the deficiency of earnings to fixed charges, (i)
earnings is defined as net loss plus fixed charges and (ii) fixed charges as
interest expense plus amortization of debt issuance costs and the interest
portion of rental and lease expense.
26
<PAGE> 27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of the results of operations and financial
condition of the Company for the three years ended December 31, 1997. This
discussion should be read in conjunction with the Company's Consolidated
Financial Statements and the notes thereto included elsewhere in this report.
When used in this discussion, the words "estimate," "project," "plan,"
"expect" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected. Readers
are cautioned not to place undue reliance on these forward-looking statements as
the assumptions or market conditions underlying the forward looking statements
may change or prove to be incorrect.
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 one-way wireless communications network and administrative infrastructure in
order to establish nationwide coverage, sales offices in major metropolitan
areas, centralized customer service call centers and administrative support
functions. The Company incurs substantial fixed operating costs related to its
one-way wireless communications infrastructure, which is designed to serve a
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 to increase
profitability and cash flow through greater utilization of its nationwide
wireless communications network. From January 1, 1992 to December 31, 1997, the
number of units in service increased from 52,125 to 2,530,737. None of the
Company's growth is attributable to acquisitions. 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 and
private brand strategic alliances with GTE Corporation, Southwestern Bell Mobile
Systems, AT&T Wireless Services, WorldCom Network Services, Inc., Ameritech
Mobile Services, Inc., EXCEL Communications, Inc., ALLTEL Communications, Inc.,
Bluegrass Cellular and First Cellular of Southern Illinois, as well as
international expansion. Given the fixed operating costs of its wireless
networks, administration and selling and marketing expenses associated with its
growth strategy, the Company generated operating losses in 1997 from its one-way
wireless communications business. In the third quarter of 1997, the Company
began generating operating profits in its one-way business and management
expects this trend to continue in 1998. In addition, the Company began testing
and development of advanced messaging services in 1996, and completed testing
and development in 1997. The Company plans to begin implementation in 1998, and
expects to incur additional operating losses and make significant capital
expenditures during 1998 and 1999. The Company does not anticipate any
significant revenues from advanced messaging services during 1998.
The Company has historically sold, rather than leased, substantially all of
the subscriber units used by its subscribers. As a result, the Company has had
much less capital invested in subscriber units than other paging carriers since
it has recouped a substantial portion of subscriber unit costs upon sale to
retailers and subscribers. This has resulted in significantly lower capital
expenditures and depreciation expense than if the Company had leased units to
its subscribers. In addition, the Company's financial results are much different
than other paging carriers that lease subscriber units to subscribers because
the Company recognizes the cost of subscriber units sold in connection with
adding new subscribers at the time of sale rather than capitalizing and
depreciating the cost of subscriber units over periods ranging from three to
five years as occurs with paging carriers that lease subscriber units to
subscribers. In addition, the Company's retail distribution strategy results
27
<PAGE> 28
in the recognition of expenses associated with subscriber unit sales and other
sales and marketing expenses in advance of new subscribers being added to the
subscriber base and generating recurring revenues (as retailers carry
inventory). The Company expects, however, to lease a substantial portion of its
advanced messaging subscriber units because sales of advanced messaging services
will initially be dominated by business and corporate customers and because of
the higher cost of advanced messaging subscriber units compared to one-way
messaging units. The Company may require up to $50 million of financing in order
to fund the purchase of such subscriber units and intends to seek
off-balance-sheet structures to accomplish such financing. See "-- Liquidity and
Capital Resources."
The Company sells its subscriber units through multiple distribution
channels, including direct sales, third party resellers, private brand strategic
alliances and local and national retail stores. At December 31, 1997, the
Company's total subscriber base was comprised of 26% from the National Retail
strategic business unit ("SBU"), 33% from the Private Brand Strategic Alliance
SBU and 41% from the National Sales Offices SBU. Selling and marketing expenses
are primarily attributable to compensation paid to the Company's sales force,
advertising and marketing costs and losses resulting from the fact that, for
competitive and marketing reasons, the Company generally sells each new unit to
national retailers 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. The Company expects its
cost of subscriber units on a per unit basis generally to remain constant or
decline only slightly as sales volumes increase. Management anticipates that
loss on equipment sold will generally remain constant on a per unit basis for
the foreseeable future. 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.
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,
1995, 1996, and 1997 were 2.5%, 2.4% and 2.5%, respectively.
Approximately 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 is dependent on usage. Management anticipates that the
Company's ARPU will decline in the foreseeable future due to a continued higher
mix of subscribers added through private brand strategic alliance programs,
which yield lower ARPU because strategic alliance partners are generally high
volume customers that are charged wholesale airtime rates. However, because
private brand strategic alliance partners are responsible for selling and
marketing costs, billing, collection and other administrative costs associated
with end-users, the Company incurs substantially lower marketing and
administrative costs with respect to such subscribers.
RESULTS OF OPERATIONS
The Company's principal operations to date are its domestic one-way
wireless operations. The following discussion of results of operations analyzes
the results of the Company's domestic one-way wireless messaging operations,
unless otherwise indicated.
Certain of the following financial information is presented on a per
subscriber unit basis. Management of the Company believes that such a
presentation is useful in understanding the Company's results because it
provides 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.
28
<PAGE> 29
FISCAL YEARS 1995, 1996 AND 1997
Units in Service
Units in service were 1,240,024, 1,851,445 and 2,513,337 as of December 31,
1995, 1996 and 1997, respectively. This represents a domestic annual growth rate
of 49% and 36% in 1996 and 1997, respectively. In addition, for the years ended
December 31, 1996 and 1997, PageMart Canada's units in service were 13,270 and
29,000, respectively. As a result of its ownership interest in PageMart Canada,
the Company's proportional share of the units in service of PageMart Canada was
7,962 and 17,400 units at December 31, 1996 and 1997. The Company has
experienced strong growth in units in service due primarily to the success of
its sales and marketing strategies in national retail and private brand
strategic alliance programs.
Revenues
Revenues for the fiscal years 1995, 1996 and 1997 were $159.2 million,
$221.6 million and $277.6 million, respectively. Recurring revenues for airtime,
voice mail and other services for the same periods were $101.5 million, $153.0
million and $206.9 million, respectively. Revenues from equipment sales and
activation fees for 1995, 1996 and 1997 were $57.7 million, $68.6 million and
$70.7 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 1996 and
1997 was partially offset by a decline in the average price per unit sold.
The Company's ARPU was $8.62, $8.04 and $7.80 in the final quarter of 1995,
1996 and 1997, respectively. The decline in 1996 and 1997 resulted primarily
from an increase in subscribers added through private brand strategic alliance
channels. This decrease in ARPU has been offset partially by a higher mix of
multi-city, regional and nationwide services as well as increased sales of other
value-added services such as voice mail and toll-free numbers.
Cost of Equipment Sold
The cost of equipment sold in 1995, 1996 and 1997 was $64.0 million, $78.9
million and $86.0 million, respectively. The change in 1996 was a combination of
an increase in the number of units sold and slightly lower average pager prices
paid to suppliers. The change in 1997 was primarily due to an increase in the
number of units sold. The Company expects pager costs generally to remain
constant, with modest reductions in cost to the Company as a result of volume
purchases.
Operating Expenses
Technical expenses were $25.5 million, $36.7 million and $46.5 million in
1995, 1996 and 1997, respectively. The increases were primarily due to increased
telecommunications and site expenses associated with servicing the Company's
expanded network and larger subscriber base. On an average monthly cost per unit
in service basis, technical expenses were $2.11, $1.98 and $1.78 in 1995, 1996
and 1997, 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 1995, 1996 and 1997 were $36.1 million, $42.6 million
and $50.8 million, respectively. This increase resulted from greater marketing
and advertising costs related to the growth in units sold as well as from
increased sales compensation because of the addition of sales personnel in
existing business units during 1996. During the years ended December 31, 1995,
1996 and 1997, the Company added 467,294, 611,421 and 661,892 net new domestic
units in service, respectively. Sales and marketing employees increased from 445
at December 31, 1995 to 552 at December 31, 1996 and then decreased to 505 at
December 31, 1997. Management views 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 domestic subscriber addition (including loss on equipment
sales) were $91, $87 and $100 for the years ended December 31, 1995, 1996 and
1997, respectively. The increase in 1997 was due to losses recognized on the
sale of pagers due to stocking new retail outlets. The Company added 7,394
29
<PAGE> 30
additional retail outlets during the year including additions from Radio Shack,
Eckerd Drug, OfficeMax and Southland (7-Eleven) stores. The losses on equipment
sold are recognized when pagers are shipped to the retailers, usually before the
units are placed into service, thus increasing selling expenses (including loss
on sale of equipment) per net subscriber addition. During the year ended
December 31, 1997, the Company incurred $526,000 in selling expenses associated
with international operations.
General and administrative expenses (including costs associated with
customer service, field administration and corporate headquarters) in 1995, 1996
and 1997 were $43.4 million, $53.7 million and $66.4 million, respectively. This
increase was attributable to the Company's expansion of its customer service
call centers, information systems and administrative capabilities to support the
growing subscriber base which required additional office space, administrative
personnel and customer service representatives. On an average cost per month per
unit in service basis, general and administrative expenses were $3.59, $2.89 and
$2.54 for fiscal years 1995, 1996, and 1997, 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 1995, 1996 and 1997 was $13.3 million,
$21.2 million and $29.7 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 1996 and 1997. As an average cost per month per unit in
service, depreciation and amortization was $1.10, $1.14, $1.13 for the years
ended December 31, 1995, 1996 and 1997, respectively.
Interest Expense
Consolidated interest expense increased from $30.7 million in 1995 to $35.0
million in 1996 and to $38.5 million in 1997. The increases in 1996 and 1997
were primarily the result of the increased interest related to the 15% Notes and
the 12 1/4% Notes. Interest expense related to the 12 1/4% Notes was $11.8
million, $13.3 million and $15.1 million in 1995, 1996 and 1997, respectively.
Interest expense related to the 15% Notes was $15.3 million, $18.4 million and
$21.2 million in 1995, 1996 and 1997, respectively. Interest expense related to
vendor financing was $0.9 million in 1997.
Net Loss
The Company sustained consolidated net losses in 1995, 1996 and 1997 of
$53.1 million, $48.6 million and $43.9 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 and
operating expenses.
MANAGEMENT'S PRESENTATION OF RESULTS OF OPERATIONS
COMPARISON WITH GAAP PRESENTATION
The Company's audited Consolidated Financial Statements for the years ended
December 31, 1995, 1996 and 1997, 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
domestic subscriber per month for the Company's one-way operations has grown
from $1.01 during the first quarter of 1995 to $2.54 during the fourth quarter
of 1997 due primarily to the Company's increase in subscribers and resulting
benefits in economies of scale.
In addition, 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
30
<PAGE> 31
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, voice mail, 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.
Technical Expenses. This item is the same under the management and
GAAP presentations.
General and Administrative Expenses. This item is the same under the
management and GAAP presentations.
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 technical expenses, general and administrative 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.
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.
31
<PAGE> 32
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 the Company's quarterly reports on Form 10-Q for
the corresponding periods below, and should not be considered in isolation or as
an alternative to results of operations that are presented in accordance with
GAAP (in thousands, except other data).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1996 1996 1996 1996 1997 1997 1997 1997
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Recurring revenues........ $ 33,743 $ 36,964 $ 39,697 $ 42,637 $ 46,475 $ 50,004 $ 53,593 $ 56,828
Technical expenses........ 7,943 8,783 9,725 10,273 10,765 11,385 11,963 12,397
General and administrative
expenses................ 12,792 13,043 13,668 14,162 15,763 15,814 16,957 17,911
Depreciation and
amortization............ 4,248 4,942 5,714 6,288 6,808 7,240 7,626 7,987
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating profit before
selling expenses........ 8,760 10,196 10,590 11,914 13,139 15,565 17,047 18,533
Selling expenses(1)....... 11,601 12,836 13,588 14,900 15,443 16,556 16,981 17,191
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss)... $ (2,841) $ (2,640) $ (2,998) $ (2,986) $ (2,304) $ (991) $ 66 $ 1,342
========== ========== ========== ========== ========== ========== ========== ==========
EBITDA.................... $ 1,407 $ 2,302 $ 2,716 $ 3,302 $ 4,504 $ 6,249 $ 7,692 $ 9,329
========== ========== ========== ========== ========== ========== ========== ==========
OTHER DATA:
Units in service(2)....... 1,374,146 1,524,297 1,684,937 1,851,445 2,001,525 2,181,775 2,343,299 2,513,337
Net subscriber
additions............... 134,122 150,151 160,640 166,508 150,080 180,250 161,524 170,038
ARPU(3)................... $ 8.61 $ 8.50 $ 8.25 $ 8.04 $ 8.04 $ 7.97 $ 7.90 $ 7.80
National retail outlets... 3,690 4,286 5,025 5,530 7,388 10,412 12,171 12,924
Operating profit before
selling expenses per
domestic subscriber per
month(4)................ $ 2.23 $ 2.35 $ 2.20 $ 2.25 $ 2.27 $ 2.48 $ 2.51 $ 2.54
Selling expenses per net
domestic subscriber
addition(5)............. 86 85 85 89 103 92 105 101
Capital employed per unit
in service(6)........... 41 49 49 43 41 40 36 34
</TABLE>
- ---------------
(1) Includes loss on sale of equipment.
(2) Stated as of the end of each period.
(3) Calculated by dividing domestic recurring revenues for the quarter by the
average number of domestic 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 domestic 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 domestic subscriber additions for the
quarter.
(6) Calculated by dividing consolidated total assets (excluding cash, NPCS
assets and international investments) minus current liabilities (excluding
current maturities of long-term debt) at the end of the period, by domestic
units in service at the end of the period.
32
<PAGE> 33
SUPPLEMENTARY INFORMATION
The following table sets forth-supplementary financial information related
to the Company's various operations (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------------
ONE-WAY ADVANCED
MESSAGING MESSAGING INTERNATIONAL CONSOLIDATED
--------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues.......................................... $159,191 $ -- $ -- $159,191
Operating loss.................................... (22,972) (376) -- (23,348)
EBITDA............................................ (9,700) (376) -- (10,076)
Total assets ..................................... 120,004 140,235 3,590 263,829
Capital expenditures.............................. 32,486 1,017 -- 33,503
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1996
----------------------------------------------------------
ONE-WAY ADVANCED
MESSAGING MESSAGING International(1) Consolidated
--------- --------- ---------------- ------------
<S> <C> <C> <C> <C>
Revenues......................................... $221,592 $ -- $ -- $221,592
Operating loss................................... (11,465) (657) (447) (12,569)
EBITDA........................................... 9,727 (657) (447) 8,623
Total assets .................................... 160,858 151,108 1,654 313,620
Capital expenditures............................. 50,838 12,966 -- 63,804
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1997
----------------------------------------------------------
ONE-WAY ADVANCED
MESSAGING MESSAGING International(1) Consolidated
--------- --------- ---------------- ------------
<S> <C> <C> <C> <C>
Revenues......................................... $277,605 $ -- $ 173 $277,778
Operating loss................................... (1,887) (207) (497) (2,591)
EBITDA........................................... 27,774 (16) (497) 27,261
Total assets .................................... 177,090 185,943 (1,157) 361,876
Capital expenditures............................. 32,169 35,337 -- 67,506
</TABLE>
- ---------------
(1) Expenses reflected in this column are for the Company's international
headquarters operations. The Company accounts for its investments in Canada
under the equity method. Consequently, the Company's share of expenses from
its Canadian operations are not reflected in this table.
SEASONALITY
Pager usage is slightly higher during the spring and summer months, which
is reflected in higher incremental usage fees earned by the Company. The
Company's retail sales are subject to seasonal fluctuations that affect retail
sales generally. Otherwise, the Company's results are generally not
significantly affected by seasonal factors.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations have historically required substantial capital
investment for the development and installation of its wireless communications
network, the procurement of subscriber units and expansion into new and existing
markets. To date, these investments by the Company have been funded by the
proceeds from the issuance of common stock, preferred stock, the 12 1/4% Notes,
the 15% Notes, as well as borrowings under vendor financing arrangements and the
Revolving Credit Agreement (as defined herein).
Capital expenditures were $33.5 million, $63.8 million and $67.5 million
for the years ended December 31, 1995, 1996 and 1997, respectively. Capital
expenditures for 1995 related entirely to the Company's one-way messaging
operation. Capital expenditures for 1996 include $44.4 million for the Company's
one-way messaging operations, $13.0 million related to the development of
advanced messaging services, and $6.4 million for the development of the
Company's new administrative system. Capital expenditures for 1997 include
approximately $35.3 million related to the development of advanced messaging
services, $22.7 million
33
<PAGE> 34
for the Company's one-way messaging operations and $9.5 million for the
development of the Company's new administrative system. During December 1995,
the Company committed to purchase $40 million in network infrastructure
equipment from Motorola from December 1, 1995 to October 31, 1999. Through
December 31, 1997, the Company had purchased $21.9 million of network
infrastructure under this purchase commitment.
The Company's net cash used in operating activities for the year ended
December 31, 1995 was $2.9 million and net cash provided by operating activities
for the years ended December 31, 1996 and 1997 was $3.6 million and $37.2
million, respectively. The increased operating cash flow in 1997 was a result of
improved operating results from a larger subscriber base. Net cash used in
investing activities was $110.2 million, $64.0 million and $68.5 million for the
years ended December 31, 1995, 1996 and 1997, respectively. Of the $110.2
million used in investing activities in 1995, $74.1 million was for the
acquisition of NPCS Licenses and the remainder was primarily for capital
expenditures. The $64.0 million and the $68.5 million used in investing
activities in 1996 and 1997, respectively, were primarily for capital
expenditures. Net cash provided by financing activities, including borrowings
and equity issuances was $125.5 million, $56.0 million and $17.0 million for the
years ended December 31, 1995, 1996 and 1997, respectively. Cash provided by
financing activities in 1995 resulted primarily from $100.1 million of net
proceeds from the issuance of the 15% Notes and non-voting common stock. Cash
provided by financing activities in 1996 resulted primarily from $70.5 million
in net proceeds received in connection with the initial public offering of the
Company's Class A Common Stock. Cash provided by financing activities in 1997
resulted from borrowings of $17.1 million under a vendor financing arrangement.
Net increases in borrowings were $128.7 million, $15.8 million and $51.4 million
for the years ended 1995, 1996 and 1997, respectively. The net increase in 1995
resulted from the issuance of the 15% Notes, the accretion of the 12 1/4% Notes
and borrowings under vendor financing arrangements. The net increases in
borrowings for 1996 and 1997 resulted primarily from the accretion of the
12 1/4% Notes and the 15% Notes. In addition, net increases in borrowings for
1997 resulted from borrowings under vendor financing arrangements.
On January 28, 1998, the Company completed an offering resulting in
approximately $249.7 million in gross proceeds of 11 1/4% Senior Subordinated
Discount Notes due 2008 (the "Offering"). Simultaneously, with the closing of
the Offering, the Company refinanced certain of its outstanding indebtedness,
(the "Refinancing"), and modified its corporate structure. The Refinancing
consisted of the following: (i) purchasing all of the outstanding 12 1/4% Notes
($136.5 million principal amount at maturity), (ii) the amending of certain
terms of the covenants and agreements in the indenture relating to the 15%
Notes; and (iii) merging PageMart, Inc. into PageMart Wireless, Inc., with
PageMart Wireless, Inc. as the surviving corporation.
Approximately $130.7 million of the gross proceeds of the Offering was used
to purchase all of the outstanding 12 1/4% Notes. The proceeds remaining after
offering expenses and refinancing were approximately $107.8 million. The Company
intends to use the remaining proceeds to fund the construction of its NPCS
network and for general corporate purposes. In connection with the Refinancing,
the Company expects to incur an extraordinary charge of approximately $13.9
million related to the early extinguishment of debt in the first quarter of
1998.
The 11 1/4% Senior Subordinated Discount Notes due 2008 ("11 1/4% Notes"),
which are unsecured senior obligations of PageMart Wireless, mature in 2005 and
were issued at a substantial discount from their principal amount at maturity.
The accretion of original issue discount on the 11 1/4% Notes will cause an
increase in indebtedness from January 28, 1998 to February 1, 2008 of $182.3
million. From and after August 1, 2003 interest on the 11 1/4% Notes will be
payable semiannually, in cash.
In March 1997, the Company entered into a vendor financing arrangement with
an infrastructure vendor (the "Vendor Financing Arrangement"), providing for the
financing of one-way or advanced messaging infrastructure equipment over a
period of 60 months up to a maximum aggregate amount of $30 million. Borrowings
under the Vendor Financing Arrangement are secured by the equipment purchased.
The interest rate applicable to such financing is equal to the sum of 7.00% and
the London interbank offered rate ("LIBOR") as published in The Wall Street
Journal for three-month maturities or the sum of 4.25% and the
34
<PAGE> 35
U.S. prime rate of interest as published in The Wall Street Journal. The
weighted average interest rate in effect on December 31, 1997 with respect to
the Vendor Financing Arrangement was 12.6%.
In June 1996, the Company sold an aggregate of 6.0 million shares of Class
A Common Stock in an initial public offering at a price to the public of $13 per
share. The Company received net proceeds of approximately $70.5 million of which
approximately $12.9 million was used to retire vendor debt and $11.9 million was
used to repay outstanding loans under the Company's Revolving Credit Agreement
(as defined below).
In May 1995, the Company entered into a four year Revolving Credit
Agreement with BT Commercial Corporation, as Agent, and Bankers Trust Company,
as Issuing Bank, which provides for a $50 million revolving line of credit (the
"Revolving Credit Agreement"). As of December 31, 1997 there were no loans
outstanding under the Revolving Credit Agreement.
As of December 31, 1997, the Company had $16.0 million outstanding under
the Vendor Financing Arrangement and its indebtedness under the 12 1/4% Notes
was $122.7 million and its indebtedness under the 15% Notes was $153.4 million.
The 15% Notes, which are unsecured senior obligations of Wireless, mature
in 2005 and were issued at a substantial discount from their principal amount at
maturity. The accretion of original issue discount on the 15% Notes will cause
an increase in indebtedness from December 31, 1997 to February 1, 2000 of $53.9
million. From and after August 1, 2000, interest on the 15% Notes will be
payable semiannually, in cash.
The indenture under which the 15% Notes were issued (the "15% Indenture"),
the indenture pursuant to which the 11 1/4% Notes were issued (the "11 1/4%
Indenture"), the Vendor Financing Arrangement and the Revolving Credit Agreement
contain certain restrictive covenants that, among other things, limit the
ability of the Company to incur indebtedness, pay dividends, repurchase capital
stock, engage in transactions with stockholders and affiliates, create liens,
sell assets, enter into leases and engage in mergers and consolidations, and the
Revolving Credit Agreement requires the Company to maintain certain financial
ratios and limits the ability of the Company to make capital expenditures.
On November 15, 1995, the Company purchased through PageMart International,
Inc., 200,000 voting shares of common stock of PageMart Canada, which represents
20% of the ownership of PageMart Canada. PageMart International, Inc. also owns
33% of the voting common stock of the holding company parent of PageMart Canada
("Canada Holding"), which owns the remaining 80% of the voting common stock of
PageMart Canada. The Company's initial investment in Canada Holding and PageMart
Canada totaled approximately $3.7 million.
The Company plans to begin the implementation of advanced messaging
services during 1998. The Company expects to incur significant capital
expenditures and operating losses associated with the implementation and
start-up phase for advanced messaging services. The Company anticipates capital
expenditures of approximately $90 million in 1998 to construct and deploy an
NPCS network, which the Company expects to enable it to market advanced
messaging services nationwide by the end of 1998. In addition, the Company
expects to incur cash operating expenses of approximately $10 million in 1998.
Thereafter, the Company anticipates that the advanced messaging operations will
require up to $55 million of additional capital expenditures to complete
construction and to add capacity to the network in 1999. In addition, the
Company expects the advance messaging operation to require up to $45 million to
fund operations and marketing in 1999 and 2000 as the Company's advanced
messaging customer base grows. In addition, the Company may require up to $50
million of secured vendor financing to fund the purchase of subscriber units.
Although the Company does not currently have a source to fund the purchase of
the subscriber units, the Company believes that it will not require such
financing until 1999 and thereafter. The Company expects such financing to be
available.
As of December 31, 1997, the Company had approximately $8.3 million in cash
and cash equivalents. On January 28, 1998 the Company received net proceeds of
approximately $107.8 million from the Offering. At December 31, 1997 the
Company's borrowings available under the Revolving Credit Agreement were
approximately $41.7 million and borrowings available under the Vendor Financing
Arrangement were
35
<PAGE> 36
approximately $13 million. The Company anticipates its one-way messaging
operations will generate sufficient cash flows to fund one-way capital
expenditures and consolidated working capital requirements for 1998 and 1999.
The Company anticipates that its capital resources, combined with anticipated
excess cash flows from the Company's one-way messaging operations, will be
sufficient to fund the Company's consolidated operations and capital
expenditures through 1998 and 1999.
In 1997, the Company began an evaluation of its computer systems and paging
networks for Year 2000 compliance. The Company is aware that it will be required
to upgrade certain software systems to a new commercial release that is
currently available. Although the Company's evaluation is not yet complete, the
Company currently believes that the cost of becoming Year 2000 compliant will
not be material to the Company.
From time to time, the Company will selectively consider potential
opportunities to make acquisitions intended to enhance its strategic position in
the wireless messaging industry. If the Company were to pursue any such
acquisitions, the Company would expect to obtain any necessary financing through
additional borrowings and/or equity financing and would need to successfully
integrate the acquired business into the existing operations.
Future revenues, costs, product mix and new product acceptance are all
influenced by a number of factors which are inherently uncertain and difficult
to predict. Therefore, no assurance can be given that financing for such
investments will be available. No assurance can be given that the Company's
strategy will be implemented as currently planned or that the Company's
operations will generate positive cash flows.
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.
36
<PAGE> 37
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information required by this item is contained in this report under the
caption "Item 1. Business -- Executive Officers and Directors of the
Registrant."
ITEM 11. EXECUTIVE COMPENSATION
See "Executive Compensation" in the Company's definitive proxy statement
dated February 16, 1998, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See "Security Ownership of Certain Beneficial Owners and Management" in the
Company's definitive proxy statement dated February 16, 1998, which is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Certain Relationships and Related Transactions" in the Company's
definitive proxy statement dated February 16, 1998, which is incorporated herein
by reference.
PART IV
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
on Page F-1 hereof.
(2) Financial Statement Schedules. See Index to Consolidated Financial
Statements on Page F-1 hereof.
(3) Exhibits Required by Item 601 of Regulation S-K. See Exhibit Index
on Page E-1 hereof.
(b) Reports on Form 8-K
The following current report on Form 8-K was filed by PageMart Wireless,
Inc. during the quarter ended December 31, 1997:
Current Report on Form 8-K dated November 3, 1997 reporting under Item
5 "Other Events" the Company's proposal to refinance certain of its
outstanding indebtedness and modify its corporate structure.
37
<PAGE> 38
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: February 16, 1998 PAGEMART WIRELESS, INC.
(Registrant)
By: /s/ JOHN D. BELETIC
----------------------------------
John D. Beletic
Chairman 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
--------- ----- ----
<C> <S> <C>
/s/ JOHN D. BELETIC Chairman and Chief Executive February 16, 1998
- ----------------------------------------------------- Officer (Principal Executive
John D. Beletic Officer)
/s/ G. CLAY MYERS Vice President, Finance, February 16, 1998
- ----------------------------------------------------- Chief Financial Officer and
G. Clay Myers Treasurer (Principal
Financial and Accounting
Officer)
Director February , 1998
- -----------------------------------------------------
Robert H. Niehaus
/s/ GUY L. DE CHAZAL Director February 16, 1998
- -----------------------------------------------------
Guy L. De Chazal
/s/ ARTHUR PATTERSON Director February 16, 1998
- -----------------------------------------------------
Arthur Patterson
/s/ LEIGH J. ABRAMSON Director February 16, 1998
- -----------------------------------------------------
Leigh J. Abramson
/s/ ALEJANDRO PEREZ ELIZONDO Director February 16, 1998
- -----------------------------------------------------
Alejandro Perez Elizondo
/s/ PAMELA D.A. REEVE Director February 16, 1998
- -----------------------------------------------------
Pamela D.A. Reeve
</TABLE>
38
<PAGE> 39
PAGEMART WIRELESS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1996 and
1997...................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1995, 1996 and 1997.......................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)
for the Years Ended December 31, 1995, 1996 and 1997...... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1996 and 1997.......................... 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, 1995, 1996, and 1997............. S-2
</TABLE>
F-1
<PAGE> 40
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of PageMart Wireless, Inc.:
We have audited the accompanying consolidated balance sheets of PageMart
Wireless, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1996
and 1997, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for each of the three years in the period ended
December 31, 1997. These 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 Wireless, Inc. and
subsidiaries as of December 31, 1996 and 1997, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
/s/ARTHUR ANDERSEN LLP
Dallas, Texas,
February 3, 1998
F-2
<PAGE> 41
PAGEMART WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 22,603 $ 8,337
Accounts receivable (net of allowance for doubtful
accounts of $4,776 and $7,170 at December 31, 1996 and
1997, respectively).................................... 33,446 61,394
Inventories............................................... 11,702 5,359
Prepaid expenses and other current assets................. 2,821 9,043
-------- --------
Total current assets.............................. 70,572 84,133
PROPERTY AND EQUIPMENT (net of accumulated depreciation of
$48,851 and $76,388 at December 31, 1996 and 1997,
respectively)............................................. 96,943 136,727
NARROWBAND LICENSES......................................... 133,065 133,065
DEFERRED DEBT ISSUANCE COSTS (net of accumulated
amortization of $4,094 and $4,940 at December 31, 1996 and
1997, respectively)....................................... 6,378 5,532
OTHER ASSETS................................................ 6,662 2,419
-------- --------
Total assets...................................... $313,620 $361,876
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 23,186 $ 28,009
Deferred revenue.......................................... 27,047 53,469
Current maturities of long-term debt...................... -- 2,755
Other current liabilities................................. 12,270 20,740
-------- --------
Total current liabilities......................... 62,503 104,973
LONG-TERM DEBT.............................................. 240,687 289,344
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.0001 par value per share, 75,000,000
shares authorized:
Class A Convertible Common Stock, 33,887,152 shares
issued at December 31, 1996; 34,115,157 shares issued
at December 31, 1997.................................. 3 3
Class B Convertible Non-Voting Common Stock, 3,809,363
shares issued at December 31, 1996 and December 31,
1997.................................................. 1 1
Class C Convertible Non-Voting Common Stock, 1,428,472
shares issued at December 31, 1996 and December 31,
1997.................................................. -- --
Class D Convertible Non-Voting Common Stock, 679,945
shares issued at December 31, 1996 and December 31,
1997.................................................. -- --
Additional paid-in capital................................ 225,661 226,622
Accumulated deficit....................................... (214,688) (258,575)
Stock subscriptions receivable............................ (547) (492)
-------- --------
Total stockholders' equity (deficit).............. 10,430 (32,441)
-------- --------
Total liabilities and stockholders' equity
(deficit)....................................... $313,620 $361,876
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
F-3
<PAGE> 42
PAGEMART WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Recurring revenue......................................... $101,503 $153,041 $206,907
Equipment revenue......................................... 57,688 68,551 70,871
-------- -------- --------
Total revenues.................................... 159,191 221,592 277,778
COST OF EQUIPMENT SOLD...................................... 63,982 78,896 86,175
OPERATING EXPENSES:
Technical................................................. 25,679 37,021 46,513
Selling................................................... 36,094 43,046 51,371
General and administrative................................ 43,512 54,006 66,458
Depreciation and amortization............................. 13,272 21,192 29,852
-------- -------- --------
Total operating expenses.......................... 118,557 155,265 194,194
-------- -------- --------
Operating loss.................................... (23,348) (12,569) (2,591)
OTHER (INCOME) EXPENSE:
Interest expense.......................................... 30,720 35,041 38,499
Interest income........................................... (1,997) (1,140) (501)
Other..................................................... 1,042 2,128 3,298
-------- -------- --------
Total other (income) expense...................... 29,765 36,029 41,296
-------- -------- --------
NET LOSS.................................................... $(53,113) $(48,598) $(43,887)
======== ======== ========
NET LOSS PER SHARE
(Basic and Diluted)....................................... $ (1.53) $ (1.30) $ (1.10)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (Basic and
Diluted).................................................. 34,653 37,462 39,922
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
F-4
<PAGE> 43
PAGEMART WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
-------------------- ADDITIONAL STOCK
NUMBER OF PAID-IN ACCUMULATED SUBSCRIPTIONS TREASURY
SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE STOCK TOTAL
---------- ------ ---------- ----------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994............... 29,529,525 $ 3 $124,694 $(112,977) $ (243) $(16) $ 11,461
Retirement of treasury stock........... (200,000) -- (16) -- -- 16 --
725,445 shares of non-voting common
stock issued in the Unit Offering.... 725,445 -- 5,078 -- -- -- 5,078
56,654 shares of common stock issued
under the stock option/stock issuance
plan................................. 56,654 -- 156 -- (125) -- 31
3,598,429 shares of common stock issued
in the 1995 stock offering........... 3,598,429 -- 24,689 -- (189) -- 24,500
Net loss............................... -- -- -- (53,113) -- -- (53,113)
---------- --- -------- --------- -------- ---- --------
BALANCE, December 31, 1995............... 33,710,053 3 154,601 (166,090) (557) -- (12,043)
94,879 shares of common stock issued
under the stock option/stock issuance
plan/Employee stock purchase plan.... 94,879 -- 561 -- -- -- 561
Repayment of stock subscriptions
receivable........................... -- -- -- -- 10 -- 10
6,000,000 shares of common stock issued
in initial public offering........... 6,000,000 1 70,499 -- -- -- 70,500
Net loss............................... -- -- -- (48,598) -- -- (48,598)
---------- --- -------- --------- -------- ---- --------
BALANCE, December 31, 1996............... 39,804,932 4 225,661 (214,688) (547) -- 10,430
179,705 shares of common stock issued
under the stock option/stock issuance
plan/employee stock purchase plan.... 179,705 -- 804 -- (45) -- 759
Exercise of common stock warrants...... 48,300 -- 157 -- -- -- 157
Repayment of stock subscriptions
receivable........................... -- -- -- -- 100 -- 100
Net loss............................... -- -- -- (43,887) -- -- (43,887)
---------- --- -------- --------- -------- ---- --------
BALANCE, December 31, 1997............... 40,032,937 $ 4 $226,622 $(258,575) $ (492) $ -- $(32,441)
========== === ======== ========= ======== ==== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
F-5
<PAGE> 44
PAGEMART WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
-------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(53,113) $ (48,598) $(43,887)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization........................... 13,272 21,192 29,852
Provision for bad debt.................................. 6,135 6,986 10,910
Accretion of discount on Senior Discount Exchange
Notes.................................................. 26,322 30,871 35,431
Amortization of deferred debt issuance costs............ 1,052 2,083 846
Changes in certain assets and liabilities:
Increase in accounts receivable....................... (12,054) (18,929) (38,858)
(Increase) decrease in inventories.................... 1,630 (523) 6,343
(Increase) decrease in prepaid expenses and other
current assets....................................... (1,383) 59 (6,222)
(Increase) decrease in other assets, net.............. (1,350) (1,052) 3,105
Increase in accounts payable.......................... 6,643 92 4,823
Increase in deferred revenue.......................... 7,447 5,638 26,422
Increase in other current liabilities................. 2,486 5,744 8,470
-------- --------- --------
Net cash (used in) provided by operating
activities.......................................... (2,913) 3,563 37,235
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Narrowband Licenses.......................... (74,079) -- --
Purchases of property and equipment....................... (33,503) (63,804) (67,506)
Release of restricted cash................................ -- 500 --
Other..................................................... (2,577) (648) (992)
-------- --------- --------
Net cash used in investing activities............... (110,159) (63,952) (68,498)
-------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock.................... 29,578 70,500 --
Proceeds from issuance of common stock under the stock
option/stock issuance plan.............................. 31 561 759
Proceeds from conversion of common stock warrants......... -- -- 157
Proceeds from issuance of Senior Discount Notes, net...... 95,001 -- --
Payment of stock subscriptions receivable................. -- 10 100
Deferred debt issuance costs incurred for Revolving Credit
Agreement............................................... (1,447) (25) --
Borrowings under Revolving Credit Agreement............... -- 31,100 3,000
Payments under Revolving Credit Agreement................. -- (31,100) (3,000)
Borrowings from vendor financing arrangements............. 6,777 -- 17,053
Payments on vendor financing arrangements................. (4,402) (15,027) (1,072)
-------- --------- --------
Net cash provided by financing activities........... 125,538 56,019 16,997
-------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 12,466 (4,370) (14,266)
CASH AND CASH EQUIVALENTS, beginning of period.............. 14,507 26,973 22,603
-------- --------- --------
CASH AND CASH EQUIVALENTS, end of period.................... $ 26,973 $ 22,603 $ 8,337
======== ========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest................................................ $ 2,146 $ 1,231 $ 1,306
Income taxes............................................ $ -- $ -- $ --
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these consolidated financial statements.
F-6
<PAGE> 45
PAGEMART WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
PageMart, Inc. ("PageMart") was incorporated as a Delaware corporation on
May 8, 1989, to provide wireless messaging products and services. In January
1995, PageMart effected a corporate reorganization pursuant to which PageMart
Nationwide, Inc., a Delaware corporation, became the holding company parent of
PageMart. In December 1995, the corporate name was changed from PageMart
Nationwide, Inc. to PageMart Wireless, Inc. ("Wireless"). Wireless and its
subsidiaries are referred to herein as the "Company." The consolidated financial
statements of the Company include the accounts of PageMart and PageMart PCS,
Inc., a wholly owned subsidiary of Wireless, ("PageMart PCS"). PageMart PCS
holds certain narrowband personal communications services licenses. 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 consolidated operations
since inception and is highly leveraged. Management expects to continue to incur
consolidated operating losses in 1998. In the third quarter of 1997, the Company
began generating operating profits in its one-way business and management
expects this trend to continue into 1998. The Company's consolidated operating
losses will be driven by the Company's investments in new advanced messaging
capabilities and the associated investment in the growth of its subscriber base
for such services. The Company's business plan calls for substantial growth in
its subscriber base in order for the Company to achieve overall operating
profitability. There can be no assurance that the Company will meet its business
plan or achieve operating profitability. If the Company cannot achieve operating
profitability, it may not be able to make the required payments on existing or
future obligations or realize its cost in developing the advanced messaging
network.
In January 1998, the Company completed an offering of 11 1/4% Senior
Subordinated Discount Notes due 2008, (the "11 1/4% Notes") yielding gross
proceeds of approximately $249.7 million. In management's opinion, the remaining
proceeds from the Offering, current working capital, cash flow from operations,
borrowings expected to be available from the Revolving Credit Agreement,
(defined herein), and the Vendor Financing Arrangement, (defined herein), will
be sufficient to support the planned growth for its wireless communications
operations through 1998, including the planned construction and implementation
of a network capable of providing advanced messaging services.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The accompanying financial statements include the accounts of Wireless 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.
INVENTORIES
Inventories consist of pagers held for resale and are stated at the lower
of cost or market. Cost is determined by using the average cost method, which
approximates the first-in, first-out method. The Company purchases a majority of
its pagers from Motorola, Inc.
F-7
<PAGE> 46
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 $12,683,000, $19,688,000
and $28,690,000 for the years ended December 31, 1995, 1996 and 1997,
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,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Network equipment........................................... $109,901 $157,543
Computer equipment.......................................... 26,268 41,023
Furniture and equipment..................................... 9,625 14,549
-------- --------
145,794 213,115
Less: Accumulated depreciation.............................. (48,851) (76,388)
-------- --------
$ 96,943 $136,727
======== ========
</TABLE>
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 voice mail,
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 1995 and
$4,596,000 are included in recurring revenues in both fiscal 1996 and 1997,
respectively.
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.
EARNINGS PER SHARE
Net loss per share amounts as reflected on the statements of operations are
based upon the weighted average number of common shares outstanding. As required
by the Securities and Exchange Commission rules, all warrants, options and
shares issued during the year immediately preceding the initial public offering
in June 1996 are assumed to be outstanding prior to the closing of the initial
public offering for all periods presented. Shares issuable upon the exercise of
stock options and warrants granted before the year immediately preceding the
initial public offering were not included in the net loss per share calculation
as the effect from the exercise of those options would be antidilutive.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings per Share," ("SFAS 128"). The Company adopted SFAS
128 for the fiscal year ending
F-8
<PAGE> 47
December 31, 1997. SFAS 128 replaces the primary earnings per share calculation
with a basic earnings per share calculation and modifies the calculation of
diluted earnings per share. Adoption of SFAS 128 did not affect the calculation
of earnings per share for the Company.
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 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 adopted 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 did not affect the Company's results of
operations for the years ended December 31, 1996 and 1997. The Company will
continue to evaluate the effect of SFAS 121 in subsequent periods.
3. NARROWBAND PERSONAL COMMUNICATIONS SERVICES LICENSES
During July and December 1994, the Company participated in auctions of
Narrowband Personal Communications Services ("NPCS") licenses frequencies
conducted by the FCC. As a result of the auctions, the Company was awarded two
nationwide NPCS licenses for a total purchase price of approximately $133
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 estimates that amortization of the NPCS licenses will commence in the
fourth quarter of 1998. 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
advanced messaging network.
4. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
Effective November 15, 1995, PageMart International, Inc. purchased 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. 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 Sheets.
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 for 714,286 shares
of voting common stock of Wireless, subject to certain United States and
Canadian ownership requirements. Wireless is ultimately responsible for
effectuating the exchange within the United States 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.
F-9
<PAGE> 48
5. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
12 1/4% Senior Discount Exchange Notes, face amount $136,500
due November 1, 2003, at accreted value................... $107,947 $122,720
15% Senior Discount Exchange Notes, face amount $207,270 due
February 1, 2005, at accreted value....................... 132,740 153,398
Vendor Financing Arrangement of $30 million, bearing
interest at the sum of 7.00% and the London interbank
offered rate for three month maturities, or the sum of
4.25% and the U.S. prime rate. (Based upon rates quoted by
The Wall Street Journal, effective interest rates ranged
from 12.44% to 12.72% at December 31, 1997.).............. -- 15,981
-------- --------
Total debt........................................ 240,687 292,099
Less: Current maturities.......................... -- (2,755)
-------- --------
Long-term debt.................................... $240,687 $289,344
======== ========
</TABLE>
On January 28, 1998, the Company, in a private offering, raised
approximately $249.7 million in gross proceeds of 11 1/4% Senior Subordinated
Discount Notes due 2008 (the "Offering"). Simultaneously, with the closing of
the Offering, the Company refinanced certain of its outstanding indebtedness,
(the "Refinancing"), and modified its corporate structure. The Refinancing
consisted of: (i) purchasing all of the outstanding 12 1/4% Notes (defined
below); (ii) amending certain terms of the covenants and agreements in the
indenture relating to the Company's 15% Notes (defined below); and (iii) merging
PageMart, Inc. into PageMart Wireless, Inc., with PageMart Wireless, Inc. as the
surviving corporation (the "Merger").
Approximately $130.7 million of the net proceeds of the Offering was used
to finance the retirement of the 12 1/4% Notes (defined below). The proceeds
remaining after expenses of the Offering and Refinancing were approximately
$107.8 million. In connection with the Refinancing, the Company estimates that
an extraordinary charge of approximately $13.9 million related to the early
extinguishment of debt will be incurred in the first quarter of 1998.
In October 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.
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.
In January 1995, the Company completed an offering of 15% Senior Discount
Notes due 2005 and 725,445 shares of non-voting common stock, par value $.0001
per share (the "Unit Offering"). Net proceeds from the Unit Offering were
approximately $100 million, of which approximately $5.1 million was allocated to
the non-voting common stock. The 15% Senior Discount Notes due 2005 (the "15%
Notes") have a principal amount at maturity of $207.3 million with an initial
accreted value of $100 million. The 15% Notes mature on February 1, 2005. From
and after August 1, 2000, interest on the 15% Notes will be payable semiannually
in cash at the rate of 15% per annum. The 15% Notes are redeemable at any time
on or after February 1, 2000, at the option of the Company in whole or in part,
at 105% of their principal amount at maturity, plus accrued and unpaid interest,
declining to 100% of their principal amount at maturity plus accrued interest on
and after February 1, 2002. In addition, at any time prior to February 1, 1998,
up to 35% of the accreted value of the 15% Notes may be redeemed at a redemption
price of 112.5% of their accreted value on the redemption date at the option of
the Company in connection with a public offering of its common stock.
F-10
<PAGE> 49
In June 1995, the Company commenced an exchange offer pursuant to an
effective registration statement whereby all outstanding 15% Notes were
exchanged for the Company's 15% Senior Discount Exchange Notes due 2005.
The 11 1/4% Notes, the 12 1/4% Notes and the 15% 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.
In March 1997, the Company entered into a vendor financing arrangement with
an infrastructure vendor (the "Vendor Financing Arrangement"), providing for the
financing of one-way or advanced messaging infrastructure equipment over a
period of 60 months up to a maximum aggregate amount of $30 million. Borrowings
under the Vendor Financing Arrangement are secured by the equipment purchased.
The interest rate applicable to such financing is equal to the sum of 7.00% and
the London interbank offered rate ("LIBOR") as published in The Wall Street
Journal for three-month maturities or the sum of 4.25% and the U.S. prime rate
of interest as published in The Wall Street Journal. The weighted average
interest rate in effect on December 31, 1997 with respect to the Vendor
Financing Arrangement was 12.63%.
On May 11, 1995, the Company entered into a four year Revolving Credit
Agreement with BT Commercial Corporation, as Agent, and Bankers Trust Company,
as Issuing Bank, which provides for a $50 million revolving line of credit (the
"Revolving Credit Agreement"). As of December 31, 1997, there were no loans
outstanding under the Revolving Credit Agreement. The maximum amount available
under the Revolving Credit Agreement at any time is limited to a borrowing base
amount equal to the lesser of (i) a specified percentage of eligible accounts
receivable and inventory owned by Wireless, and (ii) an amount equal to the
service contribution of the Company as defined in the Revolving Credit Agreement
for the immediately preceding three-month period times 4.0. The interest rate
applicable to loans under the Revolving Credit Agreement is, at the option of
Wireless, either at a prime rate plus 1 1/4% or a Eurodollar rate plus 2 1/2%.
Commitments under the Revolving Credit Agreement expire and all loans thereunder
will be due and payable on March 31, 1999.
The Revolving Credit Agreement contains certain covenants that, among other
things, limit the ability of the Company to incur indebtedness, make capital
expenditures and investments, pay dividends, repurchase capital stock, engage in
transactions with affiliates, create liens, sell assets, or engage in mergers
and consolidations, and also requires the Company to maintain certain financial
ratios.
The Revolving Credit Agreement is secured by all trade receivables and
inventory owned by Wireless from time to time and by all of the capital stock of
PageMart owned by Wireless. As of December 31, 1997, the maximum amount
available under the Revolving Credit Agreement was $41.7 million.
On January 15, 1998, the Company amended the Revolving Credit Agreement to
provide for the changes in debt and corporate structure that occurred with the
Refinancing and the Merger.
Maturities of long-term debt and capital lease obligations are as follows
(in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDING
DECEMBER 31,
- -------------------
<S> <C> <C>
1998................................................................. $ 2,755
1999................................................................. 3,123
2000................................................................. 3,541
2001................................................................. 4,015
2002................................................................. 2,547
Thereafter........................................................... 276,118
--------
$292,099
========
</TABLE>
F-11
<PAGE> 50
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
1995, 1996 and 1997 was approximately $8,471,000, $13,496,000 and $18,379,000,
respectively.
