-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ADr4aKuVchxCzL5EO95AzGH4d/hiCwb10ZOEOhK7csg/nEwayJ2iU6mcNprVcmQ6 mEr9hGBgMXKU5PZhzH8J9A== 0000950134-99-002287.txt : 19990402 0000950134-99-002287.hdr.sgml : 19990402 ACCESSION NUMBER: 0000950134-99-002287 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAGEMART WIRELESS INC CENTRAL INDEX KEY: 0000947268 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 752575229 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-28196 FILM NUMBER: 99579924 BUSINESS ADDRESS: STREET 1: 3333 LEE PARKWAY SUITE 100 STREET 2: ,UITE 100 CITY: DALLAS STATE: TX ZIP: 75219 BUSINESS PHONE: 2147654000 MAIL ADDRESS: STREET 1: 3333 LEE PARKWAY STREET 2: SUITE 100 CITY: DALLAS STATE: TX ZIP: 75219 FORMER COMPANY: FORMER CONFORMED NAME: PAGEMART NATIONWIDE INC /DE DATE OF NAME CHANGE: 19950627 10-K405 1 FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 1998 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM 10-K (MARK ONE) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF ---- THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 OR ---- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM ------------ TO ------------
COMMISSION FILE NO. 0-28196 ------------------------------ PAGEMART WIRELESS, INC. (Exact name of registrant as specified in charter) DELAWARE 75-2575229 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number)
3333 LEE PARKWAY, SUITE 100 DALLAS, TEXAS 75219 (Address of principal executive offices) (Registrant's telephone number, including area code): (214) 765-4000 ------------------------------ 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 --------------- Class A Common Stock, par value $0.0001 per share ------------------------------ 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 Class A Common Stock on January 29, 1999 as reported on the Nasdaq National Market System, was approximately $55,951,992. 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 29, 1999, there were 34,536,512; 3,809,363; 1,428,472 and 623,945 shares of the Registrant's Class A, Class B, Class C and Class D common stock outstanding, respectively. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Registrant's Proxy Statement for its Annual Meeting of Shareholders scheduled to be held on May 12, 1999 are incorporated by reference into Part III (items 11, 12 and 13) hereof. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 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, Inc." 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 Form 10-K and the Annual Report to Stockholders 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 herein under "Risk Factors", 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 could cause actual results to differ materially from those expressed in such forward-looking statements: economic conditions and consumer confidence generally in the United States; 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 messaging services; the timely development and acceptance of new products; changes in regulation by the Federal Communications Commission ("FCC") and various state regulatory agencies; potential technical problems relating to the Company's transmission network for advanced messaging services; and the cost and ability of the Company and third parties upon whose products and services the Company depends to be Year 2000 ready in a timely manner. See "Risk Factors." GENERAL The Company is the sixth largest wireless messaging carrier in the United States, based on 2,651,004 units in service at December 31, 1998. In recent years the Company has been one of the fastest growing providers of traditional one-way paging and messaging services nationwide. During 1998, the Company focused its attention on constructing the network infrastructure necessary to add narrowband personal communications services ("PCS") capabilities to its existing one-way network. Narrowband PCS permits the delivery of advanced messaging services such as two-way messaging and guaranteed or assured messaging. This effort achieved a significant milestone in December 1998 with the introduction of nationwide guaranteed messaging service. Since the founding of the Company in 1989, it has been an innovative leader in the traditional paging business. The Company built its strategy around the concepts of exclusive nationwide frequencies, flexible network architecture, and centralized control of the network and administrative functions. The strategy was aimed at providing efficient and flexible traditional paging services on a single frequency nationwide and internationally. This strategy put the Company in a position to capitalize on distribution channels that demanded single-frequency nationwide service and centralized customer service and distribution. The result was rapid subscriber growth that was generated internally rather than through the acquisition of other paging carriers. As the market for traditional paging services matures, the Company is moving aggressively to become a leader in the market for advanced messaging services, an arena that the Company believes will be the next growth market for wireless messaging carriers. The Company is only the second wireless messaging carrier to deploy a nationwide narrowband PCS network for advanced messaging services. The Company invested approximately $128 million in 1998 to construct and deploy its nationwide narrowband PCS network, which the Company believes is the wireless industry's most comprehensive. The Company expects to spend approximately $40 million in 1999 to complete the addition of narrowband PCS capabilities to its network, expand its network geographically and make other enhancements. The Company's operations now comprise of 1 3 a highly efficient nationwide network delivering traditional one-way paging and state of the art advanced messaging services. Because both types of services are delivered on the same network, references in this report to the traditional one-way paging network or the narrowband PCS network are used to distinguish when the network is used for delivery of one-way paging services or advanced messaging services, respectively. The Company now is composed of two businesses at very different points in their business life cycle. Through its PageMart Paging division, the Company offers traditional one-way local, multi-city, statewide, regional and nationwide paging and other wireless services in all 50 states, covering approximately 90% of the population of the United States. At December 31, 1998, the Company had approximately 2,618,527 traditional paging service subscribers in the United States. This is a maturing business generating free cash flow (i.e. cash flow in excess of capital expenditures) and not requiring further significant capital investments. In contrast, through its PageMart PCS division, the Company offers local and nationwide guaranteed messaging service covering over 70% of the United States population at December 31, 1998. In the first four months of 1999, the Company expects to expand its service to all 50 states covering approximately 90% of the population. Later in the year, the Company expects to introduce additional advanced messaging services, including full two-way messaging. See "Products and Services." This is a business in the early stage of its development, and the Company expects it to be a consumer of cash for the next several years as it goes through a period of rapid growth. The Company also provides its U.S. domestic customers with seamless traditional one-way paging services across the Americas, including Canada, Mexico, much of the Caribbean and Central America, and parts of South America. Through direct ownership in Canada and network affiliation agreements with owners of foreign networks, the Company's network is interconnected with foreign networks operating on a common frequency, thus providing roaming capabilities for the Company's customers in the foreign countries and for the customers of the foreign network in the United States. In 1998, the Company expanded services into Guatemala, Costa Rica, Haiti, the Cayman Islands and the Dominican Republic through network affiliation agreements with leading telecommunications companies in those countries. The Company expects to expand services into Colombia, Trinidad and Tobago, Honduras, Peru and Venezuela in 1999. The Company charges subscribers a fee that covers the paging and messaging services purchased by the subscriber. The amount of the fee varies, based primarily on the type of service provided, the amount of usage and the geographic area covered. The Company charges higher rates for service options providing more than local coverage. BUSINESS AND OPERATING STRATEGY The Company has experienced increased demand for alphanumeric messaging services and wide area coverage. These are trends that the Company believes span the entire industry. Narrowband PCS networks are designed to efficiently deliver nationwide alphanumeric messaging services at lower operating costs relative to the current costs of delivering similar one-way alphanumeric messages at comparable network utilization levels. See "Transmission Network." The Company expects strategies employing narrowband PCS networks to capture significant amounts of the projected paging and messaging industry growth because of their anticipated ability to deliver greater network capacity, new services, higher quality and improved reliability compared to existing one-way networks. The Company believes it is well positioned to take advantage of this projected growth. In the narrowband PCS auctions conducted by the FCC, the Company acquired licenses for a total of 100kHz of forward frequency and 50kHz of return frequency nationwide (the "narrowband PCS Licenses"). The Company is one of three companies in the United States with 150kHz or more of narrowband PCS frequency nationwide. The Company's narrowband PCS network employs the ReFLEX25(R) protocol, which is a second generation ReFLEX(R) technology developed by Motorola, Inc. ("Motorola") that is compatible with the FLEX(TM) protocol employed in the Company's existing one-way network. This has enabled the Company to integrate narrowband PCS capabilities into its existing one-way network, allowing the Company to build its narrowband PCS network rapidly and substantially increase its network capacity in the most cost effective manner. When 2 4 completed, the Company's narrowband PCS network will cover substantially the same "footprint", or geographic coverage area, as its existing one-way network. The Company believes that the industry growth rate for traditional paging services is slowing. As a result, the Company expects its future growth will come principally from the advanced messaging services business rather than its traditional one-way paging business. The Company expects that the six following operating principles, to which the Company attributes the significant growth of its traditional paging business, will be equally important as the market for advanced messaging services continues to develop. The Company has positioned itself to utilize these principles in its advanced messaging business. DIVERSIFIED DISTRIBUTION CHANNELS. The Company utilizes a number of distribution channels to market its current products and services, including marketing directly to individuals, corporations and other organizations through its national accounts sales force and the sales force in the Company's sales offices, and indirectly through strategic alliances with large communications providers, national and regional retailers, and regional and local resellers. See "Sales and Marketing." Management believes that a diversified approach to distribution is important to sustain growth as messaging 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. NATIONWIDE, NAFTA AND BEYOND COMMON FREQUENCY. The Company has constructed its network on common one-way and narrowband PCS frequencies nationwide. 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, Mexico, Central and South America, the Caribbean and the Bahamas. Through the use of network affiliation agreements, the Company is able to provide multi-city coverage customized to accommodate the customers' needs throughout North and Central America and in parts of South America. The common frequency approach also provides a competitive advantage to the Company when marketing its services to regional and national retailers and private brand telecommunications carriers. The Company's subscriber units can be sold in any retail store located in the Company's nationwide coverage area because they operate on a common nationwide frequency. 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 network is 100% controlled by DBS technology, which gives the Company a flexible, 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 used its efficient one-way network as the outbound transmission infrastructure for the narrowband PCS network, which allowed the Company to add narrowband PCS capabilities rapidly and substantially increase its network capacity in the most cost effective manner. As it constructed the narrowband PCS network, the Company installed very small aperture satellite terminal ("VSAT") equipment in the 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 network is 100% FLEX(R) enabled, allowing the use of the high speed FLEX(R) protocol to transmit one-way paging messages and maximize system capacity. The one-way networks included in the Company's NAFTA and beyond coverage are also 100% FLEX(R) enabled. The Company's narrowband PCS network is integrated into the one-way network. The design of the narrowband PCS network is based upon Motorola's ReFLEX25(R) technology. At December 31, 3 5 1998, the Company's nationwide narrowband PCS network covered over 70% of the population in the United States. 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 subscriber base by introducing 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, distribution, customer service, finance and marketing functions, which can support both the Company's traditional paging and advanced messaging services. 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 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. 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, 1998, the Company employed approximately 940 highly trained customer service personnel operating in state of the art call center facilities. Management believes that high-quality customer service capabilities are an important factor in supporting and retaining its strategic alliance partners, retailers and subscribers. PRODUCTS AND SERVICES TRADITIONAL ONE-WAY MESSAGING SERVICES. The Company currently offers the following two basic types of one-way paging and messaging services.
SERVICE DESCRIPTION ------- ----------- 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.
Numeric Paging Services. Although most subscribers select local coverage, the number of subscribers who select extended city coverage options continues to increase. Monthly fees for regional and nationwide 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 InfoNow(SM), and the number of subscribers utilizing the service represented 6.2% of the Company's total subscribers at December 31, 1998. The Company has not focused a significant portion of its selling and marketing efforts on alphanumeric paging services, primarily because technology has inhibited the Company's ability to deliver the services in a cost-effective manner. With the introduction of advanced messaging services, most of the Company's efforts to market alphanumeric services will be focused on advanced messaging services. See "-- Guaranteed or Assured Messaging." Roaming Services. OmniRoam(SM) services allow customers the flexibility to change their local coverage through a simple phone call. Using a touch-tone phone, the customer need only 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 4 6 automatically sent to the customer's "roaming" city until coverage is transferred back to the "home" city. With these services, the customer does not pay for paging coverage that is not needed (i.e., nationwide coverage). 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, Central and South America, U.S. Virgin Islands, Puerto Rico, the Cayman Islands and the Bahamas. GUARANTEED OR ASSURED MESSAGING. The Company's initial advanced messaging service offering is guaranteed or assured messaging. If a subscriber with guaranteed messaging service travels outside the coverage area or turns off the subscriber unit, the network stores incoming messages for up to 96 hours until the subscriber returns to the network's coverage area or turns on the subscriber unit. When a subscriber is within the network's coverage area the subscriber unit displays a message that it is in message receiving mode. If a subscriber leaves the coverage area, the subscriber unit indicates that the network is storing the subscriber's messages. Upon returning to a coverage area or turning on the subscriber unit, the subscriber unit registers with the network and the stored messages are automatically transmitted to the subscriber unit. The Company currently offers both local alphanumeric guaranteed messaging and nationwide auto-roam alphanumeric guaranteed messaging services. Local Alphanumeric Messaging. The Company's local alphanumeric guaranteed messaging service enables 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 are 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. Nationwide Auto-Roam Alphanumeric Messaging. On December 15, 1998, the Company introduced nationwide auto-roam alphanumeric guaranteed messaging service. This 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 narrowband PCS 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 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 narrowband PCS frequency spectrum and the ReFLEX25(R) technology offer significant increases in capacity over the one-way spectrum and technology currently delivering alphanumeric messaging services with regional or nationwide coverage. The Company believes that its nationwide auto-roam alphanumeric service improves upon traditional alphanumeric 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 nationwide services. The Company expects the migration of many current one-way alphanumeric service subscribers to guaranteed or assured messaging service 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. 5 7 PLANNED ADVANCED MESSAGING SERVICES. The Company's planned future advanced messaging service offerings include the following: PLANNED ADVANCED MESSAGING SERVICES
TYPE OF SERVICE DESCRIPTION BENEFIT - --------------- ----------- ------- Message Acknowledgment............... When the message is received and/or Lets the sender know the read, an alert is triggered and sent message has been received back through the network. and/or read. Multiple-choice Response............. Presents subscriber with a choice of Eliminates need for a return responses embedded in the message. phone call and completes the Sender can create custom response on messaging loop. 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 preprogrammed messages for response. method. Full Two-way......................... Subscriber can create custom Allows messages to be sent responses or initiate messages, also and information to be known as free form messaging. requested on demand. Telemetry............................ Fully customized, integrated, Provides wireless end-to-end solutions with software connectivity to machines such applications that allow as security systems, computer-based devices to transmit environmental control systems and receive data wirelessly. and vehicles.