Future minimum lease payments related to the Company's operating leases are
as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEAR ENDING OPERATING
DECEMBER 31, LEASES
- ------------------- ---------
<S> <C> <C>
1998.................................................................. $14,446
1999.................................................................. 12,228
2000.................................................................. 10,038
2001.................................................................. 7,557
2002.................................................................. 5,086
Thereafter............................................................ 19,769
-------
Total minimum lease payments.......................................... $69,124
=======
</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 purchase $40
million in network infrastructure equipment over a forty-seven month period as
part of this transaction. Through December 31, 1997, the Company had purchased
$21.9 million of network infrastructure under this purchase commitment.
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, 1996 and 1997, are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents......................... $ 22,603 $ 22,603 $ 8,337 $ 8,337
Long-term debt.................................... $240,687 $250,156 $292,099 $263,281
</TABLE>
8. STOCKHOLDERS' EQUITY (DEFICIT)
PREFERRED STOCK
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. At December 31, 1996 and 1997, there were 10 million
shares of preferred stock authorized with a par value of $.0001 and none of the
authorized shares of preferred stock were issued and outstanding.
F-12
<PAGE> 51
COMMON STOCK
In October 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. The warrants may be exercised at any time prior to December 31, 2003.
Warrants that are not exercised by such date will expire. As of December 31,
1997, 579,600 of the warrants were outstanding.
In October 1995, the Company's Certificate of Incorporation was amended
(the "Amended Certificate") and at that time the Amended and Restated Agreement
Among Certain Stockholders of PageMart Nationwide, Inc. dated September 19, 1995
(the "Stockholders' Agreement"), became effective. The Amended Certificate
provides that the Company will have four classes of outstanding common stock,
summarized as follows:
<TABLE>
<CAPTION>
SHARES ISSUED AND
OUTSTANDING
-----------------------
DECEMBER 31,
SHARES -----------------------
AUTHORIZED 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Class A Convertible Common Stock, $.0001 par value per
share (the "Class A Common Stock").................... 60,000,000 33,887,152 34,115,157
Class B Convertible Non-Voting Common Stock, $.0001 par
value per share (the "Class B Common Stock").......... 12,000,000 3,809,363 3,809,363
Class C Convertible Non-Voting Common Stock, $.0001 par
value per share (the "Class C Common Stock").......... 2,000,000 1,428,472 1,428,472
Class D Convertible Non-Voting Common Stock, $.0001 par
value per share (the "Class D Common Stock").......... 1,000,000 679,945 679,945
---------- ---------- ----------
75,000,000 39,804,932 40,032,937
========== ========== ==========
</TABLE>
Upon filing of the Amended Certificate, all shares of previously
outstanding common stock were automatically converted into shares of Class A
Common Stock, and all shares of previously outstanding non-voting common stock
issued in the Unit Offering were converted into shares of Class D Common Stock.
Additionally, pursuant to the Stockholders' Agreement, a number of shares of
Class A Common Stock owned by certain institutional investors were automatically
converted into shares of Class B Common Stock and Class C Common Stock, such
that voting control of the Company lies with the stockholders generally.
Class A Common Stock, Class B Common Stock and Class C Common Stock are
convertible by certain institutional investors subject to voting control and
regulatory restrictions at any time at the option of the holder, in accordance
with the terms of the Amended Certificate. Class A Common Stock is convertible
by certain holders thereof into either Class B or C Common Stock. Classes B, C
and D Common Stock are convertible to Class A Common Stock.
The Stockholders' Agreement provides that the parties thereto ("Holders")
shall collectively have the right to "demand" registrations at any time.
Pursuant to these "demand" rights, Holders of common stock (the "Registrable
Securities") may request in writing that the Company file a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
covering the registration of a number of shares equal to at least three million
shares or a lesser number if such number represents a majority of the
Registrable Securities then outstanding.
On March 20, 1995, the Company granted to a strategic partner warrants to
purchase a total of 206,748 shares of the Company's common stock at an exercise
price of $10.00.
On June 19, 1996, the Company issued an aggregate of 6,000,000 shares of
Class A Common Stock in an initial public offering at a price of $13.00 per
share. The Company received proceeds from the initial public offering of
approximately $70.5 million after deducting underwriting discounts, commissions,
fees and expenses associated with the initial public offering. Upon receipt of
the net proceeds, the Company retired
F-13
<PAGE> 52
vendor debt of approximately $12.9 million and repaid approximately $11.9
million of loans outstanding under the Company's Revolving Credit Agreement.
Following is a schedule of common stock reserved at December 31, 1997:
<TABLE>
<CAPTION>
SHARES
---------
<S> <C>
Exercise of common stock warrants........................... 786,348
Stock option/stock issuance plan............................ 6,488,928
Employee Stock Purchase Plan................................ 424,109
Non-Employee/Director Stock Option Plan..................... 75,000
---------
7,774,385
=========
</TABLE>
9. STOCK OPTION/STOCK ISSUANCE/STOCK PURCHASE PLANS
STOCK COMPENSATION PLANS
At December 31, 1997, the Company has three stock-based compensation plans,
the 1991 Stock Option/Issuance Plan, the 1996 Nonqualified Stock Option Plan for
Non-Employee Directors and the Employee Stock Purchase Plan. The Company applies
Accounting Principles Board Opinion 25 and related Interpretations to account
for expenses related to its plans. Accordingly, no compensation costs have been
recognized for its fixed option plans or its employee stock purchase plan. If
compensation costs for these plans had been determined based on the fair value
at the grant dates for awards under the plans consistent with the method of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation", the Company's net loss and loss per share would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C> <C>
Net loss (in 000's)..................... As reported $(53,113) $(48,598) $(43,887)
Pro forma (53,380) (50,095) (46,568)
Basic and diluted earnings per share.... As reported $ (1.53) $ (1.30) $ (1.10)
Pro forma (1.54) (1.34) (1.17)
</TABLE>
As the Employee Stock Purchase Plan and the 1996 Nonqualified Stock Option
Plan for Non-Employee Directors were adopted in 1996, 1995 pro forma balances do
not include expenses for these plans.
FIXED STOCK OPTION PLANS
The Company has two fixed stock option plans. Under the Fifth Amended and
Restated 1991 Stock Option Plan, ("1991 Plan"), the Company may grant options to
its employees for up to 7,500,000 shares of Class A Common Stock. Under the 1996
Nonqualified Stock Option Plan for Non-Employee Directors, ("Directors Plan"),
the Company may grant options to its non-employee directors for up to 100,000
shares of common stock. Under both plans, the exercise price of each option
equals the market price of the Company's stock at the close of the market on the
date of grant and an option's maximum term is 10 years. Options are granted at
various times during the year and vest over a five year period under the 1991
Plan and over a three year period under the Directors Plan. Both plans are
administered by the Board of Directors.
Under the provisions of the Third Amended and Restated 1991 Stock Issuance
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 $0.326 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.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1995, 1996 and 1997:
F-14
<PAGE> 53
dividend yield of 0 percent for all years; expected volatility of 40 percent for
1995 and 1996 and 47.3 percent for 1997 for the 1991 Plan and 40 percent for
1996 and 1997 for the Directors Plan, risk-free interest rates average 6.44
percent in 1995, 6.35 percent in 1996 and 6.31 percent in 1997 for the 1991 Plan
and 6.67 percent in 1996 and 1997 for the Directors Plan; and expected lives of
8.23 years for 1995 and 1996 and 8.69 for 1997 for the 1991 Plan and 8.23 years
for 1996 and 1997 for the Directors Plan.
A summary of the status of the Company's 1991 Plan as of December 31, 1995,
1996 and 1997 and the Directors Plan as of December 31, 1996 and 1997 and
changes during the years ending on these dates is presented below:
1991 PLAN
<TABLE>
<CAPTION>
1995 1996 1997
----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE
(000) PRICE (000) PRICE (000) PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year........ 1,597 $4.83 2,669 $6.59 3,473 $7.09
Granted................................. 1,205 8.84 1,126 8.49 2,502 8.36
Exercised............................... (37) 4.12 (64) 5.24 (135) 4.19
Forfeited............................... (96) 5.82 (258) 8.51 (1,564) 9.28
----- ----- ------
Outstanding at end of year.............. 2,669 $6.59 3,473 $7.09 4,276 $7.12
===== ===== ======
Options exercisable at year-end......... 583 1,077 1,502
===== ===== ======
Weighted-average fair value of options
granted during the year............... $5.07 $5.02 $4.74
===== ===== =====
</TABLE>
DIRECTORS PLAN
<TABLE>
<CAPTION>
1996 1997
-------------------------- --------------------------
WEIGHTED WEIGHTED
SHARES AVERAGE SHARES AVERAGE
(000) EXERCISE PRICE (000) EXERCISE PRICE
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year............... -- $ -- 25 $12.00
Granted........................................ 25 12.00 -- --
Exercised...................................... -- -- -- --
Forfeited...................................... -- -- -- --
----- -----
Outstanding at end of year..................... 25 $12.00 25 $12.00
===== =====
Options exercisable at year-end................ 6 15
===== =====
Weighted-average fair value of options granted
during the year.............................. $ 7.04 $ --
====== ======
</TABLE>
F-15
<PAGE> 54
The following table summarized information about fixed stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ----------------------------
NUMBER WEIGHTED-AVG. NUMBER
RANGE OF OUTSTANDING REMAINING WEIGHTED-AVG. EXERCISABLE WEIGHTED-AVG.
EXERCISE PRICES AT 12/31/97 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/97 EXERCISE PRICE
- --------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
1991 PLAN
$ 0.00 to 2.00 202,000 4.2 $ 1.01 202,000 $ 1.01
2.01 to 4.00 412,000 5.4 3.26 365,000 3.26
4.01 to 6.00 126,000 8.7 5.61 18,000 5.00
6.01 to 8.00 2,279,000 8.5 6.89 904,000 6.95
8.01 to 10.00 1,241,000 9.8 9.93 8,000 10.00
10.01 to 12.00 16,000 8.4 10.83 5,000 10.85
--------- ---------
4,276,000 8.4 7.12 1,502,000 5.27
========= =========
DIRECTORS PLAN
$ 0.00 to 12.00 25,000 8.2 $12.00 15,000 $12.00
========= =========
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
Under the Employee Stock Purchase Plan, the Company is authorized to issue
up to 500,000 shares of common stock to its eligible employees. Under terms of
the Plan, employees can choose on January 1 and July 1 of each year to have a
portion of their earnings not to exceed $25,000 of market value per year
withheld to purchase the Company's common stock. The purchase price of the stock
is 90 percent of the lower of the market price on the grant date or the market
price on the June 30 or December 31 immediately following the grant date of an
option. Under the Plan, the Company sold 31,275 shares to employees in 1996 and
44,616 shares in 1997. Compensation cost is recognized for the fair value of the
employees's purchase rights, which was estimated using the Black-Scholes model
with the following assumptions for 1996 and 1997: dividend yield of 0 percent;
an expected life of 0.5 years; expected volatility of 40 percent in 1996 and
47.3 percent in 1997; and a risk-free interest rate of 6.27 percent in 1996 and
5.37 percent in 1997. The weighted-average fair value of those purchased rights
granted in 1996 was $2.14 and $1.65 in 1997.
10. FEDERAL INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards 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 $149.2 million and $157.5 million of net operating
loss carryforwards for federal income tax purposes at December 31, 1996 and
1997, respectively. The net operating loss carryforwards will expire in the
years 2004 through 2012 if not previously utilized. The utilization of these
carryforwards is subject to certain limitations. Of the net operating loss
carryforwards at December 31, 1997, management has estimated that approximately
$38.9 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-16
<PAGE> 55
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, DECEMBER 31,
1996 CHANGE 1997
------------ -------- ------------
<S> <C> <C> <C>
Gross deferred tax asset:
Net operating loss carryforwards................. $ 50,741 $ 2,804 $ 53,545
Bad debt reserve................................. 3,115 1,094 4,209
Inventory reserve................................ 1,527 1,940 3,467
Accretion of Senior Discount Notes............... 23,497 12,047 35,544
Other............................................ 782 597 1,379
-------- -------- --------
79,662 18,482 98,144
Gross deferred tax liability:
Depreciation..................................... (6,999) (4,290) (11,289)
-------- -------- --------
72,663 14,192 86,855
Valuation allowance........................... (72,663) (14,192) (86,855)
-------- -------- --------
Net deferred tax asset........................ $ -- $ -- $ --
======== ======== ========
</TABLE>
11. RELATED-PARTY TRANSACTIONS
In connection with the Unit Offering completed in 1995 (see Note 5), the
Company incurred $3.8 million in fees to an affiliate of a shareholder. In
addition, an affiliate of a shareholder acted as an underwriter of the Company's
initial public offering in June 1996 and received $2.0 million in compensation
in the form of an underwriter's discount. An affiliate of a shareholder also
acted as placement agent for the Offering (see Note 5) and received compensation
from the Company in the amount of $8.1 million for acting in such capacity.
As of December 31, 1997, the president and certain other officers of the
Company are indebted to the Company in the aggregate amount of $617,225 under
promissory notes issued in connection with the purchase of the Company's common
stock and for general purposes (the "Notes"). The Notes have terms ranging from
three to four years and are secured by common stock owned by the officers. The
Notes bear interest at the Applicable Federal Rate in effect on the date of
issuance as published by the Internal Revenue Service. Interest rates on the
Notes range from 3.55% to 6.90%. Interest is due and payable annually beginning
on the first anniversary of the date of each Note. All Notes are included in
Stock Subscriptions Receivable and Accounts Receivable in the Consolidated
Balance Sheets.
F-17
<PAGE> 56
12. SUPPLEMENTARY INFORMATION
The following table sets forth supplementary financial information related
to the Company's various operations (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------
ONE-WAY ADVANCED
MESSAGING MESSAGING INTERNATIONAL CONSOLIDATED
--------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues...................................... $159,191 $ -- $ -- $159,191
Operating loss................................ (22,972) (376) -- (23,348)
EBITDA(1)..................................... (9,700) (376) -- (10,076)
Total assets.................................. 120,004 140,235 3,590 263,829
Capital expenditures.......................... 32,486 1,017 -- 33,503
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------
ONE-WAY ADVANCED
MESSAGING MESSAGING INTERNATIONAL(2) CONSOLIDATED
--------- --------- ---------------- ------------
<S> <C> <C> <C> <C>
Revenues...................................... $221,592 $ -- $ -- $221,592
Operating loss................................ (11,465) (657) (447) (12,569)
EBITDA(1)..................................... 9,727 (657) (447) 8,623
Total assets.................................. 160,858 151,108 1,654 313,620
Capital expenditures.......................... 50,838 12,966 -- 63,804
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------
ONE-WAY ADVANCED
MESSAGING MESSAGING INTERNATIONAL(2) CONSOLIDATED
--------- --------- ---------------- ------------
<S> <C> <C> <C> <C>
Revenues...................................... $277,605 $ -- $ 173 $277,778
Operating loss................................ (1,887) (207) (497) (2,591)
EBITDA(1)..................................... 27,774 (16) (497) 27,261
Total assets.................................. 177,090 185,943 (1,157) 361,876
Capital expenditures.......................... 32,169 35,337 -- 67,506
</TABLE>
- ---------------
(1) EBITDA represents earnings (loss) before interest, taxes, depreciation and
amortization.
(2) Expenses reflected in this table are for the Company's international
headquarters operations. The Company accounts for its investments in Canada
under the equity method. Consequently, the Company's share of expenses from
its Canadian operations are not reflected in this table.
F-18
<PAGE> 57
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of PageMart Wireless, Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of PageMart Wireless, Inc. and
subsidiaries included in this Form 10-K and have issued our report thereon dated
February 3, 1998. 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.
/s/ARTHUR ANDERSEN LLP
Dallas, Texas,
February 3, 1998
S-1
<PAGE> 58
PAGEMART WIRELESS, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER BALANCE AT
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
----------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year Ended December 31, 1997..... $4,776 $10,910 $ -- $8,516(a) $7,170
Year Ended December 31, 1996..... $4,534 $ 6,986 $ -- $6,744(a) $4,776
Year Ended December 31, 1995..... $1,388 $ 6,135 $ -- $2,989(a) $4,534
</TABLE>
- ---------------
(a) Accounts written off as uncollectible, net of recoveries.
S-2
<PAGE> 59
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1 Restated Certificate of Incorporation of PageMart Wireless,
Inc. (filed as an exhibit to the Registration Statement on
Form S-1 of the Company (Reg. No. 33-03012), and
incorporated herein by reference).
3.2 Certificate of Amendment to Restated Certificate of
Incorporation of PageMart Wireless, Inc. (filed as an
exhibit to the Registration Statement on Form S-1 of the
Company (Reg. No. 33-03012), and incorporated herein by
reference).
3.3 By-laws of PageMart Wireless, Inc.
4.1 Indenture, dated as of January 28, 1998, between PageMart
Wireless, Inc. and United States Trust Company of New York,
as Trustee, relating to the 11 1/4% Senior Subordinated
Discount Notes due 2008.
4.2 Indenture, dated as of January 17, 1995, between PageMart
Wireless, Inc. and United States Trust Company of New York,
as Trustee, relating to the 15% Senior Discount Notes due
2005. (filed as an exhibit to the Registration Statement on
Form S-1 of the Company (Reg. No. 33-91142), and
incorporated herein by reference).
4.3 First Supplemental Indenture, dated as of December 31, 1997,
among PageMart Wireless, Inc. and United States Trust
Company of New York, as Trustee (filed as an exhibit to the
Form 8-K of the Company dated January 28, 1998, and
incorporated herein by reference).
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 (filed as an exhibit to the Form
10-K of the Company for the fiscal year ended December 31,
1994, and incorporated herein by reference).
10.2 Telecommunications Service Agreement, dated May 29, 1992,
between PageMart, Inc. and Wiltel, Inc. (filed as an exhibit
to the Registration Statement on Form S-1 of the Company
(Reg. No. 33-91142), and incorporated herein by reference).
10.3 Amended and Restated Satellite Services Supplemental
Agreement, dated as of December 18, 1997, between PageMart
Wireless, Inc. and AvData Systems, Inc.(1)
10.4 Satellite Services and Space Segment Lease Agreement, dated
January 2, 1995, between PageMart, Inc. and SpaceCom
Systems, Inc. (filed as an exhibit to the Registration
Statement on Form S-1 of the Company (Reg. No. 33-91142),
and incorporated herein by reference).
10.5 Credit Agreement, dated as of May 11, 1995, by and among
PageMart Wireless, Inc. (formerly known as PageMart
Nationwide, Inc.), the Lenders named therein, BT Commercial
Corporation, as Agent, and Bankers Trust Company, as Issuing
Bank. (filed as an exhibit to the Registration Statement on
Form S-1 of the Company (Reg. No. 33-91142), and
incorporated herein by reference).
10.6 Fourth Amendment to Credit Agreement, dated as of January
15, 1998, among PageMart Wireless, Inc., the Lenders named
therein, BT Commercial Corporation, as Agent, and Bankers
Trust Company, as Issuing Bank.
10.7 Promissory Note and Security Agreement, dated May 21, 1997,
between PageMart, Inc. and Glenayre Electronics, Inc. (filed
as an exhibit to the Form 10-Q of the Company for the
quarter ended June 30, 1997, and incorporated herein by
reference).
</TABLE>
E-1
<PAGE> 60
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.8 Amended and Restated Agreement Among Certain Stockholders of
PageMart Nationwide, Inc. dated as of September 19, 1995
(filed as an exhibit to the Form 8-K of the Company dated
October 6, 1995, and incorporated herein by reference).
10.9 Amendment No. 1 to Amended and Restated Agreement Among
Certain Stockholders, dated as of October 1, 1997, among
PageMart Wireless, Inc. and certain of its stockholders.
10.10 Subscription Agreement dated as of July 7, 1995 among
PageMart Nationwide, Inc., PageMart Canada Holding
Corporation and TD Capital Group Ltd. (filed as an exhibit
to the Registration Statement on Form S-1 of the Company
(Reg. No. 33-03012), and incorporated herein by reference).
10.11 Agreement Among Stockholders among PageMart Nationwide,
Inc., PageMart International, Inc., TD Capital Group Ltd.,
PageMart Canada Limited. (filed as an exhibit to the
Registration Statement on Form S-1 of the Company (Reg. No.
33-03012), and incorporated herein by reference).
10.12 Equipment Purchase Agreement, dated as of January 26, 1996,
between Motorola, Inc. and PageMart Wireless, Inc. (filed as
an exhibit to the Form 10-K of the Company for the fiscal
year ended December 31, 1995, and incorporated herein by
reference)(1).
10.13 Technology Asset Agreement, dated as of December 1, 1995,
between Motorola, Inc. and PageMart Wireless, Inc. (filed as
an exhibit to the Form 10-K of the Company for the fiscal
year ended December 31, 1995, and incorporated herein by
reference)(1).
10.14 PageMart Wireless, Inc. Employee Stock Purchase Plan (filed
as an exhibit to the Registration Statement on Form S-1 of
the Company (Reg. No. 33-03012), and incorporated herein by
reference).
10.15 PageMart Wireless, Inc. Nonqualified Formula Stock Option
Plan for Non-Employee Directors. (filed as an exhibit to the
Registration Statement on Form S-1 of the Company (Reg. No.
33-03012), and incorporated herein by reference).
10.16 Office Lease Agreement, dated as of November 26, 1996,
between Crescent Real Estate Equities Limited and PageMart
Wireless, Inc. (filed as an exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1996, and incorporated herein by reference).
10.17 PageMart Wireless, Inc. Fifth Amended and Restated 1991
Stock Option Plan (filed as an exhibit to the definitive
proxy statement of the Company dated April 18, 1997, and
incorporated herein by reference).
10.18 Severance and Reimbursement Agreement, dated September 12,
1997, between PageMart Wireless, Inc. and N. Ross Buckenham
(filed as an exhibit to the Form 10-Q of the Company for the
quarter ended September 30, 1997, and incorporated herein by
reference).
10.19 Resale Agreement, dated November 1, 1993, between PageMart,
Inc., licensor, and GTE Service Corporation, licensee.
(filed as an exhibit to the Registration Statement on Form
S-1 of the Company (Reg. No. 33-91142), and incorporated
herein by reference).
10.20 Strategic Alliance Agreement No. 1, dated September 15,
1994, between GTE Service Corporation and PageMart, Inc.
(filed as an exhibit to the Registration Statement on Form
S-1 of the Company (Reg. No. 33-91142), and incorporated
herein by reference).
</TABLE>
E-2
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.21 Strategic Alliance Agreement No. 2, dated October 13, 1994,
between GTE Service Corporation and PageMart, Inc. (filed as
an exhibit to the Form 10-K of the Company for the fiscal
year ended December 31, 1994, and incorporated herein by
reference).
10.22 Resale Agreement, dated as of December 12, 1997, between
PageMart Wireless, Inc. and GTE Communications
Corporation.(1)
10.23 Third Amended and Restated 1991 Stock Issuance Plan (filed
as an exhibit to the Registration Statement on Form S-8
(Reg. No. 33-98116), and incorporated herein by reference).
10.24 Agreement between PageMart Incorporated and GTE
Communications Systems Corporation to assume and Amendment
No. 2 to Resale Agreement Number 999999-93-12 between
PageMart Incorporated and GTE Service Corporation, dated
October 2, 1997.(1)
10.25 Resale Agreement between GTE MobileNet Service Corp.,
licensee and PageMart, Inc., licensor dated July 1, 1996.(1)
11.1 Computation of per share earnings (loss) for the three
months ended December 31, 1997.
11.2 Computation of per share earnings (loss) for the three
months ended December 31, 1996.
11.3 Computation of per share earnings (loss) for the year ended
December 31, 1997.
11.4 Computation of per share earnings (loss) for the year ended
December 31, 1996.
21.1 PageMart Wireless, Inc. Subsidiaries.
27.1 Financial Data Schedule for the year ended December 31,
1997.
</TABLE>
- ---------------
(1) The Company has requested confidential treatment for certain portions of
this agreement.
E-3
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
PAGEMART WIRELESS, INC.
* * * * * *
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be in the
City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
Section 3. Books. The books of the Corporation may be kept within
or without of the State of Delaware as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of stockholders
shall be held at such place, either within or without the State of Delaware, on
such date and at such time as may be determined from time to time by the Board
of Directors (or the Chairman in the absence of a designation by the Board of
Directors).
Section 2. Annual Meeting. Annual meetings of stockholders,
commencing with the year 1995, shall be held to elect the Board of Directors and
transact such other business as may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of stockholders may be
called by the Board of Directors or the Chairman of the Board and shall be
called by the Secretary at the request in writing of holders of record of a
majority of the outstanding capital stock of the Corporation entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.
1
<PAGE> 2
Section 4. Notice of Meetings and Adjourned Meetings; Waivers of
Notice. (a) Whenever stockholders are required or permitted to take any action
at a meeting, a written notice of be given which shall state
the place, date and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless otherwise
provided by the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended ("Delaware Law"), such notice shall be given
not less than 10 nor more than 60 days before the date of the meeting to each
stockholder of record entitled to vote at such meeting. Unless these bylaws
otherwise require, when a meeting is adjourned to another time or place (whether
or not a quorum is present), notice need not be given of the adjourned meeting
if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Corporation may transact any
business which might have been transacted at the original meeting. If the
adjournment is for more than 30 days, or after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
(b) A written waiver of any such notice signed by the person entitled
thereto, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Business transacted at any special meeting of stockholders shall be
limited to the purpose stated in the notice.
Section 5. Quorum. Unless otherwise provided under the certificate of
incorporation or these bylaws and subject to Delaware Law, the presence, in
person or by proxy, of the holders of a majority of the outstanding capital
stock of the Corporation entitled to vote at a meeting of stockholders shall
constitute a quorum for the transaction of business.
Section 6. Voting. (a) Unless otherwise provided in the certificate of
incorporation and subject to Delaware Law, each stockholder shall be entitled to
one vote for each outstanding share of capital stock of the Corporation held by
such stockholder. Unless otherwise provided in Delaware Law, the certificate of
incorporation or these bylaws, the affirmative vote of a majority of the shares
of capital stock of the Corporation present, in person or by proxy, at
2
<PAGE> 3
a meeting of stockholders and entitled to vote on the subject matter shall be
the act of the stockholders.
(b) Each stockholder entitled to vote at a meeting of stockholders or
to express consent or dissent to a corporate action in writing without a meeting
may authorize another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period.
Section 7. Action by Consent. (a) Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting of stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding capital
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Corporation by
delivery to its registered office in Delaware, its principal place of business,
or an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the
earliest dated consent delivered in the manner required by this Section and
Delaware Law to the Corporation, written consents signed by a sufficient number
of holders to take action are delivered to the Corporation by delivery to its
registered office in Delaware, its principal place of business, or an officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested.
Section 8. Organization. At each meeting of stockholders, the Chairman
of the Board, if one shall have been elected, (or in his absence or if one shall
not have been elected, the President) shall act as chairman of the meeting. The
Secretary or in his absence or inability to act, the person whom the chairman of
the meeting shall
3
<PAGE> 4
appoint secretary of the meeting) shall act as secretary of the meeting and keep
the minutes thereof.
Section 9. Order of Business. The order of business at all meetings of
stockholders shall be as determined by the chairman of the meeting.
ARTICLE III
DIRECTORS
Section 1. General Powers. Except as otherwise provided in Delaware Law
or the certificate of incorporation, the business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors.
Section 2. Number, Election and Term of Office. The number of directors
which shall constitute the whole Board shall be fixed from time to time by
resolution of the Board of Directors but shall not be less than three nor more
than nine. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 12 of this Article III, and each
director so elected shall hold office until his successor is elected and
qualified or until his earlier death, resignation or removal. Directors need not
be stockholders.
Section 3. Quorum and Manner of Acting. Unless the certificate of
incorporation or these bylaws require a greater number, a majority of the total
number of directors shall constitute a quorum for the transaction of business,
and the affirmative vote of a majority of the directors present at meeting at
which a quorum is present shall be the act of the Board of Directors. When a
meeting is adjourned to another time or place (whether or not a quorum is
present), notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the Board of Directors may transact any business which
might have been transacted at the original meeting. If a quorum shall not be
present at any meeting of the Board of directors the directors present thereat
may adjourn the meeting, from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 4. Time and Place of Meetings. The Board of Directors shall
hold its meetings at such place, either within or without the State of Delaware,
and at such time as may be determined from time to time by the Board of
Directors (or the Chairman in the absence of a determination by the Board of
Directors).
4
<PAGE> 5
Section 5. Annual Meeting. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
place either within or without the State of Delaware, on such date and at such
time as shall be specified in a notice thereof given as hereinafter provided in
Section 7 of this Article III or in a waiver of notice thereof signed by any
director who chooses to waive the requirement of notice.
Section 6. Regular Meetings. After the place and time of regular
meetings of the Board of Directors shall have been determined and notice thereof
shall have been once given to each member of the Board of Directors, regular
meetings may be held without further notice being given.
Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board or the President and shall be called
by the Chairman of the Board, President or Secretary on the written request of
three directors. Notice of special meetings of the Board of Directors shall be
given to each director at least three days before the date of the meeting in
such manner as is determined by the Board of Directors.
Section 8. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the bylaws of the Corporation; and
unless the resolution of the Board of Directors or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock.
5
<PAGE> 6
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors when required.
Section 9. Action by Consent. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 10. Telephonic Meetings. Unless otherwise restricted by the
certificate of incorporation or these bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or such committee, as the case may be, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 11. Resignation. Any director may resign at any time by giving
written notice to the Board of Directors or to the Secretary of the Corporation.
The resignation of any director shall take effect upon receipt of notice thereof
or at such later time as shall be specified in such notice; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 12. Vacancies. Unless otherwise provided in the certificate of
incorporation, vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all the stockholders
having the right to vote as a single class may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the certificate of
incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of directors elected by such class
or classes or series thereof then in office, or by a sole remaining director so
elected. Each director so chosen shall hold office until his successor is
elected and qualified, or until his earlier death, resignation or removal. If
there are no directors in office, then an election of directors may be held in
accordance with Delaware Law. Unless otherwise provided in the certificate of
incorporation, when one or more directors shall resign from the Board, effective
at a future date, a majority of the directors then in office, including those
who have so
6
<PAGE> 7
resigned, shall have the power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided in the
filling of other vacancies.
Section 13. Removal. Any director or the entire Board of Directors may
be removed, with or without cause, at any time by the affirmative vote of the
holders of a majority of the outstanding capital stock of the Corporation
entitled to vote and the vacancies thus created may be filled in accordance with
Section 12 of this Article III.
Section 14. Compensation. Unless otherwise restricted by the
certificate of incorporation or these bylaws, the Board of Directors shall have
authority to fix the compensation of directors, including fees and reimbursement
of expenses.
ARTICLE IV
OFFICERS
Section 1. Principal Officers. The principal officers of the
Corporation shall be a President, one or more Vice Presidents, a Treasurer and a
Secretary who shall have the duty, among other things, to record the proceedings
of the meetings of stockholders and directors in a book kept for that purpose.
The Corporation may also have such other principal officers, including one or
more Controllers, as the Board may in its discretion appoint. One person may
hold the offices and perform the duties of any two or more of said offices,
except that no one person shall hold the hold the offices and perform the duties
of President and Secretary.
Section 2. Election, Term of Office and Remuneration. The principal
officers of the Corporation shall be elected annually by the Board of Directors
at the annual meeting thereof. Each such officer shall hold office until his
successor is elected and qualified, or until his earlier death, resignation or
removal. The remuneration of all officers of the Corporation shall be fixed by
the Board of Directors. Any vacancy in any office shall be filled in such manner
as the Board of Directors shall determine.
Section 3. Subordinate Officers. In addition to the principal officers
enumerated in Section 1 of this Article IV, the Corporation may have one or more
Assistant Treasurers, Assistant Secretaries and Assistant Controllers and such
other subordinate officers, agents and employees as the Board of Directors
7
<PAGE> 8
may deem necessary, each of whom shall hold office for such period as the Board
of Directors may from time to time determine. The Board of Directors may
delegate to any principal officer the power to appoint and to remove any such
subordinate officers, agents or employees.
Section 4. Removal. Except as otherwise permitted with respect to
subordinate officers, any officer may be removed, with or without cause, at any
time, by resolution adopted by the Board of Directors.
Section 5. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors (or to a principal officer if the Board
of Directors has delegated to such principal officer the power to appoint and to
remove such officer). The resignation of any officer shall take effect upon
receipt of notice thereof or at such later time as shall be specified in such
notice; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 6. Powers and Duties. The officers of the Corporation shall
have such powers and perform such duties incident to each of their respective
offices and such other duties as may from time to time be conferred upon or
assigned to them by the Board of Directors.
ARTICLE V
GENERAL PROVISIONS
Section 1. Fixing the Record Date. (a) In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than 60 nor less than 10 days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
a meeting of stockholders shall apply to any adjournment of the meeting;
provided that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in
8
<PAGE> 9
writing without a meeting, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which date shall not be
more than 10 days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors. If no record date has been fixed by
the Board of Directors, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by Delaware Law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the Corporation by delivery to its registered office in
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by Delaware Law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversation or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than 60 days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
Section 2. Dividends. Subject to limitations contained in Delaware Law
and the certificate of incorporation, the Board of Directors may declare and pay
dividends upon the shares of capital stock of the Corporation, which dividends
may be paid either in cash, in property or in shares of the capital stock of the
Corporation.
Section 3. Fiscal Year. The fiscal year of the Corporation shall
commence on January 1 and end on December 31 of each year.
9
<PAGE> 10
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed, affixed or otherwise reproduced.
Section 5. Voting of Stock Owned by the Corporation. The Board of
Directors may authorize any person, on behalf of the Corporation, to attend,
vote at and grant proxies to be used at any meeting of stockholders of any
corporation (except this Corporation) in which the Corporation may hold stock.
Section 6. Amendments. These bylaws or any of them, may be altered,
amended or repealed, or new bylaws may be made, by the stockholders entitled to
vote thereon at any annual or special meeting thereof or by the Board of
Directors.
Section 7. Indemnification. Each person (and the heirs, executors or
administrators of such person) who was or is a party or is threatened to be made
a party to, or is involved in any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a director
of another corporation, partnership, joint venture, trust or other enterprise,
shall be indemnified and held harmless by the Corporation to the fullest extent
permitted by Delaware Law. The right to indemnification conferred by this
Section 7 shall also include payment by the Corporation of the expenses incurred
in connection with any such proceeding in advance of its final disposition to
the fullest extent authorized by Delaware Law. The right to indemnification
conferred in this Section 7 shall be a contract right.
10
<PAGE> 1
EXHIBIT 4.1
EXECUTION COPY
================================================================================
PAGEMART WIRELESS, INC.,
as Issuer
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
---------------------
Indenture
Dated as of January 28, 1998
---------------------
11 1/4% Senior Subordinated Discount Notes due 2008
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Sections Indenture Sections
- ------------ ------------------
<S> <C>
Section 310(a)(1) .............................................................. 7.10
(a)(2) ......................................................................... 7.10
(b) ............................................................................ 7.08
Section 313(c) ................................................................. 7.06; 11.02
Section 314(a) ................................................................. 4.17; 11.02
(a)(4) ......................................................................... 4.16; 11.02
(c)(1) ......................................................................... 11.03
(c)(2) ......................................................................... 11.03
(e) ............................................................................ 11.04
Section 315(b) ................................................................. 7.05; 11.02
Section 316(a)(1)(A) ........................................................... 6.05
(a)(1)(B) ...................................................................... 6.04
(b) ............................................................................ 6.07
Section 317(a)(1) .............................................................. 6.08
(a)(2) ......................................................................... 6.09
Section 318(a) ................................................................. 11.01
(c) ............................................................................ 11.01
</TABLE>
Note: The Cross-Reference Table shall not for any purpose be deemed to be a
part of the Indenture.
<PAGE> 3
INDENTURE, dated as of January 28, 1998, between PAGEMART
WIRELESS, INC., a Delaware corporation, as Issuer (the "Company"), and UNITED
STATES TRUST COMPANY OF NEW YORK, a New York corporation, as Trustee (the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance of up to $432,000,000 aggregate
principal amount at maturity ($249,700,320 initial Accreted Value) of the
Company's 11 1/4% Senior Subordinated Discount Notes due 2008 (the "Notes")
issuable as provided in this Indenture. All things necessary to make this
Indenture a valid agreement of the Company, in accordance with its terms, have
been done, and the Company has done all things necessary to make the Notes, when
executed by the Company and authenticated and delivered by the Trustee hereunder
and duly issued by the Company, the valid obligations of the Company as
hereinafter provided.
This Indenture is subject to, and shall be governed by, the
provisions of the Trust Indenture Act of 1939, as amended, that are required to
be a part of and to govern indentures qualified under the Trust Indenture Act of
1939, as amended.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of
the Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders, as follows.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"12 1/4% Indenture" means the Indenture dated as of October
19, 1993, between PageMart, Inc., a Delaware corporation, and United States
Trust Company of New York, a New York corporation, as Trustee relating to the 12
1/4% Notes, as amended from time to time.
"15% Indenture" means the Indenture dated as of January 17,
1995, between the Company (f/k/a PageMart Nationwide Inc.) and United States
Trust Company of New York, a New York corporation, as Trustee relating to the
15% Notes, as amended from time to time.
<PAGE> 4
2
"12 1/4% Notes" means the 12 1/4% Senior Discount Notes of
PageMart, Inc. due 2003 issued pursuant to the 12 1/4% Indenture.
"15% Notes" means the 15% Senior Discount Notes of the Company
due 2005 issued pursuant to the 15% Indenture.
"Acceleration Notice" has the meaning provided in Section
6.02.
"Accreted Value" means, for any Specified Date, the amount
calculated pursuant to (i), (ii), (iii) or (iv) for each $1,000 principal amount
at maturity of Notes:
(i) if the Specified Date occurs on one of the following dates
(each a "Semi-Annual Accrual Date"), the Accreted Value will equal the
amount set forth below for such Semi-Annual Accrual Date:
<TABLE>
<CAPTION>
SEMI-ANNUAL Accreted
Accrual Date Value
- ------------------ --------
<S> <C>
August 1, 1998 $611.08
February 1, 1999 $645.45
August 1, 1999 $681.76
February 1, 2000 $720.11
August 1, 2000 $760.62
February 1, 2001 $803.40
August 1, 2001 $848.59
February 1, 2002 $896.32
August 1, 2002 $946.74
February 1, 2003 $1,000.00
</TABLE>
(ii) if the Specified Date occurs before the first Semi-Annual
Accrual Date, the Accreted Value will equal the sum of (a) $578.01 and
(b) an amount equal to the product of (1) the Accreted Value for the
first Semi-Annual Accrual Date less $578.01 multiplied by (2) a
fraction, the numerator of which is the number of days from the issue
date of the Notes to the Specified Date, using a 360-day year of twelve
30-day months, and the denominator of which is the number of days
elapsed from the issue date of the Notes to the first Semi-Annual
Accrual Date, using a 360-day year of twelve 30-day months;
(iii) if the Specified Date occurs between two Semi-Annual
Accrual Dates, the Accreted Value will equal the sum of (a) the
Accreted Value for the Semi-Annual Accrual Date immediately preceding
such Specified Date and (b) an amount equal to the product of (1) the
Accreted Value for the immediately following Semi-Annual
<PAGE> 5
3
Accrual Date less the Accreted Value for the immediately preceding
Semi-Annual Accrual Date multiplied by (2) a fraction, the numerator of
which is the number of days from the immediately preceding Semi-Annual
Accrual Date to the Specified Date, using a 360-day year of twelve
30-day months, and the denominator of which is 180; or
(iv) if the Specified Date occurs after the last Semi-Annual
Accrual Date, the Accreted Value will equal $1,000.
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person became a Restricted Subsidiary and not Incurred
in connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period determined in conformity with GAAP; provided that the following
items shall be excluded in computing Adjusted Consolidated Net Income (without
duplication): (i) the net income (or loss) of any Person that is not a
Restricted Subsidiary, except (x) with respect to net income, to the extent of
the amount of dividends or other distributions actually paid to the Company or
any of its Restricted Subsidiaries by such Person during such period and (y)
with respect to net losses, to the extent of the amount of Investments made by
the Company or any Restricted Subsidiary in such Person during such period, (ii)
solely for the purposes of calculating the amount of Restricted Payments that
may be made pursuant to clause (C) of the first paragraph of Section 4.06 (and
in such case, except to the extent includible pursuant to clause (i) above), the
net income (or loss) of any Person accrued prior to the date it becomes a
Restricted Subsidiary or is merged into or consolidated with the Company or any
of its Restricted Subsidiaries or all or substantially all of the property and
assets of such Person are acquired by the Company or any of its Restricted
Subsidiaries, (iii) the net income of any Restricted Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by the
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Restricted Subsidiary; (iv) any gains or losses (on an after-tax basis)
attributable to Asset Sales; (v) except for purposes of calculating the amount
of Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of Section 4.06, any amount paid as dividends on Preferred Stock of
the Company or any Restricted Subsidiary owned by Persons other than the Company
and any of its Restricted Subsidiaries; and (vi) all extraordinary gains and
extraordinary losses.
"Adjusted Consolidated Net Tangible Assets" means the total
amount of assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets
<PAGE> 6
4
(excluding write-ups in connection with accounting for acquisitions in
conformity with GAAP), after deducting therefrom (i) all current liabilities of
the Company and its Restricted Subsidiaries (excluding intercompany items) and
(ii) all goodwill, trade names, trademarks, patents, unamortized debt discount
and expense and other like intangibles, all as set forth on the most recently
available quarterly or annual consolidated balance sheet of the Company and its
Restricted Subsidiaries, prepared in conformity with GAAP, and filed with the
Commission or provided to the Trustee pursuant to Section 4.18.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar, Paying Agent, authenticating
agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.07(a).
"Asset Acquisition" means (i) an investment by the Company or
any of its Restricted Subsidiaries in any other Person pursuant to which such
Person shall become a Restricted Subsidiary or shall be merged into or
consolidated with the Company or any of its Restricted Subsidiaries or (ii) an
acquisition by the Company or any of its Restricted Subsidiaries of the property
and assets of any Person other than the Company or any of its Restricted
Subsidiaries that constitute substantially all of a division or line of business
of such Person.
"Asset Disposition" means the sale or other disposition by the
Company or any of its Restricted Subsidiaries (other than to the Company or
another Restricted Subsidiary) of (i) all or substantially all of the Capital
Stock of any Restricted Subsidiary or (ii) all or substantially all of the
assets that constitute a division or line of business of the Company or any of
its Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transactions) in
one transaction or a series of related transactions by the Company or any of its
Restricted Subsidiaries to any Person other than the Company or any of its
Restricted Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets (other than the Capital Stock or other
Investment in an Unrestricted
<PAGE> 7
5
Subsidiary) of the Company or any of its Restricted Subsidiaries outside the
ordinary course of business of the Company or such Restricted Subsidiary and, in
each case, that is not governed by the provisions of Article Five; provided that
"Asset Sale" shall not include (a) sales or other dispositions of inventory,
receivables and other current assets, (b) sales, transfers or other dispositions
of assets constituting Restricted Payments permitted to be made under Section
4.06 or (c) sales or other dispositions of assets for consideration at least
equal to the fair market value of the assets sold or disposed of, to the extent
that the consideration received would constitute property or assets of the kinds
described in clause (B) of Section 4.11.
"Average Life" means, at any date of determination with
respect to any debt security, the quotient obtained by dividing (i) the sum of
the products of (a) the number of years from such date of determination to the
dates of each successive scheduled principal payment of such debt security and
(b) the amount of such principal payment by (ii) the sum of all such principal
payments.
"Bank Agent" shall mean BT Commercial Corporation, or its
successor as agent for the lenders under the Credit Agreement.
"Board of Directors" means the Board of Directors of the
Company or any committee of such Board of Directors duly authorized to act under
this Indenture.
"Board Resolution" means a copy of a resolution, certified by
the Secretary of the Company to have been duly adopted by the Board of Directors
and to be in full force and effect on the date of such certification, and
delivered to the Trustee.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in The City of New York, or in the city of
the Corporate Trust Office of the Trustee, are authorized by law to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, whether outstanding on
the Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease
of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present
value of the rental obligations under a Capitalized Lease.
<PAGE> 8
6
"Change of Control" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than 30% of the total voting power of the Voting Stock and
such ownership is greater than the amount of the total voting power of the
Voting Stock of the Company, on a fully diluted basis, than is held by the
Existing Stockholders on such date; or (ii) individuals who on the Closing Date
constitute the Board of Directors (together with any new directors whose
election by the Board of Directors or whose nomination by the Board of Directors
for election by the Company's stockholders was approved by a vote of at least
two-thirds of the members of the Board of Directors then in office who either
were members of the Board of Directors on the Closing Date or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of the Board of Directors then in office.
"Closing Date" means the date on which the Notes are
originally issued under this Indenture.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body performing
such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's common stock, whether now
outstanding or issued after the date of this Indenture, including, without
limitation, all series and classes of such common stock.
"Company" means the party named as such in the first paragraph
of this Indenture until a successor replaces it pursuant to Article Five of this
Indenture and thereafter means the successor.
"Company Order" means a written request or order signed in the
name of the Company (i) by its Chairman, a Vice Chairman, its President or a
Vice President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary
or an Assistant Secretary and delivered to the Trustee; provided, however, that
such written request or order may be signed by any two of the officers or
directors listed in clause (i) above in lieu of being signed by one of such
officers or directors listed in such clause (i) and one of the officers listed
in clause (ii) above.
"Consolidated EBITDA" means, for any period, Adjusted
Consolidated Net Income for such period plus, to the extent such amount was
deducted in calculating such Adjusted Consolidated Net Income, (i) Consolidated
Interest Expense, (ii) income taxes
<PAGE> 9
7
(other than income taxes (either positive or negative) attributable to
extraordinary and non-recurring gains or losses or sales of assets), (iii)
depreciation expense, (iv) amortization expense and (v) all other non-cash items
reducing Adjusted Consolidated Net Income (other than items that will require
cash payments and for which an accrual or reserve is, or is required by GAAP to
be, made), less all non-cash items increasing Adjusted Consolidated Net Income,
all as determined on a consolidated basis for the Company and its Restricted
Subsidiaries in conformity with GAAP; provided that, if any Restricted
Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA
shall be reduced (to the extent not otherwise reduced in accordance with GAAP)
by an amount equal to (A) the amount of the Adjusted Consolidated Net Income
attributable to such Restricted Subsidiary multiplied by (B) the percentage
ownership interest in the income of such Restricted Subsidiary not owned on the
last day of such period by the Company or any of its Restricted Subsidiaries.
"Consolidated Interest Expense" means, for any period, the
aggregate amount of interest in respect of Indebtedness (including, without
limitation, amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in accordance
with the effective interest method of accounting; all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with Interest Rate Agreements;
and Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Company and its Restricted Subsidiaries during such
period; excluding, however, (i) any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof (but only in the same proportion as the net income of such
Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated
Net Income pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof) payable in connection
with the offering of the Notes, all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in conformity with GAAP.
"Consolidated Leverage Ratio" means, on any Transaction Date,
the ratio of (i) the aggregate amount of Indebtedness of the Company and its
Restricted Subsidiaries on a consolidated basis outstanding on such Transaction
Date to (ii) the aggregate amount of Consolidated EBITDA for the then most
recent four fiscal quarters for which financial statements of the Company have
been filed with the Commission or provided to the Trustee pursuant to Section
4.18 (such four fiscal quarter period being the "Four Quarter Period"); provided
that, in making the foregoing calculation, (A) pro forma effect shall be given
to any Indebtedness to be Incurred or repaid on the Transaction Date; (B) pro
forma effect shall be given to Asset Dispositions and Asset Acquisitions
(including giving pro forma effect to the application of proceeds of any Asset
Disposition) that occur from the beginning of the Four
<PAGE> 10
8
Quarter Period through and including the Transaction Date (the "Reference
Period"), as if they had occurred and such proceeds had been applied on the
first day of such Reference Period; and (C) pro forma effect shall be given to
asset dispositions and asset acquisitions (including giving pro forma effect to
the application of proceeds of any asset disposition) that have been made by any
Person that has become a Restricted Subsidiary or has been merged with or into
the Company or any Restricted Subsidiary during such Reference Period and that
would have constituted Asset Dispositions or Asset Acquisitions had such
transactions occurred when such Person was a Restricted Subsidiary as if such
asset dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference Period; provided
that to the extent that clause (B) or (C) of this sentence requires that pro
forma effect be given to an Asset Acquisition or Asset Disposition, such pro
forma calculation shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division or line of business of
the Person, that is acquired or disposed of for which financial information is
available.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of the Company and its Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Redeemable Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of the Company or any of its Restricted Subsidiaries, each item to
be determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Corporate Trust Office" means the office of the Trustee at
which the corporate trust business of the Trustee shall, at any particular time,
be principally administered, which office is, at the date of this Indenture,
located at 114 W. 47th Street, New York, New York 10036, Attention: Corporate
Trust Department.
"Credit Agreement" means the Credit Agreement dated as of May
11, 1995, as amended, by and among the Company (f/k/a PageMart Nationwide Inc.),
the lenders named therein, BT Commercial Corporation, as Agent and Bankers Trust
Company, as Issuing Bank, together with the related documents thereof (including
without limitation any guarantees and security documents), in each case as such
agreements may be amended (including any amendment and restatement thereof),
supplemented, renewed, extended, substituted, replaced or otherwise modified
from time to time, including any agreement extending the maturity of,
refinancing or otherwise restructuring (including, but not limited to, the
inclusion of additional borrowers thereunder that are Subsidiaries of the
Company) all or any portion of the Indebtedness under such agreement or any
successor agreement, with
<PAGE> 11
9
the same or different lenders as such agreement may be amended, renewed,
extended, substituted, replaced, restated and otherwise modified from time to
time.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Depositary" shall mean The Depository Trust Company, its
nominees, and their respective successors.
"Designated Senior Indebtedness" means the Indebtedness under
the Credit Agreement and the 15% Notes and any other Indebtedness constituting
Senior Indebtedness that, at the date of determination, has an aggregate
principal amount outstanding of at least $25 million and that is specifically
designated by the Company, in the instrument creating or evidencing such Senior
Indebtedness as "Designated Senior Indebtedness".
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.11.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means any notes of the Company containing
terms identical to the Notes (except that such Exchange Notes (i) shall be
registered under the Securities Act and (ii) shall have an interest rate equal
to 11 1/4% per annum, without provision for adjustment as provided in the fourth
paragraph of Section 1 of the Notes) that are issued and exchanged for the Notes
pursuant to the Registration Rights Agreement and this Indenture.
"Existing Stockholders" means (i) The Morgan Stanley Leveraged
Equity Fund II, L.P., Morgan Stanley Capital Partners III, L.P., Morgan Stanley
Capital Investors, L.P., Morgan Stanley Venture Capital Fund, L.P., Morgan
Stanley Venture Capital Fund II, L.P., Morgan Stanley Venture Capital Fund II,
C.V., Morgan Stanley Venture Investors, L.P., Accel Telecom L.P., Accel III L.P.
and Accel Investors '89 L.P and (ii) solely for purposes of determining whether
any other person's ownership of Voting Stock exceeds the voting power of the
Voting Stock held by the Existing Stockholders, First Plaza Group Trust, Pulsar
Internacional, S.A. de C.V., John D. Beletic and Roger D. Linquist.
"fair market value" means the price that would be paid in an
arm's-length transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer under no compulsion to buy,
as determined in good faith by the
<PAGE> 12
10
Board of Directors, whose determination shall be conclusive if evidenced by a
Board Resolution; provided that for purposes of clause (xi) of the second
paragraph of Section 4.03(a), (x) the fair market value of any security
registered under the Exchange Act shall be the average of the closing prices,
regular way, of such security for the 20 consecutive trading days immediately
preceding the sale of Capital Stock and (y) in the event the aggregate fair
market value of any other property (other than cash or cash equivalents)
received by the Company exceeds $10 million, the fair market value of such
property shall be determined by a nationally recognized investment banking firm
and set forth in their written opinion which shall be delivered to the Trustee.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the Closing Date, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession. All ratios and computations based on GAAP
contained or referred to in this Indenture shall be computed in conformity with
GAAP applied on a consistent basis, except that calculations made for purposes
of determining compliance with the terms of the covenants set forth in Article
Four and Article Five and with other provisions of this Indenture shall be made
without giving effect to (i) the amortization of any expenses incurred in
connection with the offering of the Notes and (ii) except as otherwise provided,
the amortization of any amounts required or permitted by Accounting Principles
Board Opinion Nos. 16 and 17.
"Global Notes" has the meaning provided in Section 2.01.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of any other
Person and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services (unless such purchase arrangements are on arm's-length
terms and are entered into in the ordinary course of business), to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business.
The term "Guarantee" used as a verb has a corresponding meaning.
"Guaranteed Indebtedness" has the meaning provided in Section
4.09.
<PAGE> 13
11
"Holder" means the registered holder of any Note.
"Incur" means, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an "Incurrence" of Acquired Indebtedness; provided that
neither the accrual of interest nor the accretion of original issue discount
shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all Capitalized Lease Obligations of
such Person, (vi) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided that the amount of such Indebtedness shall be the lesser of (A)
the fair market value of such asset at such date of determination and (B) the
amount of such Indebtedness, (vii) all Indebtedness of other Persons Guaranteed
by such Person to the extent such Indebtedness is Guaranteed by such Person and
(viii) to the extent not otherwise included in this definition, obligations
under Currency Agreements and Interest Rate Agreements. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and, with respect to
contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation, provided (A) that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as determined
in conformity with GAAP, (B) that money borrowed and set aside at the time of
the Incurrence of any Indebtedness in order to prefund the payment of the
interest on such Indebtedness shall not be deemed to be "Indebtedness" so long
as such money is held to secure the payment of such interest and (C) that
Indebtedness shall not include any liability for federal, state, local or other
taxes.
"Indenture" means this Indenture as originally executed or as
it may be amended or supplemented from time to time by one or more indentures
supplemental to this Indenture entered into pursuant to the applicable
provisions of this Indenture.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
<PAGE> 14
12
"Interest Payment Date" means each semiannual interest payment
date on February 1 and August 1 of each year, commencing August 1, 2003.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement, option or future contract or other
similar agreement or arrangement.
"Investment" in any Person means any direct or indirect
advance, loan or other extension of credit (including, without limitation, by
way of Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable on the balance sheet of the Company or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account
or use of others), or any purchase or acquisition of Capital Stock, bonds,
notes, debentures or other similar instruments issued by, such Person and shall
include (i) the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary and (ii) the fair market value of the Capital Stock (or any other
Investment), held by the Company or any of its Restricted Subsidiaries, of (or
in) any Person that has ceased to be a Restricted Subsidiary, including, without
limitation, by reason of any transaction permitted by clause (iii) of Section
4.08; provided that the fair market value of the Investment remaining in any
Person that has ceased to be a Restricted Subsidiary shall not exceed the
aggregate amount of Investments previously made in such Person valued at the
time such Investments were made less the net reduction of such Investments. For
purposes of the definition of "Unrestricted Subsidiary" and Section 4.06, (i)
"Investment" shall include the fair market value of the assets (net of
liabilities (other than liabilities to the Company or any of its Restricted
Subsidiaries)) of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair market value
of the assets (net of liabilities (other than liabilities to the Company or any
of its Restricted Subsidiaries)) of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be
considered a reduction in outstanding Investments and (iii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof or any agreement to give any security interest).
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest,
<PAGE> 15
13
component thereof) when received in the form of cash or cash equivalents (except
to the extent such obligations are financed or sold with recourse to the Company
or any Restricted Subsidiary) and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) provisions for all
taxes (whether or not such taxes will actually be paid or are payable) as a
result of such Asset Sale without regard to the consolidated results of
operations of the Company and its Restricted Subsidiaries, taken as a whole,
(iii) payments made to repay Indebtedness or any other obligation outstanding at
the time of such Asset Sale that either (A) is secured by a Lien on the property
or assets sold or (B) is required to be paid as a result of such sale and (iv)
appropriate amounts to be provided by the Company or any Restricted Subsidiary
as a reserve against any liabilities associated with such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as determined
in conformity with GAAP and (b) with respect to any issuance or sale of Capital
Stock, the proceeds of such issuance or sale in the form of cash or cash
equivalents, including payments in respect of deferred payment obligations (to
the extent corresponding to the principal, but not interest, component thereof)
when received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of attorney's fees, accountants'
fees, underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees incurred in connection with such issuance
or sale and net of taxes paid or payable as a result thereof.
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Note Register" has the meaning provided in Section 2.04.
"Notes" means any of the notes, as defined in the first
paragraph of the recitals hereof, that are authenticated and delivered under
this Indenture. For all purposes of this Indenture, the term "Notes" shall
include Exchange Notes to be issued and exchanged for any Notes pursuant to the
Registration Rights Agreement and this Indenture and, for purposes of this
Indenture, all Notes and Exchange Notes shall vote together as one series of
Notes under this Indenture.
"Offer to Purchase" means an offer to purchase Notes by the
Company from the Holders commenced by mailing a notice to the Trustee and each
Holder stating: (i) the covenant pursuant to which the offer is being made and
that all Notes validly tendered will be accepted for payment on a pro rata
basis; (ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
<PAGE> 16
14
such notice is mailed) (the "Payment Date"); (iii) that any Note not tendered
will continue to accrue interest (or original issue discount) pursuant to its
terms; (iv) that, unless the Company defaults in the payment of the purchase
price, any Note accepted for payment pursuant to the Offer to Purchase shall
cease to accrue interest (or original issue discount) on and after the Payment
Date; (v) that Holders electing to have a Note purchased pursuant to the Offer
to Purchase will be required to surrender the Note, together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side of the
Note completed, to the Paying Agent at the address specified in the notice prior
to the close of business on the Business Day immediately preceding the Payment
Date; (vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount at maturity of Notes delivered for purchase and a statement that such
Holder is withdrawing his election to have such Notes purchased; and (vii) that
Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered;
provided that each Note purchased and each new Note issued shall be in a
principal amount at maturity of $1,000 or integral multiples thereof. On the
Payment Date, the Company shall (i) accept for payment on a pro rata basis Notes
or portions thereof tendered pursuant to an Offer to Purchase; (ii) deposit with
the Paying Agent money sufficient to pay the purchase price of all Notes or
portions thereof so accepted; and (iii) deliver, or cause to be delivered, to
the Trustee all Notes or portions thereof so accepted together with an Officers'
Certificate specifying the Notes or portions thereof accepted for payment by the
Company. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail to such Holders a new Note equal in principal
amount at maturity to any unpurchased portion of the Note surrendered; provided
that each Note purchased and each new Note issued shall be in a principal amount
at maturity of $1,000 or integral multiples thereof. The Company will publicly
announce the results of an Offer to Purchase as soon as practicable after the
Payment Date. The Trustee shall act as the Paying Agent for an Offer to
Purchase. The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that the Company is required to
repurchase Notes pursuant to an Offer to Purchase.
"Officer" means, with respect to the Company, (i) the Chairman
of the Board, the President, any Vice President, the Chief Financial Officer,
and (ii) the Treasurer or any Assistant Treasurer, or the Secretary or any
Assistant Secretary.
"Officers' Certificate" means a certificate signed by one
Officer listed in clause (i) of the definition thereof and one Officer listed in
clause (ii) of the definition thereof. Each Officers' Certificate (other than
certificates provided pursuant to TIA Section 314(a)(4)) shall include the
statements provided for in TIA Section 314(e).
<PAGE> 17
15
"Offshore Global Note" has the meaning provided in Section
2.01.
"Offshore Physical Notes" has the meaning provided in Section
2.01.
"Opinion of Counsel" means a written opinion signed by legal
counsel who may be an employee of or counsel to the Company. Each such Opinion
of Counsel shall include the statements provided for in TIA Section 314(e).
"Paying Agent" has the meaning provided in Section 2.04,
except that, for the purposes of Article Eight, the Paying Agent shall not be
the Company or a Subsidiary of the Company or an Affiliate of any of them. The
term "Paying Agent" includes any additional Paying Agent.
"Payment Blockage Period" has the meaning provided in Section
10.02.
"Permitted Investment" means (i) an Investment in the Company
or a Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash
Investments; (iii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP; (iv) stock, obligations or securities received in
satisfaction of judgments; and (v) Investments received as consideration in
Asset Sales to the extent permitted under Section 4.11.
"Person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's preferred or preference stock,
whether now outstanding or issued after the date of the Indenture, including,
without limitation, all series and classes of such preferred or preference
stock.
"principal" of a debt security, including the Notes, means the
principal amount due on the Stated Maturity as shown on such debt security.
<PAGE> 18
16
"Private Placement Legend" means the legend initially set
forth on the Notes in the form set forth in Section 2.02.
"Public Equity Offering" means an underwritten primary public
offering of Common Stock of the Company pursuant to an effective registration
statement under the Securities Act.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Redeemable Stock" means any class or series of Capital Stock
of any Person that by its terms or otherwise is (i) required to be redeemed
prior to the Stated Maturity of the Notes, (ii) redeemable at the option of the
holder of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Notes or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Redeemable Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Redeemable Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in Sections 4.11 and 4.12 and such
Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Company's
repurchase of such Notes as are required to be repurchased pursuant to the
provisions of Sections 4.11 and 4.12.
"Redemption Date", when used with respect to any Note to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Note to be
redeemed, means the price at which such Note is to be redeemed pursuant to this
Indenture.
"Registrar" has the meaning provided in Section 2.04.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of January 28, 1998, between the Company and Morgan Stanley
& Co. Incorporated, and certain permitted assigns specified therein.
"Registration Statement" means the Registration Statement as
defined and described in the Registration Rights Agreement.
<PAGE> 19
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"Regular Record Date" for the interest payable on any Interest
Payment Date means the January 15 or July 15 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice chairman of the board of directors, the chairman
or any vice chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, any
assistant vice president, the secretary, any assistant secretary, the treasurer,
any assistant treasurer, the cashier, any assistant cashier, any trust officer
or assistant trust officer, the controller or any assistant controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of his or her knowledge of and familiarity with the particular
subject.
"Restricted Payments" has the meaning provided in Section
4.06.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Secured Indebtedness" has the meaning provided in Section
4.05.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means the following obligations of the
Company, whether outstanding on the Closing Date or thereafter Incurred: (i) all
Indebtedness and all other monetary obligations (including expenses,
indemnities, fees and other monetary obligations) of the Company under the
Credit Agreement, any Interest Rate Agreement or Currency Agreement relating to
Indebtedness under the Credit Agreement, the 12 1/4% Notes, the 15% Notes and
the Vendor Financing Arrangement and (ii) all Indebtedness and all other
monetary obligations of the Company (other than the Notes), including principal
and interest on such Indebtedness, unless such Indebtedness, by its terms or by
the terms of any agreement or instrument pursuant to which such Indebtedness is
issued, is pari passu with, or subordinated in right of payment to, the Notes;
provided that the term "Senior Indebtedness" shall not include (a) any
Indebtedness of the Company that, when Incurred, was without recourse to the
Company, (b) any Indebtedness of the Company to a Subsidiary of the Company, or
to a joint venture in which the Company has an interest, (c) any Indebtedness of
the Company, to the extent not permitted by Section 4.03 or Section 4.04 (but as
to any
<PAGE> 20
18
such Indebtedness under the Credit Agreement, no such violation shall be deemed
to exist for purposes of this clause (c) if the Bank Agent shall have received
an Officers' Certificate to the effect that the issuance of such Indebtedness
does not violate such covenant), (d) any Indebtedness to any employee of the
Company or any of its respective Subsidiaries, (e) any liability for taxes owed
or owing by the Company or (f) any Trade Payables. Senior Indebtedness will also
include interest accruing subsequent to events of bankruptcy of the Company and
its respective Subsidiaries at the rate provided for in the document governing
such Senior Indebtedness, whether or not such interest is an allowed claim
enforceable against the debtor in a bankruptcy case under bankruptcy law.
"Senior Subordinated Obligations" means any principal of,
premium, if any, or interest (including, without limitation, any additional
interest payable by reason of the Company's failure to consummate an exchange
offer to cause a shelf registration to become effective) on the Notes payable
pursuant to the terms of the Notes or upon acceleration, including any amounts
received upon the exercise of rights of rescission or other rights of action
(including claims for damages) or otherwise, to the extent relating to the
purchase price of the Notes or amounts corresponding to such principal, premium,
if any, or interest on the Notes.
"Significant Subsidiary" means, at any date of determination,
any Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
"Specified Date" means any Redemption Date, any Payment Date
for an Offer to Purchase or any date on which the Notes first become due and
payable after an Event of Default.
"S&P" means Standard & Poor's Ratings Services and its
successors.
"Stated Maturity" means, (i) with respect to any debt
security, the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of or interest on
any debt security, the date specified in such debt security as the fixed date on
which such installment is due and payable.
"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more than 50% of the
voting power of the outstanding
<PAGE> 21
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Voting Stock is owned, directly or indirectly, by such Person and one or more
other Subsidiaries of such Person.
"Subsidiary Guarantee" has the meaning provided in Section
4.09.
"Temporary Cash Investment" means any of the following: (i)
direct obligations of the United States of America or any agency thereof or
obligations fully and unconditionally guaranteed by the United States of America
or any agency thereof, (ii) time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States of America, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50 million (or
the foreign currency equivalent thereof) and has outstanding debt which is rated
"A" (or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) commercial paper, maturing not more than 90 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America, any
state thereof or any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is made of "P-1"
(or higher) according to Moody's or "A-1" (or higher) according to S&P, and (v)
securities with maturities of six months or less from the date of acquisition
issued or fully and unconditionally guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or Moody's.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act
of 1939, as amended (15 U.S. Code Sections 77aaa-77bbb), as in effect on
the date this Indenture was executed, except as provided in Section 9.06.
"Trade Payables" means, with respect to any Person, any
accounts payable or any other indebtedness or monetary obligation to trade
creditors created, assumed or Guaranteed by such Person or any of its
Subsidiaries arising in the ordinary course of business in connection with the
acquisition of goods or services.
"Transaction Date" means, with respect to the Incurrence of
any Indebtedness by the Company or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.
<PAGE> 22
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"Trustee" means the party named as such in the first paragraph
of this Indenture until a successor replaces it in accordance with the
provisions of Article Seven of this Indenture and thereafter means such
successor.
"United States Bankruptcy Code" means the Bankruptcy Reform
Act of 1978, as amended and as codified in Title 11 of the United States Code,
as amended from time to time hereafter, or any successor federal bankruptcy law.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below; and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Restricted Subsidiary (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Company or any Restricted Subsidiary; provided that (A) any Guarantee by
the Company or any Restricted Subsidiary of any Indebtedness of the Subsidiary
being so designated shall be deemed an "Incurrence" of such Indebtedness and an
"Investment" by the Company or such Restricted Subsidiary (or both, if
applicable) at the time of such designation; (B) either (I) the Subsidiary to be
so designated has total assets of $1,000 or less or (II) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under Section
4.06 and (C) if applicable, the Incurrence of Indebtedness and the Investment
referred to in clause (A) of this proviso would be permitted under Sections 4.03
and 4.06. The Board of Directors may designate any Unrestricted Subsidiary to be
a Restricted Subsidiary; provided that (i) no Default or Event of Default shall
have occurred and be continuing at the time of or after giving effect to such
designation and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately after such designation would, if Incurred at such time,
have been permitted to be Incurred (and shall be deemed to have been Incurred)
for all purposes of the Indenture. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the Trustee
a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Global Note" has the meaning provided in Section 2.01.
"U.S. Government Obligations" means securities that are (i)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Notes, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government
<PAGE> 23
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Obligation or a specific payment of interest on or principal of any such U.S.
Government Obligation held by such custodian for the account of the holder of a
depository receipt; provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the U.S. Government Obligation or the specific payment of interest on or
principal of the U.S. Government Obligation evidenced by such depository
receipt.
"U.S. Physical Notes" has the meaning provided in Section
2.01.
"Vendor Financing Arrangement" means the Financing and
Security Agreement between Glenayre Electronics Inc. and the Company dated March
21, 1997, as amended from time to time.
"Voting Stock" means with respect to any Person, Capital Stock
of any class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Warrant Agreement" means the Warrant Agreement dated as of
October 19, 1993 between the Company and United States Trust Company of New
York, as warrant agent.
"Warrants" means the warrants issued under the Warrant
Agreement, each of which entitles the holder thereof to purchase one share of
Common Stock of the Company at a price of $3.26 per share, subject to
adjustment.
"Wholly Owned" means, with respect to any Subsidiary of any
Person, the ownership of all of the outstanding Capital Stock of such Subsidiary
(other than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) by such Person or one or more Wholly Owned
Subsidiaries of such Person.
SECTION 1.02. Incorporation by Reference of Trust Indenture
Act. Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
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22
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the indenture securities means the Company or any
other obligor on the Notes.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in
the plural include the singular;
(v) provisions apply to successive events and
transactions;
(vi) "herein", "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision;
(vii) all ratios and computations based on GAAP contained in
this Indenture shall be computed in accordance with the definition of
GAAP set forth in Section 1.01; and
(viii) all references to Sections or Articles refer to
Sections or Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating. The Notes and the Trustee's
certificate of authentication shall be substantially in the form annexed hereto
as Exhibit A. The Notes may have notations, legends or endorsements required by
law, stock exchange agreements to which the Company is subject or usage. The
Company shall approve the form of the Notes
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23
and any notation, legend or endorsement on the Notes. Each Note shall be dated
the date of its authentication.
The terms and provisions contained in the form of the Notes
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent global Notes in registered
form, substantially in the form set forth in Exhibit A (the "U.S. Global
Notes"), deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the U.S. Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of one or more permanent
global Notes in registered form substantially in the form set forth in Exhibit A
(the "Offshore Global Notes") deposited with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Offshore Global
Notes may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
Notes offered and sold in reliance on Regulation D under the
Securities Act shall be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A (the "U.S.
Physical Notes"). Notes issued pursuant to Section 2.07 in exchange for
interests in the Offshore Global Notes shall be in the form of permanent
certificated Notes in registered form substantially in the form set forth in
Exhibit A (the "Offshore Physical Notes").
The Offshore Physical Notes and U.S. Physical Notes are
sometimes collectively herein referred to as the "Physical Notes". The U.S.
Global Note and the Offshore Global Note are sometimes referred to herein as the
"Global Notes".
The definitive Notes shall be typed, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the Officers executing such Notes, as
evidenced by their execution of such Notes.
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SECTION 2.02. Restrictive Legends. Unless and until a Note is
exchanged for an Exchange Note in connection with an effective Registration
Statement pursuant to the Registration Rights Agreement, (i) each U.S. Global
Note and each U.S. Physical Note shall bear the legend, set forth below on the
face thereof and (ii) each Offshore Physical Note and each Offshore Global Note
shall bear the legend set forth below on the face thereof until at least the
41st day after the Closing Date and receipt by the Company and the Trustee of a
certificate substantially in the form of Exhibit B hereto.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(k)
UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF TRANSFER OF SUCH
NOTE RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY
OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS
IN RESPECT OF AN ACCRETED VALUE OF NOTES AT THE TIME OF TRANSFER OF
LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS NOTE
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IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS
AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN
TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Each Global Note, whether or not an Exchange Note, shall also
bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
NOTE SHALL BE LIMITED TO TRANSFERS
<PAGE> 28
26
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.08 OF
THE INDENTURE.
SECTION 2.03. Execution, Authentication and Denominations.
Subject to Article Four, the aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is unlimited. The Notes shall
be executed by an Officer of the Company listed in clause (i) of the definition
of Officer herein and attested by its Secretary, any Assistant Secretary, the
Treasurer or any Assistant Treasurer. The signature of any of these Officers on
the Notes may be by facsimile or manual signature, in the name and on behalf of
the Company.
If an Officer whose signature is on a Note no longer holds
that office at the time the Trustee or authenticating agent authenticates the
Note, the Note shall be valid nevertheless.
A Note shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
At any time and from time to time after the execution of this
Indenture, the Trustee or an authenticating agent shall upon receipt of a
Company Order authenticate for original issue Notes in the aggregate principal
amount specified in such Company Order; provided that the Trustee shall be
entitled to receive an Officers' Certificate and an Opinion of Counsel of the
Company that it may reasonably request in connection with such authentication of
Notes. Such Company Order shall specify the amount of Notes to be authenticated,
the date on which the original issue of Notes is to be authenticated and the
aggregate principal amount of Notes then authorized and in case of an issuance
of Notes pursuant to Section 2.15, shall certify that such issuance is in
compliance with Article Four.
The Trustee may appoint an authenticating agent to
authenticate Notes. If the appointment of such authenticating agent is not at
the discretion and for the convenience of the Trustee, then such authenticating
agent shall be compensated by the Company. An authenticating agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
authenticating agent. An authenticating agent has the same rights as an Agent to
deal with the Company or an Affiliate of the Company.
The Notes shall be issuable only in registered form without
coupons and only in denominations of $1,000 in principal amount and any integral
multiple thereof.
SECTION 2.04. Registrar and Paying Agent. The Company shall
maintain an office or agency where Notes may be presented for registration of
transfer or for
<PAGE> 29
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exchange (the "Registrar"), an office or agency where Notes may be presented for
payment (the "Paying Agent") and an office or agency where notices and demands
to or upon the Company in respect of the Notes and this Indenture may be served,
which shall be in the Borough of Manhattan, The City of New York. The Company
shall cause the Registrar to keep a register of the Notes and of their transfer
and exchange (the "Note Register"). The Note Register shall be in written form
or any other form capable of being converted into written form within a
reasonable time. The Company may have one or more co-Registrars and one or more
additional Paying Agents.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall give
prompt written notice to the Trustee of the name and address of any such Agent
and any change in the address of such Agent. If the Company fails to maintain a
Registrar, Paying Agent and/or agent for service of notices and demands, the
Trustee shall act as such Registrar, Paying Agent and/or agent for service of
notices and demands. The Company may remove any Agent upon written notice to
such Agent and the Trustee; provided that no such removal shall become effective
until (i) the acceptance of an appointment by a successor Agent to such Agent as
evidenced by an appropriate agency agreement entered into by the Company and
such successor Agent and delivered to the Trustee or (ii) notification to the
Trustee that the Trustee shall serve as such Agent until the appointment of a
successor Agent in accordance with clause (i) of this proviso. The Company, any
Subsidiary of the Company, or any Affiliate of any of them may act as Paying
Agent, Registrar or co-Registrar, and/or agent for service of notice and
demands.
The Company initially appoints the Trustee as Registrar,
Paying Agent, authenticating agent and agent for service of notice and demands.
If, at any time, the Trustee is not the Registrar, the Registrar shall make
available to the Trustee at least seven Business Days before each Interest
Payment Date and at such other times as the Trustee may reasonably request, the
names and addresses of the Holders as they appear in the Note Register. At the
option of the Company, payment of interest may be made by check mailed to the
address of the Holders as such address appears in the Note Register.
SECTION 2.05. Paying Agent to Hold Money in Trust. Not later
than each due date of the principal, premium, if any, and interest on any Notes,
the Company shall deposit with the Paying Agent money in immediately available
funds sufficient to pay such principal, premium, if any, and interest so
becoming due. The Company shall require each Paying Agent other than the Trustee
to agree in writing that such Paying Agent shall hold in trust for the benefit
of the Holders or the Trustee all money held by the Paying Agent for the payment
of principal of, premium, if any, and interest on the Notes (whether such money
has been paid to it by the Company or any other obligor on the Notes), and such
Paying Agent shall promptly notify the Trustee of any default by the Company (or
any other obligor on the
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Notes) in making any such payment. The Company at any time may require a Paying
Agent to pay all money held by it to the Trustee and account for any funds
disbursed, and the Trustee may at any time during the continuance of any payment
default, upon written request to a Paying Agent, require such Paying Agent to
pay all money held by it to the Trustee and to account for any funds disbursed.
Upon doing so, the Paying Agent shall have no further liability for the money so
paid over to the Trustee. If the Company or any Subsidiary of the Company or any
Affiliate of any of them acts as Paying Agent, it will, on or before each due
date of any principal of, premium, if any, or interest on the Notes, segregate
and hold in a separate trust fund for the benefit of the Holders a sum of money
sufficient to pay such principal, premium, if any, or interest so becoming due
until such sum of money shall be paid to such Holders or otherwise disposed of
as provided in this Indenture, and will promptly notify the Trustee of its
action or failure to act.
SECTION 2.06. Transfer and Exchange. The Notes are issuable
only in registered form. A Holder may transfer a Note by written application to
the Registrar stating the name of the proposed transferee and otherwise
complying with the terms of this Indenture. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer by the Registrar in the Note
Register. Prior to the registration of any transfer by a Holder as provided
herein, the Company, the Trustee, and any agent of the Company shall treat the
person in whose name the Note is registered as the owner thereof for all
purposes whether or not the Note shall be overdue, and neither the Company, the
Trustee, nor any such agent shall be affected by notice to the contrary.
Furthermore, any Holder of a Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent) and that ownership of a beneficial interest in the
Note shall be required to be reflected in a book entry. When Notes are presented
to the Registrar or a co- Registrar with a request to register the transfer or
to exchange them for an equal principal amount of Notes of other authorized
denominations (including an exchange of Notes for Exchange Notes), the Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transactions are met; provided that no exchanges of Notes
for Exchange Notes shall occur until a Registration Statement shall have been
declared effective by the Commission and that any Notes that are exchanged for
Exchange Notes shall be cancelled by the Trustee. To permit registrations of
transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Notes at the Registrar's request. No service charge shall be made
for any registration of transfer or exchange or redemption of the Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any such
transfer taxes or other similar governmental charge payable upon exchanges
pursuant to Section 2.11, 3.08 or 9.04).
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The Registrar shall not be required (i) to issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Notes selected for redemption under Section 3.03 and ending at the close of
business on the day of such mailing, or (ii) to register the transfer of or
exchange any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
SECTION 2.07. Book-Entry Provisions for Global Notes. (a) The
U.S. Global Notes and Offshore Global Notes initially shall (i) be registered in
the name of the Depositary for such Global Notes or the nominee of such
Depositary, (ii) be delivered to the Trustee as custodian for such Depositary
and (iii) bear legends as set forth in Section 2.02.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depositary, or the Trustee as its custodian, or
under the Global Note, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee, from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers
of such Global Note in whole, but not in part, to the Depositary, its successors
or their respective nominees. Interests of beneficial owners in a Global Note
may be transferred in accordance with the rules and procedures of the Depositary
and the provisions of Section 2.08. In addition, U.S. Physical Notes and
Offshore Physical Notes shall be transferred to all beneficial owners in
exchange for their beneficial interests in the U.S. Global Notes or the Offshore
Global Notes, respectively, if (i) the Depositary notifies the Company that it
is unwilling or unable to continue as Depositary for the U.S. Global Notes or
the Offshore Global Notes, as the case may be, and a successor depositary is not
appointed by the Company within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing and the Registrar has received a request
to the foregoing effect from the Depositary.
(c) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, will
thereafter be subject to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
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(d) In connection with any transfer of a portion of the
beneficial interests in a U.S. Global Note or Offshore Global Note to beneficial
owners pursuant to paragraph (b) of this Section, the Registrar shall reflect on
its books and records the date and a decrease in the principal amount of the
U.S. Global Notes or Offshore Global Notes in an amount equal to the principal
amount of the beneficial interest in such Global Notes to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more U.S. Physical Notes or Offshore Physical Notes, as the case may be, of
like tenor and amount.
(e) In connection with the transfer of the entire U.S. Global
Note or Offshore Global Note to beneficial owners pursuant to paragraph (b) of
this Section, the U.S. Global Note or Offshore Global Note, as the case may be,
shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the U.S. Global Note or Offshore Global Note, as the case may be, an
equal aggregate principal amount of U.S. Physical Notes or Offshore Physical
Notes, as the case may be, of authorized denominations.
(f) Any U.S. Physical Note delivered in exchange for an
interest in the U.S. Global Note pursuant to paragraph (b), (d) or (e) of this
Section shall, except as otherwise provided by paragraph (e) of Section 2.08,
bear the legend regarding transfer restrictions applicable to the U.S. Physical
Note set forth in Section 2.02.
(g) Any Offshore Physical Note delivered in exchange for an
interest in the Offshore Global Note pursuant to paragraph (b), (d) or (e) of
this Section shall, except as otherwise provided by paragraph (e) of Section
2.08, bear the legend regarding transfer restrictions applicable to the Offshore
Physical Note set forth in Section 2.02.
(h) The registered holder of a Global Note may grant proxies
and otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
(i) Beneficial owners of interests in a U.S. Global Note may
receive U.S. Physical Notes (which shall bear the Private Placement Legend if
required by Section 2.02) in accordance with the procedures of the Depositary.
In connection with the execution, authentication and delivery of such U.S.
Physical Notes, the Registrar shall reflect on its books and records a decrease
in the principal amount of the relevant U.S. Global Note equal to the principal
amount of such U.S. Physical Notes and the Company shall execute and the Trustee
shall authenticate and deliver one or more U.S. Physical Notes having an equal
aggregate principal amount.
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SECTION 2.08. Special Transfer Provisions. Unless and until a
Note is exchanged for an Exchange Note in connection with an effective
Registration Statement pursuant to the Registration Rights Agreement, the
following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors.
The following provisions shall apply with respect to the registration of any
proposed transfer of a Note to any Institutional Accredited Investor which is
not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Note,
whether or not such Note bears the Private Placement Legend, if (x) the
requested transfer is after the time period referred to in Rule 144(k)
under the Securities Act as in effect with respect to such transfer or
(y) the proposed transferee has delivered to the Registrar (A) a
certificate substantially in the form of Exhibit C hereto and (B) if
the Accreted Value of the Notes being transferred is less than $100,000
at the time of such transfer, an opinion of counsel acceptable to the
Company that such transfer is in compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Note, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i) and
(y) instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the U.S.
Global Note in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Note to be transferred, and the
Company shall execute, and the Trustee shall authenticate and deliver,
one or more U.S. Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of a U.S. Physical
Note, an interest in a U.S. Global Note or an interest in an Offshore Global
Note prior to the removal of the Private Placement Legend to a QIB (excluding
Non-U.S. Persons):
(i) If the Note to be transferred consists of (x) either (A)
an interest in a Offshore Global Note prior to the removal of the
Private Placement Legend or (B) U.S. Physical Notes, the Registrar
shall register the transfer if such transfer is being made by a
proposed transferor who has checked the box provided for on the form of
Note stating, or has otherwise advised the Company and the Registrar in
writing, that the sale has been made in compliance with the provisions
of Rule 144A to a transferee who has signed the certification provided
for on the form of Note stating, or has otherwise advised the Company
and the Registrar in writing, that it is purchasing the Note for its
own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within
the meaning of Rule 144A, and is aware that the sale to it is being
made in reliance
<PAGE> 34
32
on Rule 144A and acknowledges that it has received such information
regarding the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order
to claim the exemption from registration provided by Rule 144A or (y)
an interest in the U.S. Global Notes, the transfer of such interest may
be effected only through the book entry system maintained by the
Depositary.
(ii) If the proposed transferee is an Agent Member, and the
Note to be transferred consists of U.S. Physical Notes, upon receipt by
the Registrar of the documents referred to in clause (i) and
instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the U.S.
Global Notes in an amount equal to the principal amount of the U.S.
Physical Notes, to be transferred, and the Trustee shall cancel the
U.S. Physical Notes so transferred.
(c) Transfers of Interests in the Offshore Global Note or
Offshore Physical Notes. The following provisions shall apply with respect to
any transfer of interests in the Offshore Global Notes or Offshore Physical
Notes:
(i) prior to the removal of the Private Placement Legend from
a Offshore Global Note or Offshore Physical Note pursuant to Section
2.02, the Registrar shall refuse to register such transfer unless such
transfer complies with Section 2.08(b) or Section 2.08(d), as the case
may be; and
(ii) after such removal, the Registrar shall register the
transfer of any such Note without requiring any additional
certification.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of a Note to a Non-U.S.
Person:
(i) The Registrar shall register any proposed transfer to any
Non-U.S. Person if the Note to be transferred is a U.S. Physical Note
or an interest in the U.S. Global Note only upon receipt of a
certificate substantially in the form of Exhibit D from the proposed
transferor.
(ii) (a) If the proposed transferor is an Agent Member holding
a beneficial interest in a U.S. Global Note, upon receipt by the
Registrar of (x) the documents required by paragraph (i) and (y)
instructions in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the
date and a decrease in the principal amount of such U.S. Global Note in
an amount equal to the principal amount of the beneficial interest in
the U.S. Global Note to be transferred, and (b) if the proposed
transferee is an Agent Member, upon receipt by
<PAGE> 35
33
the Registrar of instructions given in accordance with the Depositary's
and the Registrar's procedures, the Registrar shall reflect on its
books and records the date and an increase in the principal amount of
the Offshore Global Note in an amount equal to the principal amount of
the U.S. Physical Notes or the U.S. Global Note, as the case may be, to
be transferred, and the Trustee shall cancel the Physical Note, if any,
so transferred or decrease the amount of the U.S. Global Note.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless either (i) the circumstances contemplated by paragraphs (a)(i)(x) or
(c)(ii) of this Section 2.08 exist or (ii) there is delivered to the Registrar
an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to
the effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(f) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture. The Registrar shall not register a transfer of any Note unless such
transfer complies with the restrictions on transfer of such Note set forth in
this Indenture. In connection with any transfer of Notes, each Holder agrees by
its acceptance of the Notes to furnish the Registrar or the Company such
certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration requirements
of the Securities Act; provided that the Registrar shall not be required to
determine (but may conclusively rely on a determination made by the Company with
respect to) the sufficiency of any such certifications, legal opinions or other
information.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.07 or this Section
2.08. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
SECTION 2.09. Replacement Notes. If a mutilated Note is
surrendered to the Trustee or if the Holder claims that the Note has been lost,
destroyed or wrongfully taken, then, in the absence of notice to the Company or
the Trustee that such Note has been acquired by a bona fide purchaser, the
Company shall issue and the Trustee shall authenticate a replacement Note of
like tenor and principal amount; provided that the requirements of this Section
2.09 are met. If required by the Trustee or the Company, an indemnity bond must
<PAGE> 36
34
be furnished that is sufficient in the judgment of both the Trustee and the
Company to protect the Company, the Trustee or any Agent from any loss that any
of them may suffer if a Note is replaced. The Company may charge such Holder for
the expenses of the Company and the Trustee in replacing a Note. In case any
such mutilated, lost, destroyed or wrongfully taken Note has become or is about
to become due and payable, the Company in its discretion may pay such Note
instead of issuing a new Note in replacement thereof.
Every replacement Note is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.
The provisions of this Section 2.09 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies against the
Company and the Trustee with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Notes.
SECTION 2.10. Outstanding Notes. Notes outstanding at any time
are all Notes that have been authenticated by the Trustee except for those
cancelled by it, those delivered to it for cancellation and those described in
this Section 2.10 as not outstanding.
If a Note is replaced pursuant to Section 2.09, it ceases to
be outstanding unless and until the Trustee and the Company receive proof
satisfactory to each of them that the replaced Note is held by a bona fide
purchaser.
If the Paying Agent (other than the Company or an Affiliate of
the Company) holds on a Redemption Date or the Stated Maturity of the Notes
money sufficient to pay Notes payable on that date, then on and after that date
such Notes cease to be outstanding and interest on them shall cease to accrue.
Notes, or portions thereof, for the payment or redemption of
which moneys or U.S. Government Obligations (as provided for in Article Eight)
in the necessary amount shall have been deposited in trust with the Trustee or
with any Paying Agent (other than the Company) or shall have been set aside,
segregated and held in trust by the Company for the Holders of such Notes (if
the Company shall act as its own Paying Agent), on and after that time shall
cease to be outstanding and, in the case of redemption, interest on such Notes
shall cease to accrue, provided that if such Notes, or portions thereof, are to
be redeemed prior to the maturity thereof, notice of such redemption shall have
been given as herein provided, or provision satisfactory to the Trustee shall
have been made for giving such notice.
A Note does not cease to be outstanding because the Company or
one of its Affiliates holds such Note, provided, however, that, in determining
whether the Holders of the requisite principal amount of the outstanding Notes
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder, Notes owned by the Company or any other obligor upon the Notes
or any Affiliate of the Company or of such other obligor
<PAGE> 37
35
shall be disregarded and deemed not to be outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only Notes
which the Trustee has actual knowledge to be so owned shall be so disregarded.
Notes so owned which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is not
the Company or any other obligor upon the Notes or any Affiliate of the Company
or of such other obligor.
SECTION 2.11. Temporary Notes. Until definitive Notes are
ready for delivery, the Company may prepare and execute and the Trustee shall
authenticate temporary Notes. Temporary Notes shall be substantially in the form
of definitive Notes but may have insertions, substitutions, omissions and other
variations determined to be appropriate by the Officers executing the temporary
Notes, as evidenced by their execution of such temporary Notes. If temporary
Notes are issued, the Company will cause definitive Notes to be prepared without
unreasonable delay. After the preparation of definitive Notes, the temporary
Notes shall be exchangeable for definitive Notes upon surrender of the temporary
Notes at the office or agency of the Company designated for such purpose
pursuant to Section 4.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Notes the Company shall execute and
the Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Notes of authorized denominations. Until so exchanged, the
temporary Notes shall be entitled to the same benefits under this Indenture as
definitive Notes.
SECTION 2.12. Cancellation. The Company at any time may
deliver, or cause to be delivered, Notes to the Trustee for cancellation. The
Registrar and the Paying Agent shall forward to the Trustee any Notes
surrendered to them for transfer, exchange or payment. The Trustee (and no one
else) shall cancel all Notes surrendered for transfer, exchange, payment,
replacement or cancellation and shall destroy them in accordance with its normal
procedure.
SECTION 2.13. CUSIP Numbers. The Company in issuing the Notes
may use "CUSIP," "CINS" and "ISIN" numbers (if then generally in use), and the
Trustee shall use CUSIP, CINS or ISIN numbers, as the case may be, in notices of
redemption or exchange as a convenience to Holders; provided that any such
notice shall state that no representation is made as to the correctness of such
CUSIP, CINS or ISIN numbers either as printed on the Notes or as contained in
any notice of redemption or exchange and that reliance may be placed only on the
other identification numbers printed on the Notes; and provided further that
failure to use CUSIP, CINS or ISIN numbers in any notice of redemption or
exchange shall not affect the validity or sufficiency of such notice. The
Company shall promptly notify the Trustee of any change in CUSIP numbers.
<PAGE> 38
36
SECTION 2.14. Defaulted Interest. If the Company defaults in a
payment of interest on the Notes, it shall pay, or shall deposit with the Paying
Agent money in immediately available funds sufficient to pay the defaulted
interest, plus (to the extent lawful) any interest payable on the defaulted
interest, to the Persons who are Holders on a subsequent special record date. A
special record date, as used in this Section 2.14 with respect to the payment of
any defaulted interest, shall mean the 15th day next preceding the date fixed by
the Company for the payment of defaulted interest, whether or not such day is a
Business Day. At least 15 days before the subsequent special record date, the
Company shall mail to each Holder and to the Trustee a notice that states the
subsequent special record date, the payment date and the amount of defaulted
interest to be paid.
SECTION 2.15. Issuance of Additional Notes. The Company may,
subject to Article Four of this Indenture, issue additional Notes under this
Indenture. The Notes issued on the Closing Date and any additional Notes
subsequently issued shall be treated as a single class for all purposes under
this Indenture.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption. (a) The Notes may be
redeemed at the election of the Company, in whole or in part, at any time and
from time to time on or after February 1, 2003 and prior to maturity, upon not
less than 30 nor more than 60 days' prior notice mailed by first-class mail to
each Holder's last address as it appears in the Note Register, at the following
Redemption Prices (expressed in percentages of their principal amount at
maturity), plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date) if redeemed during the 12-month period commencing
February 1, of the applicable years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003 105.625%
2004 103.750
2005 101.875
2006 and thereafter 100.000
</TABLE>
(b) In addition, at any time prior to February 1, 2001, the
Company may redeem up to 35% of the principal amount of the Notes with the
proceeds of one or more sales of Capital Stock (other than Redeemable Stock), of
the Company, at any time or from time to time in part, at a Redemption Price
equal to 111.250% of their Accreted Value on
<PAGE> 39
37
the Redemption Date provided that at least $280.8 million aggregate principal
amount at maturity of Notes remains outstanding after each of such redemption.
SECTION 3.02. Notices to Trustee. If the Company elects to
redeem Notes pursuant to Section 3.01(a) or 3.01(b), it shall notify the Trustee
in writing of the Redemption Date and the principal amount of Notes to be
redeemed.
The Company shall give each notice provided for in this
Section 3.02 in an Officers' Certificate at least 45 days before the Redemption
Date (unless a shorter period shall be satisfactory to the Trustee).
SECTION 3.03. Selection of Notes to Be Redeemed. If less than
all of the Notes are to be redeemed at any time, the Trustee shall select the
Notes to be redeemed in compliance with the requirements, as certified to it by
the Company, of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not listed on a national securities
exchange, by lot or by such other method as the Trustee in its sole discretion
shall deem fair and appropriate; provided that no Notes of $1,000 in principal
amount at maturity or less shall be redeemed in part.
The Trustee shall make the selection from the Notes
outstanding and not previously called for redemption. Notes in denominations of
$1,000 in principal amount at maturity may only be redeemed in whole. The
Trustee may select for redemption portions (equal to $1,000 in principal amount
at maturity or any integral multiple thereof) of Notes that have denominations
larger than $1,000 in principal amount at maturity. Provisions of this Indenture
that apply to Notes called for redemption also apply to portions of Notes called
for redemption. The Trustee shall notify the Company and the Registrar promptly
in writing of the Notes or portions of Notes to be called for redemption.
SECTION 3.04. Notice of Redemption. At least 30 days but not
more than 60 days before a Redemption Date, the Company shall mail a notice of
redemption by first class mail to each Holder whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and shall
state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered
to the Paying Agent in order to collect the Redemption Price;
<PAGE> 40
38
(v) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on
and after the Redemption Date and the only remaining right of the
Holders is to receive payment of the Redemption Price plus accrued
interest to the Redemption Date upon surrender of the Notes to the
Paying Agent;
(vi) that, if any Note is being redeemed in part, the portion
of the principal amount (equal to $1,000 in principal amount at
maturity or any integral multiple thereof) of such Note to be redeemed
and that, on and after the Redemption Date, upon surrender of such
Note, a new Note or Notes in principal amount equal to the unredeemed
portion thereof will be reissued; and
(vii) that, if any Note contains a CUSIP number as provided in
Section 2.13, no representation is being made as to the correctness of
the CUSIP number either as printed on the Notes or as contained in the
notice of redemption and that reliance may be placed only on the other
identification numbers printed on the Notes.
At the Company's request (which request may be revoked by the
Company at any time prior to the time at which the Trustee shall have given such
notice to the Holders), made in writing to the Trustee at least 60 days (or such
shorter period as shall be satisfactory to the Trustee) before a Redemption
Date, the Trustee shall give the notice of redemption in the name and at the
expense of the Company. If, however, the Company gives such notice to the
Holders, the Company shall concurrently deliver to the Trustee an Officers'
Certificate stating that such notice has been given.
SECTION 3.05. Effect of Notice of Redemption. Once notice of
redemption is mailed, Notes called for redemption become due and payable on the
Redemption Date and at the Redemption Price. Upon surrender of any Notes to the
Paying Agent, such Notes shall be paid at the Redemption Price, plus accrued
interest, if any, to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed,
whether or not the Holder receives the notice. In any event, failure to give
such notice, or any defect therein, shall not affect the validity of the
proceedings for the redemption of Notes held by Holders to whom such notice was
properly given.