Message Acknowledgment Service. The Company plans to introduce message acknowledgment service in 1999. 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 that was used to create the original message or by designating another communication path for the acknowledgment. Response and Full Two-way Service. The Company plans to introduce response and full two-way messaging services in 1999. Response messaging allows a subscriber to respond back to the sender of a message. A subscriber can either: - Select from a custom set of multiple choice responses sent with the message, or - Send a response chosen from a set of predefined responses stored in the subscriber unit. Multiple responses can be made to the same message. The sender is expected to be able to receive responses through the same mechanism that 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 in transit, using a portable and relatively inexpensive device and service. In addition to these benefits, this service will also have the traditional benefits of one-way paging: broad geographic coverage; good building penetration; small, 6 8 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. Telemetry. The Company plans to introduce telemetry services in the second half of 1999. Telemetry services allow computer-based devices to transmit and receive data wirelessly over the Company's nationwide narrowband PCS network. See "Sales and Marketing -- Telemetry." 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 message retrieval service which allows a one-way service 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 operator dispatch services, nationwide toll-free access numbers for paging subscribers, a customized voice prompt that allows subscribers to record a personal greeting, maintenance agreements and loss protection programs. During 1998, approximately 21% of the Company's recurring revenues were 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. SUBSCRIBER UNITS. The Company's messaging services are delivered to pocket-sized subscriber units which the Company sells or leases to its subscribers. One-way subscriber units are available from a number of manufacturers. Guaranteed messaging subscriber units are currently available from Motorola and Wireless Access, a subsidiary of Glenayre Technologies, Inc. Subscriber units with the capabilities to utilize more sophisticated advanced messaging services are expected to be available in 1999. The Company's operating model for one-way wireless messaging emphasizes a strategy of selling rather than leasing subscriber units. As of December 31, 1998, approximately 94% of the Company's one-way subscriber units were customer owned and maintained ("COAM"). 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 $27 at December 31, 1998. Capital employed per subscriber represents total assets, less narrowband PCS 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." In contrast to the Company's operating model for traditional one-way messaging, the Company expects that it will lease rather than sell a majority of its advanced messaging subscriber units. The higher price per unit for advanced messaging subscriber units is expected to make leasing an attractive alternative to purchasing the units. In addition, the Company expects that the strongest market demand for advanced messaging services will come initially from corporate and business customers, which often prefer to lease subscriber units. PRODUCT DEVELOPMENT. The Company anticipates that growth in advanced messaging services will be enhanced through new wireless alliances with software companies and electronic equipment manufacturers to develop additional text messaging products and services. Computers, personal organizers and personal digital assistants ("PDAs") are being equipped with built-in RF capability. In October 1997, the Company, Motorola and 3Com entered into a development and supply agreement to develop, produce and market a pager card providing one-way paging services for 3Com's PalmPilot PDA. In July 1998, the Company initiated shipments of the Synapse(TM) Pager Card, branded by the Company, for integration into the PalmPilot. The Synapse(TM) Pager Card adds wireless messaging capability to the PalmPilot PDA. A PalmPilot equipped with the Synapse(TM) Pager Card can receive and store wireless messages in substantially the same manner as a traditional pager, including text messages originated over any PC connected to the Internet. The Synapse(TM) Pager Card also provides a user of a PalmPilot with new messaging features such as sender identification, 7 9 wireless schedule updates and missed message alerts. The Company plans to continue to explore new alliances with software companies and equipment manufacturers for the development of messaging solutions utilizing its wireless messaging network. SALES AND MARKETING The Company's messaging 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 marketing directly through its national accounts sales force and the sales force in the Company's sales offices, and indirectly through strategic alliances with large communications providers, national and regional retailers, and regional and local resellers. The Company also anticipates expanded distribution of messaging services through the development of telemetry applications and additional product development. Management believes that a diversified approach to distribution is important to sustain growth as demand for messaging 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. The Company is not dependent on any single customer or a few customers, the loss of one or more of which would have a material adverse effect on the Company. CARRIER SERVICES. Through its Carrier Services Strategic Business Unit ("Carrier Services SBU"), the Company has established numerous strategic alliance relationships with large communications providers, such as GTE Corporation, Southwestern Bell Mobile Systems, BellSouth Cellular Corp., Ameritech Mobile Services, Inc., WorldCom Network Services, Inc., EXCEL Communications, Inc., ALLTEL Communications, Bluegrass Cellular, Inc. and First Cellular of Southern Illinois. These companies utilize their brand awareness and billing and distribution efficiencies to market private brand pagers and services using the Company's transmission network. The business unit is positioned to support carriers in the bundling and integration of messaging services into an extended portfolio of communications services. At December 31, 1998, approximately 37% of the Company's units in service had been added through the Carrier Services SBU. The Company expects this proportion to increase over the next several years in part due to the introduction of the Company's nationwide narrowband PCS network. As market demand for advanced messaging services continues to develop, the Company expects its carrier services distribution channel to grow in significance. The Company believes that a limited number of narrowband PCS networks will be built nationwide. The Company believes that its narrowband PCS network is 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. In addition, the Company has entered into agreements with Metrocall, Inc. ("Metrocall") and AirTouch Paging ("AirTouch"), the second and fourth largest paging carriers, respectively, in the United States as of year end 1998. The agreements are organized into two phases. Initially, Metrocall and AirTouch will market their switch-based narrowband PCS services utilizing the Company's narrowband PCS network. During the second phase, Metrocall and AirTouch will install their own narrowband PCS networks leveraging the Company's infrastructure and sites. Under these agreements, the companies will share certain capital and operating expenses, which will significantly lower costs for all companies. The Company anticipates that it may enter into similar arrangements with other major paging carriers. However, there can be no assurance of the success of the arrangements with Metrocall and AirTouch or of similar arrangements with other paging carriers, if any. NATIONAL ACCOUNTS. In 1998, the Company formed its National Accounts Strategic Business Unit ("National Accounts SBU") for the purpose of selling and leasing traditional and advanced messaging products and services to major corporate accounts. The Company expects that initially the strongest market demand for advanced messaging services will be from large, geographically dispersed corporate accounts because of the growing need of business customers for 8 10 mobile, reasonably priced access to communication and information services with wide area coverage; the ability of business customers to pay the higher cost of advanced messaging subscriber units compared to one-way subscriber units; and the lack of sales personnel in retail stores trained to sell the new services. The National Accounts SBU emphasizes sales of advanced messaging services as a solution to business messaging needs. As a result, the Company believes that its National Accounts SBU, along with the Company sales offices and Carrier Services SBU distribution channels are initially best suited for marketing and selling these services. The Company divided its direct sales force 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 Company has embarked on a program to hire and train sales personnel for its National Accounts SBU. In 1998, the Company increased its direct sales force by approximately 60% to position itself to meet the anticipated demand for advanced messaging services. COMPANY SALES OFFICES. The Company's Markets Strategic Business Unit ("Markets SBU") consists of Company-owned sales offices that sell and lease equipment and messaging services through three distribution channels: direct sales, agents and third-party resellers. At December 31, 1998, approximately 37% of the Company's units had been added through the Markets SBU. 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 compensated in large part by sales commissions for each unit sold or placed in service. Agents. The Company markets its equipment and paging services through agents. Agents establish customers which are billed directly by the Company. Agents typically sell subscriber units for their own account and earn a commission or fee on the sale of the service. Third-Party Resellers. In addition to offering paging and messaging services directly to end-users, the Company also offers paging services to third party resellers in bulk quantities at wholesale monthly rates that are lower than the Company's regular retail rates. RETAIL MARKETING. Since early 1993, the Company has been an industry pioneer in developing the retail distribution channel through sales arrangements with regional and national retail chains that sell electronic and business equipment or consumer goods. The Company's National Retail Strategic Business Unit ("National Retail SBU") sells subscriber units to a retailer who then sells the subscriber units to potential users. The purchaser can activate the subscriber unit and subscribe for service with the Company by simply calling the toll-free number identified on the unit. 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. The Company has entered into sales arrangements with a number of large national retail chains such as OfficeMax, RadioShack, Eckerd's, Bradlees, 7-Eleven, Fry's Electronics and Target Stores. Retail distribution also allows the Company to sell subscriber units in markets that would not support a direct sales office but in which it has installed the necessary network 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. In addition, in 1998 the Company tested the retail marketing of prepaid paging service cards, a program which the Company expects to expand in 1999. The number of retail store locations has increased to 15,744 stores at December 31, 1998 from 12,924 stores, 5,530 stores and 3,411 stores at December 31, 1997, 1996 and 1995, respectively. However, the Company believes that the rate of growth in the number of stores will level off in 1999 and years thereafter. At December 31, 1998, approximately 26% of the Company's units in service are represented by the national retail channel. 9 11 TELEMETRY. In the third quarter of 1998, the Company announced the formation of its Telemetry Strategic Business Unit ("Telemetry SBU"). The Telemetry SBU was chartered to develop cutting-edge, standards-based, cost-effective technology for any industry, business or consumer with the need to transport machine originated data over a wireless network. The Telemetry SBU will offer customized, integrated, end-to-end solutions with software applications that allow computer-based devices to transmit and receive data wirelessly over the Company's nationwide narrowband PCS network. The Company plans to provide telemetry services over its network utilizing the ReFLEX25(R) protocol and "transceiver" two-way devices such as the Creatalink2XT being developed by Motorola. In September 1998, the Company announced a strategic alliance with Interactive Technologies, Inc. to provide wireless telemetry connectivity to home security systems. In October 1998, the Company announced strategic alliances with RoadTrac(TM), LLC and Pentech Energy Solutions, Inc. to provide telemetry solutions for vehicle location technology and environmental control systems, respectively. In November 1998, Monitel Products Corp. and the Company entered into a strategic agreement under which the Company will provide telemetry services to be utilized in Monitel's remote monitoring diagnostic products within the photocopying and imaging industry. Although the Company does not expect the Telemetry SBU to originate any units in service until the second half of 1999, as market demand for wireless telemetry services develops, the Company expects its Telemetry SBU to grow in significance. However, there can be no assurance that wireless telemetry services over narrowband PCS networks will be commercially viable or that the proposed telemetry solutions will be possible, and the success of wireless telemetry services could be affected by matters beyond the Company's control such as the availability and viability of transceiver devices. TRANSMISSION NETWORK GENERAL. 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 direct broadcast satellite ("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 has utilized its existing one-way paging network infrastructure as the basis for its nationwide narrowband PCS network. A narrowband PCS network employs both radio transmission and receiving equipment throughout the network. Subscriber units contain not only a receiver, but also a transmitter that broadcasts its identity and other data, such as acknowledgement of receipt of a message, to the network receivers. The network can determine whether a subscriber is within range. If a subscriber travels outside the range of the network, the network stores the message for up to 96 hours until the subscriber returns to the coverage area and then transmits the message. In contrast, a one-way network employs only radio transmitters. One-way subscriber units contain only receivers and have no ability to send messages to the network. 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 the coverage of the network when the message is sent. The one-way network broadcasts messages 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. The narrowband PCS network is expected to have the capability to identify the subscriber's approximate location and to broadcast messages from a limited number of transmitters in a zone rather than from all transmitters in the subscriber's coverage area, which will result in higher network capacity due to efficient use of spectrum. 10 12 NARROWBAND PCS NETWORK BUILDOUT. During 1998, the Company deployed receivers and other network equipment to add narrowband PCS capabilities to the existing one-way paging network to facilitate provisioning of advanced messaging services. The Company chose Glenayre Technologies, Inc. ("Glenayre") and Motorola as the primary providers of the infrastructure equipment. The Company began commercial operation of local guaranteed messaging service in the Austin and San Antonio, Texas areas in June 1998. In the third quarter of 1998, the Company continued the roll-out of its narrowband PCS network introducing guaranteed messaging service in more than 250 cities throughout the country. On December 15, 1998, the Company announced nationwide guaranteed messaging over its narrowband PCS network. The Company's narrowband PCS network covered approximately 70% of the population of the United States as of December 31, 1998. The Company plans to continue to build out its network and expand its coverage area during 1999. The key elements of the narrowband PCS network are as follows: Design. The design of the Company's nationwide narrowband PCS network is based upon Motorola's ReFLEX25(R) technology. Existing transmitters and transmitter sites are used for the outbound portion of the network. The inbound or receive portion of the network required 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. By primarily utilizing the Company's existing transmission sites, the Company was able to build-out the narrowband PCS network with significantly less capital than other newly constructed networks. Equipment. The infrastructure of the Company's network consists of a home terminal, encoders, satellite access controllers ("SACs"), 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 advanced messaging services that can be provided on the narrowband PCS 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)"), rather than purchase it from an outside vendor. As of December 31, 1998, the Company had invested approximately $9.8 million in the development of AXIS(TM) over a period of three years. The Company purchases infrastructure equipment (other than the AXIS(TM) home terminal, SACs and ancillary equipment) from industry leading equipment suppliers, Motorola and Glenayre. Glenayre was chosen as the primary provider of the narrowband PCS network infrastructure equipment. 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 purchases infrastructure equipment from Glenayre and Motorola under existing volume purchase agreements. The Company's guaranteed messaging requires an AccessMate(TM) advanced messaging device. The AccessMate(TM) is manufactured by Wireless Access, a subsidiary of Glenayre. The Company purchases AccessMates(TM) under a supply agreement executed in early 1998. The Company expects to purchase advanced messaging subscriber units from Motorola under an existing volume purchase agreement. The Company has entered into a volume purchase agreement with AvData to purchase SACs, VSATs and related equipment for its narrowband PCS network. The Company would be adversely affected if it were unable to obtain additional infrastructure equipment and subscriber units on satisfactory terms by planned delivery dates. SATELLITE SERVICES. The Company leases satellite services pursuant to agreements with AvData Systems, Inc. ("AvData") and SpaceCom Systems, Inc. ("SpaceCom"). The agreements subject the Company to 11 13 monthly service charges based on the amount and types of services used and expire on July 1, 2003 and July 31, 2003, 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 resources 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. INTERNATIONAL STRATEGY The Company is implementing a systematic plan to provide messaging services in selected countries on a seamless international network. The Company's international strategy is initially to pursue opportunities in North America, Central America, the Caribbean and South America. The Company pursues international opportunities through direct ownership in Canada, and through network affiliation agreements between the Company and the owners of foreign networks. Network affiliation agreements provide, with minimal incremental capital investment by the Company, interconnection between the Company's network and the foreign network and capabilities for the Company's subscribers to roam to the foreign country and the foreign owner's subscribers to roam to the U.S. In each country in which the Company offers paging and messaging services, such services are offered on a nationwide frequency common to at least one of the Company's nationwide frequencies 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 coverage that a frequency will be available that is common to one of the Company's U.S. nationwide frequencies. One of the Company's international investments is in Canadian companies, PageMart Canada Limited and PageMart Canada Holding Corporation ("Canada Holding") (collectively "PageMart Canada"). PageMart Canada, obtained a nationwide license in Canada in 1995 for 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. On November 26, 1998 the Company received notification from the third party Canadian investors, which represent the controlling shareholder interest in PageMart Canada, of its intent to exchange its 1,000,000 shares of Class A Common Stock in Canada Holding for 714,286 shares of PageMart Wireless pursuant to rights contained in the Agreement Among Stockholders of PageMart Canada, dated July 28, 1995. The Agreement Among Stockholders permits the Company to find a replacement for the Canadian investors in order to comply with Canadian regulations governing ownership of Canadian paging licenses. The Company is currently examining alternative arrangements in Canada including the replacement of the Canadian investors or the ultimate transfer of PageMart Canada to another entity. The Company may consider selling its interest in PageMart Canada in exchange for a network affiliation arrangement similar to those utilized by the Company in other countries. In 1997, the Company 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 such frequencies in all 33 markets where Buscatel operates. Under the terms of the agreement, the Company and Buscatel 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 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. The Company also provides paging coverage on the Company's nationwide frequency in Puerto Rico and the U.S. Virgin Islands through affiliation agreements. In September 1998, the Company enhanced its Caribbean coverage by adding the Cayman Islands through a network affiliation agreement with Island Electronics (Paging) Limited, the Cayman Islands' premier paging company. 12 14 PageMart has also signed network affiliation agreements with leading paging companies in El Salvador, Guatemala, Honduras, Costa Rica, Panama, Venezuela, Peru and Haiti. 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 allows PageMart to offer its domestic customers paging service from Canada into South America. The Company expanded services into Guatemala, Costa Rica, Haiti, the Cayman Islands and the Dominican Republic in 1998. The Company expects to expand services into Colombia, Honduras, Trinidad and Tobago Peru and Venezuela in 1999. With the addition of Trinidad and Tobago to its international FLEX(TM) paging network, the Company expanded its network to include seventeen countries in North, Central and South America and the Caribbean. 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 its equipment and wireless services prices, quality of service, and 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. ("PageNet"), Metrocall, Inc., MobileMedia Communications, Inc., AirTouch Communications, Inc., Arch Communications Group, Inc. and SkyTel Communications, Inc. ("SkyTel"). 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. SkyTel introduced the first nationwide advanced messaging network and other carriers, such as PageNet have announced plans to provide services over their own nationwide narrowband PCS networks in 1999. 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 and broadband personal communications services provide an alternative communications system for customers who are frequently away from fixed-wire communications systems (i.e., ordinary telephones). Compared to cellular telephone service and broadband service, paging services are generally less expensive, offer longer battery life, provide better in-building penetration, extend over wider coverage areas, and are more transportable. For those cellular customers for whom convenience and price are considerations, paging and narrowband PCS 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 currently being offered commercially in some cities and 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. 13 15 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 50kHz unpaired nationwide narrowband PCS license (the "Nationwide Narrowband License") and five 50/50kHz paired regional narrowband PCS 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 narrowband PCS 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 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 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"). 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 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 narrowband PCS Licenses. As a nationwide narrowband PCS 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 narrowband PCS 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 (in February 1998, the FCC amended its rules to exempt pro forma transactions from this requirement). The 14 16 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 1998. 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 narrowband PCS spectrum as well as a Further Notice of Proposed Rulemaking seeking commentary on a proposal to license narrowband PCS 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 narrowband PCS licenses. Adoption of either of these two proposals would increase the amount of nationwide narrowband PCS spectrum available to the public and might negatively impact the value of the nationwide narrowband PCS 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 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. Some LECs 15 17 continue to disagree with the FCC in regards to this issue, and are continuing their refusal to comply with these rules. 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 were filed with a federal appellate court. In May 1998, the DC Circuit ordered the FCC to explain, by January 8, 1999, its deviation of the 28.4c rate. 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. The mechanism to be used by paging providers in allocating revenues between interstate and intrastate jurisdictions continues to be debated. Pending the issuance of a final mechanism, the FCC recently established a "safe harbor" percentage of 12% for paging carriers that the agency believes reasonably approximates the percentage of interstate revenues generated by such carriers. 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. 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, 1998, the Company had 48 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, 1998, the Company had seven 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 16 18 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. RISK FACTORS In this section, "we," "our" and "us" refer to the Company and its subsidiaries. RISK OF LONG HISTORY OF OPERATING LOSSES. We have sustained consolidated operating losses in each year of operations through the year ending December 31, 1997. We recognized a $2.5 million operating profit for the year ending December 31, 1998. However, we sustained an aggregate $12.7 million operating loss for the three year period ended December 31, 1998. We expect to continue to incur operating losses for the next several years. Although the Company had positive EBITDA of $8.6 million for the year ended December 31, 1996, $27.3 million for the year ended December 31, 1997 and $45.9 million for the year ended December 31, 1998, prior to 1996 the Company had negative EBITDA in each year of its operations. EBITDA is earnings before interest, taxes, depreciation and amortization. 