SECTION 3.06. Deposit of Redemption Price. On or prior to any
Redemption Date, the Company shall deposit with the Paying Agent (or, if the
Company is acting as its own Paying Agent, shall segregate and hold in trust as
provided in Section 2.05) money sufficient to pay the Redemption Price of and
accrued interest on all Notes to be redeemed on that date other than Notes or
portions thereof called for redemption on that date that have been delivered by
the Company to the Trustee for cancellation.
<PAGE> 41
39
SECTION 3.07. Payment of Notes Called for Redemption. If
notice of redemption has been given in the manner provided above, the Notes or
portion of Notes specified in such notice to be redeemed shall become due and
payable on the Redemption Date at the Redemption Price stated therein, together
with accrued interest to such Redemption Date, and on and after such date
(unless the Company shall default in the payment of such Notes at the Redemption
Price and accrued interest to the Redemption Date, in which case the principal,
until paid, shall bear interest from the Redemption Date at the rate prescribed
in the Notes), such Notes shall cease to accrue interest. Upon surrender of any
Note for redemption in accordance with a notice of redemption, such Note shall
be paid and redeemed by the Company at the Redemption Price, together with
accrued interest, if any, to the Redemption Date; provided that installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders registered as such at the close of business on the
relevant Regular Record Date.
SECTION 3.08. Notes Redeemed in Part. Upon surrender of any
Note that is redeemed in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder a new Note equal in principal amount to
the unredeemed portion of such surrendered Note.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes. The Company shall pay the
principal of, premium, if any, and interest on the Notes on the dates and in the
manner provided in the Notes and this Indenture. An installment of principal,
premium, if any, or interest shall be considered paid on the date due if the
Trustee or Paying Agent (other than the Company, a Subsidiary of the Company, or
any Affiliate of any of them) holds on that date money designated for and
sufficient to pay the installment. If the Company or any Subsidiary of the
Company or any Affiliate of any of them, acts as Paying Agent, an installment of
principal, premium, if any, or interest shall be considered paid on the due date
if the entity acting as Paying Agent complies with the last sentence of Section
2.05. As provided in Section 6.09, upon any bankruptcy or reorganization
procedure relative to the Company, the Trustee shall serve as the Paying Agent
and conversion agent, if any, for the Notes.
The Company shall pay interest on overdue principal, premium,
if any, and interest on overdue installments of interest, to the extent lawful,
at the rate per annum specified in the Notes.
SECTION 4.02. Maintenance of Office or Agency. The Company
will maintain in the Borough of Manhattan, the City of New York an office or
agency where Notes may be surrendered for registration of transfer or exchange
or for presentation for
<PAGE> 42
40
payment and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company will give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee set forth in Section 11.02.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby initially designates the Corporate Trust
Office of the Trustee, located in the Borough of Manhattan, the City of New
York, as such office of the Company in accordance with Section 2.04.
SECTION 4.03. Limitation on Indebtedness. (a) The Company
will not, and will not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness (other than the Notes and Indebtedness existing on the Closing
Date); provided that the Company may Incur Indebtedness if, after giving effect
to the Incurrence of such Indebtedness and the receipt and application of the
proceeds therefrom, the Consolidated Leverage Ratio would be greater than zero
and less than (x) 7:1, for Indebtedness Incurred on or prior to December 31,
2000 or (y) 6:1, for Indebtedness Incurred thereafter.
Notwithstanding the foregoing, the Company and any Restricted
Subsidiary (except as specified below) may Incur each and all of the following:
(i) Indebtedness of the Company outstanding at any time in an
aggregate principal amount not to exceed the greater of (x) $150
million and (y) an amount equal to 4.5 times the Company's Consolidated
EBITDA for the then most recent four fiscal quarters for which
financial statements of the Company have been filed with the Commission
or provided to the Trustee pursuant to Section 4.18, in each case less
any amount of such Indebtedness permanently repaid as provided under
Section 4.11;
(ii) Indebtedness owed (A) to the Company evidenced by a
promissory note or (B) to any Restricted Subsidiary; provided that any
event which results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any subsequent transfer of such Indebtedness
(other than to the Company or another Restricted Subsidiary)
<PAGE> 43
41
shall be deemed, in each case, to constitute an Incurrence of such
Indebtedness not permitted by this clause (ii);
(iii) Indebtedness issued in exchange for, or the net proceeds
of which are used to refinance or refund, then outstanding Indebtedness
(other than Indebtedness Incurred under clause (i), (ii), (iv), (vii),
(ix) or (xi) of this paragraph) and any refinancings thereof in an
amount not to exceed the amount so refinanced or refunded (plus
premiums, accrued interest, fees and expenses); provided that
Indebtedness the proceeds of which are used to refinance or refund the
Notes or Indebtedness that is pari passu with, or subordinated in right
of payment to, the Notes shall only be permitted under this clause
(iii) if (A) in case the Notes are refinanced in part or the
Indebtedness to be refinanced is pari passu with the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is outstanding, is
expressly made pari passu with, or subordinate in right of payment to,
the remaining Notes, (B) in case the Indebtedness to be refinanced is
subordinated in right of payment to the Notes, such new Indebtedness,
by its terms or by the terms of any agreement or instrument pursuant to
which such new Indebtedness is issued or remains outstanding, is
expressly made subordinate in right of payment to the Notes at least to
the extent that the Indebtedness to be refinanced is subordinated to
the Notes and (C) such new Indebtedness, determined as of the date of
Incurrence of such new Indebtedness, does not mature prior to the
Stated Maturity of the Indebtedness to be refinanced or refunded, and
the Average Life of such new Indebtedness is at least equal to the
remaining Average Life of the Indebtedness to be refinanced or
refunded; and provided further that in no event may Indebtedness of the
Company be refinanced by means of any Indebtedness of any Restricted
Subsidiary pursuant to this clause (iii);
(iv) Indebtedness (A) in respect of performance, surety or
appeal bonds provided in the ordinary course of business, (B) under
Currency Agreements and Interest Rate Agreements; provided that such
agreements (a) are designed solely to protect the Company or its
Restricted Subsidiaries against fluctuations in foreign currency
exchange rates or interest rates and (b) do not increase the
Indebtedness of the obligor outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest
rates or by reason of fees, indemnities and compensation payable
thereunder and (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations,
or from Guarantees or letters of credit, surety bonds or performance
bonds securing any obligations of the Company or any of its Restricted
Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted
Subsidiary (other than Guarantees of Indebtedness Incurred by any
Person acquiring all or any portion of such business, assets or
Restricted Subsidiary for the purpose of financing such acquisition),
in a principal amount not to exceed the
<PAGE> 44
42
gross proceeds actually received by the Company or any Restricted
Subsidiary in connection with such disposition;
(v) Indebtedness under letters of credit and bankers'
acceptances issued in the ordinary course of business;
(vi) Acquired Indebtedness; provided that, with respect to
this clause (vi), after giving effect to the Incurrence thereof, the
Company's Consolidated Leverage Ratio is not more than it was
immediately prior to the Incurrence of such Acquired Indebtedness;
(vii) Indebtedness, in an amount not to exceed $2 million at
any one time outstanding, Incurred by the Company in connection with
the purchase, redemption, acquisition, cancellation or other retirement
for value of shares of Capital Stock of the Company or any Restricted
Subsidiary, options on any such shares or related stock appreciation
rights or similar securities held by officers or employees or former
officers or employees (or their estates or beneficiaries under their
estates), upon death, disability, retirement, termination of employment
or pursuant to any agreement under which such shares of stock or
related rights were issued; provided that (A) such Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to which
such Indebtedness is issued, is expressly made subordinate in right of
payment to the Notes, (B) such Indebtedness, by its terms or by the
terms of any agreement or instrument pursuant to which such
Indebtedness is issued, provides that no payments of principal of such
Indebtedness by way of sinking fund, mandatory redemption or otherwise
(including defeasance) may be made by the Company at any time prior to
the Stated Maturity of the Notes and (C) the scheduled maturity of all
principal of such Indebtedness is beyond the Stated Maturity of the
Notes;
(viii) Indebtedness of the Company to the extent the net
proceeds thereof are promptly (A) used to purchase Notes tendered in an
Offer to Purchase made as a result of a Change in Control or (B)
deposited to defease the Notes in accordance with Section 8.01;
(ix) Guarantees of the Notes and Guarantees of Indebtedness of
the Company by any Restricted Subsidiary provided the Guarantee of such
Indebtedness is permitted by and made in accordance with Section 4.09;
(x) Indebtedness Incurred to finance the cost (including the
cost of design, development, acquisition, construction, installation,
improvement, transportation or integration) of equipment, inventory or
network assets (including under any Capitalized Lease and the cost of
the Capital Stock of a Person that becomes a Restricted Subsidiary to
the extent of the fair market value of the equipment,
<PAGE> 45
43
inventory or network assets of such Person at the time it becomes a
Restricted Subsidiary) to be acquired by the Company or a Restricted
Subsidiary after the Closing Date;
(xi) Indebtedness of the Company not to exceed, at any time
outstanding, two times the sum of (A) the Net Cash Proceeds received by
the Company after the Closing Date from the issuance and sale of its
Capital Stock (other than Redeemable Stock) to a Person that is not a
Subsidiary of the Company, to the extent such Net Cash Proceeds have
not been used pursuant to clause (C)(2) of the first paragraph or
clause (iii), (iv) or (vi) of the second paragraph of Section 4.06 to
make a Restricted Payment and (B) 80% of the fair market value of
property (other than cash and cash equivalents) received by the Company
after the Closing Date from the sale of its Capital Stock (other than
Redeemable Stock) to a Person that is not a Subsidiary of the Company,
to the extent such sale of Capital Stock has not been used pursuant to
clause (iii), (iv) or (vii) of the second paragraph of Section 4.06 to
make a Restricted Payment; provided that such Indebtedness does not
mature prior to the Stated Maturity of the Notes and has an Average
Life longer than the Notes; and
(xii) Guarantees of Indebtedness, in an aggregate principal
amount not to exceed $10 million, of any Person the primary business of
which is located outside the United States and is related, ancillary or
complementary to the business of the Company and its Restricted
Subsidiaries.
(b) Notwithstanding any other provision of this Section 4.03,
the maximum amount of Indebtedness that the Company or a Restricted Subsidiary
may Incur pursuant to this Section 4.03 shall not be deemed to be exceeded, with
respect to any outstanding Indebtedness due solely to the result of fluctuations
in the exchange rates of currencies.
(c) For purposes of determining any particular amount of
Indebtedness under this Section 4.03, (1) Guarantees, Liens or obligations with
respect to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included and (2) any Liens
granted pursuant to the equal and ratable provisions referred to in Section 4.05
shall not be treated as Indebtedness. For purposes of determining compliance
with this Section 4.03, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses, the Company, in its sole discretion, shall classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses.
SECTION 4.04. Limitation on Senior Subordinated Indebtedness.
The Company shall not Incur any Indebtedness that is subordinate in right of
payment to any Senior Indebtedness unless such Indebtedness is pari passu with,
or subordinated in right of payment to, the Notes; provided that the foregoing
limitation shall not apply to distinctions
<PAGE> 46
44
between categories of Senior Indebtedness of the Company that exist by reason of
any Liens or Guarantees arising or created in respect of some but not all such
Senior Indebtedness.
SECTION 4.05. Limitation on Liens. The Company shall not Incur
any Indebtedness secured by a Lien ("Secured Indebtedness") which is not Senior
Indebtedness unless contemporaneously therewith effective provision is made to
secure the Notes equally and ratably with (or, if the Secured Indebtedness is
subordinated in right of payment to the Notes, prior to) such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien.
SECTION 4.06. Limitation on Restricted Payments. The Company
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, (i) declare or pay any dividend or make any distribution on or with
respect to its Capital Stock (other than (x) dividends or distributions payable
solely in shares of its Capital Stock (other than Redeemable Stock) or in
options, warrants or other rights to acquire shares of such Capital Stock and
(y) pro rata dividends or distributions on Common Stock of Restricted
Subsidiaries held by minority stockholders) held by Persons other than the
Company or any of its Restricted Subsidiaries, (ii) purchase, redeem, retire or
otherwise acquire for value any shares of Capital Stock of (A) the Company or an
Unrestricted Subsidiary (including options, warrants or other rights to acquire
such shares of Capital Stock) held by any Person, or (B) a Restricted Subsidiary
(including options, warrants or other rights to acquire such shares of Capital
Stock) held by any Affiliate of the Company (other than a Wholly Owned
Restricted Subsidiary) or any holder (or any Affiliate of such holder) of 5% or
more of the Capital Stock of the Company, (iii) make any voluntary or optional
principal payment, or voluntary or optional redemption, repurchase, defeasance,
or other acquisition or retirement for value, of Indebtedness of the Company
that is subordinated in right of payment to the Notes, or (iv) make any
Investment, other than a Permitted Investment, in any Person (such payments or
any other actions described in clauses (i) through (iv) being collectively
"Restricted Payments") if, at the time of, and after giving effect to, the
proposed Restricted Payment: (A) a Default or Event of Default shall have
occurred and be continuing, (B) the Company could not Incur at least $1.00 of
Indebtedness under the first paragraph of Section 4.03(a) or (C) the aggregate
amount expended for all Restricted Payments (the amount, if other than in cash,
to be determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a Board Resolution) made after the Closing
Date shall exceed the sum of (1) 50% of the aggregate amount of the Adjusted
Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss,
minus 100% of the amount of such loss) (determined by excluding income resulting
from transfers of assets by the Company or a Restricted Subsidiary to an
Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken
as one accounting period) beginning on the first day of the fiscal quarter
immediately following the Closing Date and ending on the last day of the last
fiscal quarter preceding the Transaction Date for which reports have been filed
with the Commission or provided to the Trustee pursuant to Section 4.18 plus (2)
the aggregate Net Cash Proceeds
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45
received by the Company after the Closing Date from the issuance and sale
permitted by this Indenture of its Capital Stock (other than Redeemable Stock)
to a Person who is not a Subsidiary of the Company, including an issuance or
sale permitted by this Indenture of Indebtedness of the Company for cash
subsequent to the Closing Date, upon the conversion of such Indebtedness into
Capital Stock (other than Redeemable Stock) of the Company, or from the issuance
to a Person who is not a Subsidiary of the Company of any options, warrants or
other rights to acquire Capital Stock of the Company (in each case, exclusive of
any Redeemable Stock or any options, warrants or other rights that are
redeemable at the option of the holder, or are required to be redeemed, prior to
the Stated Maturity of the Notes), in each case except to the extent such Net
Cash Proceeds are used to Incur Indebtedness pursuant to clause (xi) of the
second paragraph of Section 4.03 plus (3) an amount equal to the net reduction
in Investments (other than reductions in Permitted Investments) in any Person
resulting from payments of interest on Indebtedness, dividends, repayments of
loans or advances, or other transfers of assets, in each case to the Company or
any Restricted Subsidiary or from the Net Cash Proceeds from the sale of any
such Investment (except, in each case, to the extent any such payment or
proceeds are included in the calculation of Adjusted Consolidated Net Income),
or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued in each case as provided in the definition of "Investments"), not to
exceed, in each case, the amount of Investments previously made by the Company
or any Restricted Subsidiary in such Person or Unrestricted Subsidiary.
The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend within 60 days after the date
of declaration thereof if, at said date of declaration, such payment
would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Indebtedness that is
subordinated in right of payment to the Notes including premium, if
any, and accrued and unpaid interest, with the proceeds of, or in
exchange for, Indebtedness Incurred under clause (iii) of the second
paragraph of Section 4.03(a);
(iii) the repurchase, redemption or other acquisition of
Capital Stock of the Company or an Unrestricted Subsidiary (or options,
warrants or other rights to acquire said Capital Stock) in exchange
for, or out of the proceeds of a substantially concurrent offering of,
shares of Capital Stock (other than Redeemable Stock) of the Company
(or options, warrants or other rights to acquire such Capital Stock);
(iv) the making of any principal payment or the repurchase,
redemption, retirement, defeasance or other acquisition for value of
Indebtedness of the Company which is subordinated in right of payment
to the Notes in exchange for, or out of the
<PAGE> 48
46
proceeds of, a substantially concurrent offering of, shares of the
Capital Stock (other than Redeemable Stock) of the Company (or options,
warrants or other rights to acquire such Capital Stock);
(v) payments or distributions, to dissenting stockholders
pursuant to applicable law, pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the
provisions of this Indenture applicable to mergers, consolidations and
transfers of all or substantially all of the property and assets of the
Company;
(vi) Investments in any Person the primary business of which
is related, ancillary or complementary to the business of the Company
and its Restricted Subsidiaries on the date of such Investments;
provided that the aggregate amount of Investments made pursuant to this
clause (vi) does not exceed the sum of (x) $15 million plus (y) the
amount of Net Cash Proceeds received by the Company after the Closing
Date from the sale of its Capital Stock (other than Redeemable Stock)
to a Person who is not a Subsidiary of the Company, except to the
extent such Net Cash Proceeds are used to Incur Indebtedness pursuant
to clause (xi) of Section 4.03 or to make Restricted Payments pursuant
to clause (C)(2) of the first paragraph, or clauses (iii) or (iv) of
this paragraph, of this Section 4.06, plus (z) the net reduction in
Investments made pursuant to this clause (vi) resulting from
distributions on or repayments of such Investments or from the Net Cash
Proceeds from the sale of any such Investment (except in each case to
the extent any such payment or proceeds is included in the calculation
of Adjusted Consolidated Net Income) or from such Person becoming a
Restricted Subsidiary (valued in each case as provided in the
definition of "Investments"), provided that the net reduction in any
Investment shall not exceed the amount of such Investment;
(vii) Investments acquired in exchange for Capital Stock
(other than Redeemable Stock) of the Company;
(viii) the declaration or payment of dividends on the Common
Stock of the Company following a Public Equity Offering of such Common
Stock, of up to 6% per annum of the Net Cash Proceeds received by the
Company in such Public Equity Offering;
(ix) repurchases of Warrants pursuant to a Repurchase Offer
(as defined in the Warrant Agreement);
(x) any purchase of any fractional share of Common Stock of
the Company in connection with an exercise of the Warrants;
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47
(xi) the purchase, redemption, acquisition, cancellation or
other retirement for value of shares of Capital Stock of the Company or
any Restricted Subsidiary, options on any such shares or related stock
appreciation rights or similar securities held by officers or employees
or former officers or employees (or their estates or beneficiaries
under their estates), upon death, disability, retirement, termination
of employment or pursuant to any agreement under which such shares of
stock or related rights were issued; provided that the aggregate cash
consideration paid for such purchase, redemption, acquisition,
cancellation or other retirement of such shares of Capital Stock or
related rights after the Closing Date does not exceed an aggregate
amount of $5 million;
(xii) the purchase, redemption, acquisition, cancellation or
other retirement for value of shares of Capital Stock of the Company or
any Restricted Subsidiary to the extent necessary, in the judgment of
the Board of Directors, to prevent the loss or secure the renewal or
reinstatement of any license or franchise held by the Company or any of
its Restricted Subsidiaries from any governmental agency;
(xiii) Investments in any Person the primary business of which
is located outside the United States and is related, ancillary or
complementary to the business of the Company and its Restricted
Subsidiaries on the date of such Investments, provided that the
aggregate amount of Investments pursuant to this clause (xiii) does not
exceed (x) $10 million plus (y) the net reduction in Investments made
pursuant to this clause (xiii) resulting from distributions on or
repayments of such Investments or from the Net Cash Proceeds from the
sale of any such Investment (except in each case to the extent any such
payment or proceeds is included in the calculation of Adjusted
Consolidated Net Income) or from such Person becoming a Restricted
Subsidiary (valued in each case as provided in the definition of
"Investments"), provided that the net reduction in any Investment shall
not exceed the amount of such Investment; or
(xiv) Investments in the form of Guarantees Incurred under
Section 4.03(a)(xii);
provided that, except in the case of clauses (i) and (iii), no Default or Event
of Default shall have occurred and be continuing or occur as a consequence of
the actions or payments set forth therein.
Each Restricted Payment permitted pursuant to this Section
4.06 (other than the Restricted Payment referred to in clause (ii), an exchange
of Capital Stock for Capital Stock or Indebtedness referred to in clause (iii)
or (iv) and an Investment referred to in clause (vi) or (vii)), and the Net Cash
Proceeds from any issuance of Capital Stock referred to in clauses (iii) and
(iv), shall be included in calculating whether the conditions of clause (C) of
the first paragraph of this Section 4.06 have been met with respect to any
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48
subsequent Restricted Payments. In the event the proceeds of an issuance of
Capital Stock of the Company are used for the redemption, repurchase or other
acquisition of the Notes, or Indebtedness that is pari passu with the Notes,
then the Net Cash Proceeds of such issuance shall be included in clause (C) of
the first paragraph of this Section 4.06 only to the extent such proceeds are
not used for such redemption, repurchase or other acquisition of Indebtedness.
SECTION 4.07. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. The Company will not, and will
not permit any Restricted Subsidiary to, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to (i) pay dividends or make any
other distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any other Restricted
Subsidiary or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances
or restrictions:
(i) existing on the Closing Date in the Credit Agreement, the
Vendor Financing Arrangement, the 15% Indenture, this Indenture or any
other agreements in effect on the Closing Date, and any extensions,
refinancings, renewals or replacements of such agreements; provided
that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any
material respect to the Holders than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced,
renewed or replaced;
(ii) existing under or by reason of applicable law;
(iii) existing with respect to any Person or the property or
assets of such Person acquired by the Company or any Restricted
Subsidiary, existing at the time of such acquisition and not incurred
in contemplation thereof, which encumbrances or restrictions are not
applicable to any Person or the property or assets of any Person other
than such Person or the property or assets of such Person so acquired;
(iv) in the case of clause (iv) of the first paragraph of this
Section 4.07, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the
Company or any Restricted Subsidiary not otherwise prohibited by this
Indenture or (C) arising or agreed to in the ordinary course of
business, not relating to any Indebtedness, and that do not,
<PAGE> 51
49
individually or in the aggregate, detract from the value of property or
assets of the Company or any Restricted Subsidiary in any manner
material to the Company or any Restricted Subsidiary;
(v) with respect to a Restricted Subsidiary and imposed
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or
property and assets of, such Restricted Subsidiary; or
(vi) contained in the terms of any Indebtedness or any
agreement pursuant to which such Indebtedness was issued if (A) the
encumbrance or restriction applies only in the event of a payment
default or a default with respect to a financial covenant contained in
such Indebtedness or agreement, (B) the encumbrance or restriction is
not materially more disadvantageous to the Holders of the Notes than is
customary in comparable financings (as determined by the Company) and
(C) the Company determines that any such encumbrance or restriction
will not materially affect the Company's ability to make principal or
interest payments on the Notes.
Nothing contained in this Section 4.07 shall prevent the Company or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in Section 4.05 or (2) restricting the sale
or other disposition of property or assets of the Company or any of its
Restricted Subsidiaries that secure Indebtedness of the Company or any of its
Restricted Subsidiaries.
SECTION 4.08. Limitation on the Issuance and Sale of Capital
Stock of Restricted Subsidiaries. The Company will not sell, and will not permit
any Restricted Subsidiary, directly or indirectly, to issue or sell, any shares
of Capital Stock of a Restricted Subsidiary (including options, warrants or
other rights to purchase shares of such Capital Stock) except (i) to the Company
or a Wholly Owned Restricted Subsidiary; (ii) issuances of director's qualifying
shares or sales to foreign nationals of shares of Capital Stock of foreign
Restricted Subsidiaries, to the extent required by applicable law; (iii) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any Investment
in such Person remaining after giving effect to such issuance or sale would have
been permitted to be made under Section 4.06 if made on the date of such
issuance or sale; or (iv) issuances and sales of Common Stock, if the Net Cash
Proceeds from such issuance or sale are applied, to the extent required to be
applied, pursuant to Section 4.11.
SECTION 4.09. Limitation on Issuances of Guarantees by
Restricted Subsidiaries. The Company will not permit any Restricted Subsidiary,
directly or indirectly, to Guarantee any Indebtedness of the Company which is
pari passu with or subordinate in right of payment to the Notes ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to this Indenture
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50
providing for a Guarantee (a "Subsidiary Guarantee") of payment of the Notes by
such Restricted Subsidiary and (ii) such Restricted Subsidiary waives and will
not in any manner whatsoever claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights against
the Company or any other Restricted Subsidiary as a result of any payment by
such Restricted Subsidiary under its Subsidiary Guarantee; provided that this
paragraph shall not be applicable to any Guarantee of any Restricted Subsidiary
that existed at the time such Person became a Restricted Subsidiary and was not
Incurred in connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary. If the Guaranteed Indebtedness is (A) pari passu with the
Notes, then the Guarantee of such Guaranteed Indebtedness shall be pari passu
with, or subordinated to, the Subsidiary Guarantee or (B) subordinated to the
Notes, then the Guarantee of such Guaranteed Indebtedness shall be subordinated
to the Subsidiary Guarantee at least to the extent that the Guaranteed
Indebtedness is subordinated to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary may provide by its terms that it shall be automatically
and unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the Company's
and each Restricted Subsidiary's Capital Stock in, or all or substantially all
the assets of, such Restricted Subsidiary (which sale, exchange or transfer is
not prohibited by the Indenture) or (ii) the release or discharge of the
Guarantee which resulted in the creation of such Subsidiary Guarantee, except a
discharge or release by or as a result of payment under such Guarantee.
SECTION 4.10. Limitation on Transactions with Shareholders and
Affiliates. The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into, renew or extend any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) with any holder (or any
Affiliate of such holder) of 5% or more of any class of Capital Stock of the
Company or with any Affiliate of the Company or any Restricted Subsidiary,
except upon fair and reasonable terms no less favorable to the Company or such
Restricted Subsidiary than could be obtained, at the time of such transaction
or, if such transaction is pursuant to a written agreement, at the time of the
execution of the agreement providing therefor, in a comparable arm's-length
transaction with a Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply
to:
(i) transactions (A) approved by a majority of the
disinterested members of the Board of Directors or (B) for which the
Company or a Restricted Subsidiary delivers to the Trustee a written
opinion of a nationally recognized investment banking firm stating that
the transaction is fair to the Company or such Restricted Subsidiary
from a financial point of view;
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(ii) any transaction solely between the Company and any of its
Wholly Owned Restricted Subsidiaries or solely between Wholly Owned
Restricted
Subsidiaries;
(iii) the payment of reasonable and customary regular fees to
directors of the Company who are not employees of the Company;
(iv) any payments or other transactions pursuant to any
tax-sharing agreement between the Company and any other Person with
which the Company files a consolidated tax return or with which the
Company is part of a consolidated group for tax purposes;
(v) the payment of amounts to Morgan Stanley & Co.
Incorporated or its Affiliates pursuant to underwriting or placement
agreements;
(vi) any loans or advances to officers or employees of the
Company or any Restricted Subsidiary in the ordinary course of
business;
(vii) any Restricted Payments not prohibited by Section 4.06
(including any Permitted Investment);
(viii) the sale, lease, transfer or other disposition by the
Company or any Restricted Subsidiary of Capital Stock or assets of any
Unrestricted Subsidiary having a fair market value of less than $5
million as determined by the Board of Directors; and
(ix) any transactions solely between shareholders of the
Company (including amendments to any shareholder agreement to which the
Company is a party); provided that the Company is not affected in any
material way by any such transaction.
SECTION 4.11. Limitation on Asset Sales. The Company will not,
and will not permit any Restricted Subsidiary to, consummate any Asset Sale,
unless (i) the consideration received by the Company or such Restricted
Subsidiary is at least equal to the fair market value of the assets sold or
disposed of and (ii) at least 75% of the consideration received consists of cash
or Temporary Cash Investments or the assumption of Indebtedness of the Company
or such Restricted Subsidiary provided that the Company and its Restricted
Subsidiaries are irrevocably released from all liability with respect to such
Indebtedness. In the event and to the extent that the Net Cash Proceeds received
by the Company or any of its Restricted Subsidiaries from one or more Asset
Sales occurring on or after the Closing Date in any period of 12 consecutive
months exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of
the date closest to the commencement of such 12-month period for
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52
which a consolidated balance sheet of the Company and its Subsidiaries has been
filed with the Commission pursuant to Section 4.18), then the Company shall or
shall cause the relevant Restricted Subsidiary to (x) within 12 months after the
date Net Cash Proceeds so received exceed 10% of Adjusted Consolidated Net
Tangible Assets (A) apply an amount equal to such excess Net Cash Proceeds to
permanently repay Senior Indebtedness of the Company, or any Restricted
Subsidiary providing a Subsidiary Guarantee pursuant to Section 4.09 or
Indebtedness of any other Restricted Subsidiary, in each case owing to a Person
other than the Company or any of its Restricted Subsidiaries or (B) invest an
equal amount, or the amount not so applied pursuant to clause (A) (or enter into
a definitive agreement committing to so invest within 12 months after the date
of such agreement), in property or assets (other than current assets) of a
nature or type or that are used in a business (or in a company having property
and assets of a nature or type, or engaged in a business) similar or related to
the nature or type of the property and assets of, or the business of, the
Company and its Restricted Subsidiaries existing on the date of such investment
(as determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a Board Resolution) and (y) apply (no later
than the end of the 12-month period referred to in clause (x)) such excess Net
Cash Proceeds (to the extent not applied pursuant to clause (x)) as provided in
the following paragraphs of this Section 4.11. The amount of such excess Net
Cash Proceeds required to be applied (or to be committed to be applied) during
such 12- month period as set forth in clause (x) of the preceding sentence and
not applied as so required by the end of such period shall constitute "Excess
Proceeds".
If, as of the first day of any calendar month, the aggregate
amount of Excess Proceeds not theretofore subject to an Offer to Purchase
pursuant to this Section 4.11 totals at least $10 million, the Company must
commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate Accreted Value of Notes equal to the Excess Proceeds on such date, at
a purchase price equal to 100% of the Accreted Value of the Notes on the
relevant Payment Date, plus, in each case, accrued interest (if any) to the
Payment Date.
SECTION 4.12. Repurchase of Notes upon a Change of Control.
The Company shall commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Notes then outstanding, at
a purchase price equal to 101% of the Accreted Value thereof on the relevant
Payment Date, plus accrued interest (if any) to the Payment Date.
SECTION 4.13. Existence. Subject to Articles Four and Five of
this Indenture, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and the existence of
each of its Restricted Subsidiaries in accordance with the respective
organizational documents of the Company and each such Subsidiary and the rights
(whether pursuant to charter, partnership certificate, agreement, statute or
otherwise), material licenses and franchises of the Company and each such
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53
Subsidiary; provided that the Company shall not be required to preserve any such
right, license or franchise, or the existence of any Restricted Subsidiary, if
the maintenance or preservation thereof is no longer desirable in the conduct of
the business of the Company and Restricted its Subsidiaries taken as a whole.
SECTION 4.14. Payment of Taxes and Other Claims. The Company
will pay or discharge and shall cause each of its Subsidiaries to pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent (i) all material taxes, assessments and governmental charges levied
or imposed upon (a) the Company or any such Subsidiary, (b) the income or
profits of any such Subsidiary which is a corporation or (c) the property of the
Company or any such Subsidiary and (ii) all material lawful claims for labor,
materials and supplies that, if unpaid, might by law become a lien upon the
property of the Company or any such Subsidiary; provided that the Company shall
not be required to pay or discharge, or cause to be paid or discharged, any such
tax, assessment, charge or claim the amount, applicability or validity of which
is being contested in good faith by appropriate proceedings and for which
adequate reserves have been established.
SECTION 4.15. Maintenance of Properties and Insurance. The
Company will cause all properties used or useful in the conduct of its business
or the business of any of its Restricted Subsidiaries, to be maintained and kept
in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided
that nothing in this Section 4.15 shall prevent the Company or any such
Subsidiary from discontinuing the use, operation or maintenance of any of such
properties or disposing of any of them, if such discontinuance or disposal is,
in the judgment of the Company, desirable in the conduct of the business of the
Company or such Subsidiary.
The Company will provide or cause to be provided, for itself
and its Restricted Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds customarily insured against
by corporations similarly situated and owning like properties, including, but
not limited to, products liability insurance and public liability insurance,
with reputable insurers or with the government of the United States of America,
or an agency or instrumentality thereof, in such amounts, with such deductibles
and by such methods as shall be customary for corporations similarly situated in
the industry in which the Company or such Restricted Subsidiary, as the case may
be, is then conducting business.
SECTION 4.16. Notice of Defaults. In the event that the
Company becomes aware of any Default or Event of Default the Company, promptly
after it becomes aware thereof, will give written notice thereof to the Trustee.
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SECTION 4.17. Compliance Certificates. (a) The Company shall
deliver to the Trustee, within 45 days after the end of each fiscal quarter (90
days after the end of the last fiscal quarter of each year), an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default that occurred during such fiscal quarter. In the case of the Officers'
Certificate delivered within 90 days of the end of the Company's fiscal year,
such certificate shall contain a certification from the principal executive
officer, principal financial officer or principal accounting officer that a
review has been conducted of the activities of the Company and its Restricted
Subsidiaries and the Company's and its Restricted Subsidiaries' performance
under this Indenture and that the Company has complied with all conditions and
covenants under this Indenture. For purposes of this Section 4.17, such
compliance shall be determined without regard to any period of grace or
requirement of notice provided under this Indenture. If they do know of such a
Default or Event of Default, the certificate shall describe any such Default or
Event of Default and its status. The first certificate to be delivered pursuant
to this Section 4.17(a) shall be for the first fiscal quarter beginning after
the execution of this Indenture.
(b) The Company shall deliver to the Trustee, within 90 days
after the end of the Company's fiscal year, a certificate signed by the
Company's independent certified public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the Notes
as they relate to accounting matters, (ii) that they have read the most recent
Officers' Certificate delivered to the Trustee pursuant to paragraph (a) of this
Section 4.17 and (iii) whether, in connection with their audit examination,
anything came to their attention that caused them to believe that the Company
was not in compliance with any of the terms, covenants, provisions or conditions
of Article Four and Section 5.01 of this Indenture as they pertain to accounting
matters and, if any Default or Event of Default has come to their attention,
specifying the nature and period of existence thereof; provided that such
independent certified public accountants shall not be liable in respect of such
statement by reason of any failure to obtain knowledge of any such Default or
Event of Default that would not be disclosed in the course of an audit
examination conducted in accordance with generally accepted auditing standards
in effect at the date of such examination.
(c) Within 90 days of the end of each of the Company's fiscal
years, the Company shall deliver to the Trustee a list of all Significant
Subsidiaries. The Trustee shall have no duty with respect to any such list
except to keep it on file and available for inspection by the Holders.
SECTION 4.18. Commission Reports and Reports to Holders.
Whether or not the Company is then required to file reports with the Commission,
the Company shall file with the Commission all such reports and other
information as it would be required to file with the Commission by Sections
13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company
shall supply the Trustee and each Holder, or shall supply to
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the Trustee for forwarding to each such Holder, without cost to such Holder,
copies of such reports or other information.
SECTION 4.19. Waiver of Stay, Extension or Usury Laws. The
Company covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion of the
principal of, premium, if any, or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or that may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. The Company shall
not consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as an
entirety or substantially an entirety in one transaction or a series of related
transactions) to, any Person or permit any Person to merge with or into the
Company unless:
(i) the Company shall be the continuing Person, or the Person
(if other than the Company) formed by such consolidation or into which
the Company is merged or that acquired or leased such property and
assets of the Company shall be a corporation organized and validly
existing under the laws of the United States of America or any
jurisdiction thereof and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, all of the
obligations of the Company on all of the Notes and under the Indenture;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a
pro forma basis, (A) the Company or any Person becoming the successor
obligor of the Notes, as the case may be, shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the
Company immediately prior to such transaction, or (B) the Company or
any Person becoming the successor obligor of the Notes, as the case may
be, shall have a Consolidated Leverage Ratio no more than the greater
of (I)
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7:1, on or prior to December 31, 2000, or 6:1 thereafter and (II) the
Consolidated Leverage Ratio of the Company immediately prior to such
transaction; provided that this clause (iii) shall not apply to a
consolidation or merger with or into a Wholly Owned Restricted
Subsidiary with a positive net worth; provided that, in connection with
any such merger or consolidation, no consideration (other than Capital
Stock (other than Redeemable Stock) in the surviving Person or the
Company) shall be issued or distributed to the stockholders of the
Company; and
(iv) the Company delivers to the Trustee an Officers'
Certificate (attaching the arithmetic computations to demonstrate
compliance with clause (iii)) and Opinion of Counsel, in each case
stating that such consolidation, merger or transfer and such
supplemental indenture complies with this provision and that all
conditions precedent provided for herein relating to such transaction
have been complied with;
provided, however, that clause (iii) above does not apply if, in the good faith
determination of the Board of Directors of the Company, whose determination
shall be evidenced by a Board Resolution, the principal purpose of such
transaction is to change the state of incorporation of the Company; and that any
such transaction shall not have as one of its purposes the evasion of the
foregoing limitations.
SECTION 5.02. Successor Substituted. Upon any consolidation or
merger, or any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default" shall
occur with respect to the Notes if:
(a) the Company defaults in the payment of the principal of
(or premium, if any, on) any Note when the same becomes due and payable
at maturity, upon acceleration, redemption or otherwise, whether or not
such payment is prohibited by Section Ten;
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(b) the Company defaults in the payment of interest on any
Note when the same becomes due and payable, and such default continues
for a period of 30 days whether or not such payment is prohibited by
Section Ten;
(c) the Company defaults in the performance of or breaches the
provisions of this Indenture applicable to mergers, consolidations and
transfers of all or substantially all of the assets of the Company or
fails to make or consummate an Offer to Purchase in accordance with
Section 4.11 or Section 4.12;
(d) the Company defaults in the performance of or breaches any
other covenant or agreement of the Company in this Indenture or under
the Notes (other than a default specified in clause (a), (b) or (c)
above) and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of
25% or more in aggregate principal amount of the Notes;
(e) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Significant Subsidiary having an
outstanding principal amount of $10 million or more in the aggregate
for all such issues of all such Persons, whether such Indebtedness now
exists or shall hereafter be created, (I) an event of default that has
caused the holder thereof to declare such Indebtedness to be due and
payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or
annulled within 30 days of such acceleration and/or (II) the failure to
make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or
extended within 30 days of such payment default;
(f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $10 million in the aggregate for all
such final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Significant Subsidiary and shall
not be paid or discharged, and there shall be any period of 30
consecutive days following entry of the final judgment or order that
causes the aggregate amount for all such final judgments or orders
outstanding and not paid or discharged against all such Persons to
exceed $10 million during which a stay of enforcement of such final
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect;
(g) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any
Significant Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
(B) appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of the Company or any
Significant Subsidiary
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or for all or substantially all of the property and assets of the
Company or any Significant Subsidiary or (C) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary
and, in each case, such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(h) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (B)
consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the
benefit of creditors.
SECTION 6.02. Acceleration. If an Event of Default (other than
an Event of Default specified in clause (g) or (h) of Section 6.01 that occurs
with respect to the Company) occurs and is continuing under this Indenture, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by written notice to the Company (and to the Trustee if
such notice is given by the Holders), may, and the Trustee at the request of
such Holders shall, declare the Accreted Value of, premium, if any, and accrued
interest on the Notes to be immediately due and payable. Upon a declaration of
acceleration (the "Acceleration Notice"), such Accreted Value of, premium, if
any, and accrued interest shall be immediately due and payable; provided,
however, that if there are any amounts outstanding under the Credit Agreement,
such declaration shall not become effective until the earlier of (i) an
acceleration of the Indebtedness under the Credit Agreement and (ii) five
Business Days after receipt by the Company and the Bank Agent of such
Acceleration Notice. In the event of a declaration of acceleration because an
Event of Default set forth in clause (e) of Section 6.01 has occurred and is
continuing, such declaration of acceleration shall be automatically rescinded
and annulled if the event of default triggering such Event of Default pursuant
to clause (e) shall be remedied or cured by the Company or the relevant
Significant Subsidiary or waived by the holders of the relevant Indebtedness
within 60 days after the declaration of acceleration with respect thereto. If an
Event of Default specified in clause (g) or (h) of Section 6.01 occurs with
respect to the Company, the Accreted Value of, premium, if any, and accrued
interest on the Notes then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
At any time after such a declaration of acceleration, but
before a judgment or decree for the payment of the money due has been obtained
by the Trustee, the Holders of at least a majority in principal amount of the
outstanding Notes by written notice to the Company and to the Trustee may waive
all past Defaults and rescind and annul such declaration of acceleration and its
consequences if (a) the Company has paid or deposited
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with the Trustee a sum sufficient to pay (i) all sums paid or advanced by the
Trustee hereunder and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, (ii) all overdue interest on
all Notes, (iii) the principal of and premium, if any, on any Notes that have
become due otherwise than by such declaration or occurrence of acceleration and
interest thereon at the rate prescribed therefor by such Notes, and (iv) to the
extent that payment of such interest is lawful, interest upon overdue interest
at the rate prescribed therefor by such Notes, (b) all existing Events of
Default, other than the nonpayment of the Accreted Value of, premium, if any,
and accrued interest on the Notes that have become due solely by such
declaration of acceleration, have been cured or waived and (c) the rescission
would not conflict with any judgment or decree of a court of competent
jurisdiction.
SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy by proceeding at
law or in equity to collect the payment of principal of, premium, if any, or
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding.
SECTION 6.04. Waiver of Past Defaults. Subject to Sections
6.02, 6.07 and 9.02, the Holders of at least a majority in principal amount of
the outstanding Notes, by notice to the Trustee, may waive an existing Default
or Event of Default and its consequences, except a Default in the payment of
principal of, premium, if any, or interest on any Note as specified in clause
(a) or (b) of Section 6.01 or in respect of a covenant or provision of this
Indenture which cannot be modified or amended without the consent of the holder
of each outstanding Note affected. Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereto.
SECTION 6.05. Control by Majority. The Holders of at least a
majority in aggregate principal amount of the outstanding Notes may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee; provided,
that the Trustee may refuse to follow any direction that conflicts with law or
this Indenture, that may involve the Trustee in personal liability, or that the
Trustee determines in good faith may be unduly prejudicial to the rights of
Holders not joining in the giving of such direction; and provided further, that
the Trustee may take any other action it deems proper that is not inconsistent
with any directions received from Holders of Notes pursuant to this Section
6.05.
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SECTION 6.06. Limitation on Suits. A Holder may not institute
any proceeding, judicial or otherwise, with respect to this Indenture or the
Notes, or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(i) such Holder has previously given to the Trustee written
notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount
of outstanding Notes shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee
indemnity reasonably satisfactory to the Trustee against any costs,
liabilities or expenses to be incurred in compliance with such request;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Notes have not given the
Trustee a direction that is inconsistent with such written request.
For purposes of Section 6.05 of this Indenture and this
Section 6.06, the Trustee shall comply with TIA Section 316(a) in making any
determination of whether the Holders of the required aggregate principal amount
of outstanding Notes have concurred in any request or direction of the Trustee
to pursue any remedy available to the Trustee or the Holders with respect to
this Indenture or the Notes or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
of a Note to receive payment of the Accreted Value of, premium, if any, or
interest on such Holder's Note on or after the respective due dates expressed on
such Note, or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default in payment of principal, premium or interest specified in clause (a),
(b) or (c) of Section 6.01 occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee
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of an express trust against the Company or any other obligor of the Notes for
the whole amount of principal, premium, if any, and accrued interest remaining
unpaid, together with interest on overdue principal, premium, if any, and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate specified in the Notes, and
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07) and the Holders allowed in any judicial proceedings relative to
the Company (or any other obligor of the Notes), its creditors or its property
and shall be entitled and empowered to collect and receive any monies,
securities or other property payable or deliverable upon conversion or exchange
of the Notes or upon any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to empower the Trustee to authorize or consent to, or accept or adopt on
behalf of any Holder, any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money
pursuant to this Article Six, it shall pay out the money in the
following order:
First: to the Trustee for all amounts due under Section 7.07;
Second: to Holders for amounts then due and unpaid for
principal of, premium, if any, and interest on the Notes in respect of
which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Notes for principal, premium, if any,
and interest, respectively; and
Third: to the Company or any other obligors of the Notes, as
their interests may appear, or as a court of competent jurisdiction
may direct.
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The Trustee, upon prior written notice to the Company, may fix
a record date and payment date for any payment to Holders pursuant to this
Section 6.10.
SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court may
require any party litigant in such suit to file an undertaking to pay the costs
of the suit, and the court may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit having due regard to the
merits and good faith of the claims or defenses made by the party litigant. This
Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 of this Indenture, or a suit by Holders of more than
10% in principal amount of the outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies. If the
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then, and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Company, Trustee and the Holders shall continue as though no
such proceeding had been instituted.
SECTION 6.13. Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Notes in Section 2.09, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 6.14. Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article Six or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
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ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General. The duties and responsibilities of the
Trustee shall be as provided by the TIA and as set forth herein. Notwithstanding
the foregoing, no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it. Whether or not therein expressly so provided,
every provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Article Seven.
SECTION 7.02. Certain Rights of Trustee. Subject to TIA
Sections 315(a) through (d):
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper person. The Trustee need not investigate any
fact or matter stated in the document;
(ii) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, which shall
conform to Section 11.04. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion;
(iii) the Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care;
(iv) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction;
(v) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within
its rights or powers or for any action it takes or omits to take in
accordance with the direction of the Holders of a majority in principal
amount at maturity of the Outstanding Notes relating to the time,
method and place of conducting any proceeding for any remedy available
to the
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Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture; provided that the Trustee's conduct does not
constitute gross negligence or bad faith;
(vi) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a making be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officer's
Certificate; and
(vii) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company personally or by agent or
attorney.
SECTION 7.03. Individual Rights of Trustee. The Trustee, in
its individual or any other capacity, may become the owner or pledgee of Notes
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not the Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to TIA Sections 310(b) and 311.
SECTION 7.04. Trustee's Disclaimer. The Trustee (i) makes no
representation as to the validity or adequacy of this Indenture or the Notes,
(ii) shall not be accountable for the Company's use or application of the
proceeds from the Notes and (iii) shall not be responsible for any statement in
the Notes other than its certificate of authentication.
SECTION 7.05. Notice of Default. If any Default or any Event
of Default occurs and is continuing and if such Default or Event of Default is
known to the Trustee, the Trustee shall mail to each Holder in the manner and to
the extent provided in TIA Section 313(c) notice of the Default or Event of
Default within 45 days after it occurs, unless such Default or Event of Default
has been cured; provided, however, that, except in the case of a default in the
payment of the principal of, premium, if any, or interest on any Note, the
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interest of the Holders.
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SECTION 7.06. Reports by Trustee to Holders. Within 60 days
after each May 15, beginning with May 15, 1998, the Trustee shall mail to each
Holder as provided in TIA Section 313(c) a brief report dated as of such May 15,
if required by TIA Section 313(a).
SECTION 7.07. Compensation and Indemnity. The Company shall
pay to the Trustee such compensation as shall be agreed upon in writing for its
services. The compensation of the Trustee shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses and advances
incurred or made by the Trustee. Such expenses shall include the reasonable
compensation and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it
harmless against, any loss or liability or expense incurred by it without
negligence or bad faith on its part in connection with the acceptance or
administration of this Indenture and its duties under this Indenture and the
Notes, including the costs and expenses of defending itself against any claim or
liability and of complying with any process served upon it or any of its
officers in connection with the exercise or performance of any of its powers or
duties under this Indenture and the Notes.
To secure the Company's payment obligations in this Section
7.07, the Trustee shall have a lien prior to the Notes on all money or property
held or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay principal of, premium, if any, and interest on
particular Notes.
If the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in clause (g) or (h) of Section
6.01, the expenses and the compensation for the services will be intended to
constitute expenses of administration under Title 11 of the United States
Bankruptcy Code or any applicable federal or state law for the relief of
debtors.
SECTION 7.08. Replacement of Trustee. A resignation or removal
of the Trustee and appointment of a successor Trustee shall become effective
only upon the successor Trustee's acceptance of appointment as provided in this
Section 7.08.
The Trustee may resign at any time by so notifying the Company
in writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Trustee in writing and may appoint a successor
Trustee with the consent of the Company. The Company may at any time remove the
Trustee, by Company Order given at least 30 days prior to the date of the
proposed removal.
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If the Trustee resigns or is removed, or if a vacancy exists
in the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company. If
the successor Trustee does not deliver its written acceptance required by the
next succeeding paragraph of this Section 7.08 within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the Holders
of a majority in principal amount of the outstanding Notes may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.07, (i) the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, (ii) the resignation or removal of the retiring
Trustee shall become effective and (iii) the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder.
If the Trustee is no longer eligible under Section 7.10, any
Holder who satisfies the requirements of TIA Section 310(b) may petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
The Company shall give notice of any resignation and any
removal of the Trustee and each appointment of a successor Trustee to all
Holders. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligation under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.
SECTION 7.10. Eligibility. This Indenture shall always have a
Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee
shall have a combined capital and surplus of at least $25,000,000 as set forth
in its most recent published annual report of condition.
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SECTION 7.11. Money Held in Trust. The Trustee shall not be
liable for interest on any money received by it except as the Trustee may agree
with the Company. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law and except for money held in
trust under Article Eight of this Indenture.
SECTION 7.12. Withholding Taxes. The Trustee, as agent for the
Company, shall exclude and withhold from each payment of principal and interest
and other amounts due hereunder or under the Notes any and all withholding taxes
applicable thereto as required by law. The Trustee agrees to act as such
withholding agent and, in connection therewith, whenever any present or future
taxes or similar charges are required to be withheld with respect to any amounts
payable in respect of the Notes, to withhold such amounts and timely pay the
same to the appropriate authority in the name of and on behalf of the holders of
the Notes, that it will file any necessary withholding tax returns or statements
when due, and that, as promptly as possible after the payment thereof, it will
deliver to each holder of a Note appropriate documentation showing the payment
thereof, together with such additional documentary evidence as such holders may
reasonably request from time to time.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations. Except
as otherwise provided in this Section 8.01, the Company may terminate its
obligations under the Notes and this Indenture if:
(i) all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes that have been replaced or Notes
that are paid pursuant to Section 4.01 or Notes for whose payment money
or securities have theretofore been held in trust and thereafter repaid
to the Company, as provided in Section 8.05) have been delivered to the
Trustee for cancellation and the Company has paid all sums payable by
it hereunder; or
(ii) (A) the Notes mature within one year or all of them are
to be called for redemption within one year under arrangements
satisfactory to the Trustee for giving the notice of redemption, (B)
the Company irrevocably deposits in trust with the Trustee during such
one-year period, under the terms of an irrevocable trust agreement in
form and substance satisfactory to the Trustee, as trust funds solely
for the benefit of the Holders for that purpose, money or U.S.
Government Obligations sufficient (in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee), without
consideration of any reinvestment of any interest thereon, to pay
principal,
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premium, if, any, and interest on the Notes to maturity or redemption,
as the case may be, and to pay all other sums payable by it hereunder,
(C) no Default or Event of Default with respect to the Notes shall have
occurred and be continuing on the date of such deposit, (D) such
deposit will not result in a breach or violation of, or constitute a
default under, this Indenture or any other agreement or instrument to
which the Company is a party or by which it is bound and (E) the
Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, in each case stating that all conditions precedent
provided for herein relating to the satisfaction and discharge of this
Indenture have been complied with.
With respect to the foregoing clause (i), the Company's
obligations under Section 7.07 shall survive. With respect to the foregoing
clause (ii), the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06,
2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall
survive until the Notes are no longer outstanding. Thereafter, only the
Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. After any
such irrevocable deposit, the Trustee upon request shall acknowledge in writing
the discharge of the Company's obligations under the Notes and this Indenture
except for those surviving obligations specified above.
SECTION 8.02. Defeasance and Discharge of Indenture. The
Company will be deemed to have paid and will be discharged from any and all
obligations in respect of the Notes on the 123rd day after the date of the
deposit referred to in clause (A) of this Section 8.02, and the provisions of
this Indenture will no longer be in effect with respect to the Notes, and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same, except as to (i) rights of registration of transfer and
exchange, (ii) substitution of apparently mutilated, defaced, destroyed, lost or
stolen Notes, (iii) rights of Holders to receive payments of principal thereof
and interest thereon, (iv) the Company's obligations under Section 4.02, (v) the
rights, obligations and immunities of the Trustee hereunder and (vi) the rights
of the Holders as beneficiaries of this Indenture with respect to the property
so deposited with the Trustee payable to all or any of them; provided that the
following conditions shall have been satisfied:
(A) with reference to this Section 8.02, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section 7.10
of this Indenture) and conveyed all right, title and interest for the
benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee for the benefit of
the Holders as security for payment of the principal of, premium, if
any, and interest, if any, on the Notes, and dedicated solely to, the
benefit of the Holders, in and to (1) money in an amount, (2) U.S.
Government Obligations that, through the payment of interest, premium,
if any, and principal in respect thereof in accordance with their
terms, will provide, not
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69
later than one day before the due date of any payment referred to in
this clause (A), money in an amount or (3) a combination thereof in an
amount sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, without
consideration of the reinvestment of such interest and after payment of
all federal, state and local taxes or other charges and assessments in
respect thereof payable by the Trustee, the principal of, premium, if
any, and accrued interest on the outstanding Notes at the Stated
Maturity of such principal or interest; provided that the Trustee shall
have been irrevocably instructed to apply such money or the proceeds of
such U.S. Government Obligations to the payment of such principal,
premium, if any, and interest with respect to the Notes;
(B) such deposit will not result in a breach or violation of,
or constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(C) immediately after giving effect to such deposit on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or during the period ending on
the 123rd day after such date of deposit;
(D) the Company shall have delivered to the Trustee (1) either
(x) a ruling directed to the Trustee received from the Internal Revenue
Service to the effect that the Holders will not recognize income, gain
or loss for federal income tax purposes as a result of the Company's
exercise of its option under this Section 8.02 and will be subject to
federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such option had not been
exercised or (y) an Opinion of Counsel to the same effect as the ruling
described in clause (x) above accompanied by a ruling to that effect
published by the Internal Revenue Service, unless there has been a
change in the applicable federal income tax law since the Closing Date
such that a ruling from the Internal Revenue Service is no longer
required and (2) an Opinion of Counsel to the effect that (x) the
creation of the defeasance trust does not violate the Investment
Company Act of 1940 and (y) after the passage of 123 days following the
deposit (except, with respect to any trust funds for the account of any
Holder who may be deemed to be an "insider" for purposes of the United
States Bankruptcy Code, after one year following the deposit), the
trust funds will not be subject to the effect of Section 547 of the
United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law in a case commenced by or against the Company under either
such statute, and either (I) the trust funds will no longer remain the
property of the Company (and therefore will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally) or (II) if a court
were to rule under any such law in any case or proceeding that the
trust funds remained property of the Company,
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(a) assuming such trust funds remained in the possession of the Trustee
prior to such court ruling to the extent not paid to the Holders, the
Trustee will hold, for the benefit of the Holders, a valid and
perfected security interest in such trust funds that is not avoidable
in bankruptcy or otherwise except for the effect of Section 552(b) of
the United States Bankruptcy Code on interest on the trust funds
accruing after the commencement of a case under such statute and (b)
the Holders will be entitled to receive adequate protection of their
interests in such trust funds if such trust funds are used in such case
or proceeding;
(E) the Company is not prohibited from making payments in
respect of the Notes by the provisions of Section Ten;
(F) if the Notes are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit defeasance and discharge will
not cause the Notes to be delisted; and
(G) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day
(or one year) period referred to in clause (D)(2)(y) of this Section 8.02, none
of the Company's obligations under this Indenture shall be discharged.
Subsequent to the end of such 123-day (or one year) period with respect to this
Section 8.02, the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05,
2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.05 and 8.06 shall
survive until the Notes are no longer outstanding. Thereafter, only the
Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. If and when
a ruling from the Internal Revenue Service or an Opinion of Counsel referred to
in clause (D)(1) of this Section 8.02 is able to be provided specifically
without regard to, and not in reliance upon, the continuance of the Company's
obligations under Section 4.01, then the Company's obligations under such
Section 4.01 shall cease upon delivery to the Trustee of such ruling or Opinion
of Counsel and compliance with the other conditions precedent provided for
herein relating to the defeasance contemplated by this Section 8.02.
After any such irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Notes and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 8.03. Defeasance of Certain Obligations. The Company
may omit to comply with any term, provision or condition set forth in clauses
(iii) and (iv) of Section 5.01 and Sections 4.03 through 4.18, and clause (c) of
Section 6.01 with respect to
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clauses (iii) and (iv) of Section 5.01, and clause (d) of Section 6.01 with
respect to Sections 4.03 through 4.18 and clauses (e) and (f) of Section 6.01
shall be deemed not to be Events of Default, in each case with respect to the
outstanding Notes if:
(i) with reference to this Section 8.03, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section
7.10) and conveyed all right, title and interest to the Trustee for the
benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee for the benefit of
the Holders as security for payment of the principal of, premium, if
any, and interest, if any, on the Notes, and dedicated solely to, the
benefit of the Holders, in and to (A) money in an amount, (B) U.S.
Government Obligations that, through the payment of interest and
principal in respect thereof in accordance with their terms, will
provide, not later than one day before the due date of any payment
referred to in this clause (i), money in an amount or (C) a combination
thereof in an amount sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of the reinvestment of such interest
and after payment of all federal, state and local taxes or other
charges and assessments in respect thereof payable by the Trustee, the
principal of, premium, if any, and interest on the outstanding Notes on
the Stated Maturity of such principal or interest; provided that the
Trustee shall have been irrevocably instructed to apply such money or
the proceeds of such U.S. Government Obligations to the payment of such
principal, premium, if any, and interest with respect to the Notes;
(ii) such deposit will not result in a breach or violation of,
or constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(iii) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit;
(iv) the Company has delivered to the Trustee an Opinion of
Counsel to the effect that (A) the creation of the defeasance trust
does not violate the Investment Company Act of 1940, (B) the Holders
have a valid first-priority security interest in the trust funds, (C)
the Holders will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit and defeasance of certain
obligations and will be subject to federal income tax on the same
amount and in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred and (D) after
the passage of 123 days following the deposit (except, with respect to
any trust funds for the account of any Holder who may be deemed to be
an
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"insider" for purposes of the United States Bankruptcy Code, after one
year following the deposit), the trust funds will not be subject to the
effect of Section 547 of the United States Bankruptcy Code or Section
15 of the New York Debtor and Creditor Law in a case commenced by or
against the Company under either such statute, and either (1) the trust
funds will no longer remain the property of the Company (and therefore
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally) or (2) if a court were to rule under any such law in any
case or proceeding that the trust funds remained property of the
Company, (x) assuming such trust funds remained in the possession of
the Trustee prior to such court ruling to the extent not paid to the
Holders, the Trustee will hold, for the benefit of the Holders, a valid
and perfected security interest in such trust funds that is not
avoidable in bankruptcy or otherwise (except for the effect of Section
552(b) of the United States Bankruptcy Code on interest on the trust
funds accruing after the commencement of a case under such statute),
(y) the Holders will be entitled to receive adequate protection of
their interests in such trust funds if such trust funds are used in
such case or proceeding and (z) no property, rights in property or
other interests granted to the Trustee or the Holders in exchange for,
or with respect to, such trust funds will be subject to any prior
rights of holders of other Indebtedness of the Company or any of its
Subsidiaries;
(v) the Company is not prohibited from making payments in
respect of the Notes by the provisions of Section Ten;
(vi) if the Notes are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit defeasance and discharge will
not cause the Notes to be delisted; and
(vii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.03 have been complied with.
SECTION 8.04. Application of Trust Money. Subject to Section
8.06, the Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the
case may be, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with the Notes and this Indenture to the
payment of principal of, premium, if any, and interest on the Notes; but such
money need not be segregated from other funds except to the extent required by
law.
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SECTION 8.05. Repayment to Company. Subject to Sections 7.07,
8.01, 8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to the
Company upon request set forth in an Officers' Certificate any excess money held
by them at any time and thereupon shall be relieved from all liability with
respect to such money. The Trustee and the Paying Agent shall pay to the Company
upon request any money held by them for the payment of principal, premium, if
any, or interest that remains unclaimed for two years; provided that the Trustee
or such Paying Agent before being required to make any payment may cause to be
published at the expense of the Company once in a newspaper of general
circulation in the City of New York or mail to each Holder entitled to such
money at such Holder's address (as set forth in the Note Register) notice that
such money remains unclaimed and that after a date specified therein (which
shall be at least 30 days from the date of such publication or mailing) any
unclaimed balance of such money then remaining will be repaid to the Company.
After payment to the Company, Holders entitled to such money must look to the
Company for payment as general creditors unless an applicable law designates
another Person, and all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with
Section 8.01, 8.02 or 8.03, as the case may be, by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.01, 8.02 or
8.03, as the case may be, until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with Section 8.01, 8.02 or 8.03, as the case may be; provided that, if the
Company has made any payment of principal of, premium, if any, or interest on
any Notes because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Company, when
authorized by a resolution of its Board of Directors, and the Trustee may amend
or supplement this Indenture or the Notes without notice to or the consent of
any Holder:
(1) to cure any ambiguity, defect or inconsistency in the
Indenture; provided that such amendments or supplements shall not
adversely affect the interests of the Holders in any material respect;
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(2) to comply with Article Five;
(3) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA;
(4) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee; or
(5) to make any change that, in the good faith opinion of the
Board of Directors as evidenced by a Board Resolution, does not
materially and adversely affect the rights of any Holder.
SECTION 9.02. With Consent of Holders. Subject to Sections
6.04 and 6.07 and without prior notice to the Holders, the Company, when
authorized by its Board of Directors (as evidenced by a Board Resolution), and
the Trustee may amend this Indenture and the Notes with the written consent of
the Holders of a majority in principal amount of the Notes then outstanding, and
the Holders of a majority in principal amount of the Notes then outstanding by
written notice to the Trustee may waive future compliance by the Company with
any provision of this Indenture or the Notes.
Notwithstanding the provisions of this Section 9.02, without
the consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the Accreted Value or
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or adversely affect any right of
repayment at the option of any Holder of any Note, or change any place
of payment where, or the currency in which, any Note or any premium or
the interest thereon is payable, or impair the right to institute suit
for the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption
Date);
(ii) reduce the percentage in principal amount of outstanding
Notes the consent of whose Holders is required for any such
supplemental indenture, for any waiver of compliance with certain
provisions of this Indenture or certain Defaults and their consequences
provided for in this Indenture;
(iii) waive a Default in the payment of principal of, premium,
if any, or interest on, any Note;
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(iv) modify the provisions of Section Ten in a manner
adverse to the Holders; or
(v) modify any of the provisions of this Section 9.02, except
to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each outstanding Note affected thereby.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. The Company will
mail supplemental indentures to Holders upon request. Any failure of the Company
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture or waiver.
SECTION 9.03. Revocation and Effect of Consent. Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as the Note of the consenting
Holder, even if notation of the consent is not made on any Note. However, any
such Holder or subsequent Holder may revoke the consent as to its Note or
portion of its Note. Such revocation shall be effective only if the Trustee
receives the notice of revocation before the date the amendment, supplement or
waiver becomes effective. An amendment, supplement or waiver shall become
effective on receipt by the Trustee of written consents from the Holders of the
requisite percentage in principal amount of the outstanding Notes.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last two sentences of the immediately preceding paragraph,
those persons who were Holders at such record date (or their duly designated
proxies) and only those persons shall be entitled to consent to such amendment,
supplement or waiver or to revoke any consent previously given, whether or not
such persons continue to be Holders after such record date. No such consent
shall be valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder unless it is of the type described in any of clauses (i)
through (v) of Section 9.02. In case of an amendment or waiver of the type
described in clauses (i) through
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(v) of Section 9.02, the amendment or waiver shall bind each Holder who has
consented to it and every subsequent Holder of a Note that evidences the same
indebtedness as the Note of the consenting Holder.
SECTION 9.04. Notation on or Exchange of Notes. If an
amendment, supplement or waiver changes the terms of a Note, the Trustee may
require the Holder to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Note about the changed terms and return it to the
Holder and the Trustee may place an appropriate notation on any Note thereafter
authenticated. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Note shall issue and the Trustee shall authenticate
a new Note that reflects the changed terms.
SECTION 9.05. Trustee to Sign Amendments, Etc. The Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article Nine is authorized or permitted by
this Indenture. Subject to the preceding sentence, the Trustee shall sign such
amendment, supplement or waiver if the same does not adversely affect the rights
of the Trustee. The Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.06. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article Nine shall conform to
the requirements of the TIA as then in effect.
ARTICLE TEN
SUBORDINATION OF NOTES
SECTION 10.01. Notes Subordinated to Senior Indebtedness. The
Company and the Trustee each covenants and agrees, and each Holder, by its
acceptance of a Note, likewise covenants and agrees that all Notes shall be
issued subject to the provisions of this Article Ten; and each Person holding
any Note, whether upon original issue or upon transfer, assignment or exchange
thereof, accepts and agrees that Senior Subordinated Obligations shall, to the
extent and in the manner set forth in this Article Ten, be subordinated in right
of payment to the prior payment in full, in cash or cash equivalents, of all
amounts payable under Senior Indebtedness (including any interest accruing
subsequent to an event specified in Sections 6.01(g) and 6.01(h) of this
Indenture, whether or not such interest is an allowed claim enforceable against
the debtor under the United States Bankruptcy Code).
SECTION 10.02. No Payment on Notes in Certain Circumstances.
(a) No direct or indirect payment by or on behalf of the Company of Senior
Subordinated Obligations, whether pursuant to the terms of the Notes or upon
acceleration or otherwise,
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shall be made if, at the time of such payment, there exists a default in the
payment of all or any portion of the obligations of any Senior Indebtedness of
the Company (including, without limitation, a payment default arising from the
acceleration of any Senior Indebtedness), and such default shall not have been
cured or waived or the benefits of this sentence waived by or on behalf of the
holders of such Senior Indebtedness.
(b) During the continuance of any other event of default with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated, upon receipt by the Trustee of written notice from
the trustee or other representative for the holders of such other Designated
Senior Indebtedness (or the holders of at least a majority in principal amount
of such Designated Senior Indebtedness then outstanding), no payment of Senior
Subordinated Obligations may be made by or on behalf of the Company upon or in
respect of the Notes for a period (a "Payment Blockage Period") commencing on
the date of receipt of such notice and ending 179 days thereafter (unless, in
each case, such Payment Blockage Period shall be terminated by written notice to
the Trustee from such trustee of, or other representatives for, such holders or
by repayment in full in cash or cash equivalents of such Designated Senior
Indebtedness). Not more than one Payment Blockage Period may be commenced with
respect to the Notes during any period of 360 consecutive days; provided that,
subject to the limitation contained in the next sentence, the commencement of a
Payment Blockage Period by the representatives for, or the holders of,
Designated Senior Indebtedness other than under the Credit Agreement shall not
bar the commencement of another Payment Blockage Period by the Bank Agent within
such period of 360 consecutive days. Notwithstanding anything in this Indenture
to the contrary, there must be 180 consecutive days in any 360-day period in
which no Payment Blockage Period is in effect. For all purposes of this Section
10.02(b), no event of default that existed or was continuing (it being
acknowledged that any subsequent action that would give rise to an event of
default pursuant to any provision under which an event of default previously
existed or was continuing shall constitute a new event of default for this
purpose) on the date of the commencement of any Payment Blockage Period with
respect to the Designated Senior Indebtedness initiating such Payment Blockage
Period shall be, or shall be made, the basis for the commencement of a second
Payment Blockage Period by the representative for, or the holders of, such
Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days.
(c) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 10.02(a) or 10.02(b) of this Indenture, the Trustee shall
promptly notify the holders of Senior Indebtedness of such prohibited payment
and such payment shall be held in trust for the benefit of, and shall be paid
over or delivered to, the holders of Senior Indebtedness or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their respective
interests may appear, but only to the extent that, upon notice from the Trustee
to the holders of Senior Indebtedness that such prohibited payment has been
made, the holders of the Senior
<PAGE> 80
78
Indebtedness (or their representative or representatives of a trustee) within 30
days of receipt of such notice from the Trustee notify the Trustee of the
amounts then due and owing on the Senior Indebtedness, if any, and only the
amounts specified in such notice to the Trustee shall be paid to the holders of
Senior Indebtedness and any excess above such amounts due and owing on Senior
Indebtedness shall be paid to the Company.
SECTION 10.03. Payment over Proceeds upon Dissolution, Etc.
(a) Upon any payment or distribution of assets or securities of the Company of
any kind or character, whether in cash, property or securities, upon any
dissolution or winding up or total or partial liquidation or reorganization of
the Company, whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness (including any interest accruing subsequent to an event
specified in Sections 6.01(g) and 6.01(h) of this Indenture, whether or not such
interest is an allowed claim enforceable against the debtor under the United
States Bankruptcy Code) shall first be paid in full, in cash or cash
equivalents, before the Holders or the Trustee on their behalf shall be entitled
to receive any payment by the Company on account of Senior Subordinated
Obligations, or any payment to acquire any of the Notes for cash, property or
securities, or any distribution with respect to the Notes of any cash, property
or securities. Before any payment may be made by, or on behalf of, the Company
on any Senior Subordinated Obligations upon any such dissolution, winding up,
liquidation or reorganization, any payment or distribution of assets or
securities of the Company of any kind or character, whether in cash, property or
securities, to which the Holders or the Trustee on their behalf would be
entitled, but for the provisions of this Article Ten, shall be made by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other similar Person making such payment or distribution, or by the Holders or
the Trustee if received by them or it, directly to the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders) or their representatives or to any
trustee or trustees under any indenture pursuant to which any such Senior
Indebtedness may have been issued, as their respective interests appear, to the
extent necessary to pay all such Senior Indebtedness in full, in cash or cash
equivalents after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Indebtedness.
(b) To the extent any payment of Senior Indebtedness (whether
by or on behalf of the Company, as proceeds of security or enforcement of any
right of setoff or otherwise) is declared to be fraudulent or preferential, set
aside or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then if such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person, the Senior Indebtedness or part thereof
originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred. To the extent the obligation to
repay any Senior Indebtedness is declared to be fraudulent, invalid, or
otherwise set aside under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then the obligations so declared
<PAGE> 81
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fraudulent, invalid or otherwise set aside (and all other amounts that would
come due with respect thereto had such obligation not been so affected) shall be
deemed to be reinstated and outstanding as Senior Indebtedness for all purposes
hereof as if such declaration, invalidity or setting aside had not occurred.
(c) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Company of any kind or character, whether in cash, property
or securities, shall be received by the Trustee or any Holder at a time when
such payment or distribution is prohibited by Section 10.03(a) of this Indenture
and before all obligations in respect of Senior Indebtedness are paid in full,
in cash or cash equivalents, such payment or distribution shall be received and
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Senior Indebtedness (pro rata to such holders on the basis of such
respective amount of Senior Indebtedness held by such holders) or their
representatives, or to the trustee or trustees under any indenture pursuant to
which any such Senior Indebtedness may have been issued, as their respective
interests appear, for application to the payment of Senior Indebtedness
remaining unpaid until all such Senior Indebtedness has been paid in full, in
cash or cash equivalents, after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of such Senior
Indebtedness.
(d) For purposes of this Section 10.03, the words "cash,
property or securities" shall not be deemed to include, so long as the effect of
this clause is not to cause the Notes to be treated in any case or proceeding or
similar event described in this Section 10.03 as part of the same class of
claims as the Senior Indebtedness or any class of claims pari passu with, or
senior to, the Senior Indebtedness for any payment or distribution, securities
of the Company or any other corporation provided for by a plan of reorganization
or readjustment that are subordinated, at least to the extent that the Notes are
subordinated, to the payment of all Senior Indebtedness then outstanding;
provided that (1) if a new corporation results from such reorganization or
readjustment, such corporation assumes the Senior Indebtedness and (2) the
rights of the holders of the Senior Indebtedness are not, without the consent of
such holders, altered by such reorganization or readjustment. The consolidation
of the Company with, or the merger of the Company with or into, another
corporation or the liquidation or dissolution of the Company following the sale,
conveyance, transfer, lease or other disposition of all or substantially all of
its property and assets to another corporation upon the terms and conditions
provided in Article Five of this Indenture (including in connection with the
Acquisition) shall not be deemed a dissolution, winding up, liquidation or
reorganization for the purposes of this Section 10.03 if such other corporation
shall, as a part of such consolidation, merger, sale, conveyance, transfer,
lease or other disposition, comply (to the extent required) with the conditions
stated in Article Five of this Indenture.
SECTION 10.04. Subrogation. (a) Upon the payment in full of
all Senior Indebtedness in cash or cash equivalents, the Holders shall be
subrogated to the rights of the
<PAGE> 82
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holders of Senior Indebtedness to receive payments or distributions of cash,
property or securities of the Company made on such Senior Indebtedness until the
principal of, premium, if any, and interest on the Notes shall be paid in full;
and, for the purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities to which
the Holders or the Trustee on their behalf would be entitled except for the
provisions of this Article Ten, and no payment pursuant to the provisions of
this Article Ten to the holders of Senior Indebtedness by Holders or the Trustee
on their behalf shall, as between the Company, its creditors other than holders
of Senior Indebtedness, and the Holders, be deemed to be a payment by the
Company to or on account of the Senior Indebtedness. It is understood that the
provisions of this Article Ten are intended solely for the purpose of defining
the relative rights of the Holders, on the one hand, and the holders of the
Senior Indebtedness, on the other hand.
(b) If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article Ten shall
have been applied, pursuant to the provisions of this Article Ten, to the
payment of all amounts payable under Senior Indebtedness, then, and in such
case, the Holders shall be entitled to receive from the holders of such Senior
Indebtedness any payments or distributions received by such holders of Senior
Indebtedness in excess of the amount required to make payment in full, in cash
or cash equivalents, of such Senior Indebtedness of such holders.
SECTION 10.05. Obligations of Company Unconditional. (a)
Nothing contained in this Article Ten or elsewhere in this Indenture or in the
Notes is intended to or shall impair, as among the Company and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the principal of, premium, if any, and interest on the Notes as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders and creditors of
the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Holders or the Trustee on their behalf
from exercising all remedies otherwise permitted by applicable law upon Default
under this Indenture, subject to the rights, if any, under this Article Ten of
the holders of the Senior Indebtedness.
(b) Without limiting the generality of the foregoing, nothing
contained in this Article Ten will restrict the right of the Trustee or the
Holders to take any action to declare the Notes to be due and payable prior to
their Stated Maturity pursuant to Section 6.01 of this Indenture or to pursue
any rights or remedies hereunder; provided, however, that all Senior
Indebtedness then due and payable or thereafter declared to be due and payable
shall first be paid in full, in cash or cash equivalents, before the Holders or
the Trustee are entitled to receive any direct or indirect payment from the
Company of Senior Subordinated Obligations.
SECTION 10.06. Notice to Trustee. The Company shall give
prompt written notice to the Trustee of any fact known to the Company that would
prohibit the making of any payment to or by the Trustee in respect of the Notes
pursuant to the provisions of this
<PAGE> 83
81
Article Ten. The Trustee shall not be charged with the knowledge of the
existence of any default or event of default with respect to any Senior
Indebtedness or of any other facts that would prohibit the making of any payment
to or by the Trustee unless and until the Trustee shall have received notice in
writing at its Corporate Trust Office to that effect signed by an Officer of the
Company, or by a holder of Senior Indebtedness or trustee or agent thereof; and
prior to the receipt of any such written notice, the Trustee shall, subject to
Article Seven, be entitled to assume that no such facts exist; provided that, if
the Trustee shall not have received the notice provided for in this Section
10.06 at least two Business Days prior to the date upon which, by the terms of
this Indenture, any monies shall become payable for any purpose (including,
without limitation, the payment of the principal of, premium, if any, or
interest on any Note), then, notwithstanding anything herein to the contrary,
the Trustee shall have full power and authority to receive any monies from the
Company and to apply the same to the purpose for which they were received, and
shall not be affected by any notice to the contrary that may be received by it
on or after such prior date except for an acceleration of the Notes prior to
such application. Nothing contained in this Section 10.06 shall limit the right
of the holders of Senior Indebtedness to recover payments as contemplated by
this Article Ten. The foregoing shall not apply if the Payment Agent is the
Company. The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of any
Senior Indebtedness (or a trustee on behalf of, or other representative of, such
holder) to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee or representative on behalf of any such holder.
(b) In the event that the Trustee determines in good faith
that any evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article Ten, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article Ten and, if such
evidence is not furnished to the Trustee, the Trustee may defer any payment to
such Person pending judicial determination as to the right of such Person to
receive such payment.
SECTION 10.07. Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets or securities
referred to in this Article Ten, the Trustee and the Holders shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction in
which bankruptcy, dissolution, winding up, liquidation or reorganization
proceedings are pending, or upon a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person making such
payment or distribution, delivered to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
Ten.
<PAGE> 84
82
SECTION 10.08. Trustee's Relation to Senior Indebtedness. (a)
The Trustee and any Paying Agent shall be entitled to all the rights set forth
in this Article Ten with respect to any Senior Indebtedness that may at any time
be held by it in its individual or any other capacity to the same extent as any
other holder of Senior Indebtedness and nothing in this Indenture shall deprive
the Trustee or any Paying Agent of any of its rights as such holder.
(b) With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Ten, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness (except
as provided in Sections 10.02(c) and 10.03(c) of this Indenture) and shall not
be liable to any such holders if the Trustee shall in good faith mistakenly pay
over or distribute to Holders of Notes or to the Company or to any other person
cash, property or securities to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article Ten or otherwise.
SECTION 10.09. Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of Senior Indebtedness. No right of any
present or future holders of any Senior Indebtedness to enforce subordination as
provided in this Article Ten will at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms of this Indenture, regardless of any knowledge
thereof that any such holder may have or otherwise be charged with. The
provisions of this Article Ten are intended to be for the benefit of, and shall
be enforceable directly by, the holders of Senior Indebtedness.
SECTION 10.10. Holders Authorize Trustee to Effectuate
Subordination of Notes. Each Holder by his acceptance of any Notes authorizes
and expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article Ten, and appoints the Trustee his attorney-in-fact for such purposes,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency, receivership,
reorganization or similar proceedings or upon an assignment for the benefit of
creditors or otherwise) tending towards liquidation of the property and assets
of the Company, the filing of a claim for the unpaid balance of its Notes in the
form required in those proceedings. If the Trustee does not file a proper claim
or proof of indebtedness in the form required in such proceeding at least 30
days before the expiration of the time to file such claim or claims, each holder
of Senior Indebtedness is hereby authorized to file an appropriate claim for and
on behalf of the Holders.
SECTION 10.11. Not to Prevent Events of Default. The failure
to make a payment on account of principal of, premium, if any, or interest on
the Notes by reason of
<PAGE> 85
83
any provision of this Article Ten will not be construed as preventing the
occurrence of an Event of Default.
SECTION 10.12. Trustee's Compensation Not Prejudiced. Nothing
in this Article Ten will apply to amounts due to the Trustee pursuant to other
sections of this Indenture, including Section 7.07.
SECTION 10.13. No Waiver of Subordination Provisions. Without
in any way limiting the generality of Section 10.09, the holders of Senior
Indebtedness may, at any time and from time to time, without the consent of or
notice to the Trustee or the Holders, without incurring responsibility to the
Holders and without impairing or releasing the subordination provided in this
Article Ten or the obligations hereunder of the Holders to the holders of Senior
Indebtedness, do any one or more of the following: (a) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding or secured; (b) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (c) release any Person liable in any manner for the collection of
Senior Indebtedness; and (d) exercise or refrain from exercising any rights
against the Company and any other Person.
SECTION 10.14. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Ten or elsewhere in this Indenture shall
prevent (i) the Company except under the conditions described in Section 10.02
or 10.03, from making payments of principal of, premium, if any, and interest on
the Notes, or from depositing with the Trustee any money for such payments, or
(ii) the application by the Trustee of any money deposited with it for the
purpose of making such payments of principal of, premium, if any, and interest
on the Notes to the Holders entitled thereto unless, at least two Business Days
prior to the date upon which such payment becomes due and payable, the Trustee
shall have received the written notice provided for in Section 10.02(b) of this
Indenture (or there shall have been an acceleration of the Notes prior to such
application) or in Section 10.06 of this Indenture. The Company shall give
prompt written notice to the Trustee of any dissolution, winding up, liquidation
or reorganization of the Company.
SECTION 10.15. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article Eight by the Trustee
for the payment of principal of, premium, if any, and interest on the Notes
shall not be subordinated to the prior payment of any Senior Indebtedness
(provided that at the time deposited, such deposit did not violate the terms of
any then outstanding Senior Indebtedness), and none of the Holders shall be
obligated to pay over any such amount to any holder of Senior Indebtedness.
<PAGE> 86
84
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939. Prior to the
effectiveness of the Registration Statement, this Indenture shall incorporate
and be governed by the provisions of the TIA that are required to be part of and
to govern indentures qualified under the TIA. After the effectiveness of the
Registration Statement, this Indenture shall be subject to the provisions of the
TIA that are required to be a part of this Indenture and shall, to the extent
applicable, be governed by such provisions.
SECTION 11.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail addressed as follows:
if to the Company:
PageMart Wireless, Inc.
3333 Lee Parkway
Suite 900
Dallas, Texas 75219
Attention: President
if to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Holder shall be mailed
to him at his address as it appears on the Note Register by first class mail and
shall be sufficiently given to him if so mailed within the time prescribed.
Copies of any such communication or notice to a Holder shall also be mailed to
the Trustee and each Agent at the same time.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
Except for a notice to the Trustee, which is deemed given only when received,
and except as otherwise provided in this Indenture, if a notice or communication
is mailed in the manner provided in this Section 11.02, it is duly given,
whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the
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85
event, and such waiver shall be the equivalent of such notice. Waivers of notice
by Holders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 11.03. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of
such Counsel, all such conditions precedent have been complied with.
SECTION 11.04. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each person signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion
contained in such certificate or opinion is based;
(iii) a statement that, in the opinion of each such person, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with;
provided, however, that, with respect to matters of fact, an Opinion of
Counsel may rely on an Officers' Certificate or certificates of public
officials.
SECTION 11.05. Rules by Trustee, Paying Agent or Registrar.
The Trustee may make reasonable rules for action by or at a meeting of Holders.
The Paying Agent or Registrar may make reasonable rules for its functions.
<PAGE> 88
86
SECTION 11.06. Payment Date Other Than a Business Day. If an
Interest Payment Date, Redemption Date, Stated Maturity or date of maturity of
any Note shall not be a Business Day, then payment of principal of, premium, if
any, or interest on such Note, as the case may be, need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date or Redemption Date, or at the
Stated Maturity or date of maturity of such Note; provided that no interest
shall accrue for the period from and after such Interest Payment Date,
Redemption Date, Stated Maturity or date of maturity, as the case may be.
SECTION 11.07. Governing Law. The laws of the State of New
York shall govern this Indenture and the Notes. The Trustee, the Company and the
Holders agree to submit to the jurisdiction of the courts of the State of New
York in any action or proceeding arising out of or relating to this Indenture or
the Notes.
SECTION 11.08. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any Subsidiary of the Company. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.09. No Recourse Against Others. No recourse for the
payment of the principal of, premium, if any, or interest on any of the Notes,
or for any claim based thereon or otherwise in respect thereof, and no recourse
under or upon any obligation, covenant or agreement of the Company contained in
this Indenture, or in any of the Notes, or because of the creation of any
Indebtedness represented thereby, shall be had against any incorporator or
against any past, present or future partner, shareholder, other equityholder,
officer, director, employee or controlling person, as such, of the Company or of
any successor Person, either directly or through the Company or any successor
Person, whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Notes.
SECTION 11.10. Successors. All agreements of the Company in
this Indenture and the Notes shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 11.11. Duplicate Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement.
SECTION 11.12. Separability. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
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87
SECTION 11.13. Table of Contents, Headings, Etc. The Table of
Contents, Cross-Reference Table and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms and provisions hereof.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
PAGEMART WIRELESS, INC.
By:
---------------------------------
Name:
Title:
UNITED STATES TRUST COMPANY
OF NEW YORK
By:
---------------------------------
Name:
Title:
<PAGE> 90
EXHIBIT A
[FACE OF NOTE]
PAGEMART WIRELESS, INC.
11 1/4% Senior Subordinated Discount Note Due 2008
[CUSIP] [CINS] [ISIN] __________
No. $_________
The following information is supplied for purposes of Sections
1273 and 1275 of the Internal Revenue Code:
Issue Date: January 28, 1998
Yield to maturity for period from Issue Date to February 1, 2008: 11 1/4%,
compounded semi-annually on February 1 and August 1 commencing August 1, 1998
(computed without giving effect to the additional payments of interest in the
event the issuer fails to commence the exchange offer or cause the registration
statement to be declared effective, each as described on the reverse hereof)
Original issue discount under Section 1273 of the Internal Revenue Code (for
each $1,000 principal amount): $984.49
Issue Price (for each $1,000 principal amount): $578.01
PAGEMART WIRELESS, INC., a Delaware corporation (the
"Company", which term includes any successor under the Indenture hereinafter
referred to), for value received, promises to pay to____________, or its
registered assigns, the principal sum of _____________($_______) on February 1,
2008.
Interest Payment Dates: February 1 and August 1, commencing
August 1, 2003.
Regular Record Dates: January 15 and July 15.
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
<PAGE> 91
A-2
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Date: January 28, 1998 PAGEMART WIRELESS, INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
(Form of Trustee's Certificate of Authentication)
This is one of the 11 1/4% Senior Subordinated Discount Notes due 2008 described
in the within-mentioned Indenture.
_______________, as Trustee
By:
----------------------------------
Authorized Signatory
<PAGE> 92
A-3
[REVERSE SIDE OF NOTE]
PAGEMART WIRELESS, INC.
11 1/4% Senior Subordinated Discount Note due 2008
1. Principal and Interest.
The Company will pay the principal of this Note on February 1,
2008.
The Company promises to pay interest on the principal amount
of this Note on each Interest Payment Date, as set forth below, at the rate per
annum shown above.
Interest will be payable semiannually (to the holders of
record of the Notes at the close of business on the January 15 or July 15
immediately preceding the Interest Payment Date) on each Interest Payment Date,
commencing August 1, 2003; provided that no interest shall accrue on the
principal amount of this Note prior to February 1, 2003 and no interest shall be
paid on this Note prior to August 1, 2003, except as provided in the next
paragraph.
If an exchange offer registered under the Securities Act is
not consummated, or a shelf registration statement under the Securities Act with
respect to resales of the Notes is not declared effective by the Commission, on
or before July 28, 1998 in accordance with the terms of the Registration Rights
Agreement dated January 28, 1998 between the Company and Morgan Stanley & Co.
Incorporated, interest on the Notes (in addition to the accrual of original
discount during the period ending February 1, 2003 and in addition to the
interest otherwise due on the Notes after such date) will accrue, at an annual
rate of 0.5% of Accreted Value on the preceding Semiannual Accrual Date from
July 28, 1998, payable in cash semiannually, in arrears, on each February 1 and
August 1, commencing February 1, 1999. The Holder of this Note is entitled to
the benefits of such Registration Rights Agreement.
From and after February 1, 2003, interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from February 1, 2003; provided that, if there is no
existing default in the payment of interest and this Note is authenticated
between a Regular Record Date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such Interest
Payment Date. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The Company shall pay interest on overdue principal and
premium, if any, and interest on overdue installments of interest, to the extent
lawful, at a rate per annum that is 2% in excess of the rate otherwise payable.
<PAGE> 93
A-4
2. Method of Payment.
The Company will pay interest (except defaulted interest) on
the principal amount of the Notes as provided above on each February 1 and
August 1 to the persons who are Holders (as reflected in the Note Register at
the close of business on such January 15 and July 15 immediately preceding the
Interest Payment Date), in each case, even if the Note is cancelled on
registration of transfer or registration of exchange after such record date;
provided that, with respect to the payment of principal, the Company will make
payment to the Holder that surrenders this Note to a Paying Agent on or after
February 1, 2008.
The Company will pay principal, premium, if any, and as
provided above, interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. However, the
Company may pay principal, premium, if any, and interest by its check payable in
such money. It may mail an interest check to a Holder's registered address (as
reflected in the Note Register). If a payment date is a date other than a
Business Day at a place of payment, payment may be made at that place on the
next succeeding day that is a Business Day and no interest shall accrue for the
intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as authenticating agent,
Paying Agent and Registrar. The Company may change any authenticating agent,
Paying Agent or Registrar without notice. The Company, any Subsidiary or any
Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar.
4. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of
January 28, 1998 (the "Indenture"), between the Company and United States Trust
Company of New York, as trustee (the "Trustee"). Capitalized terms herein are
used as defined in the Indenture unless otherwise indicated. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act. The Notes are subject to all such
terms, and Holders are referred to the Indenture and the Trust Indenture Act for
a statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.
The Notes are general unsecured obligations of the Company.
The Company may, subject to Article Four of the Indenture, issue additional
Notes under the Indenture.
<PAGE> 94
A-5
5. Redemption.
The Notes will be redeemable, at the Company's option, in
whole or in part, at any time on or after February 1, 2003 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to each Holder's last address as it appears in the Note
Register, at the following Redemption Prices (expressed in percentages of their
principal amount at maturity), plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date that is on or prior to the Redemption Date to receive
interest due on an Interest Payment Date) if redeemed during the 12-month period
commencing February 1 of the applicable years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----------
<S> <C>
2003 105.625%
2004 103.750
2005 101.875
2006 and thereafter 100.000
</TABLE>
In addition, prior to February 1, 2001, the Company may redeem
up to 35% of the principal amount of the Notes with the proceeds of one or more
sales of Capital Stock (other than Redeemable Stock) of the Company, at any time
or from time to time in part, at a Redemption Price equal to 111.250% of their
Accreted Value on the Redemption Date provided that at least $280.8 million
aggregate principal amount at maturity of Notes remains outstanding after each
of such redemption.
Notice of any redemption will be mailed at least 30 days but
not more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at his last address as it appears in the Note Register. Notes in
original denominations larger than $1,000 may be redeemed in part. On and after
the Redemption Date, interest ceases to accrue on Notes or portions of Notes
called for redemption, unless the Company defaults in the payment of the
Redemption Price.
6. Repurchase upon Change in Control.
The Company shall commence, within 30 days of the occurrence
of a Change of Control, and consummate an Offer to Purchase for all Notes then
outstanding, at a purchase price equal to 101% of the Accreted Value thereof on
the relevant Payment Date, plus accrued interest (if any) to the Payment Date.
A notice of such Change of Control will be mailed within 30
days after any Change of Control occurs to each Holder at his last address as it
appears in the Note Register. Notes in original denominations larger than $1,000
may be sold to the Company in part. On and after the Change of Control Payment
Date, interest ceases to accrue on Notes or portions
<PAGE> 95
A-6
of Notes surrendered for purchase by the Company, unless the Company defaults in
the payment of the Change of Control Payment.
7. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in
denominations of $1,000 of principal amount at maturity and multiples of $1,000
in excess thereof. A Holder may register the transfer or exchange of Notes in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not register the transfer or exchange of any Notes selected for redemption.
Also, it need not register the transfer or exchange of any Notes for a period of
15 days before a selection of Notes to be redeemed is made.
8. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all
purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its request. After that, Holders entitled
to the money must look to the Company for payment, unless an abandoned property
law designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company deposits with the Trustee money or U.S.
Government Obligations sufficient to pay the then outstanding principal of,
premium, if any, and accrued interest on the Notes (a) to redemption or
maturity, the Company will be discharged from the Indenture and the Notes,
except in certain circumstances for certain sections thereof, and (b) to the
Stated Maturity, the Company will be discharged from certain covenants set forth
in the Indenture.
<PAGE> 96
A-7
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency and make any change that does not
materially and adversely affect the rights of any Holder.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Company and its Restricted Subsidiaries, among other things, to Incur
additional Indebtedness, make Restricted Payments, use the proceeds from Asset
Sales, engage in transactions with Affiliates or merge, consolidate or transfer
substantially all of its assets. Within 45 days after the end of each fiscal
quarter (90 days after the end of the last fiscal quarter of each year), the
Company must report to the Trustee on compliance with such limitations.
13. Successor Persons.
When a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
14. Defaults and Remedies.
The following events constitute "Events of Default" under the
Indenture: (a) default in the payment of the principal of (or premium, if any,
on) any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise, whether or not such payment is prohibited
by Section Ten; (b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30 days
whether or not such payment is prohibited by Section Ten; (c) default in the
performance of or breaches the provisions of the Indenture applicable to
mergers, consolidations and transfers of all or substantially all of the assets
of the Company or fails to make or consummate an Offer to Purchase in accordance
with Section 4.11 or Section 4.12 of the Indenture; (d) the Company defaults in
the performance of or breaches any other covenant or agreement of the Company in
the Indenture or under the Notes (other than a default specified in clause (a),
(b) or (c) above) and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25% or
more in
<PAGE> 97
A-8
aggregate principal amount of the Notes; (e) there occurs with respect to any
issue or issues of Indebtedness of the Company or any Significant Subsidiary
having an outstanding principal amount of $10 million or more in the aggregate
for all such issues of all such Persons, whether such Indebtedness now exists or
shall hereafter be created, (I) an event of default that has caused the holder
thereof to declare such Indebtedness to be due and payable prior to its Stated
Maturity and such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the final
(but not any interim) fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment default; (f) any
final judgment or order (not covered by insurance) for the payment of money in
excess of $10 million in the aggregate for all such final judgments or orders
against all such Persons (treating any deductibles, self-insurance or retention
as not so covered) shall be rendered against the Company or any Significant
Subsidiary and shall not be paid or discharged, and there shall be any period of
30 consecutive days following entry of the final judgment or order that causes
the aggregate amount for all such final judgments or orders outstanding and not
paid or discharged against all such Persons to exceed $10 million during which a
stay of enforcement of such final judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; (g) a court having jurisdiction in
the premises enters a decree or order for (A) relief in respect of the Company
or any Significant Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, (B)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs of
the Company or any Significant Subsidiary and, in each case, such decree or
order shall remain unstayed and in effect for a period of 60 consecutive days;
or (h) the Company or any Significant Subsidiary (A) commences a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consents to the entry of an order for relief in an
involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the benefit of
creditors.
If an Event of Default, as defined in the Indenture, occurs
and is continuing, the Trustee or the Holders of at least 25% in principal
amount of the Notes may declare all the Notes to be due and payable. Upon a
declaration of acceleration (the "Acceleration Notice"), such Accreted Value of,
premium, if any, and accrued interest shall be immediately due and payable;
provided, however, that if there are any amounts outstanding under the Credit
Agreement, such declaration shall not become effective until the earlier of (i)
an acceleration of the Indebtedness under the Credit Agreement and (ii) five
Business Days after receipt by the Company and the Bank Agent of such
Acceleration Notice. If a bankruptcy or insolvency default with respect to the
Company or any Restricted Subsidiary occurs and is
<PAGE> 98
A-9
continuing, the Notes automatically become due and payable. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of at least a
majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power.
15. Subordination
The payment of the Notes will, to the extent set forth in the
Indenture, be subordinated in right of payment to the prior payment in full, in
cash or cash equivalents, of all Senior Indebtedness.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from and perform services for
the Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
17. No Recourse Against Others.
No incorporator or any past, present or future partner,
shareholder, other equity holder, officer, director, employee or controlling
person as such, of the Company or of any successor Person shall have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
18. Authentication.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on the other side
of this Note.