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 Company's operating losses and negative EBITDA resulted principally from expenditures associated with the establishment of the Company's one-way operations infrastructure and the growth of its subscriber base. Although we expect that our one-way operations will continue to generate EBITDA, the Company will incur substantial additional operating losses and negative EBITDA during the start-up phase for advanced messaging services. EBITDA generated from the Company's one-way operations will be used primarily to fund the Company's advanced messaging operations for the next several years. We cannot assure you that the Company's consolidated operations will become profitable or continue to generate EBITDA or that its one-way operations will continue to generate positive EBITDA. If the Company cannot achieve operating profitability or continue to generate EBITDA, we may not be able to make required debt service payments and our common stock may have little or no value. RISKS OF HIGH LEVERAGE; DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES; RESTRICTIVE COVENANTS. The Company is highly leveraged, primarily as a result of debt financing incurred to fund the construction of the Company's nationwide operations infrastructure, the growth of its subscriber base and the acquisition of the narrowband PCS licenses it acquired in FCC auctions. At December 31, 1998, the Company's long-term debt was $462.1 million and its stockholders' deficit was $90.0 million. In addition, the accretion of original issue discount on the Company's outstanding indebtedness will cause a substantial increase in indebtedness. The Company's deficiency of earnings before fixed charges to cover fixed charges for each of the three years ended December 31, 1996, 1997, and 1998, was $48.6 million, $43.9 million and $70.5 million, respectively. The indentures pursuant to which the Company's 11 1/4% Senior Subordinated Discount Notes due 2008 and 15% Senior Discount Notes due 2005 were issued and the Company's credit facility contain restrictive covenants. The restrictions affect, and in many respects significantly limit or prohibit the ability of the Company to incur additional indebtedness, make prepayments of certain indebtedness, pay dividends, make investments, engage in transactions with affiliates, issue capital stock of certain subsidiaries, create liens, sell assets and engage in mergers and consolidations. The limitations in the indentures are subject to a number of important qualifications and exceptions. In particular, while the indentures will generally restrict the Company's ability to incur indebtedness by requiring compliance with specified leverage ratios, they will permit the Company to incur an unlimited amount of additional indebtedness to finance the acquisition of equipment, inventory and network assets. However, one indenture prohibits the Company from securing more than $175 million of indebtedness (other than intercompany indebtedness). RISKS OF IMPLEMENTATION AND FINANCING OF NARROWBAND PCS NETWORK. We cannot assure you that advanced messaging services will be commercially viable or that the advanced messaging service levels beyond guaranteed messaging will be possible. The success of advanced messaging services could be affected by 17 19 matters beyond the Company's control. These matters include market acceptance, the future cost of subscriber units, technological changes in wireless messaging services, marketing and pricing strategies of competitors, regulatory developments and general economic conditions. As the Company continues development and implementation of advanced messaging services, we expect to incur significant additional operating losses during the start-up phase for such services, and it will be necessary for the Company to make substantial additional investments. We anticipate that advanced messaging operations will require approximately $40 million of additional capital expenditures to complete the addition of narrowband PCS capabilities, expand its network geographically and make other enhancements. In addition, we expect the advanced messaging operations to require approximately $30 million to fund operations and marketing in 1999 as the advanced messaging customer base grows. The Company's ability to incur indebtedness is limited by the covenants contained in its debt indentures, the Company's vendor financing arrangement and the Company's credit facility. As a result, any additional financing may need to be in the form of new equity capital. We cannot assure you that sufficient financing will be available, and if available, on attractive terms. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." OUR GROWTH STRATEGY MAY NOT BE ACHIEVED. The successful implementation of our strategy to increase cash flow through the expansion of our subscriber base and the marketing of advanced messaging services is necessary for the Company to meet its capital expenditures, working capital and debt service requirements. The Company expects to continue to incur operating losses for the next several years. Our strategy assumes that the wireless messaging industry will continue to grow rapidly, and that the Company will continue to grow substantially faster than the industry. We do not expect to continue to grow at our historical rate. We cannot assure you that the Company will be able to achieve the growth contemplated by its business strategy. The Company may not be able to make required payments on its outstanding indebtedness and may have to refinance its outstanding indebtedness in order to repay such obligations. No assurance can be given that the Company will be able to refinance its outstanding indebtedness. WE OPERATE IN A HIGHLY COMPETITIVE MARKET. We face significant competition in all of our markets. Many of our competitors, which include regional and national paging companies, providers of broadband PCS and certain regional telephone companies, possess significantly greater financial, technical and other resources than the Company. If any of such companies were to devote additional resources to the paging or other wireless messaging businesses or focus its strategy on the Company's marketing and product niches, the Company's results of operations could be adversely affected. For competitive and marketing reasons, the Company generally sells each new subscriber unit for less than its acquisition cost. In addition, a number of telecommunications companies (including PCS providers) have constructed or are in the process of constructing nationwide networks that offer services similar to the Company's services, including the provision of advanced messaging services and two-way messaging. See "Competition." Industry reports indicate, and we believe, that the retail distribution of subscriber units has become increasingly common in the paging industry. If the Company is unable to maintain its current sales relationships with retail distributors or obtain new sales relationships with other retail distributors, we may not be able to achieve our projected growth. RISK OF ADVERSE EFFECT OF SUBSCRIBER DISCONNECTIONS. Our results of operations are significantly affected by subscriber disconnections. In order to realize net growth in units in service, disconnected users must be replaced, and additional users must be added. However, the sales and marketing costs associated with attracting new subscribers are substantial relative to the costs of providing service to existing customers. Expenses associated with each new unit placement exceed the sales price and service initiation fee. The Company's average monthly disconnection rates increased during 1998. For the twelve months ended December 31, 1996, 1997 and 1998, disconnection rates were 2.4%, 2.5% and 3.2%, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Results of Operations -- Fiscal Years 1996, 1997 and 1998 -- Units in Service." Average monthly disconnection rates are calculated by dividing the sum of (i) direct subscriber disconnections, (ii) negative subscriber additions from the local, regional and reseller channel, taken as a whole and (iii) the cumulative negative subscriber 18 20 additions from each of the Carrier Services SBU's strategic alliance partners, by the total number of units in service at the beginning of the period. Disconnect rates are stated as the monthly average of each period presented. Further increases in our rate of disconnections may adversely affect our results of operations. WE DEPEND ON KEY PERSONNEL. Our success is dependent, to a significant extent, upon the continued services of our key executive officers. We do not have employment agreements with any of our current executive officers. All current executive officers have entered into non-competition agreements with the Company. The loss or unavailability of one or more of our executive officers or the inability to attract or retain key employees in the future could have an adverse effect upon our operations. RISK OF INABILITY TO MANAGE GROWTH. Our future performance will depend upon our ability to manage our growth effectively. We need to improve and expand our operating, financial, accounting, information and customer service systems, and to expand, train and manage our employee base. Our inability to expand in accordance with our plans or to manage our growth could have a material adverse effect on our business, financial condition and results of operations. RISKS OF RAPID TECHNOLOGICAL CHANGES. The telecommunications industry is characterized by rapid technological change. Future technology advances in the industry may result in the availability of new services or products that could compete directly with our paging and other wireless messaging services. Changes in technology could also lower the cost of competitive products and service to a level where our products and services become less competitive or we are required to reduce the prices of our services. WE DEPEND ON KEY SUPPLIERS. We do not manufacture any of the subscriber units or infrastructure equipment used in our operations. We buy subscriber units primarily from Motorola as well as other manufacturers and are dependent on such manufacturers to obtain sufficient inventory for new subscriber and replacement needs. We purchase terminals, transmitters, receivers and other infrastructure equipment primarily from Motorola and Glenayre, and are dependent on such manufacturers for sufficient infrastructure equipment to meet our expansion and replacement requirements. We cannot assure you that the Company will obtain subscriber units and infrastructure equipment in the future as needed. See "Business -- Transmission Network -- Narrowband PCS Network Buildout -- Equipment". RISK OF CHANGE IN REGULATORY ENVIRONMENT. The Company and the wireless communications industry are subject to regulation by the FCC and various state regulatory agencies. From time to time, legislation and regulations which could potentially adversely affect the Company are proposed by federal and state legislators. We cannot assure you that federal or state legislation or regulations will not be adopted that would adversely affect our business. EMPLOYEES At December 31, 1998, the Company had 2,446 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 21 EXECUTIVE OFFICERS AND DIRECTORS OF REGISTRANT The Company's Board of Directors currently consists of eight 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:
NAME AGE POSITION - ---- --- -------- John D. Beletic....................... 47 Chairman and Chief Executive Officer N. Ross Buckenham..................... 41 President Douglas H. Kramp...................... 37 Executive V.P., Strategic Business Units Frederick G. Anderson................. 47 V.P., General Counsel and Secretary G. Clay Myers......................... 39 V.P., Finance, Chief Financial Officer and Treasurer Allan D. Angus........................ 48 V.P., Technical Strategy Todd A. Bergwall...................... 35 V.P., Law and Regulation Bo Bernard............................ 53 V.P., Market Sales Jack D. Hanson........................ 55 V.P., Network Services Frances W. Hopkins.................... 58 V.P., Customer Advocacy Thomas C. Keys........................ 40 V.P., Corporate Development Bradley W. Kinzbach................... 43 V.P., Inventory and Distribution Sandra D. Neal........................ 50 V.P., Strategic Projects Richard S. Nelson..................... 50 V.P., International; President of PageMart International, Inc. Donna Regenbaum....................... 32 V.P., Marketing W. Wayne Stargardt.................... 46 V.P., Carrier Services Division David Swift........................... 52 V.P., National Retail Paul L. Turner........................ 40 V.P., National Service Center E. Russell Villemez................... 39 V.P., Information Systems and Chief Information Officer Andrew R. Weisheit.................... 39 V.P., National Accounts Leigh J. Abramson(1)(2)............... 30 Director Guy L. de Chazal(1)................... 51 Director Steven B. Dodge....................... 53 Director Michael C. Hoffman.................... 37 Director Arthur Patterson(1)................... 55 Director Alejandro Perez Elizondo(2)........... 49 Director Pamela D.A. Reeve(1)(2)............... 49 Director
- --------------- (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 also became Chief Executive Officer of the Company in February 1994 and Chairman of the Company's Board in August 1994. In November 1997, Mr. Beletic continued as the Chairman and Chief Executive Officer with Mr. Buckenham assuming 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., a manufacturer of voice mail systems. Mr. Beletic earned his bachelor's degree in finance from Cincinnati's Xavier University and his MBA from the Harvard Business School. Mr. Beletic currently serves as a director of Pulse Point Communications and Triton PCS Holdings, Inc. Within the paging industry, Mr. Beletic currently serves as a director of the Personal 20 22 Communications Industry Association, 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 Executive Vice President and General Manager, PCS in September 1996, was promoted 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. 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., a public specialty property and casualty insurance holding company, from March 1992 through July 1997. American Eagle's 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 engaged in the private practice of law as a partner in the corporate and securities section of Akin, Gump, Strauss, Hauer & Feld, L.L.P., an international law firm. 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, LLP from 1982 to 1991. Mr. Myers currently serves as Treasurer of the Paging Leadership Association and Treasurer of the Personal Communication Wireless Alliance. Mr. Myers is a certified public accountant. Allan D. Angus, Vice President, Technical Strategy. 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 Regulation. 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 promoted to Vice President, Law and Assistant General Counsel in August 1997. Mr. Bergwall became Vice President of Law and Regulation in August 1998. 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. Bo Bernard, Vice President, Market 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, and in August 1998, he became Vice President of Market Sales. Prior to joining the Company Mr. Bernard was Executive Vice President and co-founder of ProNet, Inc., a publicly traded paging company, from August 1982 to December 1996. 21 23 Jack D. Hanson, Vice President, Network Services. Mr. Hanson joined the Company in October 1993 as Vice President of Network Operations. Prior to joining the Company, Mr. Hanson was Director of Engineering for Spectradyne, Inc. from June 1992 to October 1993. Previously, he held senior engineering positions with VMX, Inc. from December 1984 to June 1992, most recently as Vice President of National Account Support. Frances W. Hopkins, Co-founder and 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 founder of TelPage, a regional paging company. Thomas C. Keys, Vice President, Corporate Development. Mr. Keys joined the Company in January 1993 as Area Manager for the Company's largest West Coast market. He became Sales Director and General Manager in April 1994. Mr. Keys was promoted to Vice President of Arbitrage in September 1994, and to Vice President of Market Development in August 1998. He was named Vice President of Corporate Development in January 1999. 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, was promoted to Vice President, Inventory and Distribution in December 1997 and was named Vice President of Distribution in August 1998. Prior to joining the Company, Mr. Kinzbach was Director of Distribution and held various other management positions for Blockbuster Entertainment Corporation from February 1986 to February 1994 and was President of BKCM Corporation, a distributor of bottled water, from March 1992 until December 1993. Sandra D. Neal, 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. Richard S. Nelson, Vice President, International; President of PageMart International, Inc. Mr. Nelson joined the Company as Vice President, Marketing in June 1992. Mr. Nelson was named Vice President of International in March 1996. 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. Donna Regenbaum, Vice President, Marketing. Ms. Regenbaum joined the Company in July 1994 as Director of Market Development, and in July 1997 she became Director of Products and Services. She was promoted to Vice President of Marketing in May 1998. Prior to joining the Company, Ms. Regenbaum was enrolled in the graduate business program of Harvard Business School. She received her MBA degree in 1994. W. Wayne Stargardt, Vice President, Carrier Services Division. Mr. Stargardt joined the Company in May 1996 as Vice President, Marketing. Mr. Stargardt has been Vice President of Carrier Services since May 1998. 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 May 1996. David Swift, Vice President, National Retail. Mr. Swift joined the Company in May 1997 as Director of National Retail Marketing. He was promoted to Vice President of National Retail in May 1998. Prior to joining the Company, Mr. Swift was President of Sampling Plus, Inc., a promotional marketing company, from June 1994 until May 1997. He was Senior Vice President, Marketing of Greyhound Lines, Inc., a 22 24 national bus line, from April 1993 through May 1994. Prior thereto Mr. Swift held several marketing positions with Frito-Lay, most recently as Marketing Director. Paul L. Turner, Vice President, National Service Center. Mr. Turner joined the Company as Vice President, Customer Service March 1994. He was named Vice President of National Service Center in August 1998. 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. E. Russell Villemez, Vice President, Information Systems and Chief Information Officer. Mr. Villemez joined the Company in September 1998 as Vice President of Information Systems and Chief Information Officer. From April 1996 to September 1998, Mr. Villemez was an independent consultant in the area of information technology strategy for telecommunications companies such as AT&T and Bell Atlantic. Prior to that, Mr. Villemez directed information technology consulting in the telecommunications industry for A.T. Kearney from August 1993 to April 1996. Mr. Villemez has also been Director of Distributed Systems Architecture for Sprint, and was employed at Andersen Consulting prior to that. Andrew R. Weisheit, Vice President, National Accounts. He joined the Company in January 1995 as Director, Strategic Alliances and was promoted to Vice President, Carrier Services Division in November 1997. Mr. Weisheit was named Vice President of National Accounts in April 1998. Prior to joining the Company, Mr. Weisheit was Branch Manager with Paging Network, Inc. for two years. Previously, Mr. Weisheit was with Owens-Corning Fiberglas for nine years where held various management positions of increasing responsibility. 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 & Co. Incorporated ("Morgan Stanley") and of Morgan Stanley Dean Witter Capital Partners. Mr. Abramson has been with Morgan Stanley since 1990, first in the Corporate Finance Division and, since 1992, in the Private Equity Division. Mr. Abramson is also a Director of Silgan Holdings. Mr. Abramson was designated by Morgan Stanley Capital Partners III, L.P. ("MSCP III") 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 a Managing Director of Morgan Stanley and is President and a general partner of Morgan Stanley Dean Witter Venture Partners. Mr. de Chazal joined Morgan Stanley in 1984. Mr. de Chazal is also a director of several private companies. Mr. de Chazal was designated by Morgan Stanley Venture Capital Fund, L.P. ("MSVCF") pursuant to the Stockholders Agreement. Steven B. Dodge, Director. Mr. Dodge has been a Director of the Company since November 1998. Mr. Dodge is Chairman and Chief Executive Officer of American Tower Corporation ("ATC"), a leading independent owner and operator of wireless communications towers in the United States. Prior to joining ATC, Mr. Dodge founded and was the Chairman of the Board, President and CEO of American Radio Systems Corporation ("ARS"), an independent owner and operator of radio stations, a position he occupied from ARS' founding in November, 1993 until its merger with CBS Corporation. In addition, Mr. Dodge founded Atlantic Radio, L.P. in 1988, which was one of the predecessor entities of ARS. Prior to forming Atlantic Radio, L.P., Mr. Dodge founded and served as Chairman and CEO of American Cablesystems Corporation, a cable television company. Currently, Mr. Dodge is also a Director of Sensitech, Inc. and Jobson Publishing, L.L.C. Michael C. Hoffman, Director. Mr. Hoffman has been a Director of the Company since March 1999. Mr. Hoffman is a Managing Director of Morgan Stanley and of Morgan Stanley Dean Witter Capital Partners. Mr. Hoffman joined Morgan Stanley in 1986. Mr. Hoffman was designated by The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II") 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 23 25 VIASOFT, Unify, Portal Software and the AIM Funds 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 the 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. Pamela D. A. Reeve, Director. Ms. Reeve has been a Director of the Company since April 1996. Ms. Reeve is 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, Inc. Effective January 19, 1995, PageMart, Inc. merged with a wholly-owned subsidiary of PageMart 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, Inc. had the same ownership interest in PageMart Wireless as they had in PageMart, Inc., and PageMart Wireless owned all of the capital stock of PageMart, Inc. On December 28, 1995, the name of PageMart Wireless was changed from PageMart Nationwide, Inc. to PageMart Wireless, Inc. On January 28, 1998, PageMart, Inc. 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 messaging network equipment, which includes switching terminals, transmitters, receivers and a host of related equipment such as satellite and digital link controllers, satellite dishes, antennas, cable, etc. The Company continues to add equipment to its messaging network as it expands to new service areas and completes the buildout of its narrowband PCS network. To date, it has not experienced any material difficulty or delay in obtaining network equipment as needed. The Company acquired the narrowband PCS Licenses in auctions held by the FCC. The narrowband PCS Licenses permit the nationwide operation of the narrowband PCS network with 100kHz of outbound capacity and 50kHz of return 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 $18.3 million as of December 31, 1998. The Company does not anticipate material difficulty in renewing these leases or finding equally suitable alternate facilities on acceptable terms. The Company leases approximately 162,000 square feet of office space for its corporate headquarters in Dallas, Texas. The lease will have an annual cost of approximately $2.4 million in 1999, 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 24 26 offices, call centers and other facilities at various locations. Aggregate annual rental charges under these leases were approximately $6.0 million as of December 31, 1998. 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, Inc. 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, Inc's paging services to approximately 38,000 customers. PageMart, Inc. 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, Inc., that PageMart, Inc. was aware that EconoPage's pricing would not permit it to sustain its business and PageMart, Inc. 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, Inc., and requested injunctive relief as well as compensatory, punitive, special and incidental damages in an unspecified amount. PageMart, Inc. denies all claims. Discovery has proceeded and plaintiffs filed a motion for class certification. After briefing and oral arguments, the court denied plaintiff's motion. Plaintiffs appealed the denial of class certification and then withdrew the appeal. PageMart, Inc. filed a motion to transfer the case to municipal court. The motion is currently pending. The Company will continue to defend this action vigorously. 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. On March 20, 1998, an action against the Company and Paging Network, Inc. was filed in Superior Court of the State of California, County of Los Angeles, by three customers of EconoPage of Southern California, Inc. ("EPSC"), a reseller of the Company's services that had resold the Company's paging services to approximately 12,000 customers. The Company terminated the reseller agreement when EPSC ceased operations on March 4, 1998. In the complaint, plaintiffs requested class action status on behalf of EPSC customers and allege that EPSC was an agent of the Company, that the Company was aware that EPSC's pricing would not permit it to sustain its business and the Company permitted EPSC to continue to enter into service contracts with customers while EPSC was having serious financial difficulties. The complaint alleged violation of statute, fraud and negligent misrepresentation by the Company, and requested injunctive relief as well as compensatory, punitive, special and incidental damages in an unspecified amount. Paging Network, Inc. demurred to plaintiff's complaint on the grounds that it did not state facts sufficient to constitute a cause of action. The court sustained the demurrer without leave to amend the fraud and negligent misrepresentation causes of action, and it sustained with leave to amend the statutory violation cause of action if plaintiffs could allege that defendants knew EPSC was going to fail but continued to allow their names to be used to solicit customers. Plaintiffs filed a second amended complaint that states only a statutory violation cause of action against defendants. The Company has demurred to the second amended complaint on grounds similar to the demurrer to the original complaint. Plaintiffs requested leave of the court to file a third amended complaint adding a request to proceed with a representative action under Section 17200 of the California Business and Professions Code. The court granted the request for leave to amend and transferred the case to a court that specialized in those types of cases. PageMart filed a demurrer and a motion to transfer the case to municipal court, the jurisdictional amount of which is $5,000, and the court granted the demurrer and the motion to transfer. Plaintiffs filed a motion in the original court in an attempt to revive the class action allegations, but the court denied the motion. The Company denies all claims and will defend this action vigorously. 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. 25 27 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 into 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 last two years: 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 1998: First Quarter............................................. $10 7/16 $7 Second Quarter............................................ $10 7/8 $8 7/16 Third Quarter............................................. $10 1/16 $6 1/4 Fourth Quarter............................................ $ 8 3/4 $5
As of January 31, 1999, the Company's Class A, Class B, Class C and Class D Common Stock was held by approximately 212, 8, 2 and 2 holders of record, respectively. Management believes there were approximately 3,000 beneficial holders at January 31, 1999. 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. 26 28 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, 1998. 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.