19. Abbreviations.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
<PAGE> 99
A-10
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to PageMart
Wireless, Inc., 3333 Lee Parkway, Suite 900, Dallas, Texas 75219, Attention:
President.
<PAGE> 100
A-11
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- --------------------------------------------------------------------------------
Please print or typewrite name and address including zip code of assignee
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing ____________________________________attorney to transfer said Note on
the books of the Company with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL NOTES OTHER THAN EXCHANGE NOTES,
UNLEGENDED OFFSHORE GLOBAL NOTES AND
UNLEGENDED OFFSHORE PHYSICAL NOTES]
In connection with any transfer of this Note occurring prior
to the date which is the earlier of (i) the date the shelf registration
statement is declared effective or (ii) the end of the period referred to in
Rule 144(k) under the Securities Act, the undersigned confirms that without
utilizing any general solicitation or general advertising that:
[Check One]
[ ] (a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
<PAGE> 101
A-12
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.
Date:
--------------- ------------------------------------
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or
any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
--------------- ------------------------------------------------
NOTICE: To be executed by an executive officer
<PAGE> 102
A-13
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company
pursuant to Section 4.11 or Section 4.12 of the Indenture, check the Box: |_|
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 4.11 or Section 4.12 of the Indenture, state the
amount (in principal amount at maturity): $___________________.
Date:
-----------------------
Your Signature:
-----------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
------------------------------
<PAGE> 103
EXHIBIT B
Form of Certificate
______________,___
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
Re: PageMart Wireless, Inc. (the "Company")
11 1/4% Senior Subordinated Discount Notes
due 2008 (the "Notes")
Dear Sirs:
This letter relates to U.S. $ principal amount at maturity of
Notes represented by a Note (the "Legended Note") which bears a legend outlining
restrictions upon transfer of such Legended Note. Pursuant to Section 2.01 of
the Indenture (the "Indenture") dated as of January 28, 1998 relating to the
Notes, we hereby certify that we are (or we will hold such securities on behalf
of) a person outside the United States to whom the Notes could be transferred in
accordance with Rule 904 of Regulation S promulgated under the U.S. Securities
Act of 1933, as amended. Accordingly, you are hereby requested to exchange the
legended certificate for an unlegended certificate representing an identical
principal amount at maturity of Notes, all in the manner provided for in the
Indenture.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
------------------------------------
Authorized Signature
<PAGE> 104
EXHIBIT C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
____________,___
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
Re: PageMart Wireless, Inc. (the "Company")
11 1/4% Senior Subordinated Discount Notes due 2008
(the "Notes")
Dear Sirs:
In connection with our proposed purchase of $___________________
aggregate principal amount at maturity of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture dated
as of January 28, 1998, relating to the Notes (the "Indenture") and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with, such restrictions and conditions
and the Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not
been registered under the Notes Act, and that the Notes may not be offered or
sold except as permitted in the following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter stated,
that if we should sell any Notes, we will do so only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to
a "qualified institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter
<PAGE> 105
C-2
substantially in the form of this letter, (D) outside the United States in
accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant
to the exemption from registration provided by Rule 144 under the Securities
Act, or (F) pursuant to an effective registration statement under the Securities
Act, and we further agree to provide to any person purchasing any of the Notes
from us a notice advising such purchaser that resales of the Notes are
restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we
will be required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions. We
further understand that the Notes purchased by us will bear a legend to the
foregoing effect.
4. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
--------------------------------
Authorized Signature
<PAGE> 106
EXHIBIT D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
____________,___
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
Re: PageMart Wireless, Inc. (the "Company")
11 1/4% Senior Subordinated Discount Notes
due 2008 (the "Notes")
Dear Sirs:
In connection with our proposed sale of U.S.$ aggregate
principal amount at maturity of the Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933, as amended, and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the
United States;
(2) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the
United States in contravention of the requirements of Rule 903(b) or Rule 904(b)
of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933.
<PAGE> 107
D-2
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
--------------------------------------
Authorized Signature
<PAGE> 108
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS OF THE COMPANY..................................................................................... 1
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.................................................................................. 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act............................................ 21
SECTION 1.03. Rules of Construction........................................................................ 22
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.............................................................................. 22
SECTION 2.02. Restrictive Legends.......................................................................... 24
SECTION 2.03. Execution, Authentication and Denominations.................................................. 26
SECTION 2.04. Registrar and Paying Agent................................................................... 26
SECTION 2.05. Paying Agent to Hold Money in Trust.......................................................... 27
SECTION 2.06. Transfer and Exchange........................................................................ 28
SECTION 2.07. Book-Entry Provisions for Global Notes....................................................... 29
SECTION 2.08. Special Transfer Provisions.................................................................. 31
SECTION 2.09. Replacement Notes............................................................................ 33
SECTION 2.10. Outstanding Notes............................................................................ 34
SECTION 2.11. Temporary Notes.............................................................................. 35
SECTION 2.12. Cancellation................................................................................. 35
SECTION 2.13. CUSIP Numbers................................................................................ 35
SECTION 2.14. Defaulted Interest........................................................................... 36
SECTION 2.15. Issuance of Additional Notes................................................................. 36
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption.......................................................................... 36
SECTION 3.02. Notices to Trustee........................................................................... 37
SECTION 3.03. Selection of Notes to Be Redeemed............................................................ 37
SECTION 3.04. Notice of Redemption......................................................................... 37
SECTION 3.05. Effect of Notice of Redemption............................................................... 38
SECTION 3.06. Deposit of Redemption Price.................................................................. 38
SECTION 3.07. Payment of Notes Called for Redemption....................................................... 39
</TABLE>
- --------
Note: The Table of Contents shall not for any purposes be deemed to be
a part of the Indenture.
<PAGE> 109
ii
<TABLE>
<S> <C>
SECTION 3.08. Notes Redeemed in Part....................................................................... 39
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes............................................................................. 39
SECTION 4.02. Maintenance of Office or Agency.............................................................. 39
SECTION 4.03. Limitation on Indebtedness................................................................... 40
SECTION 4.04. Limitation on Senior Subordinated Indebtedness............................................... 43
SECTION 4.05. Limitation on Liens.......................................................................... 44
SECTION 4.06. Limitation on Restricted Payments............................................................ 44
SECTION 4.07. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.............................................................. 48
SECTION 4.08. Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries......................................................................... 49
SECTION 4.09. Limitation on Issuances of Guarantees by Restricted Subsidiaries............................. 49
SECTION 4.10. Limitation on Transactions with Shareholders and Affiliates.................................. 50
SECTION 4.11. Limitation on Asset Sales.................................................................... 51
SECTION 4.12. Repurchase of Notes upon a Change of Control................................................. 52
SECTION 4.13. Existence.................................................................................... 52
SECTION 4.14. Payment of Taxes and Other Claims............................................................ 53
SECTION 4.15. Maintenance of Properties and Insurance...................................................... 53
SECTION 4.16. Notice of Defaults........................................................................... 53
SECTION 4.17. Compliance Certificates...................................................................... 54
SECTION 4.18. Commission Reports and Reports to Holders.................................................... 54
SECTION 4.19. Waiver of Stay, Extension or Usury Laws...................................................... 55
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc.................................................................. 55
SECTION 5.02. Successor Substituted........................................................................ 56
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default............................................................................ 56
SECTION 6.02. Acceleration................................................................................. 58
SECTION 6.03. Other Remedies............................................................................... 59
SECTION 6.04. Waiver of Past Defaults...................................................................... 59
SECTION 6.05. Control by Majority.......................................................................... 59
SECTION 6.06. Limitation on Suits.......................................................................... 60
</TABLE>
<PAGE> 110
iii
<TABLE>
<S> <C>
SECTION 6.07. Rights of Holders to Receive Payment......................................................... 60
SECTION 6.08. Collection Suit by Trustee................................................................... 60
SECTION 6.09. Trustee May File Proofs of Claim............................................................. 61
SECTION 6.10. Priorities................................................................................... 61
SECTION 6.11. Undertaking for Costs........................................................................ 62
SECTION 6.12. Restoration of Rights and Remedies........................................................... 62
SECTION 6.13. Rights and Remedies Cumulative............................................................... 62
SECTION 6.14. Delay or Omission Not Waiver................................................................. 62
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. General ..................................................................................... 63
SECTION 7.02. Certain Rights of Trustee.................................................................... 63
SECTION 7.03. Individual Rights of Trustee................................................................. 64
SECTION 7.04. Trustee's Disclaimer......................................................................... 64
SECTION 7.05. Notice of Default............................................................................ 64
SECTION 7.06. Reports by Trustee to Holders................................................................ 65
SECTION 7.07. Compensation and Indemnity................................................................... 65
SECTION 7.08. Replacement of Trustee....................................................................... 65
SECTION 7.09. Successor Trustee by Merger, Etc............................................................. 66
SECTION 7.10. Eligibility.................................................................................. 66
SECTION 7.11. Money Held in Trust.......................................................................... 67
SECTION 7.12. Withholding Taxes............................................................................ 67
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations......................................................... 67
SECTION 8.02. Defeasance and Discharge of Indenture........................................................ 68
SECTION 8.03. Defeasance of Certain Obligations............................................................ 70
SECTION 8.04. Application of Trust Money................................................................... 72
SECTION 8.05. Repayment to Company......................................................................... 73
SECTION 8.06. Reinstatement................................................................................ 73
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders................................................................... 73
SECTION 9.02. With Consent of Holders...................................................................... 74
SECTION 9.03. Revocation and Effect of Consent............................................................. 75
SECTION 9.04. Notation on or Exchange of Notes............................................................. 76
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SECTION 9.05. Trustee to Sign Amendments, Etc.............................................................. 76
SECTION 9.06. Conformity with Trust Indenture Act.......................................................... 76
ARTICLE TEN
SUBORDINATION OF NOTES
SECTION 10.01. Notes Subordinated to Senior Indebtedness................................................... 76
SECTION 10.02. No Payment on Notes in Certain Circumstances................................................ 76
SECTION 10.03. Payment over Proceeds upon Dissolution, Etc................................................. 78
SECTION 10.04. Subrogation................................................................................. 79
SECTION 10.05. Obligations of Company Unconditional........................................................ 80
SECTION 10.06. Notice to Trustee........................................................................... 80
SECTION 10.07. Reliance on Judicial Order or Certificate of Liquidating Agent.............................. 81
SECTION 10.08. Trustee's Relation to Senior Indebtedness................................................... 82
SECTION 10.09. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Indebtedness............................................ 82
SECTION 10.10. Holders Authorize Trustee to Effectuate Subordination of Notes.............................. 82
SECTION 10.11. Not to Prevent Events of Default............................................................ 82
SECTION 10.12. Trustee's Compensation Not Prejudiced....................................................... 83
SECTION 10.13. No Waiver of Subordination Provisions....................................................... 83
SECTION 10.14. Payments May Be Paid Prior to Dissolution................................................... 83
SECTION 10.15. Trust Moneys Not Subordinated............................................................... 83
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939................................................................. 84
SECTION 11.02. Notices..................................................................................... 84
SECTION 11.03. Certificate and Opinion as to Conditions Precedent.......................................... 85
SECTION 11.04. Statements Required in Certificate or Opinion............................................... 85
SECTION 11.05. Rules by Trustee, Paying Agent or Registrar................................................. 85
SECTION 11.06. Payment Date Other Than a Business Day...................................................... 86
SECTION 11.07. Governing Law............................................................................... 86
SECTION 11.08. No Adverse Interpretation of Other Agreements............................................... 86
SECTION 11.09. No Recourse Against Others.................................................................. 86
SECTION 11.10. Successors.................................................................................. 86
SECTION 11.11. Duplicate Originals......................................................................... 86
SECTION 11.12. Separability................................................................................ 86
SECTION 11.13. Table of Contents, Headings, Etc............................................................ 87
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EXHIBIT A Form of Note................................................................................. A-1
EXHIBIT B Form of Certificate.......................................................................... B-1
EXHIBIT C Form of Certificate to be Delivered in Connection with
Transfers Pursuant to Regulation S........................................................ C-1
EXHIBIT D Form of Certificate to be Delivered in Connection with
Transfers to Non-QIB Accredited Investors................................................. D-1
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AMENDED AND RESTATED
SATELLITE SERVICES SUPPLEMENTAL AGREEMENT
THIS AMENDED AND RESTATED SATELLITE SERVICES SUPPLEMENTAL
AGREEMENT (the "SSS Agreement") is made and entered into as of December 18, 1997
(the "Execution Date") by and between AvData Systems, Inc., a Delaware
corporation ("AvData"), whose principal place of business is located at 55
Marietta Street, NW, Atlanta, Georgia 30303 and PageMart Wireless Inc. (the
"Customer" or "PageMart"), a corporation existing under the laws of the state of
Delaware with offices at 3333 Lee Parkway, Suite 100, Dallas, Texas, 75219.
WHEREAS, AvData and PageMart, Inc. entered into a Satellite
Services Supplemental Agreement dated as of September 30, 1995 (the "Existing
SSS Agreement") concerning the purchase of certain satellite services and have
subsequently amended the Existing SSS Agreement by Amendment Number 1 (the
"Amendment").
WHEREAS, PageMart, Inc. has assigned its rights in the
Existing SSS Agreement to its sole stockholder, Customer, and AvData and
Customer now desire to restate and amend the Existing SSS Agreement as amended
to reflect the parties' actions to date, to integrate the pertinent provisions
of the Amendment and to specify certain additional and/or revised terms and
conditions as more fully stated below;
WHEREAS, Customer and AvData have entered into an Amended and
Restated Master Agreement dated December 18, 1997 ("Master Agreement"); and
WHEREAS, the parties acknowledge and agree that the SSS
Agreement is a separate, free standing document, independent of the Master
Agreement and all of the parties' rights and obligations hereunder shall
continue in full force and effect notwithstanding any termination of or default
by either party under the Master Agreement; and
WHEREAS, AvData leases certain Ku-Band satellite transponder
capacity on multiple satellites, and Customer desires to purchase from AvData
and AvData is willing to provide to Customer, a portion of such satellite
transponder capacity for use in the VNI Network.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and other
good and valuable consideration received and acknowledged, AvData and Customer
further agree that as of the Execution Date, the Existing SSS Agreement as
amended by the Amendment, is hereby amended and restated to read in its
entirety as follows:
During the Satellite Services Term, AvData shall provide
Customer's Satellite Capacity in accordance with, and Customer shall be bound
by, the terms and conditions set forth below:
A. "SATELLITE SERVICES TERM":
1. "Commencement Date": 12:00 a.m. (Eastern Time) on August 1, 1996.
2. "Termination Date": 11:59 p.m. (Eastern Time) on July 31, 2001 unless
earlier terminated pursuant to this SSS Agreement.
B. CUSTOMER'S SATELLITE CAPACITY: AvData shall provide satellite
transponder capacity for the VNI Network according to the terms hereof. From the
Commencement Date through the Termination Date Customer's Satellite Capacity
shall be provided through Ku-band transponder capacity leased by AvData on
Satellite(s) selected by AvData in its sole discretion subject to approval by
Customer, which shall not be
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unreasonably withheld; provided, however, that at least one of the Satellites
(i.e. GE-1) provides coverage for all fifty states of the USA.
C. PRICE: Customer shall pay to AvData a monthly satellite capacity payment
for Customer's Satellite Capacity, in accordance with Section J below and
Schedule 1 attached hereto, except that payment for the first month of any
increased usage shall be due and payable on the date the Customer uses any
increase in satellite capacity, with a corresponding increase in subsequent
monthly satellite capacity payments.
D. DEPOSIT: The parties acknowledge that Customer paid AvData a non-refundable
satellite services deposit on the date of execution of the Existing SSS
Agreement, which has been retained by AvData in consideration for the
modifications contained therein. PageMart acknowledges that it is not entitled
to a set-off against any financial obligations with respect to such payment.
E. CERTAIN DEFINITIONS
1. "Affiliates" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control
(i.e., the power to direct affairs by reason of ownership of voting stock,
by contract or otherwise) with such Person and any member, director,
officer or employee of such Person.
2. "FCC" shall mean the Federal Communications Commission or any successor
organization.
3. "Satellite(s)" shall mean GE-1 and Galaxy IV and such other geo-stationary
communications satellite or satellites through which AvData will provide
Customer's Satellite Capacity.
4. "Laws" shall mean all international, federal, state, local and other laws,
rules and other regulations, including without limitation, those issued by
the FCC.
5. "Person" shall mean any person or entity, whether an individual, trustee,
corporation, general partnership, limited partnership, trust,
unincorporated organization, business association, firm, joint venture,
governmental agency or authority, or otherwise.
6. "Transponder(s)" shall mean a component of the Satellite(s) which, for a
particular frequency band, receives, amplifies, translates frequency and
retransmits radio signals. Each Transponder contains one traveling wave
tube amplifier (a "TWTA"). Transponder shall also mean, for purposes of
this definition, any replacement or alternate components thereof.
7. "Satellite Capacity Failure" shall mean the failure of AvData to provide
Customer's aggregate Satellite Capacity on a Satellite(s) (due to a
Satellite failure). Determination that a Satellite Capacity Failure has
occurred shall be made by AvData in its sole discretion.
8. "Usage" or "Use" shall refer to radio transmission to, or utilization of,
the Satellite(s) for the VNI Network.
9. "Satellite Operators" shall mean the owner(s) of the Satellite(s)
specifically authorized by the FCC to operate the Satellite(s) and through
whom AvData makes available the satellite capacity required for the VNI
Network.
10. "Primary Hub" shall mean the Equipment at AvData's primary hub location in
Atlanta, Georgia which will be used to access Customer's Satellite
Capacity to run the VNI Network.
11. "Alternate Hub" shall mean the equipment PageMart sets up at a site to be
determined which will be used to access Customer's Satellite Capacity to
run the VNI Network for load sharing with, or failure of the Primary Hub.
12. "Customer's Satellite Capacity" shall mean the satellite capacity to be
provided hereunder to Customer (expressed as SCUs or High Power SCUs)
during the Satellite Services Term, as more
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particularly described in Paragraph J.2. hereof. In addition, if PageMart
requests additional satellite capacity as described in Schedule 1
attached hereto, subject to availability of such satellite capacity, such
additional satellite capacity shall be included upon commencement of
service for such satellite capacity.
13. "Equipment" shall mean the Very Small Aperture satellite Terminals (VSATs)
and associated hub hardware and remote site hardware including embedded
software provided by AvData under the Master Agreement.
14. "Satellite Capacity Unit" or "SCU" - One SCU equals 800 kHz of bandwidth,
which is normally configured as one (1) 128 Kbps outbound channel and two
(2) 64 Kbps inbound channels. Using standard power levels and BPSK
modulation, the percentage of available bandwidth in the transponder that
is utilized by a SCU is equal to the percentage of the power available in
the transponder utilized by that SCU.
15. "High Power SCU" - One High Power SCU consumes twice the satellite
capacity of one standard power SCU. Using high power levels and BPSK
modulation, the percentage of available power in the transponder that is
utilized by a High Power SCU is equal to two (2) times the percentage of
available bandwidth in the transponder that is utilized by a SCU. A High
Power SCU has a power density of not less than 9 dBW/4KHz and requires
authorization from the Federal Communications Commission (FCC).
16. "VNI" or "VNI Network" shall mean the VSAT network infrastructure
consisting of the Equipment, and software provided by AvData under the
Master Agreement.
F. CERTAIN UNDERSTANDINGS
1. Ownership of Transponders. Customer understands and agrees that the
Satellite Operators are the FCC-authorized operator of the Satellites . Neither
this SSS Agreement nor Customer's Satellite Capacity shall, or shall be deemed
to, convey title or any other ownership interest to Customer in or to any
Satellite, any Transponder or any part thereof. Customer acknowledges and
agrees (i) that nothing contained in this SSS Agreement shall prevent any sale,
mortgage, or encumbrance of any Satellite or any Transponder thereof by the
owner, (ii) that Customer's Satellite Capacity is provided on a right to use
basis (with Equipment and services provided by AvData under the Master
Agreement) and is not being sold to Customer, (iii) that neither any
Transponder nor any Satellite, nor any right to use thereof nor any interest of
any type therein, shall be subject to any claim, prior, subsequent or
otherwise, of Customer or its creditors as a result of this SSS Agreement, and
(iv) that, as to any Transponder, the rights of Customer under this SSS
Agreement will be subject and subordinate to the rights of any purchaser
purchasing such Transponder and leasing it back to the Satellite Operator
pursuant to a sale and leaseback transaction. Notwithstanding the foregoing,
AvData shall use reasonable efforts to provide that the foregoing restrictions
shall not impact or interfere with Customer's use of Customer's Satellite
Capacity as provided for herein.
2. Control of Satellite. Customer understands and agrees that the
Satellite Operator(s) shall control and provide for the operation of the
Satellite(s).
3. Communication with Satellite. All communications with the
Satellite(s) will be provided through Equipment controlled by AvData at either
the Primary Hub or Alternate Hub; provided, however, upon the prior written
request of Customer, AvData shall use its reasonable efforts to obtain the
consent of each Satellite Operator to permit Customer to exercise control of
the Equipment at the Alternate Hub, and upon obtaining such consent(s),
Customer shall have the right to make communications with the Satellite(s)
through Equipment controlled by Customer or its nominee at the Alternate Hub.
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G. CONTINUITY OF SERVICE
1. Preemption/Interruption of Service. Customer recognizes and agrees
with respect to each Satellite that for "Technical or Safety Reason(s)", which
shall include, but shall not be limited to, (1) the protection of the overall
health or performance of the Satellite or its Transponders; (2) the prevention
of interference or cross-talk; (3) the protection of public safety; or (4)
compliance with an order from the FCC or other governmental authorities - and
the existence of which the Satellite Operator shall determine in its sole
discretion - the Satellite Operator may take the following "Action(s)": (i)
preempt or interfere with Customer's Use of any Transponder or other component
of the Satellite, (ii) reassign TWTAs to different Transponders on the
Satellite, or (iii) reassign the frequency assignment of Customer's Satellite
Capacity. Customer acknowledges and agrees that an Action by Satellite Operator
may result in the preemption or interruption of the Use of Customer's Satellite
Capacity. AvData shall notify Customer as soon as reasonably practical after
receipt by AvData of oral or written notice from the Satellite Operator
concerning an Action and shall use reasonable efforts to cause the Satellite
Operator to schedule and conduct such Action so as to minimize the Satellite
Operator disruption of Customer's Use of Customer's Satellite Capacity.
Customer acknowledges and agrees that if such preemption or interruption
occurs, then Customer shall cooperate with and assist AvData and the Satellite
Operator during such periods and Customer's sole remedies shall be the
termination of this SSS Agreement or reduction in Customer's Satellite Capacity
pursuant to Paragraph K herein.
2. Provision of Continuing Service. In the event of a Satellite
Capacity Failure, AvData shall use its best efforts to cause the Satellite
Operator to provide Customer's Satellite Capacity using spare Transponder
capacity on the Satellite, if available, or if such spare capacity is
unavailable, then by using an alternate Transponder on the Satellite of the
same polarity, if available. The availability of such spare or alternate
Transponder on the Satellite, on a permanent or temporary basis, shall be
determined by the Satellite Operator in its sole discretion. The foregoing
notwithstanding, Customer's sole remedies for any preemption or interruption of
Use shall be the termination of this SSS Agreement or reduction in Customer's
Satellite Capacity pursuant to Paragraph K herein.
H. CUSTOMER'S OBLIGATIONS
1. Compliance With SSS Agreement and Laws. During the Satellite
Services Term, Customer shall comply with the terms of this SSS Agreement and
shall be responsible for complying with, and shall comply with all Laws
applicable to it regarding the operation and Use of the Satellites and the
Transponders, or Use of Customer's Satellite Capacity. Customer shall be
permitted to use Customer's Satellite Capacity for any business unit,
subsidiary, Strategic Alliance Partner or customer of PageMart subject to the
approval of AvData, which shall not be unreasonably withheld, provided,
however, operation of the Equipment provided under the Master Agreement or any
other equipment used to access Customer's Satellite Capacity, including
PageMart's Alternate Hub, must be in strict accordance with guidelines and
instructions provided by the Satellite Operator directly or through AvData.
I. REMEDIES
1. LIMITATION OF LIABILITY
a. ANY AND ALL EXPRESS AND IMPLIED WARRANTIES INCLUDING, BUT NOT
LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE OR USE,
ARE EXPRESSLY EXCLUDED AND DISCLAIMED BY AVDATA. CUSTOMER EXPRESSLY AGREES THAT
AVDATA'S SOLE OBLIGATIONS AND CUSTOMER'S EXCLUSIVE REMEDIES FOR ANY CAUSE
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, LIABILITY ARISING FROM NEGLIGENCE)
ARISING OUT OF OR RELATING TO THIS SSS AGREEMENT AND/OR THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY ARE LIMITED TO TERMINATION OF THIS SSS
AGREEMENT FOR THE REASONS DESCRIBED IN PARAGRAPH G ABOVE, AND ALL OTHER
REMEDIES OF ANY KIND ARE EXPRESSLY EXCLUDED.
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b. IN NO EVENT SHALL AVDATA BE LIABLE FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR NOT, OCCASIONED BY ANY DEFECT IN
CUSTOMER'S SATELLITE CAPACITY, FAILURE OF THE CUSTOMER'S SATELLITE CAPACITY TO
PERFORM OR ANY OTHER CAUSE WHATSOEVER. AVDATA MAKES NO WARRANTY, EXPRESS OR
IMPLIED, TO ANY OTHER PERSON CONCERNING CUSTOMER'S SATELLITE CAPACITY AND
CUSTOMER SHALL INDEMNIFY AVDATA FROM ANY CLAIMS MADE UNDER ANY WARRANTY OR
REPRESENTATION BY CUSTOMER TO ANY THIRD PARTY.
2. Indemnification.
Customer shall indemnify and save AvData and the Satellite Operators
harmless from all liability to Customer disclaimed by AvData, as specified
above, to the extent such liability arises in connection with the provision by
AvData or the Satellite Operators of facilities and/or Customer's Satellite
Capacity or use of Customer's Satellite Capacity pursuant to this SSS Agreement
provided, however, Customer shall not be obligated to indemnify AvData from
such liability to the extent such liability arises from the willful misconduct
or gross negligence of AvData.
J. PAYMENTS TO AVDATA
1. Payment.
a. Unless otherwise provided, any sum due AvData for the provision of
Customer's Satellite Capacity shall be invoiced and payable in advance on the
first day of each month.
b. If any payment of any sum due from Customer is not received by
AvData within thirty (30) days after such payment is due, then such overdue
amount shall be subject to a delinquency charge at the rate of interest equal
to one and one-half percent (1 1/2%) per month, from the date such overdue
amount was actually due until the date it is actually received by AvData.
c. Customer's obligations to make the monthly satellite capacity
payments provided by Paragraph C above and J(2) below shall be absolute and
unconditional and shall not be affected by any circumstances, including,
without limitation, any setoff, counterclaim, recoupment, defense or other
right which Customer may have against AvData or anyone else for any reason
whatsoever.
d. The charges specified herein do not include any amounts for sales,
use, property, privilege, license, excise or similar taxes, fees or assessments
which may be levied by any governmental agency on this SSS Agreement, the
services provided or the payments made hereunder. Any such taxes or charges
shall be paid directly by Customer to the taxing authority, if legally
permitted. Otherwise, if required to be paid by AvData, the amount shall be
reimbursed to AvData by the Customer. Upon request, the Customer shall provide
AvData with tax exemption certificates, if applicable, or evidence of tax
payments, if made by Customer.
2. Required Satellite Capacity.
a. Commencing August 1, 1996, PageMart shall pay per
month per Satellite Capacity Unit ("SCU") for satellite capacity,
*
Nothing contained in
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this paragraph is intended to limit PageMart's ability to increase its number of
SCUs at a rate faster than * per month. PageMart shall have the right to
designate by written notice by PageMart that a portion of Customer's Satellite
Capacity, not to exceed ten (10) SCUs (i.e. five (5) High Power SCUs), shall be
provided as High Power SCUs. The provision of Customer's Satellite Capacity as
High Power SCUs shall be subject to availability of High Power SCUs on the
Satellite(s) and regulatory approval by the FCC. Upon receipt of such written
notice, AvData shall pursue such regulatory approval on a "best efforts" basis,
at PageMart's sole cost and expense. One (1) High Power SCU shall count as two
(2) SCUs for the purpose of the above calculations.
b. *
c. *
d. *
K. TERMINATION
1. Events of Termination. This Agreement shall terminate automatically
upon the Termination Date, unless terminated earlier pursuant to one of the
following paragraphs:
a. Termination for Satellite Capacity Failure. If a Satellite Capacity
Failure continues uninterrupted for more than ten (10) consecutive days, or
such other period is mutually agreed upon in writing by AvData and Customer,
then this Agreement may be immediately terminated by either party by written
notice to the other delivered on or before the thirtieth day after the calendar
day on which the Satellite Capacity Failure began; provided, however, that if
such Satellite Capacity Failure affects only one Satellite and a portion of
Customer's Satellite Capacity remains available from other Satellite(s), then
the right of termination shall apply only to Customer's Satellite Capacity
received hereunder from such failed Satellite and this SSS Agreement shall
continue in force with respect to the remaining portion of Customer's Satellite
Capacity. If so terminated, AvData shall refund to Customer the amount of any
prepaid monthly charges for the terminated capacity prorated from the date of
the Satellite Capacity Failure, and AvData shall have no other or further
liability to Customer.
b. Cancellation for Non-Payment and Violations of Law. Notwithstanding
anything to the contrary and in addition to all other remedies AvData may have,
AvData may immediately cancel this Agreement and accelerate all remaining
payments due through the Satellite Services Term if Customer materially
breaches any provision of this Agreement, including for example (but without
limitation), (1) if Customer fails to pay when due any amounts due pursuant to
this Agreement within ten (10) days after AvData has delivered notice to
Customer of such non-payment, or (2) if Customer violates the provisions of
Paragraph H.1. ("Compliance with Laws"). Upon termination, pursuant to this
Paragraph K.1.b, AvData shall be entitled to transfer Customer's Satellite
Capacity immediately to whomever AvData sees fit, Customer shall not be
entitled to any equitable relief as a result thereof, and Customer's exclusive
remedy shall be limited to recovery of any payments made by it to AvData for
the period of time as to which it has
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been canceled, without interest, less any claim AvData has against Customer by
reason of such Customer's default.
c. Termination by Customer. In event that AvData fails to provide
Customer's Satellite Capacity to Customer as a result of the termination by a
Satellite Operator of the lease to AvData of Ku-Band satellite transponder
capacity due to a default by AvData, Customer, provided that Customer is not in
default hereunder, shall have the right to reduce Customer's Satellite Capacity
under this Agreement to the extent of the Customer's Satellite Capacity
received hereunder from such Satellite Operator if AvData fails to cure such
failure within thirty (30) days after receiving written notice of such failure
from Customer. If Customer's Satellite Capacity is so reduced, AvData shall (i)
refund to Customer the amount of any prepaid monthly charges for the terminated
Customer's Satellite Capacity prorated from the date AvData failed to provide
such Customer's Satellite Capacity and (ii) provide reasonable cooperation, at
Customer's request and expense, with any efforts by Customer to contract
directly with the Satellite Operator for such terminated Customer's Satellite
Capacity, and AvData shall have no other or further liability to Customer with
respect to such terminated Customer's Satellite Capacity.
2. Continuation after Termination of Master Agreement. The parties
acknowledge and agree that this SSS Agreement is a separate, free standing
contract and is independent of the Master Agreement. This SSS Agreement, and
the parties rights and obligations hereunder, shall continue in full force and
effect notwithstanding any termination of or default by either party under the
Master Agreement.
L. MISCELLANEOUS
1. Headings. The Paragraph headings used in this SSS Agreement, except
where terms are specifically defined, are for reference and convenience only
and shall not enter into the interpretation hereof.
2. Waiver. No delay or omission by either party to exercise any right
or power shall impair any such right or power or be construed to be a waiver
thereof. A waiver by either of the parties of any of the covenants, conditions
or agreements to be performed by the other or any breach thereof shall not be
construed to be a waiver of any succeeding breach thereof or of any other
covenant, condition or agreement herein contained.
3. Severability. If, but only to the extent that, any provision of
this SSS Agreement is declared or found to be illegal, unenforceable or void,
then both parties shall be relieved of all obligations arising under such
provision, it being the intent and agreement of the parties that this SSS
Agreement shall be deemed amended by modifying such provision to the extent
necessary to make it legal and enforceable while preserving its intent. If that
is not possible, another provision that is legal and enforceable and achieves
substantially the same objective shall be substituted. If the remainder of this
SSS Agreement is not affected by such declaration or finding and is capable of
substantial performance then the remainder shall be enforced to the extent
permitted by law.
4. Relationship of Parties. AvData is performing pursuant to this SSS
Agreement only as an independent contractor and nothing set forth in this SSS
Agreement shall be construed to create the relationship of principal and agent
between AvData and Customer. Neither AvData nor Customer shall act or attempt
to act or represent itself, directly or by implication, as an agent of the
other party or its Affiliates or in any manner assume or create, or attempt to
assume or create, any obligation on behalf of, or in the name of, the other
party or its Affiliates.
5. Approvals and Authorizations. The obligations of the parties hereto
shall be subject to obtaining and maintaining all necessary regulatory and
other governmental approvals and authorizations. The parties agree to use their
respective and, where applicable, collective best reasonable efforts to obtain
promptly and maintain any such approvals.
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6. Notices. In addition to such other requirements as may be set forth
herein, any notices hereunder by one party to the other party shall be given in
writing by personal delivery (or by recognized overnight delivery service) or
posted by certified mail return receipt requested, to the parties at the
following addresses:
IF AVDATA, SEND TO: IF CUSTOMER, SEND TO:
AvData Systems, Inc. PageMart Wireless, Inc.
55 Marietta Street 3333 Lee Parkway, Suite 100
Atlanta, GA 30303 Dallas, TX 75219
Attn: Judith H. Drobinski Attn: James E. Freytag
V.P. - Finance & Admin. Director of Network
Implementation
Notices will be deemed to have been given hereunder when delivered (whether or
not accepted by the addressee).
7. Confidentiality. Each party hereby agrees that all non-public,
confidential or proprietary information communicated to it by the other party
or its customers, whether before or after the Execution Date, shall be and was
received in strict confidence, shall be used only for purposes of this SSS
Agreement, and, for a period of five (5) years following the termination of
this SSS Agreement, shall not be disclosed by such party, its agents or
employees without the prior written consent of the other party, except as may
be necessary by reason of legal, accounting or regulatory requirements beyond
the reasonable control of the disclosing party. The obligations set forth in
this Section shall survive termination of this SSS Agreement.
8. Force Majeure. The term "Force Majeure" shall include, but not be
limited to, fires or other casualties or accidents, acts of God, severe weather
conditions, sun outages, strikes or labor disputes, war or other violence, any
law, order, proclamation, regulation, ordinance, demand or requirement of any
governmental agency or any other act or condition whatsoever beyond the
reasonable control of the affected party. A party whose performance of its
obligations hereunder is prevented, restricted or interfered with by reason of
a Force Majeure condition shall be excused from such performance to the extent
of such Force Majeure condition so long as such party immediately continues
performance whenever and to the extent such causes are removed. Nothing in this
Section shall relieve Customer of its obligations to make payments to AvData in
accordance with Paragraphs C and J of this Satellite Services Supplemental
Agreement, except to the extent that AvData is relieved of its obligations to
make payments to the Satellite Operator by such Force Majeure condition.
9. Applicable Law and Entire Agreement. THIS SSS AGREEMENT SHALL BE
INTERPRETED, CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
GEORGIA. This SSS Agreement constitutes the entire agreement between the
parties, supersedes all previous understandings, commitments or representations
and is intended as the complete and exclusive statement of the terms of the
agreement between the parties concerning the subject matter hereof. This SSS
Agreement may not be amended or modified in any way, and none of its provisions
may be waived, except by a writing signed by each party hereto.
10. Attorney's Fees. In the event of any dispute or controversy
arising hereunder, any court having jurisdiction in any such dispute or
controversy shall determine which of the parties is the prevailing party and
shall award to the prevailing party the reasonable fees and expenses of
counsel, experts and other court costs incurred in connection with such dispute
or controversy.
11. No right of Transfer. Customer shall not, and shall not have the
right to, grant, sell, assign, encumber, permit the utilization of, license,
lease, or otherwise convey, directly or indirectly, in whole or in part
(individually, a "Transfer:"), Customer's Satellite Capacity, or any of its
rights under this SSS Agreement, to any other entity or person. Notwithstanding
the foregoing, Customer may assign its
A & R Satellite AvData Systems, Inc.
Services Supplemental Proprietary
8
<PAGE> 9
AMENDED AND RESTATED
SATELLITE SERVICES SUPPLEMENTAL AGREEMENT
Satellite Capacity, and its rights under this SSS Agreement, without AvData's
written consent, to any corporation, partnership or other entity which is
controlled by Customer and in which Customer has not less than fifty-one percent
(51%) of the ownership interest, provided that no such assignment shall relieve
Customer of any of its obligations hereunder.
12. Successors and Assigns. Subject to Paragraph L.11 above, this SSS
Agreement shall be binding on and shall inure to the benefit of any successors
and assigns of the parties, provided that no assignment of this SSS Agreement
shall relieve either party hereto of its obligations to the other party. Any
purported assignment by either party not in compliance with the provisions of
this SSS Agreement shall be null and void and of no force and effect.
- -------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto, each by a duly authorized officer, have
caused this Agreement to be executed as of the date written above.
<TABLE>
<CAPTION>
PAGEMART, INC. AVDATA SYSTEMS, INC.
<S> <C> <C>
By: By: Harold E. Cowan
------------------------------------ ------------------------------------
Title: Title: Vice President Account Management
------------------------------------ ------------------------------------
Date: Date: December 18, 1997
------------------------------------ ------------------------------------
Signed: /s/ ILLEGIBLE Signed: /s/ HAROLD E COWAN
------------------------------------ ------------------------------------
</TABLE>
A & R Satellite AvData Systems, Inc.
Services Supplemental Proprietary
9
<PAGE> 10
AMENDED AND RESTATED
SATELLITE SERVICES SUPPLEMENTAL AGREEMENT
SCHEDULE 1
*
<PAGE> 1
EXHIBIT 10.6
FOURTH AMENDMENT
FOURTH AMENDMENT (this "Amendment"), dated as of January 15,
1998, among PAGEMART WIRELESS, INC. (formerly PageMart Nationwide, Inc.) (the
"Borrower"), the financial institutions party to the Credit Agreement referred
to below (the "Lenders"), BT COMMERCIAL CORPORATION, as Agent (the "Agent"),
and BANKERS TRUST COMPANY, as Issuing Bank (the "Issuing Bank"). All
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, the Borrower, the Lenders, the Agent, and the Issuing
Bank are parties to a Credit Agreement, dated as of May 11, 1995 (as amended,
modified or supplemented through, but not including, the date hereof, the
"Credit Agreement");
WHEREAS, the parties hereto wish to further modify the Credit
Agreement as herein provided; and
WHEREAS, subject to the terms and conditions of this
Amendment, the parties hereto agree as follows;
NOW, THEREFORE, it is agreed:
1. Section 1 of the Credit Agreement is hereby amended
by:
(a) inserting the following definitions in the
appropriate alphabetical order:
"'Capital Expenditure Amount' shall mean (i) $175,000,000 less
(ii) the amount by which (x) $90,000,000 exceeds (y) the Net
Refinancing Amount plus (iii) the Permitted Equity Basket.
'Consent Solicitation Statement' shall mean the Amended
Consent Solicitation Statement dated December 17, 1997 relating to the
15% Senior Discount Notes due 2005, a copy of which has been provided
to the Agent and the Lenders prior to the Fourth Amendment Effective
Date.
<PAGE> 2
'Fourth Amendment Effective Date' shall mean the date on which
the Fourth Amendment to this Agreement becomes effective in accordance
with its terms.
'Indenture Amendments' shall mean, collectively, (i) the
amendments to the Indenture for the 12 1/4% Senior Discount Notes due
2003 described in the Offer to Purchase and (ii) the amendments to the
Indenture for the 15% Senior Discount Notes due 2005 described in the
Consent Solicitation Statement.
'Merger' shall mean the merger of PageMart into the Borrower
pursuant to which the Borrower will be the surviving corporation.
'Net Refinancing Amount' shall mean (i) the net cash proceeds
received by the Borrower from the issuance of the Senior Subordinated
Notes, less (ii) the amounts paid in connection with the prepayment of
the 12 1/4% Senior Discount Notes due 2003 less (iii) all fees and
expenses incurred in connection with the Refinancing (including,
without limitation, all consent fees payable in connection with the
Consent Solicitation Statement).
'Offer to Purchase' shall mean the Offer to Purchase and
Consent Solicitation Statement relating to the 12 1/4% Senior Discount
Notes due 2003 dated December 23, 1997, a copy of which has been
provided to the Agent and the Lenders prior to the Fourth Amendment
Effective Date.
'Refinancing' shall mean (i) the repurchase of the 12 1/4%
Senior Discount Notes due 2003 as described in the Offer to Purchase,
(ii) the Indenture Amendments, (iii) the Merger and (iv) the issuance
of the Senior Subordinated Notes.
'Senior Subordinated Notes' shall mean the senior subordinated
discount notes to be issued by the Borrower, the terms of which are
described in the Offering Memorandum issued January 6, 1998 (a copy of
which has been provided to the Agent and the Lenders prior to the
Fourth Amendment Effective Date) and which on the date of issuance
thereof are otherwise satisfactory in form and substance to the
Agent.";
(b) amending the definition of "Eligible Accounts
Receivable" set forth therein by (x) deleting the "(i)" immediately after the
word "Accounts" in the first line thereof and (y) deleting the phrase "and (ii)
title to which has been effectively conveyed by PageMart to the Borrower
pursuant to the Asset Transfer Documents";
(c) amending the definition of "Indentures" set forth
therein by (i) deleting the "and" before clause (ii) thereof and inserting a
comma in lieu thereof and (ii) adding the following at the end thereof "and
(iii) the Indenture pursuant to which the
-2-
<PAGE> 3
Borrower issues its Senior Subordinated Notes, as each such Indenture may be
amended and modified from time to time in accordance with the terms hereof";
(d) amending the definition of "PageMart" set forth
therein by adding the following phrase at the end thereof "provided that after
the consummation of the Merger all references to 'PageMart' set forth in the
Credit Documents shall be deemed to be references to the Borrower";
(e) amending the definition of "Permitted Equity Basket"
set forth therein by (i) inserting the phrase "received after the Fourth
Amendment Effective Date" after the word "proceeds" in the second line thereof
and (iii) inserting the phrase "after the Fourth Amendment Effective Date and"
after the word "used" in the fourth line thereof; and
(f) deleting the definitions of "Asset Transfers," "Asset
Transfer Documents," "Permitted Indenture Financing," "Permitted Indenture
Financing Basket" and "Permitted Two Way Vendor Financing" set forth therein
(and all references to such terms in the Credit Agreement are also deleted).
2. Section 2.12 of the Credit Agreement is hereby
amended by deleting the phrase "(a) the segregation of Collections in respect
of Accounts, on the one hand, from collections in respect of accounts
receivable of PageMart, on the other hand and (b)".
3. Section 7.2 of the Credit Agreement is hereby amended
by adding the following phrase at the end of the parenthetical in the second
line thereof "and any other week if no Revolving Loan or Letter of Credit is
then outstanding".
4. Section 8.6 of the Credit Agreement is hereby deleted
in its entirety and the following provision is inserted in lieu thereof:
"8.6 Capital Expenditures. Neither the Borrower nor any
of its Restricted Subsidiaries shall make, or commit to make, any
Capital Expenditures after the Fourth Amendment Effective Date other
than (a) Capital Expenditures made or committed to be made the
aggregate amount of which does not exceed the Capital Expenditure
Amount and (b) Capital Expenditures allowed under Section 8.7(d)."
5. Section 8.7 of the Credit Agreement is hereby amended
by (i) deleting the text of clauses (a) and (e) of said Section 8.7 in their
entirety and inserting "[Intentionally Deleted]" in lieu thereof and (ii)
deleting from clauses 5(c) and (d) of said Section 8.7 the following phrase
"the Permitted Indenture Financing Basket".
6. Section 8.8 of the Credit Agreement is hereby amended
as follows:
(i) clause (d) of said Section 8.8 is amended by
deleting the phrase "Indebtedness under the Indentures and any
other" set forth therein;
-3-
<PAGE> 4
(ii) clause (g) of said Section 8.8 is amended by
adding the following phrase at the end thereof "except that
the Borrower may guarantee Indebtedness of PageMart Canada
Holding Corporation provided that the aggregate principal
amount of such guaranteed Indebtedness does not exceed
$5,000,000";
(iii) clause (h) of said Section 8.8 is hereby
deleted in its entirety and substituted in lieu thereof is the
following:
"(h) Indebtedness of the Borrower, and
prior to the Merger, PageMart under the Indentures,
provided that (x) the initial accreted value of the
Senior Subordinated Notes shall not exceed $225
million or such higher amount as shall be permitted
under the Indentures, (y) the Senior Subordinated
Notes may be issued only in connection with the
Refinancing and (z) the aggregate principal amount of
the 12 1/4% Senior Discount Notes due 2003 which
remain outstanding after the consummation of the
Refinancing shall not exceed, $58,000,000;", and
(iv) deleting the text of clause (j) of said
Section 8.8 in its entirety and inserting "[Intentionally
Deleted]" in lieu thereof.
7. Section 8.12(b) of the Credit Agreement is hereby
amended by (i) deleting the "and" before clause (iv) thereof and inserting a
comma in lieu thereof and (ii) inserting the following at the end thereof "and
(v) the Borrower may make prepayments of the 12 1/4% Senior Discount Notes due
2003 as described in the Offer to Purchase provided that (x) such prepayments
do not exceed the aggregate net proceeds received by the Borrower from the
issuance of the Senior Subordinated Notes, (y) the amounts paid in respect of
such prepayments do not exceed the amount set forth in the Offer to Purchase
and (z) such prepayments may only be made in connection with the Refinancing."
8. Article 8 of the Credit Agreement is hereby amended by
adding the following new covenant:
"8.19 Indentures. (a) The Borrower shall not, and shall not
permit any of its Subsidiaries to, amend or modify any Indenture
without the prior written consent of the Agent and the Majority
Lenders except that the Indenture Amendments shall be permitted.
(b) The Borrower shall not designate any Indebtedness as
'Designated Senior Indebtedness' under the Indenture for the Senior
Subordinated Notes."
-4-
<PAGE> 5
9. Section 9.1(h) of the Credit Agreement is hereby amended
deleting the word "either" set forth in the second line thereof and inserting
the word "any" in lieu thereof.
10. This Amendment shall become effective on the date (the
"Fourth Amendment Effective Date") when each of the following conditions have
been met:
(a) the Borrower, the Agent, the Majority Lenders and the
Issuing Bank shall have signed a counterpart hereof (whether the same
or different counterparts) and shall have delivered (including by way
of facsimile transmission) the same to the Agent at the Notice Office;
(b) the Agent shall have received resolutions of the
Board of Directors of the Borrower, which resolutions shall be
certified by the Secretary or any Assistant Secretary of the Borrower
and shall authorize the execution, delivery and performance by the
Borrower of this Amendment and the consummation of the transactions
contemplated hereby, and the foregoing shall be reasonably acceptable
to the Agent;
(c) the Merger and the Indenture Amendments shall have
become effective;
(d) the Agent shall have received evidence satisfactory
to it that all filings, notices and recordings necessary and advisable
to perfect the security interests created under the Collateral
Documents after giving effect to the Merger had been made, given or
accomplished.
11. In order to induce the Banks to enter into this
Amendment, the Borrower hereby represents and warrants that:
(a) no Default or Event of Default exists on the Fourth
Amendment Effective Date, after giving effect to this Amendment and
the Refinancing; and
(b) on the Fourth Amendment Effective Date, and after giving
effect to this Amendment and the Refinancing, all representations and
warranties contained in the Credit Agreement and in the other Credit
Documents are true and correct in all material respects as though such
representations and warranties were made on the Fourth Amendment
Effective Date.
12. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be delivered to the Borrower and the Agent.
-5-
<PAGE> 6
13. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.
14. From and after the Fourth Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents to
the "Credit Agreement" shall be deemed to be references to the Credit Agreement
as modified hereby.
15. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
* * *
-6-
<PAGE> 7
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
PAGEMART WIRELESS, INC.
By
----------------------------------
---
Title:
BT COMMERCIAL CORPORATION,
as Agent
By
----------------------------------
---
Title:
BANKERS TRUST COMPANY,
as Issuing Bank
By
----------------------------------
---
Title:
FIRST UNION NATIONAL BANK
By
----------------------------------
---
Title:
-7-
<PAGE> 8
BANK ONE, TEXAS, N.A.
By
----------------------------------
---
Title:
TORONTO DOMINION (TEXAS), INC)
By
----------------------------------
---
Title:
-8-
<PAGE> 1
EXHIBIT 10.9
AMENDMENT NO. 1
TO AMENDED AND RESTATED AGREEMENT
AMONG CERTAIN STOCKHOLDERS
This Amendment No. 1 to Amended and Restated Agreement Among Certain
Stockholders (this "Amendment") dated to be effective as of October 1, 1997
among PageMart Wireless, Inc. (the "Company") and certain of the holders of
common stock of the Company listed on the signature pages herein.
WHEREAS, the Company and certain of the holders of common stock of the
Company entered into the Amended and Restated Agreement Among Certain
Stockholders dated as of May 10, 1996 (the "Stockholders Agreement"); and
WHEREAS, the Company and the parties who have signed this Amendment
wish to amend the Agreement in certain respects as set forth below;
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. All capitalized terms not defined in this
Amendment will have the meanings given them in the Stockholders Agreement.
2. Amendment. The Stockholders Agreement is amended as
follows:
(a) The term "Voting Parties" as defined in Section 3.1 of the
Stockholders Agreement is hereby amended to include only the following parties:
The Morgan Stanley Shareholders, Accel, FERSA, BTIP, TDCGL and John D. Beletic.
The term "Voting Parties" shall no longer include Roger Linquist.
(b) A new Section 5.11 is added as follows:
5.11 Transfers by Linquist. Roger Linquist agrees that he will
only Transfer the number of shares of Common Stock that he
would have been permitted to Transfer under Securities and
Exchange Commission Rule 144(e)(1) if he were subject to such
rule. Linquist will report to the Secretary of the Company (or
his designee) within 10 days after the end of each month the
number of shares of Common Stock Transferred by him during the
preceding month. Upon request from Linquist, the Company will
provide to Linquist the current calculation of the maximum
number of shares that he would have been permitted to Transfer
under Rule 144(e)(1).
1
<PAGE> 2
3. Effectiveness of Amendment. Pursuant to Section 7.5 of the
Stockholders Agreement, this Amendment will be effective as of the date shown
above upon receipt by the Company of a counterpart of this Amendment executed by
Holders of a majority of the shares of Voting Common Stock then owned by the
Holders.
4. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5. Full Force and Effect. The Stockholder Agreement, as specifically
amended by this Amendment, shall remain in full force and effect.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first written above.
PAGEMART WIRELESS, INC.
By:
----------------------------------------------
John D. Beletic
Chairman & CEO
Address: 3333 Lee Parkway
Suite 100
Dallas, Texas 75206
THE MORGAN STANLEY
LEVERAGED EQUITY FUND II, L.P.
By: MORGAN STANLEY LEVERAGED
EQUITY FUND II, INC., its General Partner
By:
----------------------------------------------
Name:
Title:
Address: 1221 Avenue of the Americas
New York, New York 10020
MORGAN STANLEY CAPITAL
PARTNERS III, L.P.
By: MSCP III, L.P.,
its General Partner
By: Morgan Stanley Capital
Partners III, Inc.,
its General Partner
By:
----------------------------------------------
Name:
Title:
Address: 1221 Avenue of the Americas
New York, New York 10020
3
<PAGE> 4
MORGAN STANLEY CAPITAL
INVESTORS, L.P.
By: MSCP III, L.P.,
its General Partner
By: Morgan Stanley Capital
Partners III, Inc.,
its General Partner
By:
----------------------------------------------
Name:
Title:
Address: 1221 Avenue of the Americas
New York, New York 10020
MSCP III 892 INVESTORS, L.P.
By: MSCP III, L.P., its General Partner
By: Morgan Stanley Capital Partners III, Inc.,
its General Partner
By:
----------------------------------------------
Name:
Title:
Address: 1221 Avenue of the Americas
New York, New York 10020
MORGAN STANLEY VENTURE
CAPITAL FUND II, L.P.
By: Morgan Stanley Venture Partners
II, L.P., its General Partner
By: Morgan Stanley Venture Capital II, Inc.,
its Managing General Partner
By:
----------------------------------------------
Name:
Title:
Address: 1221 Avenue of the Americas
New York, New York 10020
4
<PAGE> 5
MORGAN STANLEY VENTURE
CAPITAL FUND, L.P.
By: Morgan Stanley Venture Partners L.P.,
its General Partner
By: Morgan Stanley Venture Capital Inc.,
its Managing General Partner
By:
----------------------------------------------
Name:
Title:
Address: 1221 Avenue of the Americas
New York, New York 10020
MORGAN STANLEY VENTURE
CAPITAL FUND II, C.V.
By: Morgan Stanley Venture Partners
II, L.P., its General Partner
By: Morgan Stanley Venture Capital II, Inc.,
its Managing General Partner
By:
----------------------------------------------
Name:
Title:
Address: 1221 Avenue of the Americas
New York, New York 10020
MORGAN STANLEY VENTURE
INVESTORS, L.P.
By: Morgan Stanley Venture Partners II,
L.P., its General Partner
By: Morgan Stanley Venture Capital II, Inc.,
its Managing General Partner
By:
----------------------------------------------
Name:
Title:
Address: 1221 Avenue of the Americas
New York, New York 10020
5
<PAGE> 6
FIRST PLAZA GROUP TRUST
By: MELLON BANK, N.A., TRUSTEE
(as directed by General Motors
Investment Management Corporation)
By:
----------------------------------------------
Name:
Title:
Address: c/o Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258-0001
Attention: Bernadette Rist
General Motors Investment
Management Corporation
767 5th Avenue
New York, NY 10153
Attention: Kathryn T. Stokel
Robert D. Cromwell
J.P. MORGAN CAPITAL
CORPORATION
By:
----------------------------------------------
Name:
Title:
SIXTY WALL STREET FUND 1995, L.P.
By: Sixty Wall Street Corporation
By:
----------------------------------------------
Name:
Title:
Address: 60 Wall Street
New York, New York 10260
6
<PAGE> 7
ACCEL TELECOM L.P.
By: Accel Telecom Associates, L.P.,
its General Partner
By:
----------------------------------------------
Name:
Title:
Address: One Palmer Square
Princeton, NJ 08542
ACCEL INVESTORS '89 L.P.
By:
----------------------------------------------
Name:
Title:
Address: One Palmer Square
Princeton, NJ 08542
ACCEL III L.P.
By: Accel III Associates L.P.,
its General Partner
By:
----------------------------------------------
Name:
Title:
Address: One Palmer Square
Princeton, NJ 08542
BT INVESTMENT PARTNERS, INC.
By:
----------------------------------------------
Name:
Title:
Address: 130 Liberty Street, 25th Floor
New York, New York 10006
Attention: Mr. Brian Talbot
Vice President
7
<PAGE> 8
LEADERSHIP INVESTMENTS LTD.
By:
----------------------------------------------
Name:
Title:
Address: c/o FOMENTO EMPRESARIAL
REGIOMONTANO, S.A. DE C.V.,
Venecia 835-5
Col. Mitras Sur
Monterrey, N.L. 64020
Mexico
EMPRESAS LA MODERNA, S.A. DE C.V.
By:
----------------------------------------------
Name:
Title:
Address: c/o FOMENTO EMPRESARIAL
REGIOMONTANO, S.A. DE C.V.,
Venecia 835-5
Col. Mitras Sur
Monterrey, N.L. 64020
Mexico
SEGUROS COMERCIAL AMERICA,
S.A. DE C.V.
By:
----------------------------------------------
Name:
Title:
Address: c/o FOMENTO EMPRESARIAL
REGIOMONTANO, S.A. DE C.V.,
Venecia 835-5
Col. Mitras Sur
Monterrey, N.L. 64020
Mexico
8
<PAGE> 9
TD CAPITAL GROUP, LTD.
By:
----------------------------------------------
Name:
Title:
Address: Ernst & Young Tower, 20th Floor
P.O. Box 1, Toronto Dominion Centre
Toronto, Ontario
M5K 1A2
Canada
9
<PAGE> 10
ELLMORE C. PATTERSON
ANNE H. PATTERSON
BRANDYWINE TRUST COMPANY,
ET. AL,
TRUSTEES U/A 5/4/56 FBO JANE
C. BECK
BRANDYWINE TRUST COMPANY,
TRUSTEE U/A 2/10/56 FBO
MICHAEL E. PATTERSON
BRANDYWINE TRUST COMPANY,
TRUSTEE U/A 2/10/56 FBO
ROBERT E. PATTERSON
BRANDYWINE TRUST COMPANY,
TRUSTEE U/A 2/10/56 FBO
DAVID C. PATTERSON
BRANDYWINE TRUST COMPANY,
TRUSTEE U/A 2/10/56 FBO
THOMAS H.C. PATTERSON
MARIA W. PATTERSON, C/F ELOISE
C. PATTERSON U/NYUGMA
MARIA W. PATTERSON, C/F DAVID
G. PATTERSON U/NYUGMA
MARIA W. PATTERSON, C/F DAPHNE
D. PATTERSON U/NYUGMA
MICHAEL E. PATTERSON & ELENA C.
PATTERSON, TRUSTEES U/A 9/6/90
FBO ANNE H. PATTERSON
MICHAEL E. PATTERSON & ELENA C.
PATTERSON, TRUSTEES U/A 9/6/90
FBO ELENA A. PATTERSON
MICHAEL E. PATTERSON & ELENA C.
PATTERSON, TRUSTEES U/A
3/12/92 FBO MICHAEL E.
PATTERSON, JR.
10
<PAGE> 11
By: Kaplan, Choate Management Inc.,
as Investment Manager
By:
----------------------------------------------
Name:
Title:
Address: c/o Kaplan Choate & Co.
880 Third Avenue
New York, NY 10022
UNITED MISSOURI BANK OF KANSAS
CITY, N.A. FOR THE BENEFIT OF GARI
L. CHEEVER
By:
----------------------------------------------
Name:
Title:
Address: 1010 Grand
P.O. Box 419226
Kansas City, MO 64141-6226
UNITED MISSOURI BANK OF KANSAS
CITY, N.A. FOR THE BENEFIT OF
EDWARD M. LEONARD
By:
----------------------------------------------
Address: 1010 Grand
P.O. Box 419226
Kansas City, Mo 64141-6226
By:
----------------------------------------------
Roger Linquist
Address: 8144 Walnut Hill Lane
Suite 600
Dallas, Texas 75231
11
<PAGE> 12
By:
John A. Beletic
Address: P.O. Box 18662
Cleveland Heights, OH 44118-0662
By:
----------------------------------------------
John D. Beletic
Address: 3333 Lee Parkway, Suite 100
Dallas, Texas 75219
By:
----------------------------------------------
John D. Beletic as Custodian
For Allison C. Beletic
Address: 3333 Lee Parkway, Suite 100
Dallas, Texas 75219
By:
----------------------------------------------
Walter F. Loeb
Address: P. O. Box 1155
New York, NY 10580
By:
----------------------------------------------
Vick T. Cox
Address: 3333 Lee Parkway, Suite 100
Dallas, Texas 75219
By:
----------------------------------------------
Frances W. Hopkins
Address: 3333 Lee Parkway, Suite 100
Dallas, Texas 75219
12
<PAGE> 13
By:
----------------------------------------------
Sandra D. Neal
Address: 3333 Lee Parkway, Suite 100
Dallas, Texas 75219
By:
----------------------------------------------
Richard S. Nelson
Address: 3333 Lee Parkway, Suite 100
Dallas, Texas 75219
By:
----------------------------------------------
Mary Jo Hernandez Sabeti
Address: 3333 Lee Parkway, Suite 100
Dallas, Texas 75219
By:
----------------------------------------------
Gari L. Cheever
Address: 520 Lowell Avenue
Palo Alto, CA 94301
By:
----------------------------------------------
G. Clay Myers
Address: 3333 Lee Parkway, Suite 100
Dallas, Texas 75219
By:
----------------------------------------------
Kenneth L. Hilton
Address: 1205 Windy Meadow Dr.
Plano, Texas 75023
13
<PAGE> 14
By:
----------------------------------------------
Homer Huddleston
Address: P.O. Box 700007
Dallas, Texas 75370-0007
By:
----------------------------------------------
Douglas S. Glen
Address: 3333 Lee Parkway, Suite 100
Dallas, Texas 75219
By:
----------------------------------------------
Carol W. Dickson
Address: 142 Allencrest Dr.
Coppell, Texas 75019
By:
----------------------------------------------
Lawrence H. Wecsler
Address: 3333 Lee Parkway, Suite 100
Dallas, Texas 75219
By:
----------------------------------------------
Douglas H. Kramp
Address: 3333 Lee Parkway, Suite 100
Dallas, Texas 75219
By:
----------------------------------------------
Paul L. Turner
Address: 3333 Lee Parkway, Suite 100
Dallas, Texas 75219
14
<PAGE> 15
By:
----------------------------------------------
Jack D. Hanson
Address: 3333 Lee Parkway, Suite 100
Dallas, Texas 75219
By:
----------------------------------------------
Thomas C. Keys
Address: 3333 Lee Parkway, Suite 100
Dallas, Texas 75219
By:
----------------------------------------------
Todd A. Bergwall
Address: 3333 Lee Parkway, Suite 100
Dallas, Texas 75219
By:
----------------------------------------------
Cesary Pasiuk
Address: c/o Kaplan Choate & Co.
880 Third Avenue
New York, NY 10022
<PAGE> 1
EXHIBIT 10.22
RESALE AGREEMENT
BETWEEN
GTE COMMUNICATIONS CORPORATION
AND
PAGEMART WIRELESS, INC.
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TABLE OF CONTENTS
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PAGE
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1. TERM 1
2. DEFINITIONS 1
3. LICENSE 2
4. INDEPENDENT PARTIES 2
5. SCOPE 3
6. LICENSOR RESPONSIBILITIES 3
7. RESELLER RESPONSIBILITIES 5
8. PERFORMANCE STANDARDS 5
9. PERFORMANCE MEASUREMENTS 6
10. SERVICE COMMITMENT 6
11. PUBLIC REGULATION 7
12. PRICING 8
13. BILLING AND COLLECTIONS 9
14. TERMS OF PAYMENT 9
15. WARRANTY 10
16 RIGHT TO AUDIT 10
17. PRECEDENCE OF DOCUMENTS 10
18. USE OF CONFIDENTIAL INFORMATION 11
19. PUBLICITY 12
20. COMPLIANCE WITH LAWS 12
21. FORCE MAJEURE 12
22. LIABILITY 13
23. ASSIGNMENT 15
24. TAXES 15
25. RECORDS 15
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26. RIGHT OF ACCESS 16
27. TERMINATION 16
28. DISPUTE RESOLUTION 17
29. NOTICES 18
30. NONWAIVER 19
31. SEVERABILITY 19
32. SECTION HEADINGS 19
33. SURVIVAL OF OBLIGATIONS 20
34. CHOICE OF LAW 20
35. ENTIRE AGREEMENT 20
SIGNATURES 20
EXHIBIT A. - PRICING 21
EXHIBIT B. - PERFORMANCE REQUIREMENTS 22
EXHIBIT C. - REPAIR REPORTING &
ESCALATION PROCEDURES 23
EXHIBIT D. - NETWORK REPORTS CRITERIA 24
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RESALE AGREEMENT
This Agreement is made as of December 12, 1997, by and between PageMart
Wireless, Inc., a Delaware corporation, with offices for the purpose of this
Agreement located at 3333 Lee Parkway, Suite 100, Dallas, Texas 75219
(hereinafter referred to as "LICENSOR") and GTE Communications Corporation, a
Delaware corporation, with offices located at 5221 North O'Connor Boulevard,
14th Floor, Irving, Texas 75039 (hereinafter referred to as "RESELLER").
WHEREAS, LICENSOR provides paging, voice messaging, and related messaging
services (hereinafter referred to as "SERVICES"); and
WHEREAS, RESELLER desires to contract with LICENSOR to resell such SERVICES
and, in connection therewith, to receive blocks of Personal Identification
Numbers (hereinafter referred to as "PINs") and Direct Inward Dialing numbers
(hereinafter referred to as "DIDs") that provide individual access to
LICENSOR's system and SERVICES, for resale to members of the general public;
THEREFORE, in consideration of the mutual promises and covenants contained
herein, the parties agree as follows:
1. TERM
This Agreement shall be effective on the date written above and shall
continue in effect thereafter for a period of thirty-six (36) months
(hereinafter the "Term") unless terminated or modified by either party in
accordance with the provisions of this Agreement. This Agreement shall
be automatically terminated unless renewed by RESELLER by written notice
to LICENSOR not less than thirty (30) days prior to the end of the Term.
At the end of each twelve (12) month period of the Term either party
shall have the option to request review of the Agreement terms and
adjustment of such terms as are mutually agreed upon by the parties.
Unless mutually agreed otherwise, the Agreement shall remain in force as
written until the end of the Term.
2. DEFINITIONS
(a) CAP Code - The numeric code that identifies and is unique to each
pager placed in service on LICENSOR's Paging System.
(b) DID - A local telephone number assigned by LICENSOR to identify a
specific pager on the LICENSOR's network.
(c) Equipment - Pagers and related message receiving devices.
(d) Paging Terminal - A paging switch that processes paging calls.
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(e) Paging System - A telecommunications and radio frequency(ies)
network that provides paging and related messaging services
throughout a specific geographic area.
(f) PIN - Personal Identification Number. A specific number assigned
by LICENSOR to identify a pager on the LICENSOR's network. By
entering the PIN into LICENSOR's computer via a touch-tone
telephone, the respective pager is activated.
(g) SERVICES - paging, voice messaging, and related messaging
services currently offered for resale by LICENSOR, including but
not limited to such additional SERVICES as LICENSOR makes
available in the retail or reseller market during the Term of
this Agreement. Notwithstanding the foregoing, at such time
LICENSOR makes available two-way messaging for resale, the
parties shall mutually agree to the terms and conditions under
which such services will be provided to RESELLER.
(h) Subscriber - A person or entity that is an end user of the
LICENSOR's Paging System.
(i) Telephone Interconnect Charges - Those charges directly
associated with acquiring Direct Inward Dial (DID) paging
telephone numbers and transporting calls from the local exchange
carrier.
3. LICENSE
(a) LICENSOR grants RESELLER a non-exclusive license to resell
LICENSOR's SERVICES subject to the terms of the Agreement and the
rules, regulations and decisions of the Federal Communications
Commission (hereinafter referred to as "the FCC").
(b) RESELLER is authorized to license its own sub-agents and
affiliates for the marketing, promotion and resale of LICENSOR's
SERVICES, provided that RESELLER shall be responsible for the
observance by its sub-agents, affiliates, and sub-licensees of
the terms and conditions of this Agreement. RESELLER shall
provide notice to LICENSOR of all sub-agents and affiliates
authorized for promotion and resale on its behalf.
4. INDEPENDENT PARTIES
Each party is an independent contractor. Except as provided in this
Agreement, neither party shall have the right, power, or authority to
act or to create any obligation, express or implied, on behalf of the
other party. Except as permitted pursuant to paragraph 3(b) above, all
sales by RESELLER shall be in its own name and for its own account.
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5. SCOPE
(a) This Agreement is non-exclusive and RESELLER is under no
obligation to LICENSOR to resell any certain amount of SERVICES
or refrain from selling or reselling competing SERVICES.
(b) LICENSOR hereby agrees to provide SERVICES in an efficient,
economic, and timely fashion in accordance with the generally
accepted commercial and business practices in the industry.
(c) This Agreement is solely between LICENSOR and RESELLER and is not
intended to create rights in or obligations to any third party.
6. LICENSOR RESPONSIBILITIES
For the Term:
(a) LICENSOR shall establish a dedicated account manager for
communications with RESELLER and shall actively manage the
relationship between the parties. The account manager will be
the focal point for all issues and questions that may arise
during this relationship and shall be available by pager at all
times. Escalation procedures have been defined by both the
LICENSOR and RESELLER as outlined in Exhibit C.
(b) LICENSOR shall provide RESELLER's Subscribers with access to its
Paging System to initiate and receive paging messages and shall
use commercially reasonable good faith efforts to provide
continuous network service in the geographical locations where
LICENSOR is legally authorized and has the facilities to provide
SERVICES.
(c) The SERVICES provided by LICENSOR for resale by RESELLER shall
include but not be limited to those listed on Exhibit A hereto as
amended by the parties from time to time.
(d) LICENSOR shall assign and coordinate all DID, CAP Code and, at
RESELLER's option, toll free numbers in order to ensure the
compatible initiation of SERVICES to RESELLER's Subscribers
placed on LICENSOR's Paging System. LICENSOR shall provide at no
charge, all required software, documentation and training to
RESELLER to authorize and enable RESELLER to initiate and
terminate SERVICES to RESELLER's customers as Subscribers on
LICENSOR's Paging System.
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(e) *
(f) LICENSOR will provide sample collateral and marketing materials.
This will include network manuals and features / options
collateral. RESELLER shall have the right to copy, modify,
reproduce and change all collateral and use and distribute such
collateral in modified or unmodified form without further consent
of or payment to LICENSOR provided that RESELLER shall not omit
or misstate any material fact contained in the collateral or
marketing material, including without limitation, the
specifications or functionality of the equipment, the SERVICES,
or LICENSOR's network capability. RESELLER will defend,
indemnify and hold harmless LICENSOR from any claim, assertion,
suit, demand or proceeding ("Claim"), to the extent that such
Claim is caused by modification by RESELLER to, or use by
RESELLER beyond that contemplated by this Agreement of,
collateral, marketing materials or manuals provided by LICENSOR
to RESELLER under this Section 6(f).
(g) At the request of RESELLER, LICENSOR shall provide RESELLER
training for all SERVICES covered by the scope of this Agreement
no less than ten (10) days, but not more than thirty (30) days
prior to RESELLER's scheduled introduction of those SERVICES.
(h) LICENSOR shall provide and support on-line access to LICENSOR's
administration system by which RESELLER may activate, deactivate,
suspend, or terminate SERVICES to its Subscribers.
(i) LICENSOR shall provide, support and update its zip code coverage
area database to reflect its Paging System coverage areas.
(j) LICENSOR shall use its commercially reasonable best efforts to
provide at least ninety (90) days' prior written notice of new
products and services offerings.
(k) LICENSOR shall use its commercially reasonable best efforts to
provide at least ninety (90) days' notice of revisions to
LICENSOR's administrative ordering system that may materially
affect LICENSOR's ability to provide SERVICES or RESELLER's
ability to initiate and terminate SERVICES to RESELLER's
customers as Subscribers on LICENSOR's Paging System.
(l) If LICENSOR alters or revises transmission protocols, LICENSOR
shall provide at least one hundred eighty (180) days' advance
notice to RESELLER prior to the effective date of such proposed
change. If LICENSOR changes transmission protocols whereby
previously authorized Equipment is no longer authorized for
additional users on LICENSOR's transmission system, except only
to the extent prohibited by law, LICENSOR agrees to grandfather
all of
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RESELLER's existing Subscriber's Equipment for continued use on
the LICENSOR's network until LICENSOR proposes a mutually
acceptable transition plan for such grandfathered Subscribers'
Equipment. At the end of the one hundred eighty (180) days'
notice period, RESELLER shall no longer sell or place into
service under lease additional units of Equipment that is no
longer authorized for additional users on LICENSOR's transmission
system.
(m) LICENSOR shall assist and support RESELLER in integrating
RESELLER'S billing and administration systems with LICENSOR's
administration system to permit RESELLER to simplify and maximize
its efficiency in reselling LICENSOR's SERVICES.
(n) LICENSOR shall provide repair services to RESELLER and RESELLER's
Subscribers in accordance with the terms of Exhibit C to this
Agreement.
(o) LICENSOR shall provide network reports in accordance with the
terms in Exhibit D to this Agreement.
7. RESELLER RESPONSIBILITIES
(a) RESELLER shall be solely responsible for providing all sales,
Equipment and customer support services to its Subscribers.
RESELLER further agrees that all Equipment provided to its
Subscribers shall be compatible with the existing transmission
system of LICENSOR. RESELLER further agrees that all Equipment
provided to its Subscribers for use on LICENSOR'S transmission
system shall utilize the industry standard of FLEX (TM) based
protocols.
(b) RESELLER shall be solely responsible for all billings to and
collections from its Subscribers, including but not limited to
the sending of periodic bills, collection of amounts owed or past
due, and the collection and return of all applicable taxes on
such SERVICES or Equipment rentals.
(c) RESELLER shall provide and mail all announcements or notices
required to be mailed to its Subscribers as required by any
regulatory agency.
(d) RESELLER shall maintain and keep in good working order all
Equipment sold or leased by RESELLER to its Subscribers pursuant
to the terms of this Agreement, in accordance with all
manufacturer's specifications and the provisions of the filed
tariffs of LICENSOR.
8. PERFORMANCE STANDARDS
LICENSOR agrees to comply with the Performance Requirements
encompassed in Exhibit B to this Agreement. If LICENSOR fails to meet
any of the Performance
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Requirements (except to the extent such failure is caused by a Force
Majeure event or an act or omission of RESELLER), RESELLER may provide
written notice to LICENSOR regarding such failure and LICENSOR shall
use its best efforts to comply with such Performance Requirements. If
LICENSOR fails to meet such Performance Requirements (except to the
extent such failure is caused by a Force Majeure event or an act or
omission of RESELLER)*
9. PERFORMANCE MEASUREMENTS
LICENSOR's performance shall be measured against the Performance
Requirements of Exhibit B as reported by RESELLER's Performance
Measurements Report Card. RESELLER shall meet with LICENSOR within
thirty (30) days of contract execution to present Report Card
Performance Measurements. The Report Card Performance Measurements
will also reflect RESELLER's Performance Objectives, which may in many
respects be more stringent than the contract requirements. On a
quarterly basis, RESELLER shall compile the performance data and
publish the Performance Report on Vendor Effectiveness (PROVE) Report
Card. LICENSOR shall provide written action plans for Performance
Measurements that do not meet RESELLER's Performance Requirements
Report Card. Additional action plans shall be provided to RESELLER in
conjunction with pre-scheduled meetings for all Report Card
Performance Measurements not met on a quarterly basis. The corrective
action associated with the action plans shall be implemented within
thirty (30) days, unless the parties otherwise agree.
10. SERVICE COMMITMENT
*
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11. PUBLIC REGULATION
(a) It is understood that the ultimate control and responsibility
for the standard and quality of SERVICES required under the
provisions of and license issued by the FCC to LICENSOR shall
be retained, rest and remain the prerogative and obligation
solely of LICENSOR. No provision of this Agreement shall be
construed as vesting in RESELLER any control whatsoever of the
radio communication facilities and operations of LICENSOR. To
the extent any performance obligations assumed in this
Agreement exceed standards set by the FCC, paragraphs (b) or
(c) of this section shall not be construed to relieve LICENSOR
from the performance obligations assumed in this Agreement.
(b) This Agreement is subject to all of the terms and conditions
of LICENSOR's outstanding authorizations from the FCC and the
utility regulatory agencies in the states to which this
Agreement pertains, as such tariffs and authorizations are
presently in effect or as they may hereafter be revised.
Nothing in this Agreement shall be construed so as to impair
or diminish LICENSOR's control over the facilities of the
applicable stations.
(c) It shall be LICENSOR's obligation to obtain all federal, state
and local approvals that are required for LICENSOR's lawful
participation in this Agreement.
(d) This Agreement shall be terminated, amended, revised, or
supplemented immediately if required by applicable law or
regulation; provided, that RESELLER shall have the option to
terminate this Agreement on thirty (30) days' written notice
to LICENSOR, given after receipt of written notice from
LICENSOR of such a required amendment, revision or supplement,
that RESELLER determines will have a material impact on its
products, services or business.
(e) The imposition by federal, state or local regulatory agencies
of any amendments, revisions, deletions or supplements to this
Agreement shall thereby relieve LICENSOR and RESELLER of any
obligations or liabilities to the other resulting from the
provisions of this Agreement which were ordered amended,
revised, deleted or supplemented; provided, that RESELLER
shall have the option to terminate this Agreement on thirty
(30) days' written notice to LICENSOR, given after receipt of
written notice from LICENSOR of such a required amendment
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revision or supplement, that RESELLER determines will have a
material impact on its products, services or business.
12. PRICING
(a) RESELLER hereby agrees to pay LICENSOR the charges and fees
for SERVICES specified in Exhibit A in accordance with the
terms and conditions contained herein.
(b) The charges and fees specified in Exhibit A shall commence at
the time RESELLER activates each particular number in LICENSOR's
Paging System. Such charges shall continue for each number for
a minimum of thirty (30) days, and thereafter until the number
in question is canceled or otherwise disconnected in accordance
with the provisions herein. When a number is activated in the
middle of a month, the applicable rate will be prorated to the
first of the following month so that all subsequent bills will
be tendered thereafter on a monthly basis.
(c) With the exception of Telephone Interconnect Charge changes, the
specified prices in Exhibit A shall remain firm for the first
twelve (12) months of this Agreement. Thereafter, each party
may propose price adjustments once in each successive twelve
(12) month period of the Term by giving written notice to the
other at least ninety (90) days prior to the proposed effective
date of the new pricing. However, no price adjustment will be
effective unless mutually agreed by the parties in writing.
LICENSOR shall honor all prices for SERVICES for which orders
have been issued prior to the effective date of such adjustment.
(d) Notwithstanding the foregoing or anything to the contrary
contained in this Agreement or any schedule or exhibit attached
hereto, LICENSOR shall have the right, where permitted by
applicable law or regulation, to change the fees charged for
SERVICES at any time upon thirty (30) days prior notice to
RESELLER in the event LICENSOR deems such change necessary to
comply with applicable law or regulation, whether state or
federal, or in the event LICENSOR determines that a change in
applicable law or regulation substantially affects LICENSOR's
operating costs. If RESELLER deems such requested changes
unreasonable or undesirable, RESELLER may terminate this
Agreement upon thirty (30) days written notice to LICENSOR.
(e) *
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(f) Where allowable by the state regulating authority, the prices
charged by RESELLER to its Subscribers for all SERVICES shall be
determined solely by RESELLER. In states where tariff rates are
required, RESELLER may operate under its own tariff or the
tariff of LICENSOR.
13. BILLING AND COLLECTIONS
(a) LICENSOR will provide RESELLER a single tape for monthly
recurring charges and excess usage in an agreed format.
LICENSOR shall provide usage data to RESELLER no later than ten
(10) days after the first day following the month such charges
were incurred. Invoice and detail shall be received no later
than fifteen (15) days after the first day of the month
following the month such charges were incurred. LICENSOR shall
endeavor to reduce the interval for provision of invoices and
detail to no more than five (5) days as soon as feasible for
RESELLER data.
(b) The invoice and associated detail must be generated and supplied
in an acceptable electronic format as predetermined by both
parties.
(c) Both parties shall collaboratively develop and establish
mutually acceptable protocol and system requirements to
accommodate electronic data transfer between their respective
computer systems.
(d) *
(e) LICENSOR shall provide the data required by RESELLER's billing
department to credit RESELLER for network outages. This credit
process shall be an automated process and shall not require a
credit request from RESELLER.
14. TERMS OF PAYMENT
Payment shall be due thirty-one (31) days after the date of LICENSOR's
invoice, or the receipt of LICENSOR's invoice, whichever is later. The
invoice rendering date and dates showing the time period covered by
the invoice must be printed on the invoice. Amounts disputed by
RESELLER shall be withheld from the monthly remittance and LICENSOR
shall be notified in writing of such disputed amounts and shall be
provided with documentation supporting such disputed amounts within
thirty-one (31) days of RESELLER's receipt of the invoice containing
such disputed charges. If the parties are unable to resolve the
dispute within thirty (30) days following LICENSOR's receipt of
RESELLER's written notice of disputed charges and supporting
documentation, the dispute shall at the request of either party that
wishes to pursue the matter be submitted for resolution via the terms
of Section 28 of this Agreement. RESELLER shall only be assessed late
charges for amounts held in dispute that are determined pursuant to
the resolution provisions of Section 28 to have been disputed in bad
faith.
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Such late charges shall be assessed at the rate of one and one-half
percent (1 1/2%) per month on the disputed amount outstanding.
15. WARRANTY
LICENSOR represents and warrants that its Paging System and any
software provided to RESELLER for use in association with the SERVICES
is capable of correctly processing, providing, and receiving date data
as well as properly exchanging accurate date data with all products
(for example, hardware, software and firmware) with which this Paging
System and software is designed to be used and will not malfunction or
cease to function due to an inability to correctly process such date
data, including but not limited to transitions to or from the years
1999 and 2000.
16. RIGHT TO AUDIT
Upon written notice to LICENSOR, RESELLER or its authorized
representative, shall have the right to commence an audit of
LICENSOR's books, records and operations pertaining to its performance
of this Agreement. The scope of the audit may include, but is not
limited to: financial records, documentation and procedures, and
input and output processing. Within thirty (30) days of such notice,
the Parties will determine the location, date and specific information
to be audited. No more than two audits may be conducted in any
calendar year. Audits will be conducted during normal business hours
and shall be of such records, accounts and internal processes and
procedures that contain information concerning any reports provided by
LICENSOR or any charges payable under the terms of this Agreement
including, but not limited to, billing logic and associated systems.
The cost of the audit shall be borne by RESELLER if the amount of
overcharges discovered but not previously reimbursed to RESELLER does
not exceed five percent (5%) of net payments to LICENSOR over the
previous twelve (12) months. However, the cost of such audit shall be
borne by LICENSOR if the amount of overcharges discovered but not
previously reimbursed to RESELLER exceeds five percent (5%) of
RESELLER's net payments to LICENSOR over the previous twelve (12)
months. All auditors shall be subject to the confidentiality
requirements of both parties established herein.
17. PRECEDENCE OF DOCUMENTS
All orders for SERVICES placed by RESELLER upon LICENSOR during the
Term hereof shall be subject to and governed by the provisions
contained herein. The terms and conditions of this written Agreement
shall control over any conflicting or inconsistent terms and
conditions contained in any order placed with LICENSOR by RESELLER and
in any order confirmation issued by LICENSOR to RESELLER.
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18. USE OF CONFIDENTIAL INFORMATION
(a) Any specifications, drawings, sketches, models, samples,
tools, computer programs, technical information, or
confidential business information or data disclosed by one
party to the other hereunder, if in writing and clearly marked
as "confidential" or with words of clearly similar meaning, at
the time of disclosure, or if oral and designated as
confidential at the time of disclosure as well as summarized
in a writing indicating the confidential nature of the same
within twenty (20) days of disclosure (hereinafter called
"Confidential Information"), shall remain the property of the
supplier of such Information. All copies of such Confidential
Information in written, graphic or other tangible form shall
be returned to the discloser upon request,
(b) For the purposes of this Agreement, Confidential Information
shall not include any information that:
(1) was previously known to the recipient;
(2) is subsequently received by the recipient free from
any obligation to keep it confidential;
(3) is independently developed by the receiving party; or
(4) was or is subsequently made public by the supplier or
a third party, without breach of any obligation of
confidentiality.
All Confidential Information shall be treated as confidential
and not disclosed by the recipient, and shall unless the prior
written consent of the disclosing party is obtained be used by
the recipient only in connection with fulfilling the
obligations of the recipient that arise pursuant to this
Agreement, Confidential Information shall only be distributed
to those employees of the recipient who have a need to know.
(c) Each party shall treat the other's Confidential Information in
accordance with a standard of care reasonably calculated to
prevent inadvertent or accidental disclosure. Nothing herein
shall be construed as waiving the right of any party to
require the other party to execute a written nondisclosure
agreement, containing reasonable additional terms and
conditions, prior to the supplying of particular Confidential
Information from time to time.
(d) LICENSOR shall take such measures as necessary to ensure that
all information regarding RESELLER's customers and potential
customers received by LICENSOR from RESELLER is not made
available to or used by LICENSOR, its affiliates, employees or
agents for any purposes other than to support RESELLER. This
shall not, however, be construed to prohibit
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LICENSOR from competing with RESELLER, provided it does not
use RESELLER provided information to do so.
19. PUBLICITY
The parties agree to submit to one another for written approval all
advertising, sales promotion, press releases and other publicity
matters relating to the SERVICES furnished or the SERVICES performed
by them pursuant to this Agreement whereby their respective names or
marks are mentioned or language from which the connection of said
names or marks therewith may be inferred or implied, and the parties
further agree not to publish or use such advertising, sales
promotions, press releases, or publicity matters without such prior
written approval. Such approval shall not be unreasonably withheld or
delayed by either party.
20. COMPLIANCE WITH LAWS
The parties hereto shall comply with the provisions of all applicable
federal, state, county and local laws, ordinances, regulations and
codes (including procurement of required permits or certificates) in
their respective performance hereunder, including, but not limited to,
the standards promulgated under the Occupational Safety and Health
Act, Executive Order 11246, as amended, relative to Equal Employment
Opportunity, Section 503 of the Vocational Rehabilitation Act of 1973,
as amended, and Section 402 of the Vietnam Era Veterans Readjustment
Assistance Act of 1974 and all applicable laws, orders and regulations
concerning immigrants and non-discrimination in the employment of
minorities, females, veterans and the handicapped. Each party hereby
agrees to indemnify the other party, and defend the same against, any
claims, loss or damage sustained because of its noncompliance
hereunder.
21. FORCE MAJEURE
Neither LICENSOR nor RESELLER shall be responsible for any delay or
failure in performance of any part of this Agreement to the extent
that such delay or failure is caused by an event beyond its control,
which may include, but not be limited to, fire, flood, explosion, war,
strike, embargo, government requirement, civil or military authority,
and acts of God ("Condition(s)"). If any such Condition(s) occur(s),
the party delayed or unable to perform shall promptly give notice to
the other party and, if such Condition(s) remains at the end of thirty
(30) days thereafter or for more than thirty (30) days within any
ninety (90) day period, the party affected by the other's delay or
inability to perform may elect to suspend this Agreement or part
thereof, and resume performance of this Agreement once the
Condition(s) cease(s), with an option in the affected party to extend
the period of this Agreement up to the length of time the Condition(s)
endured. If such Conditions continue for more than thirty (30) days,
or for more than thirty (30) days within any ninety (90) day period,
either party shall have the right to terminate this Agreement upon
written notice to the other party.
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22. LIABILITY
(a) Notwithstanding anything to the contrary herein, each party
shall indemnify and save the other harmless the other from any
loss or damages (including reasonable attorney's fees)
incurred by the other because of claims, suits, or demands
based on personal injury or death or property damage or third
party claims, suits or demands of any kind, to the extent such
loss or damage is caused by or results from the negligent or
willful acts or omissions of the other or its employees or
agents. The indemnifying party shall receive the full
opportunity and authority to assume the defense of and
settlement of such suits. The indemnified party may
participate in the indemnifying party's defense of such matter
through its own counsel at its own expense if it so elects.
The indemnified party agrees to furnish to the indemnifying
party upon request all information and reasonable assistance
available to the indemnified party for defense against any
such suit, claim, or demand.
(b) LICENSOR will defend, indemnify and hold harmless RESELLER,
and RESELLER's employees, agents and customers, from any
claim, assertion, suit, demand or proceeding ("Claim")
alleging that the SERVICES, or any materials related thereto
(including collateral, marketing materials and manuals
referred to in Section 6(f) herein except to the extent
RESELLER is obligated to indemnify LICENSOR pursuant to 6(f)),
provided by LICENSOR under this Agreement, or use or
possession thereof, constitute, cause or result in direct or
contributory infringement or inducement of infringement,
misappropriation, misuse of any patent, copyright, trademark,
trade secret or other intellectual property or proprietary
right, including any right of privacy or publicity, of any
person or entity. LICENSOR shall pay all damages,
settlements, judgments, fines, penalties and costs (including
court costs and reasonable fees of attorneys) incurred in
connection with the Claim. RESELLER will promptly notify
LICENSOR of the Claim and, at LICENSOR's expense, provide
LICENSOR with all requested information and assistance
reasonably necessary to the defense of the Claim.
(c) LICENSOR makes no warranty, either express or implied
concerning its facilities, products, or SERVICES, including,
without limitation, warranties of merchantability or fitness
for a particular purpose. RESELLER acknowledges that service
interruptions in the telecommunications industry frequently
are due to circumstances beyond a carrier's control and are
difficult to assess as to cause or resulting damages. The
parties agree that LICENSOR shall not be liable beyond the
actual and direct loss to RESELLER arising out of any
mistakes, omissions, interruptions, delays, errors, or defects
in transmission of pages on LICENSOR's Paging System. Except
as otherwise provided in Sections 8 and 10, LICENSOR's
liability in each instance shall not exceed an amount
equivalent to the proportionate charge to RESELLER for the
period of the disruption of
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<PAGE> 17
SERVICES or the amount of five hundred dollars ($500),
whichever is more. LICENSOR shall not be liable for any act
or omission of any other entity furnishing services to
RESELLER. Except with respect to a breach of the provisions
of Section 18, neither party shall be liable for any special,
incidental or other consequential damage or losses, including
without limitation lost profits, or for loss of stored,
transmitted or recorded data, even if it has been advised of
the possibility of such damages, nor shall either party be
liable for any such damages due to the fault or negligence of
the other party or its employees, agents, or representatives.
With regard to breaches of Section 18, the liability of the
breaching party shall not exceed ten thousand dollars
($10,000.00) per breach unless the breach is found to be
knowing and intentional.
(d) All work performed under this Agreement by any party shall be
performed as an independent contractor and not as an agent of
any other party. Persons furnished by the respective parties
shall be solely the employees or agents of the furnishing
party, and shall be under the sole and exclusive direction and
control of such party. They shall not be considered employees
of the other party for any purpose. Each party shall be
responsible for compliance with all laws, rules and
regulations involving its employees or agents, including (but
not limited to) employment of labor, hours of labor, health
and safety, working conditions and payment of wages. Each
party shall also be responsible, for payment of taxes,
including federal, state, and municipal taxes, chargeable or
assessed with respect to its employees or agents, such as
social security, unemployment, workers' compensation,
disability insurance and federal and state income tax
withholding.
(d) RESELLER and LICENSOR each agree to maintain during the
term hereof all insurance and/or bonds required by law or this
Agreement, including, but not limited to (1) Workers'
Compensation and related insurance as prescribed by applicable
law; (2) employer's liability insurance with limits of at least
$100,000 for each occurrence, and (3) comprehensive general
liability insurance including products liability, and, if the
use of motor vehicles is required, comprehensive motor vehicle
liability insurance, each with limits of at least $500,000 for
combined single limit for bodily injury, including death,
and/or property damage. RESELLER and LICENSOR each shall cause
the other to be included as an Additional Insured under their
respective policies and RESELLER's and LICENSOR's appropriate
coverage under such policies shall be primary. RESELLER and
LICENSOR each shall furnish certificates or evidence of the
foregoing insurance indicating the amount and nature of such
coverage, the expiration date of each policy, and stating that
no material change or cancellation of any such policy shall be
effective unless thirty (30) days advanced written notice is
given to the party named as an Additional Insured.
Notwithstanding the above, LICENSOR and RESELLER shall each
have the option, where permitted by law, to self-insure any or
all of the foregoing risks.
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<PAGE> 18
23. ASSIGNMENT
(a) Except as otherwise provided herein, the rights and
obligations of the parties hereunder shall neither be assigned
nor delegated without the prior written consent of the other
party, provided that either may assign or delegate its
respective rights and obligations hereunder, in whole or in
part, to any parent, subsidiary or affiliate of RESELLER or
LICENSOR that was a parent, subsidiary or affiliate at the
time of execution of this Agreement upon notice and without
the consent of the other party. Such assignment shall not
diminish any rights or duties that LICENSOR or RESELLER may
have had prior to the effective date of assignment.
(b) The limitation on assignment does not apply to an assignment
confined solely to moneys due or to become due under this
Agreement, provided that the assigning party gives the other
party to this Agreement thirty (30) days prior written notice
of such assignment. An assignment of moneys shall be void to
the extent that it imposes upon RESELLER or LICENSOR
obligations to the assignee in addition to the payment of such
moneys, or to preclude RESELLER or LICENSOR from dealing
solely and directly with the other in all matters pertaining
hereto, including negotiation of amendments or settlement of
amounts due. If RESELLER or LICENSOR makes such an
assignment, it is and shall remain responsible for payment
hereunder.
(c) Either party may transfer this Agreement as part of a merger
or upon the sale of all or substantially all of that party's
business on notice to the other party whose consent shall not
be required unless the purchaser is a direct competitor of the
party receiving the notice, in which case the party receiving
the notice shall have the option to terminate this Agreement
on ninety (90) days' notice.
24. TAXES
RESELLER shall be liable for and shall reimburse LICENSOR for actual
payments of any retailers' excise taxes, state and local sales and use
taxes, or any similar taxes as applicable, with respect to
transactions under this Agreement. Taxes payable by RESELLER shall be
separately stated in LICENSOR's invoices and shall not be included In
LICENSOR's prices. RESELLER shall not be liable for any tax for which
a valid exemption certificate acceptable to the applicable state or
local taxing authorities is furnished by RESELLER to LICENSOR.
25. RECORDS
(a) LICENSOR shall maintain complete and accurate records of all
amounts billable to and payments made by RESELLER hereunder,
in accordance with generally accepted accounting practices.
LICENSOR shall retain such records
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<PAGE> 19
for a period of three (3) years from the date of rendering of
SERVICES covered by this Agreement. LICENSOR agrees to
provide to RESELLER supporting documentation concerning any
disputed amount of invoice within thirty (30) days after
RESELLER provides written notification of the dispute to
LICENSOR along with RESELLER's documentation supporting any
disputed amount. LICENSOR shall retain such records for three
(3) years from date of invoice.
(b) RESELLER's original Subscriber records shall be and remain the
property of RESELLER. LICENSOR shall be entitled at
LICENSOR's expense during normal business hours to make copies
of such records directly relating to information verifying the
number of Subscribers or compliance by RESELLER to the terms
of this Agreement.
26. RIGHT OF ACCESS
LICENSOR and RESELLER shall each permit reasonable access during
normal working hours to its facilities in connection with work
hereunder. No charge shall be made for such visits. It is agreed
that reasonable prior notification shall be given when access is
required and that access is subject to compliance with the facility
rules of conduct and security procedures of the visited property.
27. TERMINATION
(a) RESELLER may terminate this Agreement with or without cause,
upon thirty (30) days' written notice to LICENSOR.