FISCAL YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------- 1994 1995 1996 1997 1998 ---------- ------------ ------------ ------------ ------------ (IN THOUSANDS, EXCEPT UNIT, PER SHARE, ARPU AND PER SUBSCRIBER DATA) STATEMENT OF OPERATIONS DATA: Recurring revenues.......................... $ 56,648 $ 101,503 $ 153,041 $ 206,907 $ 254,814 Equipment sales and activation fees......... 53,185 57,688 68,551 70,871 56,838 -------- ---------- ---------- ---------- ---------- Total revenues.............................. 109,833 159,191 221,592 277,778 311,652 Cost of equipment sold...................... 57,835 63,982 78,896 86,175 69,150 -------- ---------- ---------- ---------- ---------- 51,998 95,209 142,696 191,603 242,502 Operating expenses.......................... 85,322 118,557 155,265 194,194 240,052 -------- ---------- ---------- ---------- ---------- Operating income (loss)..................... (33,324) (23,348) (12,569) (2,591) 2,450 Interest expense............................ (12,933) (30,720) (35,041) (38,499) (43,798) Interest income............................. 858 1,997 1,140 501 3,187 Other....................................... (414) (1,042) (2,128) (3,298) (3,549) -------- ---------- ---------- ---------- ---------- Loss before extraordinary item.............. $(45,813) $ (53,113) $ (48,598) $ (43,887) $ (41,710) ======== ========== ========== ========== ========== Loss before extraordinary item per common share..................................... $ (1.72) $ (1.53) $ (1.30) $ (1.10) $ (1.03) Weighted average number of common shares and share equivalents outstanding............. 26,574 34,653 37,462 39,922 40,246 BALANCE SHEET DATA (AT PERIOD END): Current assets.............................. $ 44,397 $ 62,535 $ 70,572 $ 84,133 $ 74,537 Total assets................................ 142,059 263,829 313,620 361,876 494,055 Current liabilities......................... 37,966 56,508 62,503 104,973 120,750 Long-term debt, less current maturities..... 92,632 219,364 240,687 289,344 462,079 Stockholders' equity (deficit).............. 11,461 (12,043) 10,430 (32,441) (90,022) OTHER DATA: Units in service (at period end)............ 772,730 1,240,024 1,859,407 2,530,737 2,651,004 Net subscriber additions.................... 445,427 467,294 619,383 671,330 120,267 ARPU(1)..................................... $ 8.64 $ 8.62 $ 8.04 $ 7.80 $ 8.06 EBITDA(2)................................... (25,219) (10,076) 8,623 27,261 45,870 Capital expenditures........................ 16,719 33,503 63,804 67,506 168,546 Dividends Paid/Declared..................... -- -- -- -- -- Depreciation and amortization............... 8,105 13,272 21,192 29,852 43,420 Deficiency of earnings to fixed charges(3)(4)............................. (45,813) (53,113) (48,598) (43,887) (70,511)
- --------------- (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) EBITDA represents earnings (loss) before interest, taxes, depreciation, amortization, other expenses and extraordinary items. 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. (3) 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. (4) The 1998 deficiency of earnings to fixed charges is increased by $17.6 million in extraordinary items and $11.4 million of capitalized interest incurred during the year ended December 31, 1998. 27 29 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, 1998. This discussion should be read in conjunction with the Company's Consolidated Financial Statements and the notes thereto included elsewhere in this report. Certain prior year's amounts have been reclassified to conform with the current year presentation. This Form 10-K 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 could cause actual results for 1999 and beyond to differ materially from those expressed in any such forward-looking statements -- economic conditions and consumer confidence generally in the United States; 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; change in regulation by the FCC and various state regulatory agencies; potential technical problems relating to the Company's transmission network for advanced messaging services; and the cost and ability of the Company and third parties upon whose products and services the Company depends to be Year 2000 ready in a timely manner. GENERAL Through its PageMart Paging division, 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. Through its PageMart PCS division, the Company has constructed and operates an advanced messaging network as an overlay of its one-way network. In June 1998, the Company launched commercial advanced messaging services in its first two local markets, Austin and San Antonio, Texas. On December 15, 1998, the Company launched nationwide advanced messaging services covering approximately 70% of the U.S. population. The Company has incurred significant capital expenditures and expects to incur significant operating losses and additional capital expenditures associated with the implementation and deployment of its advanced messaging services. The Company sells and leases wireless messaging end-user devices 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. Since commencing operations in 1990, the Company has invested heavily in its wireless communications network and administrative infrastructure in order to establish nationwide coverage, sales offices in major metropolitan areas, centralized customer service call centers and administrative support functions. The Company incurs substantial fixed operating costs related to its 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. The Company has sustained consolidated operating losses in each year of operations from inception through the period ending December 31, 1997. Although the Company recognized a $2.5 million operating profit for the period ending December 31, 1998, the Company has sustained an aggregate $12.7 million operating loss for the three year period ended December 31, 1998. The Company expects to continue to incur operating losses for the next several years. 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, 1998, the number of domestic one-way units in service increased from 52,125 to 2,618,527. None of the Company's growth is attributable to acquisitions. The Company intends to achieve unit growth by promoting its customized paging and other wireless messaging services through its sales offices, national retail distribution 28 30 channels, private brand strategic alliances with telecommunication companies such as GTE Corporation, Southwestern Bell Mobile Systems, WorldCom Network Services, Inc., Ameritech Mobile Services, Inc., EXCEL Communications, Inc., ALLTEL Communications, Inc., BellSouth Cellular Corp., Bluegrass Cellular, Inc. and First Cellular of Southern Illinois, as well as international expansion. Given the fixed operating costs of its wireless networks and administration and selling and marketing expenses associated with its growth strategy, the Company generated operating losses in 1997 from its PageMart Paging division. In the third quarter of 1997, the Company began generating operating profits in its PageMart Paging division. The PageMart Paging division generated operating profits for each quarter in 1998 and management expects this trend to continue in 1999. The Company has historically sold, rather than leased, substantially all 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 four years, as occurs with paging carriers that lease subscriber units to subscribers. In addition, the Company's retail distribution strategy results 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 base and generating revenues (as retailers carry inventory). However, the Company expects to lease a substantial portion of its advanced messaging subscriber units as initial sales of advanced messaging services are expected to be dominated by business and corporate customers and because of the high cost of advanced messaging subscriber units compared to one-way messaging units. The Company sells and leases its subscriber units through the following distribution channels: (i) direct sales and third party resellers through its Markets Strategic Business Unit ("SBU"), (ii) private brand strategic alliances through its Carrier Services SBU, (iii) national retail stores through its National Retail SBU and (iv) direct sales through its National Accounts SBU. At December 31, 1998, 26% of the Company's total units in service originated from the National Retail SBU, 37% originated from the Carrier Services SBU and 37% originated from the Markets SBU. For competitive and marketing reasons, the Company generally sells each new unit to national retailers for less than its acquisition cost. Management anticipates that the loss on equipment sold in the National Retail SBU will generally remain constant on a per unit basis for the foreseeable future. The Company's accounting practices result in selling and marketing expenses, including loss on sales of equipment, being recorded at the time a unit is sold. The Company expects its costs of subscriber units on a per unit basis generally to remain constant or decline slightly as sales volumes increase. Units sold by the Company during a given month may exceed units activated and in service due to inventory stocking and distribution strategies of retailers. In the third quarter of 1998, the Company announced the formation of its Telemetry SBU and the signing of a strategic alliance with Interactive Technologies, Inc. for wireless connectivity to home security systems. During the fourth quarter of 1998, the Company announced the signing of strategic alliances with Pentech Energy Solutions, Inc. for wireless connectivity to environmental control systems, Road Trac, LLC to provide telemetry solutions for vehicle location technology and Monitel Products Corp. to provide remote monitoring and diagnostic products for the photocopy and imaging industry. The Company does not expect the Telemetry SBU to generate revenues until late in 1999. 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 29 31 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 for service, dissatisfaction with service and switching to a competing service provider. The Company's average monthly disconnection rates for the years ended December 31, 1996, 1997, and 1998 were 2.4%, 2.5% and 3.2%, respectively. Average monthly disconnect rates are calculated by dividing the sum of (i) direct subscriber disconnections, (ii) negative subscriber additions from the local, regional and reseller channel, taken as a whole and (iii) the cumulative negative subscriber additions from each of the Carrier Services SBU's strategic alliance partners, included in the Carrier Services SBU by the total number of units in service at the beginning of the period. Disconnect rates are stated as the monthly average of each period presented. 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 one-way ARPU will remain constant or decline slightly 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. Management anticipates that the Company's consolidated ARPU will increase as subscriber additions for its advanced messaging services increase, since advanced messaging yields a significantly higher ARPU than one-way messaging. On May 19, 1998, the Company and many other paging companies experienced an unprecedented interruption of service when the PanAmSat Galaxy IV communications satellite, on which the Company leased capacity, ceased to communicate with paging uplink stations throughout the United States. Management believes that this is the first event of its kind to affect the paging industry in the 35-year history of satellite telecommunications. This event occurred when the satellite's onboard control system and a back-up control system failed and PanAmSat technicians were unable to restore the satellite's proper orientation toward Earth. The Company initiated its recovery plan by re-orienting its satellite links to its back-up satellites. In order to re-orient the satellite links, the Company realigned satellite dish antennas on each of its approximately 2,000 transmission sites to receive the back-up satellites' signals. Although the satellite failure was beyond the Company's control, the Company provided its customers with a two-day airtime credit to compensate them for the period when they were unable to receive messages. The Company incurred $3.8 million of costs (including the airtime credit) during the three months ended June 30, 1998 and has recorded these costs as an extraordinary charge. RESULTS OF OPERATIONS The Company's principal operations to date are its domestic one-way wireless operations of its PageMart Paging division. The following discussion of results of operations analyzes the results of the Company's PageMart Paging division (i.e., domestic one-way wireless messaging operations), unless otherwise indicated. Certain of the following financial information is presented on a per subscriber unit per month 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. 30 32 FISCAL YEARS 1996, 1997 AND 1998 Units in Service Units in service from domestic one-way paging operations were, 1,851,445, 2,513,337 and 2,618,527 as of December 31, 1996, 1997 and 1998, respectively. This represents an annual growth rate of 49%, 36% and 4% in 1996, 1997 and 1998, respectively. In addition, for the years ended December 31, 1996, 1997, and 1998, PageMart Canada's units in service were 13,270, 29,000 and 52,836, 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, 17,400 and 31,702 units at December 31, 1996, 1997, and 1998. As of December 31, 1998, the Company had 775 advanced messaging units in service. The Company experienced historically weak fiscal quarters in terms of net subscriber additions in the third and fourth quarters of 1998, with the fourth quarter resulting in net losses. Management believes that a majority of the reasons are specific to the Company, however, a general slowing in the market for traditional one-way paging services was also a contributing factor. In the opinion of management, demand appears to be shifting away from traditional one-way paging services to the higher quality and greater benefits of advanced messaging services. Several things contributed to the Company specific reasons for the decline in net subscriber additions in the third and fourth quarters of 1998. The Company's primary pager supplier, Motorola, Inc., experienced significant manufacturing problems in the production of the Synapse(TM) pager card for the PalmPilot and delays in the introduction of a new pager product line that negatively affected the Company's sales. Also contributing to reduced net subscriber additions was an increase in the Company's composite churn rate from 2.8% in the second quarter to 3.1% in the third quarter and to 4.1% in the fourth quarter of 1998. There were several reasons for this increase aside from the general slowing of the market. Additional subscriber disconnects resulted from a price increase implemented for direct bill customers that were below the Company's standard pricing and profitability levels. The local reseller channel continued to experience volatility. Also, higher volatility was experienced in the strategic alliance distribution channel during the third and fourth quarters of 1998, primarily as a result of a review and update of customer database information by strategic alliance partners. Finally, the Company's National Retail SBU experienced an increase in disconnect rates, which resulted in net reductions in units in service in the fourth quarter of 1998. Management believes that the current dynamics in the retail marketplace have resulted in attracting new subscribers which have a higher propensity to disconnect. As a consequence, several of the Company's national retail programs are being modified to address these dynamics. These modifications are expected to reduce the Company's overall costs of delivering products and services to the national retail distribution channel during 1999. Historically, the Company has grown its subscriber base at a faster rate than the overall paging industry's subscriber growth rate. Management does not anticipate that the Company's one-way paging business will continue to grow at rates that are significantly higher than the overall industry rate. Management expects the one-way paging division to experience net subscriber losses in the first quarter of 1999, offset somewhat by advanced messaging subscriber additions. Certain factors may cause net subscriber additions to be negative in any quarter of 1999, including more severe volatility in local reseller and strategic alliance channels or an increase in disconnect rates. Revenues Revenues for the fiscal years 1996, 1997 and 1998 were $221.6 million, $277.6 million and $311.5 million, respectively. Recurring revenues for airtime, voice mail and other services for the same periods were $153.0 million, $206.9 million, and $254.8 million, respectively. Revenues from equipment sales and activation fees for 1996, 1997 and 1998 were $68.6 million, $70.7 million and $56.7 million, respectively. The increases in recurring revenues and revenues from equipment sales from 1996 to 1997 and recurring revenues from 1997 to 1998 were primarily due to the increase in the total number of units in service. The decrease in equipment sales during the year ended December 31, 1998, was primarily due to a decline in the rate of growth in national retail outlets. 31 33 The Company's ARPU was $8.04, $7.80 and $8.06 in the final quarter of 1996, 1997 and 1998, respectively. The decline in 1997 resulted primarily from an increase in subscribers added through private brand strategic alliance channels. This decrease in ARPU was 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. The increase in ARPU in 1998 is primarily attributable to an increase in alphanumeric services in the traditional one-way paging operation, as well as a decrease in the number of subscriber units deployed in the local reseller distribution channel, which generally has low ARPU. Over the past year, the Company's ARPU has varied by less than 4 percent. Management expects ARPU to remain relatively stable in the foreseeable future with minor variations from changes in distribution mix. Cost of Equipment Sold The cost of equipment sold in 1996, 1997 and 1998 was $78.9 million, $86.0 million and $68.9 million, respectively. The increase from 1996 to 1997 was primarily due to an increase in the number of retail outlets along with an increase in the number of units sold. The decrease in 1998 was primarily attributable to a decline in the rate of growth in national retail outlets. During the twelve months ended December 31, 1996, 1997 and 1998, the Company added 2,119, 7,394 and 2,820 new national retail outlets, respectively. In 1997, the Company made a concerted effort to expand its retail distribution capabilities by aggressively increasing the number of retail outlets. However, in 1998, the number of retail outlets has stabilized as a result of the Company obtaining sufficient market share. The Company expects pager costs generally to remain constant, with modest reductions in cost to the Company as a result of volume purchase discounts. The loss on equipment sold (equipment revenue less cost of equipment sold) is recognized when pagers are shipped to the retailers, usually before the units are placed into service. Operating Expenses Technical expenses were $36.7 million, $46.5 million and $52.2 million in 1996, 1997 and 1998, respectively. The increases were primarily due to increased telecommunications and site expenses associated with servicing the Company's expanded network and larger subscriber base. Based on an average monthly cost per unit in service, technical expenses were $1.98, $1.78 and $1.69 in 1996, 1997 and 1998, respectively. The per unit decreases were the result of increased operating efficiencies and economies of scale achieved through the growth of the Company's subscriber base. During the year ended December 31, 1998, the Company incurred $4.4 million in technical expense associated with advanced messaging. Selling expenses in 1996, 1997 and 1998 were $42.6 million, $50.8 million and $52.6 million, respectively. From 1996 to 1997, the 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. From 1997 to 1998, the increase resulted from greater marketing and advertising costs related to a larger base of retail outlets. During the year ended December 31, 1998, the Company incurred $2.0 million and $0.7 million in selling expenses associated with advanced messaging and international operations, respectively. General and administrative expenses (including costs associated with customer service, field administration and corporate headquarters) in 1996, 1997 and 1998 were $53.7 million, $66.4 million and $82.6 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 domestic one-way subscriber base and anticipated growth of the advanced messaging 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 $2.89, $2.54 and $2.68 for fiscal years 1996, 1997, and 1998, respectively. For the year ended December 31, 1998, the Company incurred $2.1 million in general and administrative expenses associated with advanced messaging. Depreciation and amortization in 1996, 1997 and 1998 was $21.2 million, $29.7 million and $37.6 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 computer hardware and 32 34 software associated with the Company's administrative system in 1996, 1997 and 1998. As an average cost per month per unit in service, depreciation and amortization was $1.14, $1.13 and $1.22 for the years ended December 31, 1996, 1997 and 1998, respectively. For the year ended December 31, 1998, the Company incurred $5.8 million in depreciation and amortization associated with advanced messaging. Interest Expense Consolidated interest expense increased from $35.0 million in 1996 to $38.5 million in 1997, and to $43.8 million in 1998. The increases in 1996 and 1997 were primarily the result of the increased interest related to the 15% Notes and the 12 1/4% Senior Discount Notes (the "12 1/4% Notes"). The increase in 1998 was primarily the result of interest expense related to the 11 1/4% Notes and increased interest expense related to the 15% Notes. Interest expense related to the 12 1/4% Notes, which were retired in January 1998, was $13.3 million, $15.1 million and $1.2 million in 1996, 1997 and 1998, respectively. Interest expense related to the 15% Notes was $18.4 million, $21.2 million and $24.7 million in 1996, 1997 and 1998, respectively. Interest expense related to the 11 1/4% Notes was $27.0 million in 1998. Interest expense related to the vendor financing arrangement was $0.9 million in 1997 and $0.6 million in 1998. Total interest expense for the year ended December 31, 1998, was reduced by the capitalization of $11.4 million of interest related to the construction of the Company's advanced messaging network. Net Loss The Company sustained consolidated losses before extraordinary items in 1996, 1997 and 1998 of $48.6 million, $43.9 million and $41.7 million, respectively, principally due to the cost of funding the growth rate of the Company's subscriber base. A one-time extraordinary charge of $13.8 million was recognized during the first quarter of 1998 related to the early retirement of the 12 1/4% Notes. In addition, a one-time extraordinary charge of $3.8 million was recognized during the second quarter of 1998 related to the interruption in service experienced by the Company when the Galaxy IV satellite failed. Including the extraordinary items, the Company's consolidated net loss for the year ended December 31, 1998 was $59.3 million. Allocation of Debt to Divisions The Company has allocated long-term debt amongst its PageMart Paging and PageMart PCS divisions. The methodology the Company has followed to date results in the attribution of the proceeds of each equity and debt offering based on the specific capital and operating requirements of each division. Positive free cash flow generated by a division is utilized to reduce its respective debt allocation. As of December 31, 1998, $155.9 million and $72.5 million of equity and $125.0 million and $338.3 million of debt has been allocated to PageMart Paging and PageMart PCS, respectively. For the twelve months ended December 31, 1998, interest expense of $18.6 million and $25.2 million was allocated to PageMart Paging and PageMart PCS, respectively. 33 35 SELECTED QUARTERLY RESULTS OF OPERATIONS The table below sets forth management's presentation of results of PageMart Paging's 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 generally accepted accounting principles ("GAAP") (in thousands, except other data).
THREE MONTHS ENDED ----------------------------------------------------------------------------------------------------- MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, 1997 1997 1997 1997 1998 1998 1998 1998 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (UNAUDITED) RECURRING REVENUE....... $ 46,475 $ 50,004 $ 53,593 $ 56,828 $ 60,872 $ 63,537 $ 65,205 $ 65,154 Equipment revenue....... 15,183 15,867 19,142 20,513 16,289 13,164 13,546 13,702 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 61,658 65,871 72,735 77,341 77,161 76,701 78,751 78,856 Cost of equipment sold................ 18,054 20,234 24,008 23,735 20,590 15,915 16,416 15,976 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- NET REVENUES............ 43,604 45,637 48,727 53,606 56,571 60,786 62,335 62,880 Technical expenses...... 10,765 11,385 11,963 12,397 12,359 13,464 13,364 12,993 General and administrative expenses.............. 15,763 15,814 16,957 17,911 19,728 20,524 20,862 21,452 Selling expenses........ 12,572 12,189 12,115 13,969 13,476 13,716 12,907 12,519 Depreciation and amortization expense............... 6,808 7,240 7,626 7,987 8,482 9,046 9,808 10,269 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- OPERATING INCOME (LOSS): EBIT.................. $ (2,304) $ (991) $ 66 $ 1,342 $ 2,526 $ 4,036 $ 5,394 $ 5,647 ========== ========== ========== ========== ========== ========== ========== ========== EBITDA(1)............... $ 4,504 $ 6,249 $ 7,692 $ 9,329 $ 11,008 $ 13,082 $ 15,202 $ 15,916 ========== ========== ========== ========== ========== ========== ========== ========== OTHER DATA: EBIT MARGIN(2).......... (5.3)% (2.2)% 0.1% 2.5% 4.5% 6.6% 8.7% 9.0% EBITDA MARGIN(3)........ 10.3% 13.7% 15.8% 17.4% 19.5% 21.5% 24.4% 25.3% Ending units in service............... 2,001,525 2,181,775 2,343,299 2,513,337 2,652,443 2,752,580 2,767,742 2,618,527 ARPU(4)................. $ 8.04 $ 7.97 $ 7.90 $ 7.80 $ 7.86 $ 7.84 $ 7.87 $ 8.06 Capital employed per unit in service(5).... $ 41 $ 40 $ 36 $ 34 $ 31 $ 28 $ 27 $ 27 RETURN ON CAPITAL EMPLOYED(6)........... 22.0% 28.6% 36.5% 43.7% 53.6% 67.9% 81.4% 90.0%
- --------------- (1) EBITDA represents earnings (loss) before interest, taxes, depreciation, amortization, other expenses and extraordinary items. 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 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. (2) Calculated by dividing quarterly EBIT by net revenues. (3) Calculated by dividing quarterly EBITDA by net revenues. (4) Calculated by dividing recurring revenues for the quarter by the simple average number of units in service during that quarter. Stated as the monthly average for the quarter. (5) Calculated by dividing consolidated total assets (excluding cash, advanced messaging services assets and international investments) minus non-interest bearing current liabilities, at the end of the period by units in service at the end of the period. (6) Calculated by multiplying quarterly EBITDA by four and dividing by total capital employed (capital employed per unit in service multiplied by domestic units in service.) 34 36 SUPPLEMENTARY INFORMATION The following table sets forth-supplementary financial information related to the Company's various operations (in thousands):
FISCAL YEAR ENDED DECEMBER 31, 1996 ----------------------------------------------------------- PAGEMART PAGEMART PAGEMART PAGING PCS INTERNATIONAL CONSOLIDATED -------- -------- ------------- ------------ Revenues............................... $221,592 $ -- $ -- $221,592 Operating loss......................... (11,465) (657) (447) (12,569) Interest expense....................... 16,137 18,904 -- 35,041 Interest income........................ 153 987 -- 1,140 Net loss............................... (27,638) (18,574) (2,386) (48,598) EBITDA................................. 9,727 (657) (447) 8,623 Total assets........................... 160,719 151,108 1,793 313,620 Capital expenditures................... 50,838 12,966 -- 63,804
FISCAL YEAR ENDED DECEMBER 31, 1997 ----------------------------------------------------------- PAGEMART PAGEMART PAGEMART PAGING PCS INTERNATIONAL CONSOLIDATED -------- -------- ------------- ------------ Revenues............................... $277,605 $ -- $ 173 $277,778 Operating loss......................... (1,887) (207) (497) (2,591) Interest expense....................... 18,679 19,820 -- 38,499 Interest income........................ 65 436 -- 501 Net loss............................... (20,987) (19,591) (3,309) (43,887) EBITDA................................. 27,774 (16) (497) 27,261 Total assets........................... 175,359 185,943 574 361,876 Capital expenditures................... 32,169 35,337 -- 67,506
FISCAL YEAR ENDED DECEMBER 31, 1998 ----------------------------------------------------------- PAGEMART PAGEMART PAGEMART PAGING PCS INTERNATIONAL CONSOLIDATED -------- -------- ------------- ------------ Revenues............................... $311,469 $ 96 $ 87 $311,652 Operating income (loss)................ 17,603 (14,506) (647) 2,450 Interest expense....................... 18,636 25,162 -- 43,798 Interest income........................ 42 3,145 -- 3,187 Loss before extraordinary items........ (893) (37,284) (3,533) (41,710) EBITDA................................. 55,208 (8,691) (647) 45,870 Total assets........................... 166,766 325,118 2,171 494,055 Capital expenditures................... 40,386 128,032 128 168,546
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 and the 11 1/4% Notes, as well as borrowings under the Revolving Credit Agreement and Vendor Financing Arrangement (as defined herein). 35 37 Capital expenditures (excluding capitalized interest) were $63.8 million, $67.5 million and $168.5 million for the years ended December 31, 1996, 1997 and 1998, respectively. 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 for the Company's one-way messaging operations and $9.5 million for the development of the Company's new administrative system. Capital expenditures for the year ended 1998 include approximately $128.0 million related to the development of its advanced messaging network, $8.8 million for the Company's one-way messaging network, $18.4 million for computer hardware and software, $2.3 million for corporate expansion and relocation and $8.1 million for pagers. 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, 1998, the Company had purchased $31.9 million of network infrastructure under this purchase commitment. The Company capitalized approximately $11.4 million of interest expense for the narrowband PCS licenses and advanced messaging network costs for those markets under construction during the twelve months ended December 31, 1998. The Company's net cash provided by operating activities for the years ended December 31, 1996, 1997 and 1998 was $3.6 million, $37.2 million and $75.6 million, respectively. Net cash used in investing activities was $64.0 million, $68.5 million and $168.7 million for the years ended December 31, 1996, 1997 and 1998, respectively and were primarily for capital expenditures. Net cash provided by financing activities was $56.0 million, $17.0 million and $102.3 million for the years ended December 31, 1996, 1997 and 1998, respectively. 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. Cash provided by financing activities in 1998 resulted primarily from the receipt of $107.8 million of net proceeds from the issuance of the 11 1/4% Notes and the retirement of the 12 1/4% Notes. On January 28, 1998, the Company completed an offering of 11 1/4% Notes (the "Offering") resulting in approximately $249.7 million in gross proceeds. Simultaneously, with the closing of the Offering, the Company refinanced certain of its outstanding indebtedness, and modified its corporate structure (the "Refinancing"). The Refinancing consisted of the following: (i) purchasing all of the outstanding 12 1/4% Notes ($136.5 million principal amount at maturity), (ii) amending 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 has used the remaining proceeds to fund the construction of its advanced messaging network and for general corporate purposes. In connection with the Refinancing, the Company incurred an extraordinary charge of approximately $13.8 million related to the early retirement of debt. The 11 1/4% Notes, which are unsecured senior obligations of the Company, mature in 2008 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 December 31, 1998 to February 1, 2003 of $155.6 million. From and after August 1, 2003, interest on the 11 1/4% Notes will be payable semiannually, in cash. The 15% Notes, which are unsecured senior obligations of the Company, 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, 1998 to February 1, 2000 of $30.0 million. From and after February 1, 2000, interest on the 15% Notes will be payable semiannually, in cash. 36 38 In March 1997, PageMart entered into a vendor financing arrangement with an infrastructure vendor (the "Vendor Financing Arrangement"), providing for the financing of one-way or advanced messaging services 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% 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. During the first quarter ended March 31, 1998, the Company repaid the total amount outstanding of $21.2 million on the Vendor Financing Arrangement and modified the agreement to provide $30 million of available financing, in aggregate, during the period from September 1, 1998 through December 31, 2000. The Company has borrowed $9.8 million under the Vendor Financing Arrangement as of December 31, 1998. The weighted average interest rate in effect on December 31, 1998 with respect to the Vendor Financing Arrangement was 12.56%. 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 provided for a $50 million revolving line of credit (the "Revolving Credit Agreement"). As of December 31, 1998 there were no loans outstanding under the Revolving Credit Agreement. In March 1999, the Company entered into a four year credit agreement with Bankers Trust Company and Morgan Stanley Senior Funding, Inc. which provides for a $100 million credit facility (the "Credit Facility"). The Credit Facility replaces the Revolving Credit Agreement, which was simultaneously terminated. The Credit Facility provides for $75 million of multi-draw term loans (the "Term Loans") and $25 million of revolving loans (the "Revolving Loans"). As of March 23, 1999, $50 million was immediately available to the Company, $10 million of which was Revolving Loans. On March 24, 1999, the Company borrowed $25 million in Term Loans pursuant to the terms of the Credit Facility. Approximately $12 million of the initial borrowing was used to repay amounts outstanding under the Vendor Financing Arrangement and to fund the fees and expenses of the Credit Facility. The Credit Facility bears interest at the U.S. prime rate plus 2.75% or at LIBOR plus 3.75%. Further availability of the Credit Facility beyond the initial $50 million is based on the Company's achievement of certain minimum targets for advanced messaging subscriber units in service. As of December 31, 1998, the Company had $9.7 million outstanding under the Vendor Financing Arrangement and its indebtedness under the 11 1/4% Notes was $276.4 million and its indebtedness under the 15% Notes was $177.3 million. 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. The indenture under which the 15% Notes were issued, the indenture under which the 11 1/4% Notes were issued, the Vendor Financing Arrangement and the Credit Facility 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 Credit Facility requires the Company to maintain certain operating and financial performance measures 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 expects to make further investments in Canada to upgrade the network to advanced messaging and fund working capital requirements. 37 39 During the first quarter of 1998, the Company began the implementation of its advanced messaging services network. The Company has incurred significant capital expenditures and expects to incur significant operating losses and additional capital expenditures associated with the implementation and deployment of its advanced messaging services. The Company has incurred capital expenditures of approximately $128.0 million in 1998 to construct and deploy its advanced messaging network. In addition, the Company funded negative cash flow of $8.7 million to support operations and marketing in 1998. On December 15, 1998, the Company launched nationwide advanced messaging services covering approximately 70% of the U.S. population. The Company anticipates that the advanced messaging operations will require approximately $40 million of additional capital expenditures in 1999 to complete the addition of narrowband PCS capabilities, expand its network geographically and make other enhancements. In addition, the Company expects the advanced messaging operations to require approximately $30 million to fund operations and marketing in 1999 as the Company's advanced messaging customer base grows. As of December 31, 1998, the Company had approximately $18.5 million in cash, cash equivalents and short-term investments. On March 24, 1999, the Company borrowed $25 million in Term Loans pursuant to the terms of the Credit Facility. On March 29, 1999, the Company repaid all amounts outstanding under the Vendor Financing Arrangement. At March 29, 1999 the borrowings available under the Vendor Financing Arrangement were approximately $30 million. As of March 29, 1999, the borrowings available under the Credit Facility were $25 million. Additional availability under the Credit Facility is based on certain minimum targets on advanced messaging subscriber units in service. The Company anticipates that its cash balance and amounts available under the Credit Facility and Vendor Financing Arrangement, combined with anticipated excess cash flows from the Company's PageMart Paging division, will be sufficient to fund the Company's consolidated operations and capital expenditures through 1999. 