Termination shall not affect any order placed prior to the
date of termination,
(b) Either party may terminate this Agreement, effective
immediately, without liability for said termination, upon
written notice to the other party, if any of the following
events occur:
(1) The other files a voluntary petition in bankruptcy;
(2) The other is adjudged bankrupt;
(3) A court assumes jurisdiction of the assets of the
other under a federal reorganization act;
(4) A trustee or receiver is appointed by a court for all
or a substantial portion of the assets of the other;
(5) The other becomes insolvent or suspends its business;
(6) The other makes an assignment of its assets for the
benefit of its creditors, except as required in the
ordinary course of business;
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<PAGE> 20
(c) Either party may immediately terminate this Agreement for a
material breach or default of any of the terms, conditions or
covenants of this Agreement by the other, provided that such
termination may be made only following the expiration of a
thirty (30) day period during which the other party has failed
to cure such breach after having been given written notice of
such breach.
(d) In the event of a material breach or default by LICENSOR,
provided that LICENSOR has failed to cure the same within
thirty (30) days of its receipt of RESELLER's written notice
of default, or if said default cannot be cured within a thirty
(30) day period, LICENSOR has failed to commence and
diligently pursue curing such a default, RESELLER shall be
under no obligation to continue to provide LICENSOR's SERVICES
to its Subscribers, and RESELLER shall have the right to
assign those Subscribers to another paging service.
28. DISPUTE RESOLUTION
(a) The parties desire to resolve certain disputes, controversies
and claims arising out of this Agreement without litigation.
Accordingly, except in the case of (i) a suit, action or
proceeding to compel a party to comply with its obligations to
indemnify the other party pursuant to this Agreement or (ii) a
suit, action or proceeding to compel either party to comply
with the dispute resolution procedures set forth in this
Section 27, the parties agree to use the following alternative
procedure as their sole remedy with respect to any dispute,
controversy or claim arising out of or relating to this
Agreement or its breach. The term "Arbitrable Dispute" means
any dispute, controversy or claim to be resolved in accordance
with the dispute resolution procedure specified in this
Section 27.
(b) At the written request of a party, each party shall appoint a
knowledgeable, responsible representative to meet and
negotiate in good faith to resolve any Arbitrable Dispute
arising under this Agreement. The parties intend that these
negotiations be conducted by nonlawyer, business
representatives. The discussions shall be left to the
discretion of the representatives. Upon written agreement,
the representatives may utilize other alternative dispute
resolution procedures such as mediation to assist in the
negotiations. Discussions and correspondence among the
representatives for purposes of these negotiations shall be
treated as confidential information developed for purposes of
settlement, shall be exempt from discovery and production, and
shall not be admissible in the arbitration described below or
in any lawsuit without the concurrence of all parties.
Documents identified in or provided with such communications,
which are not prepared for purposes of the negotiations, are
not so exempted and may, if otherwise admissible, be admitted
in evidence in the arbitration or lawsuit.
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<PAGE> 21
(c) If the negotiations do not resolve the Arbitrable Dispute
within sixty (60) days of the initial written request, the
Arbitrable Dispute shall be submitted to binding arbitration
by a single arbitrator pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. A party may
demand such arbitration in accordance with the procedures set
out in those rules. Discovery shall be controlled by the
arbitrator and shall be permitted to the extent set out in
this Section. Each party may submit in writing to a party,
and that party shall so respond, to a maximum of any
combination of thirty-five (35) (none of which may have
subparts) of the following: interrogatories, demands to
produce documents and requests for admission. Each party is
also entitled to take the oral deposition of one (1)
individual of another party. Additional discovery may be
permitted upon mutual agreement of the parties. The
arbitration hearing shall be commenced within sixty (60) days
of the demand for arbitration and the arbitration shall be
held in Dallas, Texas. The arbitrator shall control the
scheduling so as to process the matter expeditiously. The
parties may submit written briefs. The arbitrator shall rule
on the Arbitrable Dispute by issuing a written opinion within
thirty (30) days after the close of hearings. The times
specified in this Section may be extended upon mutual
agreement of the parties or by the arbitrator upon a showing
of good cause. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.
(d) Each party shall bear its own cost of these procedures. A
party seeking discovery shall reimburse the responding party
the cost of production of documents (to include search time
and reproduction time costs). The parties shall equally share
the fees of the arbitration and the arbitrator.
29. NOTICES
Any notice or demand given under the terms of this Agreement or
pursuant to statute shall be in writing and shall be given or made by
telegram, facsimile transmission, certified or registered mail,
express mail or other overnight delivery service or hand delivery,
proper postage or other charges paid and addressed or directed to the
respective parties as follows;
To RESELLER:
GTE Communications Corporation
5221 N. O'Connor Boulevard
East Tower, 14th Floor
Irving, Texas 75039
Attention: Director - Contract Management (HQL06C43)
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<PAGE> 22
To RESELLER's LEGAL:
GTE Communications Corporation
5221 N. O'Connor Boulevard
East Tower, 14th Floor
Irving, Texas 75039
Attention: Legal Department (HQL06B62)
To LICENSOR:
PageMart Wireless, Inc.
3333 Lee Parkway
Suite 100
Dallas, Texas 75219
Attention: Vice President - Strategic Alliance Business Unit
Such notice or demand shall be deemed to have been given or made when
actually received or the third business day following the day it is
dispatched after being sent, whichever occurs first.
The address for notice set out above may be changed at any time by
giving thirty (30) days prior written notice in the manner above.
30. NONWAIVER
Either party's failure to enforce any of the provisions of this
Agreement and/or any purchase order, or to exercise any option
hereunder, shall in no way be construed as a waiver of such
provisions, rights, or options, or in any way be deemed to affect the
validity of this Agreement or any purchase order.
31. SEVERABILITY
Should any material part of this Agreement for any reason be declared
invalid by order of any court or regulatory agency, the parties shall
meet and determine whether such action shall not affect the validity
of any remaining portion, which shall remain in force and effect as if
this Agreement had been executed with the invalid portion eliminated,
or shall require renegotiation or termination.
32. SECTION HEADINGS
The headings of the sections herein are inserted for convenience only
and are not intended to affect the meaning or interpretation of this
Agreement.
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<PAGE> 23
33. SURVIVAL OF OBLIGATIONS
The respective obligations of LICENSOR and RESELLER under this
Agreement which by their nature would continue beyond the termination,
cancellation or expiration hereof, shall survive termination,
cancellation or expiration hereof.
34. CHOICE OF LAW
The construction, interpretation and performance of this Agreement
shall be governed by and construed in accordance with the domestic
laws of the state of Texas.
35. ENTIRE AGREEMENT
This Agreement and the exhibits hereto constitute the entire agreement
between LICENSOR and RESELLER. No modifications shall be made to this
Agreement unless in writing and signed by appropriate representatives
of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement through
their authorized corporate representatives.
GTE COMMUNICATIONS PAGEMART WIRELESS, INC.
CORPORATION
By: /s/ ROBERT E. STEWART for By: /s/ DOUGLAS S. GLEN
Deb Covey
Name: Robert E. Stewart Name: Douglas S. Glen
Title: AVP-Billing and Cost Mgmt. Title: Executive Vice President
Date: 12/30/97 Date: 12/19/97
Page 20
<PAGE> 1
EXHIBIT 10.24
AGREEMENT BETWEEN
PAGEMART INCORPORATED
AND
GTE COMMUNICATION SYSTEMS CORPORATION
TO ASSUME
AND
AMENDMENT NO. 2
TO
RESALE AGREEMENT
NUMBER 999999-93-12
BETWEEN
PAGEMART INCORPORATED
AND
GTE SERVICE CORPORATION
ASSUMPTION
GTE Communication Systems Corporation, acting through its GTE Supply division,
for the benefit of itself and the affiliates enumerated in Exhibit D, with
offices at 700 Hidden Ridge, Irving, Texas 75038 ("RESELLER") assumes and
Pagemart Incorporated. with its principal offices located at 6688 North Central
Expressway, Suite 900, Dallas, Texas 75026 ("LICENSOR") accepts its assumption
of all rights and obligations of GTE SERVICE CORPORATION as RESELLER in said
Agreement Number 999999-93-12 as amended (Agreement).
AMENDMENT
THIS AMENDMENT NO. 2 to Resale Agreement Number 999999-93-12, between RESELLER
and LICENSOR shall be effective upon execution by both parties.
NOW, THEREFORE, the parties agree to the following changes for the mutual
benefit of both parties.
CHANGE NUMBER 1
Exhibit A, PRICING of the Agreement shall be replaced with Exhibit A, PRICING
attached hereto.
CHANGE NUMBER 2
In consideration of the renewal of Resale Agreement Number 999999-93-12
LICENSOR agrees to issue the credits and discounts in, and fulfill the other
commitments as detailed in Exhibit B, DISCOUNTS/CREDITS. By accepting the
discounts and credits listed in Exhibit B, RESELLER does not represent or
guarantee the ordering of any level or amount of Services from LICENSOR or any
peculiar status relative to other vendors.
CHANGE NUMBER 3
Exhibit C, AUTHORIZED EQUIPMENT attached hereto shall be added to the
Agreement.
CONFIDENTIAL
<PAGE> 2
CHANGE NUMBER 4
The following shall be added as Section 32:
32. AUTHORIZED EQUIPMENT
(a) RESELLER and its Subscribers shall only
utilize the Equipment listed in Exhibit C,
AUTHORIZED EQUIPMENT in connection with
LICENSOR's Services. LICENSOR may revise
Exhibit C from time to time upon delivery of
written notice to RESELLER at least one
hundred eighty (180) days prior to the
effective date of such revision. If LICENSOR
amends Exhibit C in such a manner whereby
previously authorized Equipment is no longer
authorized for use on LICENSOR's Paging
System, LICENSOR agrees at its sole cost and
expense to provide substitute authorized
Equipment in exchange for the previously
authorized Equipment then utilized by
RESELLER's Subscribers.
(b) All pagers previously sold by LICENSOR to
RESELLER are included in this Agreement, as
they all still work on this network.
CHANGE NUMBER 5
Exhibit D, GTE AFFILIATED ENTITIES attached hereto shall be added to the
Agreement.
CHANGE NUMBER 6
Exhibit E, REPORTS attached hereto shall be added to the Agreement and LICENSOR
agrees to provide such reports to RESELLER.
CHANGE NUMBER 7
The second line of Section 1. TERM shall be changed to read "thereafter until
October 31, 2000 unless terminated or modified by..."
CHANGE NUMBER 8
The following shall be added as Section 31.
31. SERVICE COMMITMENT
*
CHANGE NUMBER 9
Add the following to Section 6, LICENSOR RESPONSIBILITIES
2 CONFIDENTIAL
<PAGE> 3
(d) LICENSOR agrees to provide the monthly reports
described in Exhibit E, attached hereto, to RESELLER.
(e) LICENSOR shall assume the role of system coordinator
for all RESELLER'S terminals. This includes
monitoring these terminals for alarms, notifying
RESELLER of alarms, scheduling routine maintenance,
software upgrades and hardware upgrades.
(f) LICENSOR is responsible for keeping RESELLER informed
of all necessary updates and maintenance to the
degree that it does not affect the RESELLER.
CHANGE NUMBER 10
Add the following to Section 7, RESELLER RESPONSIBILITIES
(g) RESELLER is responsible for updating the contact list
of people who LICENSOR is to contact if an alarm
occurs or routine maintenance is required or upgrades
become necessary.
(h) RESELLER is responsible for purchasing software,
hardware, and spare kits for each terminal owned by
RESELLER. RESELLER agrees to reimburse LICENSOR at
the rate of $100 per man hour (plus travel expenses)
for all software and hardware upgrades and other
maintenance that RESELLER approves LICENSOR to
perform on their behalf.
(i) RESELLER will handle emergency maintenance for
service affecting outages on a case by case basis.
CHANGE NUMBER 11
Add the following to Section 10. BILLING
(b) LICENSOR shall provide to RESELLER an overcalls
invoice by the 10th day of each month.*
(c) LICENSOR shall provide to RESELLER a detailed billing
statement for airtime services charge by the 15th day
of each month.*
(d) If the 15th day of the month falls on a weekend the
statement will be delivered to RESELLER by 12:00 noon
Central Standard Time on the next business day.
Except as specifically modified, amended or supplemented herein, all terms and
conditions of Resale Agreement Number 999999-93-12 and its Amendment One shall
remain in full force and effect between the parties.
3 CONFIDENTIAL
<PAGE> 4
<TABLE>
<CAPTION>
RESELLER LICENSOR
<S> <C>
GTE COMMUNICATION SYSTEMS PAGEMART INCORPORATED
CORPORATION
/s/ KEITH HENDERSHOT /s/ DOUGLAS S. GLEN
- --------------------------------------------- ---------------------------------------------------
(Signature of Authorized Agent) (Signature of Officer)
Keith Hendershot Douglas S. Glen
- --------------------------------------------- ---------------------------------------------------
(Printed Name of Officer) (Printed Name of Officer)
Acting Group Manager - Contract Management Executive Vice President
- --------------------------------------------- ---------------------------------------------------
(Title) (Title)
Date: 10-2-97 Date: 10-2-97
--------------------------------------- ---------------------------------------------
</TABLE>
APPROVED AS TO FORM AND LEGALITY
J.R. SEASTROM
----------------------------------
Attorney, GTE Telephone Operations
Date: 09-30-97
----------------------------
4 CONFIDENTIAL
<PAGE> 1
EXHIBIT 10.25
RESALE AGREEMENT
BETWEEN
GTE MOBILNET SERVICE CORP.
AND
PAGEMART, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. TERM 1
2. DEFINITIONS 1
3. LICENSE 2
4. INDEPENDENT PARTIES 2
5. SCOPE 2
6. LICENSOR RESPONSIBILITIES 3
7. RESELLER RESPONSIBILITIES 3
8. PUBLIC REGULATION 4
9. PRICING 4
10. BILLING 5
11. TERMS OF PAYMENT 5
12. SPECIAL PROGRAMS 5
13. PRECEDENCE OF DOCUMENTS 6
14. USE OF CONFIDENTIAL INFORMATION 6
15. PUBLICITY 7
16. COMPLIANCE WITH LAWS 7
17. FORCE MAJEURE 7
18. LIABILITY 8
19. ASSIGNMENT 9
20. TAXES 10
21. RECORDS 10
22. RIGHT OF ACCESS 10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
23. TERMINATION 11
24. DISPUTE RESOLUTION 12
25. NOTICES 13
26. NONWAIVER 14
27. SEVERABILITY 14
28. SECTION HEADINGS 14
29. SURVIVAL OF OBLIGATIONS 14
30. CHOICE OF LAW 14
31. ENTIRE AGREEMENT 14
</TABLE>
ii
<PAGE> 4
RESALE AGREEMENT
This Agreement is made as of the first day of July 1996, by and between
PageMart, Inc., a Delaware corporation, with offices for the purpose of this
Agreement located at 6688 North Central Expressway, Suite 800, Dallas, Texas
75206 (hereinafter referred to individually or collectively as "LICENSOR") and
GTE Mobilnet Service Corp., a New York corporation with offices located at 245
Perimeter Center Parkway, Atlanta, GA 30346 (hereinafter referred to as
"RESELLER").
WHEREAS, LICENSOR provides paging, voice messaging, and related messaging
services (hereinafter referred to as "SERVICES"); and
WHEREAS, RESELLER desires to contract with LICENSOR to resell such SERVICES and,
in connection therewith, to receive blocks of Personal Identification Numbers
(hereinafter referred to as "PINs") and Direct Inward Dialing numbers
(hereinafter referred to as "DIDs") that provide individual access to LICENSOR's
system and SERVICES for resale to members of the general public;
THEREFORE, in consideration of the mutual promises and covenants contained
herein, the parties agree as follows:
1. TERM
This Agreement shall be effective on July 1, 1996 and shall continue in
effect thereafter until October 30, 1996 unless terminated or modified by
either party in accordance with the provisions of this Agreement.
Thereafter, this Agreement shall be automatically be renewed for
consecutive 12 month periods unless terminated by RESELLER by written
notice to LICENSOR not less than thirty (30) days prior to the expiration
date. At the end of each twelve (12) month period either party shall have
the option to review Agreement terms and adjust such terms as are mutually
agreed upon by the parties.
2. DEFINITIONS
(a) CAP Code - The numeric code that identifies and is unique to each
pager placed in service on LICENSOR's Paging System
(b) DID - A local telephone number assigned by LICENSOR to identify a
specific pager on the LICENSOR's network. By dialing the DID, the
respective pager is activated.
(c) Equipment - Pagers and related message receiving devices.
(d) GTE Tel Ops - GTE Telephone Operations Group.
<PAGE> 5
(e) Paging Terminal - A paging central office switch that processes paging
calls.
(f) Paging System - A telecommunications network that provides paging and
related messaging services throughout a specific geographic area.
(g) PIN - Personal Identification Number. A specific number assigned by
LICENSOR to identify a pager on the LICENSOR's network. By entering
their PIN into LICENSOR's computer vial a touch-tone telephone, the
respective pager is activated.
(h) Subscriber - A person or entity that is the end user of the LICENSOR's
Paging System.
(i) Telephone Interconnect Charges - Those charges directly associated
with acquiring direct dial paging telephone numbers from the local
exchange carrier.
3. LICENSE
(a) LICENSOR grants RESELLER a non-exclusive license to resell LICENSOR's
SERVICES subject to the rules, regulations and decisions of the
Federal Communications Commission (hereinafter referred to as "the
FCC").
(b) RESELLER may, upon receipt of LICENSOR's prior written approval, be
authorized by LICENSOR to license its own sub-agents or affiliates for
the marketing, promotion and resale of LICENSOR's SERVICES, provided
that RESELLER shall be responsible for the observance by its
sub-agents, affiliates, or sub-licensees of the terms and conditions
of the Agreement.
4. INDEPENDENT PARTIES
Each party is an independent contractor. Except as provided in this
Agreement, neither party shall have the right, power or authority to act or
to create any obligation, express or implied, on behalf of the other party.
All sales by RESELLER shall be in its own name and for its own account
5. SCOPE
(a) This Agreement is non-exclusive and RESELLER is under no obligation to
LICENSOR to resell any certain amount of SERVICES.
(b) LICENSOR hereby agrees to provide SERVICES in an efficient, economic
and timely fashion in accordance with generally accepted commercial
and business practices.
2
<PAGE> 6
6. LICENSOR RESPONSIBILITIES
(a) LICENSOR shall provide RESELLER's Subscribers with access to its
Paging System and shall use its good faith efforts to provide
continuous network service in the geographical locations where
LICENSOR is legally authorized and has the facilities to provide
SERVICES.
(b) The SERVICES provided by LICENSOR shall include but not be limited to:
(1) Numeric display - as long as there is frequency space available,
unlimited numeric display paging; and
(2) Alpha-numeric - as long as there is frequency space available,
unlimited alpha-numeric paging.
(c) LICENSOR shall assign and coordinate all telephone and CAP code
numbers in order to ensure the compatible initiation of SERVICES to
Subscribers placed on LICENSOR's Paging System.
7. RESELLER RESPONSIBILITIES
(a) RESELLER shall promote, solicit, market and take all reasonable
actions, in the exercise of due diligence and good faith, to secure
Subscribers for LICENSOR's Paging System.
(b) RESELLER shall be solely responsible for providing all sales,
Equipment and customer support services to its Subscribers. RESELLER
further agrees that all EQUIPMENT provided to its Subscribers shall be
compatible with the existing transmission system of LICENSOR.
(c) RESELLER shall be solely responsible for all billings to and
collections from its Subscribers, including but not limited to the
sending of monthly bills, collection of amounts owed or past due, and
the collection and return of all applicable taxes on such SERVICES or
Equipment rentals.
(d) RESELLER shall provide and mail all announcements or notices required
to be mailed to its Subscribers as required by any regulatory agency.
(e) RESELLER shall assign CAP codes, DIDs and PINs to its Subscribers only
from the group of CAP codes, DIDs and PINs assigned to RESELLER by
LICENSOR. RESELLER shall ensure that a given CAP code, DID or PIN is
not assigned to more that one pager, provided that LICENSOR has not
given RESELLER duplicate CAP codes, DIDs or PINs, which were then
assigned in violation of this provision without the fault or knowledge
of RESELLER.
3
<PAGE> 7
(f) RESELLER shall maintain and keep in good working order all
Equipment leased by RESELLER to its Subscribers pursuant to
the terms of this Agreement, in accordance with all
manufacturer's specifications and the provisions of the filed
tariffs of LICENSOR.
8. PUBLIC REGULATION
(a) It is understood that the ultimate control and responsibility
for the standard and quality of SERVICES required under the
provisions of and license issued by the FCC to LICENSOR shall
be retained, rest and remain the prerogative and obligation
solely of LICENSOR. No provision of this Agreement shall be
construed as vesting in RESELLER any control whatsoever of the
radio communication facilities and operations of LICENSOR.
(b) This Agreement is subject to all of the terms and conditions
of LICENSOR's outstanding authorizations from the FCC and the
utility regulatory agencies in the states to which this
Agreement pertains, as such tariffs and authorizations are
presently in effect or as they may hereafter be revised.
Nothing in this Agreement shall be construed so as to impair
or diminish LICENSOR's control over the facilities of the
applicable stations.
(c) This Agreement shall be subject to the approval of the FCC and
the local state regulatory agency, if such approval shall be
required.
(d) This Agreement shall be terminated, amended, revised, or
supplemented immediately if required by the FCC or the local
state regulatory agency.
(e) The imposition by the FCC or local state regulatory agency of
any amendments, revisions, deletions or supplements to this
Agreement shall thereby relieve LICENSOR and RESELLER of any
obligations or liabilities to the other resulting from the
provisions of this Agreement which were ordered amended,
revised, deleted or supplemented.
9. PRICING
(a) RESELLER hereby agrees to pay LICENSOR the charges and fees
for SERVICES specified in Exhibit A in accordance with the
terms and conditions contained herein.
(b) The charges and fees specified in Exhibit A shall commence at
the time RESELLER activates each particular number in
LICENSOR's Paging System. Such charges shall continue for each
number for a minimum of thirty (30) days, and thereafter until
the number in questions is canceled
4
<PAGE> 8
or otherwise disconnected in accordance with the provisions herein.
When a number is activated in the middle of a month, the applicable
rate will be prorated to the first of the following month so that all
subsequent bills will be tendered thereafter on a monthly basis.
(c) *
(d) *
(e) Where allowable by the state regulating authority, the prices charged
by RESELLER to its Subscribers for all SERVICES shall be determined
solely by RESELLER. In states where tariff rates are required,
RESELLER may operate under its own tariff or the tariff of LICENSOR.
10. BILLING
LICENSOR shall provide RESELLER with a hard copy statement each month which
identifies the number of DIDs or PINs billed at the applicable rates. At
the reasonable request of RESELLER, LICENSOR shall also provide monthly
billing in an electronic format.
11. TERMS OF PAYMENT
Payment shall be due thirty (30) days after the date or the receipt of
LICENSOR's invoice, whichever is later.
12. SPECIAL PROGRAMS
Concurrently herewith, LICENSOR and RESELLER are entering into (i) a
Representation Agreement, and (ii) a Trial Lease Program substantially in
the forms attached hereto as Exhibit B and Exhibit C, respectively, and
incorporated herein for all purposes. The Representation Agreement provides
for compensation to RESELLER for the promotion of LICENSOR Products and
SERVICES (as such terms are defined in the Representation Agreement). The
Trial Lease Program provides for the lease to RESELLER of Products (as
defined in the Trial Lease Program) from LICENSOR and the subsequent lease
by RESELLER of such Products to RESELLER's Subscribers.
5
<PAGE> 9
13. PRECEDENCE OF DOCUMENTS
All orders for SERVICES placed during the term hereof shall be subject to
and governed by the provisions contained herein. The terms and conditions
of this Agreement shall control over any conflicting or inconsistent terms
contained in any order placed with LICENSOR by RESELLER. Notwithstanding
the foregoing, as to the subject matter there of the terms and conditions
of the Representation Agreement or Trial Lease Program, as the case may be,
shall control over any conflicting or inconsistent terms and conditions
contained in this Agreement.
14. USE OF CONFIDENTIAL INFORMATION
(a) Any specifications, drawings, sketches, models, samples, tools,
computer programs, technical information, or confidential business
information or data furnished by the parties to one another hereunder,
if in writing and clearly marked as "confidential" at the time of
disclosure, or if oral and designated as confidential at the time of
disclosure as well as summarized in writing indicating the
confidential nature of the same within twenty (20) days of disclosure
(hereinafter called "Confidential Information") shall remain the
property of the supplier of such Information. All copies so such
Confidential Information in written, graphic or other tangible form
shall be returned to the supplier upon request.
(b) For the purposes of this Agreement, Confidential Information shall not
include any information that:
(1) was previously known to the recipient;
(2) is subsequently received by the recipient free from any
obligation to keep it confidential;
(3) is independently developed by the receiving party; or
(4) was or is subsequently made public by the supplier or a third
party, without breach of any obligation of confidentiality.
All Confidential Information shall be treated as confidential and not
disclosed by the recipient, and shall be used by the recipient only in
connection with fulfilling the obligations of the recipient that arise
pursuant to this Agreement, unless the prior written consent of the
supplier is obtained. Confidential Information shall only be distributed to
those employees who have a need to know.
(c) Each party shall treat the other's Confidential Information in
accordance with a standard of care reasonably calculated to prevent
inadvertent or
6
<PAGE> 10
accidental disclosure. Nothing herein shall be construed as waiving
the right of any party to require the other party to execute a
written non-disclosure agreement, containing reasonable additional
terms and conditions, prior to the supplying of particular
Confidential Information from time to time.
15. PUBLICITY
The parties agree to submit to one another for written approval all
advertising, sales promotion, press releases and other publicity matters
relating to the SERVICES furnished or the SERVICES performed by them
pursuant to this Agreement whereby their respective names or marks are
mentioned or language from which the connection of said names or marks
therewith may be inferred or implied, and the parties further agree not to
publish or use such advertising, sales promotions, press releases, or
publicity matters without such prior written approval. Such approval shall
not be unreasonably withheld or delayed by either party.
16. COMPLIANCE WITH LAWS
The parties hereto shall comply with the provisions of all applicable
federal, state, county and local laws, ordinances, regulations and codes
(including procurement of required permits or certificates) in their
respective performance hereunder, including, but not limited to, the
standards promulgated under the Occupational Safety and Health Act,
Executive Order 11246, as amended, relative to Equal Employment
Opportunity, Section 503 of the Vocational Rehabilitation Act of 1973, as
amended, and Section 402 of the Vietnam Era Veterans Readjustment
Assistance Act of 1974 and all applicable laws, orders and regulations
concerning immigrants and non-discrimination in the employment of
minorities, females, veterans and the handicapped. Each party hereby agrees
to indemnify the other party, and defend the same against, any claims, loss
or damage sustained because of its noncompliance hereunder.
17. FORCE MAJEURE
Neither LICENSOR nor RESELLER shall be responsible for any delay or failure
in performance of any part of this Agreement to the extent that such
delay or failure is caused by event beyond its control, which may include,
but not be limited to, fire, flood, explosion, war strike, embargo,
government requirement, civil or military authority, and acts of God
("Condition(s)"). If any such Condition(s) occurs, the party delayed or
unable to perform shall promptly give notice to the other party and, if
such Condition(s) remains at the end of thirty (30) days thereafter, the
party affected by the other's delay or inability to perform may elect to
terminate or suspend this Agreement or part thereof, and resume performance
of this Agreement once the Condition(s) ceases, with an option in
7
<PAGE> 11
the affected party to extend the period of this Agreement up to the length
of time the Condition(s) endured.
18. LIABILITY
(a) Notwithstanding anything to the contrary herein, each party shall
indemnify and save harmless the other from any loss or damages
(including reasonable attorney's fees) incurred by the other because
of claims, suits, or demands based on personal injury or death or
property damage or third party claims, suits or demands of any kind,
to the extent such loss or damage is caused by or results from the
negligent or willful acts or omissions of the other or its employees
or agents. The indemnifying party shall receive the full opportunity
and authority to assume the sole defense of and settlement of such
suits. The indemnified party agrees to furnish to the indemnifying
party upon request all information and reasonable assistance available
to the indemnified party for defense against any such suit, claim, or
demand.
(b) LICENSOR makes no warranty, either express or implied concerning its
facilities, products, or SERVICES, including, without limitation,
warranties of merchantability or fitness for a particular purpose.
RESELLER acknowledges that service interruptions in the
telecommunications industry frequently are due to circumstances beyond
a carrier's control and are difficult to assess as to cause or
resulting damages. The parties agree that LICENSOR shall not be liable
beyond the actual and direct loss arising out of any mistakes,
omissions, interruptions, delays, errors, or defects in transmission
of pages on LICENSOR's Paging System. However LICENSOR's liability
shall in no event exceed an amount equivalent to the proportionate
charge to RESELLER for the period of the disruption of SERVICES or the
amount of five hundred dollars ($500), whichever is less. LICENSOR
shall not be liable for any act or omission of any other entity
furnishing SERVICES to RESELLER. Neither party shall be liable for any
special, incidental or other consequential damage or losses, including
without limitation lost profits, or for loss of stored, transmitted or
recorded data, even if it has been advised of the possibility of such
damages, nor shall either party be liable for any such damages due to
the fault or negligence of the other party or its employees, agents,
or representatives.
(c) All work performed under this Agreement by any party shall be
performed as an independent contractor and not as an agent of any
other party. Persons furnished by the respective parties shall be
solely the employees or agents of such parties, respectively, and
shall be under the sole and exclusive direction of such parties. They
shall not be considered employees of the other party for any purpose.
Each party shall be
8
<PAGE> 12
responsible for compliance with all laws, rules and
regulations involving their respective employees or agents,
including (but not limited to) employment of labor, hours of
labor, health and safety, working conditions and payment of
wages. Each party shall also be responsible, respectively,
for payment of taxes, including federal, state, and municipal
taxes, chargeable or assessed with respect to its employees or
agents, such as social security, unemployment, workers'
compensation, disability insurance and federal and state
income tax withholding.
(d) RESELLER and LICENSOR each agree to maintain during the term
hereof all insurance and/or bonds required by law or this
Agreement, including, but limited to (1) Workers' Compensation
and related insurance as prescribed by applicable law; (2)
employer's liability insurance with limits of at least $100,000
for each occurrence, and (3) comprehensive general liability
insurance including products liability, and, if the use of
motor vehicles is required, comprehensive motor vehicle
liability insurance, each with limits of at least $500,000 for
combined single limit for bodily injury, including death,
and/or property damage. RESELLER and LICENSOR each shall cause
the other to be included as an Additional Insured under their
respective policies and RESELLER's and LICENSOR's appropriate
coverage under such policies shall be primary. RESELLER and
LICENSOR each shall furnish certificates or evidence of the
foregoing insurance indicating the amount and nature of such
coverage, the expiration date of each policy, and stating that
no material change or cancellation of any such policy shall be
effective unless thirty (30) days advanced written notice is
given to the party named as an Additional Insured.
Notwithstanding the above, LICENSOR and RESELLER shall each
have the option, where permitted by law, to self-insure any or
all of the foregoing risks.
19. ASSIGNMENT
(a) Except as otherwise provided herein, the rights and
obligations of the parties hereunder shall neither be assigned
nor delegated without prior written consent of the other
party, provided that any party may assign or delegate their
respective rights and obligations hereunder, in whole or in
part, to any parent, subsidiary or affiliate of RESELLER or
LICENSOR that was such a parent, subsidiary or affiliate at
the time of execution of this Agreement upon prior written
notice to the other. Such assignment shall not diminish any
rights or duties that LICENSOR or RESELLER may have had prior
to the effective date of assignment.
(b) The limitation on assignment does not apply to an assignment
confined solely to monies due or to become due under this
Agreement, provided RESELLER or LICENSOR is given thirty (30)
days prior written notice of such assignment. An assignment of
monies shall be void to the extent
9
<PAGE> 13
that it attempts to impose upon RESELLER or LICENSOR obligations to
the assignee in addition to the payment of such monies, or to preclude
RESELLER or LICENSOR from dealing solely and directly with the other
in all matters pertaining hereto, including negotiation of amendments
or settlement of amounts due. If RESELLER or LICENSOR makes such an
assignment, it is and shall remain responsible for payment hereunder.
20. TAXES
RESELLER shall be liable for and shall reimburse LICENSOR for actual
payments of any Retailers' Excise Taxes, state and local sales and use
taxes, or any similar taxes as applicable, with respect to transactions
under this Agreement. Taxes payable by RESELLER shall be separately stated
in LICENSOR'S invoices and shall not be included in LICENSOR's prices.
RESELLER shall not be liable for any tax for which a valid exemption
certificate acceptable to the applicable state or local taxing authorities
is furnished by RESELLER to LICENSOR.
21. RECORDS
(a) LICENSOR shall maintain complete and accurate records of all amounts
billable to and payments made by RESELLER hereunder, in accordance
with generally accepted accounting practices. LICENSOR shall retain
such records for a period of three (3) years from the date of
rendering of SERVICES covered by this Agreement. LICENSOR agrees to
provide supporting documentation concerning any disputed amount of
invoice to RESELLER within thirty (30) days after RESELLER provides
written notification of the dispute to LICENSOR. LICENSOR shall retain
such records for three (3) years from date of invoice.
(b) RESELLER's original Subscriber records shall be and remain the
property of RESELLER. LICENSOR shall be entitled at LICENSOR's expense
during normal business hours to make copies of such records directly
relating to information verifying the number of Subscribers or
compliance by RESELLER to the terms of this Agreement.
22. RIGHT OF ACCESS
LICENSOR and RESELLER shall each permit reasonable access during normal
working hours to its facilities in connection with work hereunder. No
charge shall be made for such visits. It is agreed that reasonable prior
notification shall be given when access is required.
10
<PAGE> 14
23. TERMINATION
(a) RESELLER may terminate this Agreement without cause, effective
immediately, upon written notice to LICENSOR in the event RESELLER's
resale activities are combined with the resale activities of GTE Tel
Ops under the Resale Agreement between GTE Tel Ops and LICENSOR dated
November 1, 1993 (Resale Combination). In the event of a Resale
Combination, all of RESELLER's subscribers will be transferred to the
account of GTE Tel Ops and the terms and conditions provided in the
Resale Agreement dated November 1, 1993 shall thereafter govern.
Termination shall not affect any order placed prior to the date of
termination.
(b) Either party may terminate this Agreement, effective immediately,
without liability for said termination, upon written notice to the
other party, if any of the following events occur:
(1) The other files a voluntary petition in bankruptcy;
(2) The other is adjudged bankrupt;
(3) A court assumes jurisdiction of the assets of the other under a
federal reorganization act;
(4) A trustee or receiver is appointed by a court for all or a
substantial portion of the assets of the other;
(5) The other becomes insolvent or suspends its business;
(6) The other makes and assignment of its assets for the benefits of
its creditors, except as required in the ordinary course of
business;
(7) The identity of the other's business is materially changed by
sale of its business, transfer of control of its outstanding
stock, merger or otherwise.
(c) Either party may immediately terminate this Agreement for a material
breach or default of any of the terms, conditions or covenants of this
Agreement by the other, provided that such termination may be made
only following the expiration of a thirty (30) day period during which
the other party has failed to cure such breach after having been given
written notice of such breach.
(d) In the event of a material breach of default by LICENSOR, provided
that LICENSOR has failed to cure the same within thirty (30) days of
its
11
<PAGE> 15
receipt of RESELLER's written notice of default, or if said default
cannot be cured within a thirty (30) day period,' LICENSOR has failed
to commence and diligently pursue curing such a default, RESELLER
shall be under no obligation to continue to provide LICENSOR's
SERVICES to its Subscribers, and RESELLER shall have the right to
assign those Subscribers to another paging service.
24. DISPUTE RESOLUTION
(a) The parties desire to resolve disputes arising out of this Agreement
without litigation. Accordingly, except for action seeking a temporary
restraining order or injunction related to the purposes of this
Agreement, or suit to compel compliance with this dispute resolution
process, the parties agree to use the following alternative dispute
resolution procedure as their sole remedy with respect to any
controversy or claim arising out of or relating to this Agreement or
its breach.
(b) At the written request of a party, each party shall appoint a
knowledgeable, responsible representative to meet and negotiate in
good faith to resolve any dispute arising under this Agreement. The
parties intend that these negotiations be conducted by non-lawyer,
business representatives. The discussions shall be left to the
discretion of the representatives. Upon agreement, the
representatives may utilize other alternative dispute resolution
procedures such as mediation to assist in the negotiations.
Discussions and correspondence among the representatives for
purposes of these negotiations shall be treated as confidential
information developed for purposes of settlement, exempt from
discovery and production, which shall not be admissible in the
arbitration described below or in any lawsuit without the concurrence
of all parties. Documents identified in or provided with such
communications, which are not prepared for purposes of the
negotiations, are not so exempted and may, if otherwise admissible,
be admitted in evidence in the arbitration or lawsuit.
(c) If the negotiations do not resolve the dispute within sixty (60) days
of the initial written request, the dispute shall be submitted to
binding arbitration by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. A party may
demand such arbitration in accordance with the procedures set out in
those rules. Discovery shall be controlled by the arbitrator and shall
be permitted to the extent set out in this Section. Each party may
submit in writing to a party, and that party shall so respond, to a
maximum of any combination of thirty-five (35) (none of which may have
subparts) of the following: interrogatories, demands to produce
documents and requests for admission. Each party is also entitled to
take the oral deposition of one (1) individual of another
12
<PAGE> 16
party. Additional discovery may be permitted upon mutual agreement
of the parties. The arbitration hearing shall be commenced with sixty
(60) days of the demand for arbitration and the arbitration shall be
held in Dallas, Texas. The arbitrator shall control the scheduling so
as to process the matter expeditiously. The parties may submit written
briefs. The arbitrator shall rule on the dispute by issuing a written
opinion within thirty (30) days after the close of hearings. The times
specified in this Section may be extended upon mutual agreement of the
parties or by the arbitrator upon a showing of good cause. Judgment
upon the award rendered by the arbitrator may be entered in any court
having jurisdiction.
(d) Each party shall bear its own cost of these procedures. A party
seeking discovery shall reimburse the responding party the cost of
production of the documents (to include search time and reproduction
time costs). The parties shall equally share the fees of the
arbitration and the arbitrator.
25. NOTICES
Any notice or demand given under the terms of this Agreement or pursuant to
statute shall be in writing and shall be given or made by telegram,
facsimile transmission, certified or registered mail, express mail or other
overnight delivery service or hand delivery, proper postage or other
charges paid and addressed or directed to the respective parties as
follows:
To RESELLER:
GTE Mobilnet Corp.
245 Perimeter Center Parkway
Atlanta, GA 30346
Attention: Director-Vertical Services
To LICENSOR:
PageMart
6688 North Central Expressway
Suite 800
Dallas, Texas 75206
Attention: Vice President-Division General Manager
Such notice or demand shall be deemed to have been given or made when
actually received or seventy-two (72) hours after being sent, whichever
occurs first.
13
<PAGE> 17
The address for notice set out above may be changed at any time by giving
thirty (30) days prior written notice in the manner above.
26. NONWAIVER
Either party's failure to enforce any of the provisions of this Agreement
and/or any purchase order, or to exercise any option hereunder, shall in no
way construed as a waiver of such provisions, rights, or options, or in any
way be deemed to affect the validity of this Agreement or any purchase
order.
27. SEVERABILITY
Should any part of this Agreement for any reason be declared invalid by
order of any court or regulatory agency, such order shall not affect the
validity of any remaining portion, which shall remain in force and effect
as if this Agreement had been executed with the invalid portion eliminated,
and it is hereby declared the intention of the parties that they would have
executed the remain portion of this Agreement without including therein any
such part or portion which may, for any reason be hereafter declared
invalid.
28. SECTION HEADINGS
The headings of the sections herein are inserted for convenience only and
are not intended to affect the meaning or interpretation of this Agreement.
29. SURVIVAL OF OBLIGATIONS
The respective obligations of LICENSOR and RESELLER under this Agreement
which by their nature would continue beyond the termination, cancellation
or expiration hereof, shall survive termination, cancellation or expiration
hereof.
30. CHOICE OF LAW
The construction, interpretation and performance of this Agreement shall be
governed by and construed in accordance with the domestic laws of the state
of Delaware.
31. ENTIRE AGREEMENT
This Agreement and the exhibits hereto constitute the entire agreement
between LICENSOR and RESELLER. No modifications shall be made this
Agreement unless in writing and signed by appropriate representatives of
the parties.
14
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement through
their authorized corporate representatives.
PAGEMART, INC. GTE MOBILNET SERVICE CORP.
By: /s/ DOUG GLEN By: /s/ TERRY LEWIS
------------------------- ------------------------------------
Name: Doug Glen Name: Terry Lewis
Title: Vice President, Title: Vice President,
Strategic Alliances Product Management
Attested By: /s/ M.C. HOPPE
---------------------------------------
Name: M. C. Hoppe
----------------------------------
Vice President
Title: Finance & Information Management
----------------------------------
15
<PAGE> 1
EXHIBIT 11.1
PAGEMART WIRELESS, INC.
COMPUTATION OF PER SHARE EARNINGS (LOSS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1997
--------------------------------------
NUMBER PERCENT EQUIVALENT
OF SHARES OUTSTANDING SHARES
--------- ----------- ------
<S> <C> <C> <C>
COMMON STOCK
From Founders' Stock 2,300,000 100.00% 2,300,000
Stock Options Exercised 731,072 98.10% 717,194
Preferred Stock Converted to Common Stock 15,310,943 100.00% 15,310,943
1994 Common Stock Offerings 11,242,857 100.00% 11,242,857
1995 Common Stock Offerings 4,323,874 100.00% 4,323,874
1996 Common Stock Offering 6,000,000 100.00% 6,000,000
Employee Stock Purchase Plan Shares Issued 75,891 77.24% 58,621
1997 Warrants Exercised 48,300 100.00% 48,300
---------- -----------
40,032,937 40,001,789
WEIGHTED AVERAGE SHARES OUTSTANDING 40,001,789
NET LOSS ($10,126,000)
NET LOSS PER SHARE ($0.25)
===========
</TABLE>
<PAGE> 1
EXHIBIT 11.2
PAGEMART WIRELESS, INC.
COMPUTATION OF PER SHARE EARNINGS (LOSS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1996
----------------------------------------
NUMBER PERCENT EQUIVALENT
OF SHARES OUTSTANDING SHARES
--------- ----------- ------
<S> <C> <C> <C>
COMMON STOCK
From Founders' Stock 2,300,000 100.00% 2,300,000
Stock Options Exercised 595,983 93.47% 557,058
Preferred Stock Converted to Common Stock 15,310,943 100.00% 15,310,943
1994 Common Stock Offerings 11,242,857 100.00% 11,242,857
1995 Common Stock Offerings 4,323,874 100.00% 4,323,874
1996 Common Stock Offering 6,000,000 100.00% 6,000,000
Employee Stock Purchase Plan Shares Issued 31,275 1.09% 340
---------- -----------
39,804,932 39,735,072
WEIGHTED AVERAGE SHARES OUTSTANDING 39,735,072
NET LOSS ($12,865,000)
NET LOSS PER SHARE ($0.32)
===========
</TABLE>
<PAGE> 1
EXHIBIT 11.3
PAGEMART WIRELESS, INC.
COMPUTATION OF PER SHARE EARNINGS (LOSS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
--------------------------------------
NUMBER PERCENT EQUIVALENT
OF SHARES OUTSTANDING SHARES
--------- ----------- ------
<S> <C> <C> <C>
COMMON STOCK
From Founders' Stock 2,300,000 100.00% 2,300,000
Stock Options Exercised 731,072 90.01% 658,012
Preferred Stock Converted to Common Stock 15,310,943 100.00% 15,310,943
1994 Common Stock Offerings 11,242,857 100.00% 11,242,857
1995 Common Stock Offerings 4,323,874 100.00% 4,323,874
1996 Common Stock Offering 6,000,000 100.00% 6,000,000
Employee Stock Purchase Plan Shares Issued 75,891 59.41% 45,087
1997 Warrants Exercised 48,300 84.33% 40,732
----------- -----------
40,032,937 39,921,505
WEIGHTED AVERAGE SHARES OUTSTANDING 39,921,505
NET LOSS ($43,887,000)
NET LOSS PER SHARE ($1.10)
===========
</TABLE>
<PAGE> 1
EXHIBIT 11.4
PAGEMART WIRELESS, INC.
COMPUTATION OF PER SHARE EARNINGS (LOSS)
<TABLE>
<CAPTION>
YTD ENDED JUNE 13, 1996
--------------------------------------
NUMBER PERCENT EQUIVALENT
OF SHARES OUTSTANDING SHARES
--------- ----------- ------
<S> <C> <C> <C>
COMMON STOCK
From Founders' Stock 2,300,000 100.00% 2,300,000
Stock Options Exercised 537,414 99.47% 534,581
Preferred Stock Converted to Common Stock 15,310,943 100.00% 15,310,943
1994 Common Stock Offerings 11,242,857 100.00% 11,242,857
1995 Common Stock Offerings 4,323,874 100.00% 4,323,874
---------- -----------
33,715,088 33,712,255
Adjustments to outstanding shares:
Add Exercises for 6/13/95 - 6/13/96 at 100% 2,833
Add Shares Issuable upon Exchange of Shares in
PageMart Canada Holding 714,286
Add Weighted Average Grants Issued 6/13/95 -
6/13/96 261,869
-------
Total adjustments to outstanding shares: 978,988
-----------
Weighted Average Shares Outstanding (as adjusted) at 6/13/96 34,691,243
6/13/96 Shares Weighted at 165 days 15,639,495
JUNE 14 THROUGH DECEMBER 31, 1996
--------------------------------------------
NUMBER PERCENT EQUIVALENT
OF SHARES OUTSTANDING SHARES
--------- ----------- ------
<S> <C> <C> <C>
COMMON STOCK
From Founders' Stock 2,300,000 100.00% 2,300,000
Stock Options Exercised 595,983 93.82% 559,154
Preferred Stock Converted to Common Stock 15,310,943 100.00% 15,310,943
1994 Common Stock Offerings 11,242,857 100.00% 11,242,857
1995 Common Stock Offerings 4,323,874 100.00% 4,323,874
1996 Common Stock Offering 6,000,000 100.00% 6,000,000
Employee Stock Purchase Plan Shares Issued 31,275 0.50% 156
---------- -----------
39,804,932 39,736,984
Weighted Average Shares Outstanding at 12/31/96 39,736,984
12/31/96 Shares Weighted at 201 days 21,822,770
WEIGHTED AVERAGE OF SHARES OUTSTANDING at 6/13/96 and 12/31/96 37,462,265
NET LOSS ($48,598,000)
NET LOSS PER SHARE ($1.30)
===========
</TABLE>
<PAGE> 1
EXHIBIT 21.1
PAGEMART WIRELESS, INC.
Subsidiaries: Jurisdiction of Incorporation:
PageMart, Inc.
(merged into PageMart Wireless, Inc. Delaware
on January 28, 1998)
PageMart PCS, Inc. Delaware
PageMart II, Inc. Delaware
PageMart Operations, Inc. Delaware
PageMart of California, Inc. Delaware
PageMart of Virginia, Inc. Delaware
PageMart International, Inc. Delaware
Telephone North, Inc. Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S DECEMBER 31, 1997 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 8,337
<SECURITIES> 0
<RECEIVABLES> 68,564
<ALLOWANCES> 7,170
<INVENTORY> 5,359
<CURRENT-ASSETS> 84,133
<PP&E> 213,115
<DEPRECIATION> 76,388
<TOTAL-ASSETS> 361,876
<CURRENT-LIABILITIES> 104,973
<BONDS> 289,344
0
0
<COMMON> 4
<OTHER-SE> (32,445)
<TOTAL-LIABILITY-AND-EQUITY> 361,876
<SALES> 70,871
<TOTAL-REVENUES> 277,778
<CGS> 86,175
<TOTAL-COSTS> 86,175
<OTHER-EXPENSES> 194,194
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,499
<INCOME-PRETAX> (43,887)
<INCOME-TAX> 0
<INCOME-CONTINUING> (43,887)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (43,887)
<EPS-PRIMARY> (1.10)
<EPS-DILUTED> (1.10)
</TABLE>