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. YEAR 2000 READINESS DISCLOSURE In 1997, the Company began an evaluation of its computer systems and network infrastructure for Year 2000 readiness. The Year 2000 issue stems from the use of two-digit dates in computer programs. Programs that use the two-digit dates may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in system malfunctions or failures causing disruptions in operations. The Company is currently in the process of assessing the impact of the Year 2000 on its operations and is upgrading, modifying or replacing software or equipment where necessary. To support the Company's assessment, executive management has appointed a cross-functional steering committee to address potential Year 2000 problems and to formulate and guide the Company's Year 2000 enterprise readiness plans. The Company has divided its Year 2000 efforts into two primary areas: its administrative and network systems, and third party suppliers and vendors. The Company's administrative and network systems consist of software and hardware systems that are a combination of internally developed software and third party software and hardware. The Company's approach is to: - Create an inventory of items that must be assessed and prioritize the items by how critical they are to the operations of the Company; - Assess their readiness through testing; 38 40 - Plan and implement corrective actions; - Develop contingency plans. The Company intends to include third party software and hardware in this assessment process to the extent practicable, even though it may have obtained Year 2000 readiness information from the vendor or supplier of the software or hardware. As of the date of this report, the Company has materially completed the inventory and prioritization of items. Certain administrative software that was not Year 2000 ready had to be upgraded before extensive testing could begin. The upgraded software was installed in October 1998. Testing plans have been completed and testing is proceeding. Testing of the Company's information systems is scheduled to be substantially completed in April 1999. Certain network software is not Year 2000 ready, but the vendor of the software has informed the Company that a Year 2000 ready version will be released in the second quarter of 1999. Testing of the Company's network systems is scheduled to be substantially completed by the end of the second quarter of 1999. After remediation of any problems discovered during testing, the Company expects that critical hardware and software systems that are within its ability to test will be Year 2000 ready in mid-1999. The Company then plans to conduct enterprise-wide, end-to-end testing of its systems during the third quarter of 1999. Although, the Company's contingency plans are not fully developed, the Company expects to develop contingency plans to mitigate, to the extent possible, the effects of any significant Year 2000 problem that is not corrected. The Company uses hardware, software and services supplied by third party vendors in most of its operations. The Company's approach has been to: - Create a list of suppliers and vendors; - Communicate with each supplier and vendor to try to obtain information about the Year 2000 readiness of its products and services; - Work cooperatively with vendors and suppliers whose products or services are not Year 2000 ready to resolve the problems. Some third party products can be tested by the Company for Year 2000 readiness and will be included in the assessment described above. Other third party products and services cannot be independently tested by the Company, some of which are critical to the operations of the Company, such as satellite and other third party telecommunications services and electric utility services. Although the Company has received or expects to receive Year 2000 readiness certification or information regarding most of these third party products and services, the Company can make no representation that all third party products and services will be Year 2000 ready. The Company believes that its Year 2000 readiness effort will significantly reduce the level of uncertainty about the Company's Year 2000 readiness. Throughout the remainder of 1999, the Company will continue to assess its Year 2000 readiness. However, due to the general uncertainty inherent in the Year 2000 problem, resulting in part from the uncertainty of the Year 2000 readiness of third party suppliers and vendors, the Company cannot currently determine whether all Year 2000 problems material to its operations will be corrected. A failure to correct a material Year 2000 problem could result in the interruption or failure of certain normal business operations, such as the Company's paging and messaging services, customer activations and services, or customer invoicing and collections. Such failures, if prolonged, could materially and adversely affect the Company's results of operations, liquidity or financial condition. The Company's program to upgrade, modify or replace software and hardware has two objectives, to increase functionality and efficiency and to make the Company Year 2000 ready. In 1998, the Company spent approximately $18.4 million to upgrade, modify or replace hardware and software, most of which relates to the increased functionality and efficiency. An ancillary benefit of these upgrades was Year 2000 readiness, the cost of which was not significant. The Company has not fully determined the final aggregate costs of its Year 2000 readiness activities. 39 41 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. 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 related to the Company's annual meeting of stockholders to be held on May 12, 1999, 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 related to the Company's annual meeting of stockholders to be held on May 12, 1999, 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 related to the Company's annual meeting of stockholders to be held on May 12, 1999, 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 and Financial Statement Schedule on Page F-1 hereof. (2) Financial Statement Schedules. See Index to Consolidated Financial Statements and Financial State Schedule 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, 1998: Current Report on Form 8-K dated December 11, 1998 disclosing under Item 5 "Other Events" the Company's expected financial results for fourth quarter 1998. 40 42 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: March 30, 1999 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.
SIGNATURE TITLE DATE --------- ----- ---- /s/ JOHN D. BELETIC Chairman and Chief Executive March 30, 1999 - ----------------------------------------------------- Officer (Principal Executive John D. Beletic Officer) /s/ G. CLAY MYERS Vice President, Finance, March 30, 1999 - ----------------------------------------------------- Chief Financial Officer and G. Clay Myers Treasurer (Principal Financial and Accounting Officer) /s/ LEIGH J. ABRAMSON Director March 30, 1999 - ----------------------------------------------------- Leigh J. Abramson /s/ GUY L. DE CHAZAL Director March 30, 1999 - ----------------------------------------------------- Guy L. De Chazal /s/ STEVEN B. DODGE Director March 30, 1999 - ----------------------------------------------------- Steven B. Dodge /s/ MICHAEL C. HOFFMAN Director March 30, 1999 - ----------------------------------------------------- Michael C. Hoffman /s/ ARTHUR PATTERSON Director March 30, 1999 - ----------------------------------------------------- Arthur Patterson /s/ ALEJANDRO PEREZ ELIZONDO Director March 30, 1999 - ----------------------------------------------------- Alejandro Perez Elizondo /s/ PAMELA D.A. REEVE Director March 30, 1999 - ----------------------------------------------------- Pamela D.A. Reeve
41 43 PAGEMART WIRELESS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Public Accountants.................... F-2 Consolidated Balance Sheets as of December 31, 1997 and 1998...................................................... F-3 Consolidated Statements of Operations for the Years Ended December 31, 1996, 1997 and 1998.......................... F-4 Consolidated Statements of Stockholders' (Deficit) Equity for the Years Ended December 31, 1996, 1997 and 1998...... F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and 1998.......................... F-6 Notes to Consolidated Financial Statements.................. F-7
F-1 44 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, 1997 and 1998, and the related consolidated statements of operations, stockholders' (deficit) equity and cash flows for each of the three years in the period ended December 31, 1998. 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, 1997 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP Dallas, Texas, February 3, 1999 (except with respect to the matter discussed in Note 18, as to which the date is March 26, 1999) F-2 45 PAGEMART WIRELESS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 AND 1998 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
DECEMBER 31, ---------------------- 1997 1998 --------- --------- ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 8,337 $ 17,476 Short-term investments.................................... -- 1,000 Accounts receivable (net of allowance for doubtful accounts of $7,170 and $2,580 at December 31, 1997 and 1998, respectively).................................... 61,394 38,304 Inventories............................................... 5,359 6,747 Other current assets...................................... 9,043 11,010 --------- --------- Total current assets.............................. 84,133 74,537 PROPERTY AND EQUIPMENT (net of accumulated depreciation of $76,388 and $116,326 at December 31, 1997 and 1998, respectively)............................................. 136,727 274,179 NARROWBAND LICENSES (net of accumulated amortization of $510 at December 31, 1998)..................................... 133,065 132,555 OTHER ASSETS (net of accumulated amortization of $6,077 and $5,391 at December 31, 1997 and 1998, respectively)....... 7,951 12,784 --------- --------- Total assets...................................... $ 361,876 $ 494,055 ========= ========= LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY CURRENT LIABILITIES: Accounts payable.......................................... $ 28,009 $ 38,703 Deferred revenue.......................................... 53,469 57,512 Current maturities of long-term debt...................... 2,755 1,238 Other current liabilities................................. 20,740 23,297 --------- --------- Total current liabilities......................... 104,973 120,750 LONG-TERM DEBT.............................................. 289,344 462,079 OTHER LONG-TERM LIABILITIES................................. -- 1,248 COMMITMENTS AND CONTINGENCIES (SEE NOTE 8) STOCKHOLDERS' (DEFICIT) EQUITY: Common stock, $.0001 par value per share, 75,000,000 shares authorized: Class A Convertible Common Stock, 34,115,157 shares issued and outstanding at December 31, 1997; 34,536,512 shares issued and outstanding at December 31, 1998.............................................. 3 3 Class B Convertible Non-Voting Common Stock, 3,809,363 shares issued and outstanding at December 31, 1997 and December 31, 1998..................................... 1 1 Class C Convertible Non-Voting Common Stock, 1,428,472 shares issued and outstanding at December 31, 1997 and December 31, 1998..................................... -- -- Class D Convertible Non-Voting Common Stock, 679,945 shares issued and outstanding at December 31, 1997; 623,945 shares issued and outstanding at December 31, 1998.................................................. -- -- Additional paid-in capital................................ 226,622 228,438 Accumulated deficit....................................... (258,575) (317,891) Stock subscriptions receivable............................ (492) (573) --------- --------- Total stockholders' (deficit) equity.............. (32,441) (90,022) --------- --------- Total liabilities and stockholders' (deficit) equity.......................................... $ 361,876 $ 494,055 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. F-3 46 PAGEMART WIRELESS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, ------------------------------ 1996 1997 1998 -------- -------- -------- REVENUES: Recurring revenue......................................... $153,041 $206,907 $254,814 Equipment revenue......................................... 68,551 70,871 56,838 -------- -------- -------- Total revenues.................................... 221,592 277,778 311,652 COST OF EQUIPMENT SOLD...................................... 78,896 86,175 69,150 -------- -------- -------- 142,696 191,603 242,502 OPERATING EXPENSES: Technical................................................. 37,021 46,513 56,584 Selling................................................... 43,046 51,371 55,305 General and administrative................................ 54,006 66,458 84,743 Depreciation and amortization............................. 21,192 29,852 43,420 -------- -------- -------- Total operating expenses.......................... 155,265 194,194 240,052 -------- -------- -------- Operating (loss) income........................... (12,569) (2,591) 2,450 OTHER (INCOME) EXPENSE: Interest expense.......................................... 35,041 38,499 43,798 Interest income........................................... (1,140) (501) (3,187) Other..................................................... 2,128 3,298 3,549 -------- -------- -------- Total other (income) expense...................... 36,029 41,296 44,160 -------- -------- -------- LOSS BEFORE EXTRAORDINARY ITEMS:............................ (48,598) (43,887) (41,710) ======== ======== ======== EXTRAORDINARY ITEMS: Early retirement of debt.................................. -- -- (13,808) Satellite failure......................................... -- -- (3,798) -------- -------- -------- NET LOSS.................................................... $(48,598) $(43,887) $(59,316) ======== ======== ======== NET LOSS PER SHARE (Basic and Diluted) LOSS BEFORE EXTRAORDINARY ITEMS............................. $ (1.30) $ (1.10) $ (1.03) EXTRAORDINARY ITEMS......................................... -- -- (0.44) -------- -------- -------- NET LOSS.................................................... $ (1.30) $ (1.10) $ (1.47) ======== ======== ======== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (Basic and Diluted).................................................. 37,462 39,922 40,246
The accompanying notes are an integral part of these consolidated financial statements. F-4 47 PAGEMART WIRELESS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
COMMON STOCK -------------------- ADDITIONAL STOCK NUMBER OF PAID-IN ACCUMULATED SUBSCRIPTIONS SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE TOTAL ---------- ------ ---------- ----------- ------------- -------- BALANCE, December 31, 1995.......................... 33,710,053 $ 3 $154,601 $(166,090) $(557) $(12,043) 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 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 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) Common stock issued under the stock option/stock issuance plan/employee stock purchase plan...... 364,205 -- 1,813 -- (139) 1,674 Exercise of common stock warrants................. 1,150 -- 3 -- -- 3 Repayment of stock subscriptions receivable....... -- -- -- -- 58 58 Net loss.......................................... -- -- -- (59,316) -- (59,316) ---------- --- -------- --------- ----- -------- BALANCE, December 31, 1998.......................... 40,398,292 $ 4 $228,438 $(317,891) $(573) $(90,022) ========== === ======== ========= ===== ========
The accompanying notes are an integral part of these consolidated financial statements. F-5 48 PAGEMART WIRELESS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED DECEMBER 31, ------------------------------- 1996 1997 1998 -------- -------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss.................................................. $(48,598) $(43,887) $ (59,316) Adjustments to reconcile net loss to net cash provided by operating activities: Extraordinary items..................................... -- -- 17,606 Depreciation and amortization........................... 21,192 29,852 43,420 Provision for bad debts................................. 6,986 10,910 11,130 Accretion of discount on Senior Discount Notes.......... 30,871 35,431 40,284 Amortization of deferred debt issuance costs............ 2,083 846 2,489 Changes in certain assets and liabilities: (Increase) decrease in accounts receivable............ (18,929) (38,858) 11,960 (Increase) decrease in inventories.................... (523) 6,343 (1,388) Decrease (increase) in other current assets........... 59 (6,222) (1,967) (Increase) decrease in other assets................... (1,052) 3,105 (543) Increase in accounts payable.......................... 92 4,823 10,694 Increase in deferred revenue.......................... 5,638 26,422 4,043 Increase (decrease) in other current liabilities...... 5,744 8,470 (2,820) -------- -------- --------- Net cash provided by operating activities........... 3,563 37,235 75,592 -------- -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment....................... (63,804) (67,506) (168,546) Purchase of short-term investments........................ -- -- (1,000) Release of restricted cash................................ 500 -- -- Other..................................................... (648) (992) 801 -------- -------- --------- Net cash used in investing activities............... (63,952) (68,498) (168,745) -------- -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock.................... 70,500 -- -- Proceeds from issuance of common stock under the stock option/stock issuance plan/employee stock purchase plan.................................................... 561 759 1,674 Retirement of 12 1/4% Senior Discount Notes............... -- -- (130,689) Proceeds from issuance of 11 1/4% Senior Subordinated Discount Notes.......................................... -- -- 249,700 Offering Costs related to issuance of 11 1/4% Senior Subordinated Discount Notes and retirement of 12 1/4% Senior Discount Notes................................... -- -- (12,158) Borrowings under Revolving Credit Agreement............... 31,100 3,000 -- Payments under Revolving Credit Agreement................. (31,100) (3,000) -- Borrowings from vendor financing arrangements............. -- 17,053 15,097 Payments on vendor financing arrangements................. (15,027) (1,072) (21,393) Other..................................................... (15) 257 61 -------- -------- --------- Net cash provided by financing activities........... 56,019 16,997 102,292 -------- -------- --------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ (4,370) (14,266) 9,139 CASH AND CASH EQUIVALENTS, beginning of period.............. 26,973 22,603 8,337 -------- -------- --------- CASH AND CASH EQUIVALENTS, end of period.................... $ 22,603 $ 8,337 $ 17,476 ======== ======== ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest................................................ $ 1,231 $ 1,306 $ 969 Income taxes............................................ $ -- $ -- $ --
The accompanying notes are an integral part of these consolidated financial statements. F-6 49 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"). On January 28, 1998, PageMart was merged into Wireless with Wireless as the surviving corporation. Wireless and its subsidiaries are referred to herein as the "Company." The consolidated financial statements of the Company include the accounts of PageMart PCS, Inc., PageMart II, Inc., PageMart Operations, Inc., PageMart International, Inc. and certain other direct and indirect subsidiaries of Wireless. Each of these companies is a wholly-owned subsidiary of Wireless. PageMart PCS, Inc. holds certain narrowband personal communications services licenses. PageMart II, Inc. and PageMart Operations, Inc. hold certain Federal Communications Commission ("FCC") licenses. PageMart International, Inc. holds certain investments in an international operation in Canada. Other than these licenses and international investments, the subsidiaries of Wireless have no significant assets or liabilities. The Company has incurred substantial losses from consolidated operations since inception and is highly leveraged. Although operating income was reported in 1998, management expects to continue to incur consolidated operating losses in 1999. 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 1999. 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION The accompanying consolidated 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. SHORT-TERM INVESTMENTS The Company includes as short-term investments, investments with maturities greater than three months and less than one year. 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 50 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 $19,688,000, $28,690,000 and $42,541,000 for the years ended December 31, 1996, 1997 and 1998, 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):
DECEMBER 31, ------------------- 1997 1998 -------- -------- Network equipment........................................... $157,543 $306,503 Computer equipment.......................................... 41,023 65,273 Furniture and equipment..................................... 14,549 18,729 -------- -------- 213,115 390,505 Less: Accumulated depreciation.............................. (76,388) (116,326) -------- -------- $136,727 $274,179 ======== ========
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 8). Patent licensing revenues of $4,596,000 are included in recurring revenues in fiscal years 1996, 1997 and 1998. 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. 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 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. Under the provisions of SFAS 128, dilutive securities are excluded from the calculation of earnings per share when there is a net loss because their inclusion would be anti-dilutive. The securities listed below were not included in the computation of diluted loss per share, since the effect from the conversion would be anti-dilutive.
DECEMBER 31, DECEMBER 31, DECEMBER 31, 1996 1997 1998 ------------ ------------ ------------ Stock Options......................... 3,498,292 4,300,496 5,700,971 Warrants.............................. 834,648 786,348 785,198 --------- --------- --------- 4,332,940 5,086,844 6,486,169 ========= ========= =========
F-8 51 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. 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, 1997 and 1998. 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 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 commenced in 1998 for those markets placed in service. The NPCS licenses are amortized over a period of 40 years. Amortization expense for the period ended December 31, 1998 was $510,000. 4. CAPITALIZED INTEREST In accordance with statement of Financial Accounting Standards No. 34 -- Capitalization of Interest Cost, the Company capitalizes interest on certain qualifying assets during the construction period. Interest costs attributable to the construction of the Company's advanced messaging network of $11.4 million was capitalized for the period ended December 31, 1998. The Company did not capitalize any interest costs for the period ended December 31, 1997. 5. 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 Current Assets in the Consolidated Balance Sheets. F-9 52 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. On November 26, 1998, the Company received notification from the third party Canadian investors, which represent the controlling shareholder interest in Canada Holding, of its intent to exchange its 1,000,000 shares of Class A Common Stock in Canada Holding for shares of PageMart Wireless, Inc. pursuant to its rights contained in the Agreement Among Stockholders of PageMart Canada, dated July 28, 1995. The Agreement Among Stockholders permits the Company to find a replacement for the Canadian investors in order to comply with Canadian regulations governing ownership of Canadian paging licenses. The Company is currently examining alternative arrangements in Canada including the replacement of the Canadian investors or the ultimate transfer of PageMart Canada to another entity. The Company may consider selling its interest in PageMart Canada in exchange for a network affiliation arrangement similar to those utilized by the Company in other countries. 6. OTHER CURRENT LIABILITIES Other current liabilities consisted of the following (in thousands):
DECEMBER 31, ------------------ 1997 1998 ------- ------- Accrued payroll and employee benefits....................... $ 4,080 $ 6,572 Accrued taxes............................................... 1,623 6,829 Other current liabilities................................... 15,037 9,896 ------- ------- $20,740 $23,297 ======= =======
7. LONG-TERM DEBT Long-term debt consisted of the following (in thousands):
DECEMBER 31, -------------------- 1997 1998 -------- -------- 12 1/4% Senior Discount Exchange Notes, face amount $136,500 due November 1, 2003, at accreted value................... $122,720 $ -- 15% Senior Discount Exchange Notes, face amount $207,270 due February 1, 2005, at accreted value....................... 153,398 177,270 11 1/4% Senior Subordinated Discount Exchange Notes, face amount $432,000 due February 1, 2008, at accreted value... -- 276,362 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 12.31% to 12.69% at December 31, 1998.).............. 15,981 9,685 -------- -------- Total debt........................................ 292,099 463,317 Less: Current maturities.......................... (2,755) (1,238) -------- -------- Long-term debt.................................... $289,344 $462,079 ======== ========
F-10 53 On January 28, 1998, the Company received approximately $249.7 million in gross proceeds from the sale of its 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 and modified its corporate structure (the "Refinancing"). The Refinancing consisted of: (i) purchasing all of the Company's outstanding 12 1/4% Senior Discount Notes due 2003 (the "12 1/4% Notes"); (ii) amending certain terms of the covenants and agreements in the indenture relating to the Company's 15% Senior Discount Notes due 2005; and (iii) merging PageMart, Inc. into PageMart Wireless, Inc., with PageMart Wireless, Inc. as the surviving corporation. Approximately $130.7 million of the net proceeds of the Offering was used to finance the retirement of the 12 1/4% Notes. The proceeds remaining after expenses of the Offering and Refinancing were approximately $107.8 million. In connection with the Refinancing, the Company incurred an extraordinary charge of approximately $13.8 million in the first quarter of 1998 related to the early retirement of debt. The 11 1/4% Senior Subordinated Discount Notes due 2008 (the "11 1/4% Notes") have a principal amount at maturity of $432.0 million with an initial accreted value of $249.7 million. The 11 1/4% Notes mature on February 1, 2008. From and after August 1, 2003, interest on the 11 1/4% Notes will be paid semiannually in cash at the rate of 11 1/4% per annum. The 11 1/4% Notes are redeemable at any time on or after February 1, 2003, at the option of the Company in whole or in part, at 105.625% 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, 2006. In addition, at any time prior to February 1, 2001, up to 35% of the accreted value of the 11 1/4% Notes may be redeemed at a redemption price of 111.25% of their accreted value on the redemption date at the option of the Company in connection with a public offering of its common stock, provided that at least $280.8 million aggregate principal amount at maturity of the 11 1/4% Notes remains outstanding after each redemption. In April 1998, the Company commenced an exchange offer pursuant to an effective registration statement whereby all outstanding 11 1/4% Notes were exchanged for the Company's 11 1/4% Senior Discount Exchange Notes due 2008 (the "11 1/4% Exchange Notes"). The terms and conditions of the 11 1/4% Exchange Notes are equivalent to the 11 1/4% Notes in all material respects. 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 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 "15% Exchange Notes"). The terms and conditions of the 15% Exchange Notes are equivalent to the 15% Notes in all material respects. The 11 1/4% Exchange Notes and the 15% Exchange 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 was in compliance with all such restrictive covenants at December 31, 1998. In March 1997, the Company entered into a vendor financing arrangement with an infrastructure vendor (the "Vendor Financing Arrangement"), providing for the financing of infrastructure equipment over a period of 60 months up to a maximum aggregate amount of $30 million. Borrowings under the Vendor Financing F-11 54 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. During the first quarter ended March 31, 1998, the Company repaid the total amount outstanding of $21.2 million on the Vendor Financing Arrangement and modified the agreement to provide $30 million of available financing, in aggregate, during the period from September 1, 1998 through December 31, 2000. As of December 31, 1998, there are $9.7 million in loans outstanding. The weighted average interest rate in effect on December 31, 1998 with respect to the Vendor Financing Arrangement was 12.56%. 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, 1998, 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, 1998, the maximum amount available under the Revolving Credit Agreement was $24.8 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, at accreted value, and amounts outstanding under the Vendor Financing Agreement are as follows (in thousands):
FOR THE YEAR ENDING DECEMBER 31, - ------------------- 1999.............................................................. $ 1,238 2000.............................................................. 2,071 2001.............................................................. 1,967 2002.............................................................. 2,230 2003.............................................................. 2,179 Thereafter........................................................ 453,632 -------- $463,317 ========
F-12 55 8. 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 1996, 1997 and 1998 was approximately $13,496,000, $18,379,000 and $26,749,000, respectively. Future minimum lease payments related to the Company's operating leases are as follows (in thousands):
FOR THE YEAR ENDING OPERATING DECEMBER 31, LEASES - ------------------- --------- 1999............................................................... $21,131 2000............................................................... 17,871 2001............................................................... 13,699 2002............................................................... 9,924 2003............................................................... 6,623 Thereafter......................................................... 18,523 ------- Total minimum lease payments....................................... $87,771 =======
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 threatened 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, 1998, the Company had purchased $31.9 million of network infrastructure under this purchase commitment. 9. 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, the estimated fair value is 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, 1997 and 1998, are as follows (in thousands):
DECEMBER 31, 1997 DECEMBER 31, 1998 ------------------- ------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------- -------- -------- -------- Cash and cash equivalents......................... $ 8,337 $ 8,337 $ 17,476 $ 17,476 Long-term debt.................................... $292,099 $275,666 $463,317 $381,157
10. STOCKHOLDERS' (DEFICIT) EQUITY 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, 1997 and 1998, 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-13 56 COMMON STOCK In October 1993 in connection with issuance of the 12 1/4% Notes (see Note 7), 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, 1998, 578,450 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:
SHARES ISSUED AND OUTSTANDING ----------------------- DECEMBER 31, SHARES ----------------------- AUTHORIZED 1997 1998 ---------- ---------- ---------- Class A Convertible Common Stock, $.0001 par value per share (the "Class A Common Stock").................... 60,000,000 34,115,157 34,536,512 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").......... 1,000,000 679,945 623,945 ---------- ---------- ---------- 75,000,000 40,032,937 40,398,292 ========== ========== ==========
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. 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. During the year ended December 31, 1998, certain holders of Class D Common Stock exercised their right under the Stockholder's Agreement and converted 56,000 shares into 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 all of which are outstanding at December 31, 1998. The warrants may be exercised in whole or in part starting on March 20, 1997 and expire on March 21, 2005. F-14 57 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 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, 1998:
SHARES --------- Exercise of common stock warrants........................... 785,198 Exchange of Canada Holding shares........................... 714,286 Stock option/stock issuance plan............................ 6,159,775 Employee Stock Purchase Plan................................ 389,057 Non-Employee/Director Stock Option Plan..................... 100,000 --------- 8,148,316 =========
11. STOCK OPTION/STOCK ISSUANCE/STOCK PURCHASE PLANS STOCK COMPENSATION PLANS At December 31, 1998, 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" ("SFAS 123"), the Company's net loss and loss per share would have been increased to the pro forma amounts indicated below:
1996 1997 1998 -------- -------- -------- Net loss (in 000's)..................... As reported $(48,598) $(43,887) $(59,316) Pro forma (50,095) (46,568) (62,446) Basic and diluted loss per share........ As reported $ (1.30) $ (1.10) $ (1.47) Pro forma (1.34) (1.17) (1.55)
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 generally 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. F-15 58 The pro forma net loss and loss per share amounts disclosed above reflect the SFAS 123 adjustment for pro forma compensation cost for the fair value of each option grant, which was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
1996 1997 1998 ---- ---- ---- 1991 PLAN: Dividend yield............................................ -- -- -- Expected volatility....................................... 40.0% 47.3% 48.2% Average risk-free interest rate........................... 6.4% 6.3% 5.1% Expected term in years.................................... 8.2 8.7 8.1 DIRECTORS PLAN: Dividend yield............................................ -- -- -- Expected volatility....................................... 40.0% 40.0% 48.2% Average risk-free interest rate........................... 6.7% 6.7% 4.5% Expected term in years.................................... 8.2 8.2 10.0
A summary of the status of the Company's 1991 Plan and Directors Plan as of December 31, 1996, 1997 and 1998 and changes during the years ending on these dates is presented below: 1991 PLAN
1996 1997 1998 ----------------- ----------------- ----------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE (000) PRICE (000) PRICE (000) PRICE ------ -------- ------ -------- ------ -------- Outstanding at beginning of year........ 2,669 $6.59 3,473 $7.09 4,276 $7.12 Granted................................. 1,126 8.49 2,502 8.36 2,277 7.61 Exercised............................... (64) 5.24 (135) 4.19 (329) 4.86 Forfeited............................... (258) 8.51 (1,564) 9.28 (573) 8.57 ----- ------ ----- Outstanding at end of year.............. 3,473 $7.09 4,276 $7.12 5,651 $7.30 ===== ====== ===== Options exercisable at year-end......... 1,077 $5.19 1,502 $5.26 1,892 $6.19 ===== ====== ===== Weighted-average fair value of options granted during the year............... $5.02 $4.74 $4.68 ===== ===== =====
DIRECTORS PLAN
1996 1997 1998 ----------------- ----------------- ----------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE SHARES EXERCISE SHARES EXERCISE SHARES EXERCISE (000) PRICE (000) PRICE (000) PRICE ------ -------- ------ -------- ------ -------- Outstanding at beginning of year......... -- $ -- 25 $12.00 25 $12.00 Granted.................................. 25 12.00 -- -- 25 6.05 Exercised................................ -- -- -- -- -- -- Forfeited................................ -- -- -- -- -- -- -- -- -- Outstanding at end of year............... 25 $12.00 25 $12.00 50 $ 9.03 == == == Options exercisable at year-end.......... 6 $12.00 15 $12.00 23 $12.00 == == == Weighted-average fair value of options granted during the year................ $ 7.04 $ -- $ 3.93 ====== ====== ======
F-16 59 The following table summarized information about fixed stock options outstanding at December 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ----------------------------------------------- ---------------------------- NUMBER WEIGHTED-AVG. NUMBER RANGE OF OUTSTANDING REMAINING WEIGHTED-AVG. EXERCISABLE WEIGHTED-AVG. EXERCISE PRICES AT 12/31/98 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/98 EXERCISE PRICE - --------------- ----------- ---------------- -------------- ----------- -------------- 1991 PLAN $ 0.00 to 2.00 122,317 3.0 $ 0.91 122,317 $ 0.91 2.01 to 4.00 348,367 4.4 3.26 348,367 3.26 4.01 to 6.00 112,967 7.7 5.60 49,670 5.42 6.01 to 8.00 3,017,398 8.0 6.60 1,139,171 6.92 8.01 to 10.00 2,039,572 9.1 9.49 227,337 9.93 10.01 to 12.00 10,350 7.4 10.81 5,196 10.82 DIRECTORS PLAN $ 0.00 to 12.00 50,000 8.5 $ 9.03 22,915 $12.00
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, 44,616 shares in 1997 and 35,052 shares in 1998. The weighted-average fair value of the purchased rights granted in 1996 was $2.14, $1.65 in 1997 and $2.06 in 1998. The pro forma net loss and loss per share amounts disclosed above reflect the SFAS 123 adjustment for pro forma compensation cost for the fair value of the employees' purchase rights, which was estimated using the Black-Scholes model with the following assumptions:
1996 1997 1998 ---- ---- ---- EMPLOYEE STOCK PURCHASE PLAN: Dividend yield............................................ -- -- -- Expected volatility....................................... 40.0% 47.3% 48.2% Average risk-free interest rate........................... 6.3% 5.4% 5.4% Expected term in years.................................... 0.5 0.5 0.5
12. FEDERAL INCOME TAXES Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). 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 $222.6 million of net operating loss carryforwards for federal income tax purposes at December 31, 1998. The net operating loss carryforwards will expire in the years 2004 through 2018 if not previously utilized. The utilization of these carryforwards is subject to certain limitations. Of the net operating loss carryforwards at December 31, 1998, 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 as management believes that it is more likely than not that such asset will not be realized, 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 F-17 60 will evaluate the appropriateness of the reserve in the future based upon historical and operating results of the Company. 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):
DECEMBER 31, DECEMBER 31, 1997 CHANGE 1998 ------------ -------- ------------ Gross deferred tax asset: Net operating loss carryforwards........................ $ 53,545 $ 22,123 $ 75,668 Bad debt reserve........................................ 4,209 (3,731) 478 Inventory reserve....................................... 3,467 (3,528) (61) Accretion of Senior Discount Notes...................... 35,544 13,697 49,241 Other................................................... 1,379 (120) 1,259 -------- -------- --------- 98,144 28,441 126,585 Gross deferred tax liability: Depreciation............................................ (11,289) 7,195 (4,094) -------- -------- --------- 86,855 35,636 122,491 Valuation allowance.................................. (86,855) (35,636) (122,491) -------- -------- --------- Net deferred tax asset............................... $ -- $ -- $ -- ======== ======== =========
13. EXTRAORDINARY ITEMS In connection with the Refinancing (as discussed in Note 7), the Company incurred an extraordinary charge of approximately $13.8 million in the first quarter of 1998 related to the early retirement of debt. On May 19, 1998, the Company and many other paging companies experienced an unprecedented interruption of service when the PanAmSat Galaxy IV communications satellite, on which the Company leased capacity, ceased to communicate with paging uplink stations throughout the United States. Management believes that this is the first event of its kind to affect the paging industry in the 35 year history of satellite telecommunications. This event occurred when the satellite's onboard control system and a back-up control system failed and PanAmSat technicians were unable to restore the satellite's proper orientation toward Earth. The Company initiated its recovery plan by re-orienting its satellite links to its back-up satellites. In order to re-orient the satellite links, the Company realigned satellite dish antennas on each of its approximately 2,000 transmission sites to receive the back-up satellites' signals. Although the satellite failure was beyond the Company's control, the Company provided its customers with a two-day airtime credit to compensate them for the period when they were unable to receive messages. The Company incurred $3.8 million of costs (including the airtime credit)during the three months ended June 30, 1998 and has recorded these costs as an extraordinary charge. 14. START-UP COSTS In April, 1998, the AICPA (AcSEC -- Accounting Standards Executive Committee) issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"). The intent of SOP 98-5 is to have all companies account for start-up costs consistently. The SOP is effective for financial statements for fiscal years beginning after December 15, 1998. The initial application of this SOP is reported as the cumulative effect of change in accounting principle as described in Accounting Principles Board Opinion No. 20, Accounting Changes. The Company has not capitalized "start-up" costs as defined by SOP 98-5. Therefore, the adoption of SOP 98-5 will have no effect on the Company's financial statements. F-18 61 15. COMPREHENSIVE INCOME (LOSS) In January 1998, the Company adopted the Financial Accounting Standards Board Statement No. 130 -- Reporting Comprehensive Income, which establishes standards for reporting comprehensive income and its components within the financial statements. Comprehensive income is defined as all changes in the equity of a business enterprise from transactions and other events and circumstances, except those resulting from investments by owners and distributions to owners. The Company's comprehensive income components are immaterial for the periods ended December 31, 1998 and 1997; therefore, comprehensive income is the same as net income for both periods. 16. RELATED-PARTY TRANSACTIONS In connection with the Unit Offering completed in 1995 (see Note 7), 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 11 1/4% Notes offering and received compensation from the Company in the amount of $8.1 million for acting in such capacity. As of December 31, 1998, the president and certain other officers of the Company are indebted to the Company in the aggregate amount of $573,000 under promissory notes issued in connection with the purchase of the Company's common stock (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. Annual 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 in the Consolidated Balance Sheets. 17. SEGMENT REPORTING In June 1997, the FASB issued Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"). The Company adopted SFAS 131 for the fiscal year ending December 31, 1998. SFAS 131 establishes accounting standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company's reportable segments are divisions that offer different products and/or services. They are managed separately because each division requires different technology and management strategies. The Company reports segments based on these divisions as management makes operating decisions and assesses individual performances based on the performance of these segments. The Company has three reportable segments: PageMart Paging, PageMart PCS and PageMart International. Through its PageMart Paging division, 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. Through its PageMart PCS division, the Company has constructed and operates an advanced messaging network as an overlay of its one-way network. Advanced messaging service was first offered in Austin and San Antonio, Texas in June of 1998. As of December 15, 1998, advanced messaging services are available to approximately seventy percent of the U.S. population. Through PageMart International, the Company provides messaging services in selected countries on a seamless international network. The Company pursues international opportunities through foreign related entities, interests in joint venture arrangements, or network affiliation agreements between the Company and the owners of foreign networks. The accounting policies of the segments are the same as those described in the summary of significant accounting policies except for the allocation of debt by divisions. F-19 62 The Company has allocated proceeds from equity and debt offerings to its PageMart Paging and PageMart PCS divisions. The methodology the Company has followed to date results in the attribution of the proceeds of each offering based on the specific capital and operating requirements of each division. Positive free cash flow generated by a division is utilized to reduce its respective debt allocation. As of December 31, 1998, $155.9 million and $72.5 million of equity and $125.0 million and $338.3 million of debt have been allocated to PageMart Paging and PageMart PCS, respectively. For the twelve months ended December 31, 1998, interest expense of $18.6 million and $25.2 million was allocated to PageMart Paging and PageMart PCS, respectively. The following table sets forth segment financial information related to the Company's various operations (in thousands):
FISCAL YEAR ENDED DECEMBER 31, 1996 -------------------------------------------------- PAGEMART PAGEMART PAGEMART PAGING PCS INTERNATIONAL CONSOLIDATED -------- -------- ------------- ------------ Revenues........................................ $221,592 $ -- $ -- $221,592 Operating loss.................................. (11,465) (657) (447) (12,569) Interest expense................................ 16,137 18,904 -- 35,041 Interest income................................. 153 987 -- 1,140 Net loss........................................ (27,638) (18,574) (2,386) (48,598) EBITDA(1)....................................... 9,727 (657) (447) 8,623 Total assets.................................... 160,719 151,108 1,793 313,620 Capital expenditures............................ 50,838 12,966 -- 63,804
FISCAL YEAR ENDED DECEMBER 31, 1997 -------------------------------------------------- PAGEMART PAGEMART PAGEMART PAGING PCS INTERNATIONAL CONSOLIDATED -------- -------- ------------- ------------ Revenues........................................ $277,605 $ -- $ 173 $277,778 Operating loss.................................. (1,887) (207) (497) (2,591) Interest expense................................ 18,679 19,820 -- 38,499 Interest income................................. 65 436 -- 501 Net loss........................................ (20,987) (19,591) (3,309) (43,887) EBITDA(1)....................................... 27,774 (16) (497) 27,261 Total assets.................................... 175,359 185,943 574 361,876 Capital expenditures............................ 32,169 35,337 -- 67,506
FISCAL YEAR ENDED DECEMBER 31, 1998 ---------------------------------------------------- PAGEMART PAGEMART PAGEMART PAGING PCS INTERNATIONAL CONSOLIDATED -------- -------- --------------- ------------ Revenues...................................... $311,469 $ 96 $ 87 $311,652 Operating income (loss)....................... 17,603 (14,506) (647) 2,450 Interest expense.............................. 18,636 25,162 -- 43,798 Interest income............................... 42 3,145 -- 3,187 Loss before extraordinary items............... (893) (37,284) (3,533) (41,710) EBITDA(1)..................................... 55,208 (8,691) (647) 45,870 Total assets.................................. 166,766 325,118 2,171 494,055 Capital expenditures.......................... 40,386 128,032 128 168,546
- --------------- (1) EBITDA represents earnings (loss) before interest, taxes, depreciation, amortization, other expenses and extraordinary items. 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 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. F-20 63 18. SUBSEQUENT EVENT On March 23, 1999, the Company entered into a four year credit agreement with Bankers Trust Company and Morgan Stanley Senior Funding, Inc. which provides for a $100 million credit facility (the "Credit Facility"). The Credit Facility replaces the Revolving Credit Agreement (see Note 7), which was simultaneously terminated. The Credit Facility provides for $75 million of multi-draw term loans (the "Term Loans") and $25 million of revolving loans (the "Revolving Loans"). As of March 23, 1999, $50 million was immediately available to the Company, $10 million of which was Revolving Loans. On March 24, 1999, the Company borrowed $25 million in Term Loans pursuant to terms of the Credit Facility. Approximately $12 million of the initial borrowing was used to repay amounts outstanding under the Vendor Financing Arrangement (see Note 7) and to fund the fees and expenses of the Credit Facility. The Credit Facility bears interest at the U.S. prime rate plus 2.75% or at LIBOR plus 3.75%. The interest rate on the amounts borrowed on March 24, 1998 was 11.0%. Further availability of the Credit Facility beyond the initial $50 million is based on the Company's achievement of certain minimum targets for advanced messaging subscriber units in service. The Credit Facility contains certain restrictive covenants that, among other things, limits 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 requires the Company to maintain certain operating and financial performance measures and limits the ability of the Company to make capital expenditures. F-21 64 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 as of December 31, 1997 and 1998, and the related consolidated statements of operations, stockholders' (deficit) equity and cash flows for each of the three years in the period ended December 31, 1998, included in this Form 10-K and have issued our report thereon dated February 3, 1999 (except with respect to the matter discussed in Note 18, as to which the date is March 26, 1999). These consolidated financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits. Our audits were made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedule II -- Valuation and Qualifying Accounts is not a required part of the basic consolidated financial statements but is supplementary information required by the Securities and Exchange Commission. This information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole. /s/ ARTHUR ANDERSEN LLP Dallas, Texas, March 26, 1999 S-1 65 PAGEMART WIRELESS, INC. AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998 (DOLLARS IN THOUSANDS)
ADDITIONS ----------------------- BALANCE AT CHARGED TO CHARGED TO BEGINNING COSTS AND OTHER BALANCE AT DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD ----------- ---------- ---------- ---------- ---------- ------------- ALLOWANCE FOR DOUBTFUL ACCOUNTS Year Ended December 31, 1998.......... $7,170 $11,130 $ -- $15,720(a) $2,580 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
- --------------- (a) Accounts written off as uncollectible, net of recoveries. S-2 66 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 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. dated December 28, 1995 (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. (filed as an exhibit to the Form 10-K of the Company for the fiscal year ended December 31, 1997, and incorporated herein by reference.) 3.4 Certificate of Amendment to Restated Certificate of Incorporation of PageMart Wireless, Inc. dated May 9, 1996 (filed as an exhibit to the Registration Statement on Form S-1 of the Company (Reg. No. 33-03012), and incorporated herein by reference). 3.5 Certificate of Ownership and Merger merging PageMart, Inc. into 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. (filed as an exhibit to the Form 10-K of the Company for the fiscal year ended December 31, 1997, and incorporated herein by reference). 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 Second Amended and Restated Satellite Services Supplemental Agreement, dated as of July 1, 1998, 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).
E-1 67
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 10.5 Credit Agreement, dated as of March 23, 1999, by and among PageMart Wireless, Inc., and the Lenders and Agents named therein. 10.6 Security Agreement, dated as of March 23, 1999, among PageMart Wireless, Inc., and the Lenders and Agent named therein. 10.7 Pledge Agreement, dated as of March 23, 1999 among PageMart Wireless, Inc. and the Lenders and Collateral Agent named therein. 10.8 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). 10.9 Modification and Reaffirmation Agreement, dated March 12, 1998, between PageMart Wireless, Inc. and Glenayre Electronics, Inc. (filed as an exhibit to the Form 10-Q of the Company for the quarter ended March 31, 1998, and incorporated herein by reference). 10.10 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). 10.11 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 (filed as an exhibit to the Form 10-K of the Company for the fiscal year ended December 31, 1997, and incorporated herein by reference). 10.12 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). 10.13 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). 10.14 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). 10.15 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). 10.16 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). 10.17 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).
E-2 68
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 10.18 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). 10.19 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). 10.20 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). 10.21 Resale Agreement, dated September 1, 1998, between PageMart Wireless, Inc. and GTE Communications System Corporation.(1) 10.22 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). 10.23 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). 10.24 Resale Agreement, dated as of December 12, 1997, between PageMart Wireless, Inc. and GTE Communications Corporation (filed as an exhibit to the Form 10-K of the Company for the fiscal year ended December 31, 1997, and incorporated herein by reference).(1) 10.25 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). 10.26 Resale Agreement between GTE MobileNet Service Corp., licensee and PageMart, Inc., licensor dated July 1, 1996 (filed as an exhibit to the Form 10-K of Company for the fiscal year ended December 31, 1997, and incorporated herein by reference).(1) 11.1 Computation of per share earnings (loss) for the three months ended December 31, 1998. 11.2 Computation of per share earnings (loss) for the three months ended December 31, 1997. 11.3 Computation of per share earnings (loss) for the three months ended December 31, 1996. 11.4 Computation of per share earnings (loss) for the year ended December 31, 1998. 11.5 Computation of per share earnings (loss) for the year ended December 31, 1997. 11.6 Computation of per share earnings (loss) for the year ended December 31, 1996.
E-3 69
EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 12.1 Computation of Ratio of Earnings to Fixed Charges for years ended December 31, 1993, 1994, 1995, 1996, 1997 and 1998 and the three months ended December 31, 1998. 21.1 PageMart Wireless, Inc. Subsidiaries. 23.1 Consent of Arthur Andersen LLP. 27.1 Financial Data Schedule for the year ended December 31, 1998.
- --------------- (1) The Company has requested confidential treatment for certain portions of this agreement. E-4 EX-3.5 2 CERTIFICATE OF OWNERSHIP & MERGER 1 EXHIBIT 3.5 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 08:00 AM 01/28/1998 981032906 - 2456424 ----------------------------- CERTIFICATE OF OWNERSHIP AND MERGER MERGING PAGEMART, INC. INTO PAGEMART WIRELESS, INC. ----------------------------- Pursuant to Section 253 of the General Corporation Law of the State of Delaware ----------------------------- PageMart Wireless, Inc. ("PARENT"), a corporation organized and existing under the General Corporation Law of the State of Delaware (the "GENERAL CORPORATION LAW"), does hereby certify that: FIRST: PageMart, Inc., a Delaware corporation (the, "COMPANY"), was incorporated on May 8, 1989, pursuant to the General Corporation Law and is existing thereunder. SECOND: Parent was incorporated on November 29, 1994, pursuant to the General Corporation Law and is existing thereunder. THIRD: Parent owns of record 100% of the outstanding shares of Common Stock (the "SHARES") of the Company, the Sharer, being the only stock of the Company outstanding. FOURTH: At a meeting of the board of directors held on November 13, 1997, the board of directors of Parent adopted the following resolutions providing for the merger (the "MERGER") of the Company into Parent, which resolutions have not been amended or rescinded and are in full force and effect: RESOLVED, that pursuant to Section 253 of the General Corporation Law of the State of Delaware, Pagemart, Inc. ("PAGEMART") shall be merged with and into the Corporation (the "MERGER"), whereupon the separate existence of PageMart shall cease, and the Corporation shall be the Surviving Corporation (the "SURVIVING CORPORATION"); 2 RESOLVED, that the Merger is hereby approved pursuant to the provisions of Section 253 of the General Corporation Law of the State of Delaware; RESOLVED, that the Merger shall become effective upon filing of the Certificate of Ownership and Merger (the "EFFECTIVE TIME"); provided, however that the Merger shall not become effective until such time as (a) PageMart shall have consummated its tender offer for, and solicitation of consents to permit the Merger and the Note Issuance (as defined below) from the holders of, its 12 1/4% Senior Discount Notes due 2003, (b) the Corporation shall have consummated its solicitation of consents to permit the Merger and the Note Issuance (as defined below) from the holders of its 15% Senior Discount Exchange Notes due 2005, (c) the Revolving Credit Agreement with BT Commercial Corporation, as Agent, and Bankers Trust Company, as Issuing Bank shall have been amended to permit the Merger and the Note Issuance (as defined below); (d) the consent of the Federal Communication Commission with respect to the transfer in the Merger of the communication licenses held by PageMart or its Subsidiaries shall have been obtained, (e) the Corporation shall have received all other consents or approvals necessary to permit the Merger or Note Issuance other than those that the failure to receive would not have a material adverse effect on the Corporation and (f) Morgan Stanley & Co. Incorporated shall have advised the Board of Directors of the Corporation that all conditions (other than the Merger) to the issuance of the Corporation's Senior Discount Notes due 2007 (the "NOTE ISSUANCE") shall have been satisfied or waived; RESOLVED, that at the Effective Time each share of common stock, par value $.0001 per share, of PageMart outstanding immediately prior to the Effective Time be retired; RESOLVED, that from and after the Effective Time, until successors are duly elected or appointed in accordance with applicable law, the directors of the Corporation at the Effective Time shall be the directors of the Surviving Corporation, and the officers the Corporation of at the Effective Time shall be the officers of the Surviving Corporation; RESOLVED, that from and after the Effective Time, the name of the Surviving Corporation shall be "PageMart Wireless, Inc."; RESOLVED, that from and after the Effective Time, the bylaws and certificate of incorporation of the Corporation shall be the bylaws and certificate of incorporation of the Surviving Corporation; and 2 3 RESOLVED, that the officers of the Corporation are, and each of them hereby is, authorized and directed to take or cause to be taken all such further actions, and to execute and deliver or cause to be delivered all such further instruments and documents in the name and on behalf of the Corporation (including, without limitation, a Certificate of Ownership and Merger in the form approved by counsel for the Corporation) and to incur all such fees and expenses, all as in their judgment they deem necessary or advisable in order to carry into effect each of the foregoing resolutions, and that the actions of any officer of the Corporation authorized by the foregoing resolutions or which would have been authorized by the foregoing resolutions except that such actions were taken prior to the adoption of such resolutions be, and they hereby are, ratified, confirmed, approved and adopted as actions of the Corporation. 3 4 IN WITNESS WHEREOF, PageMart Wireless, Inc. has caused this Certificate of Ownership and Merger to be executed in its corporate name by its duty authorized officer this 28th day of January, 1998. PAGEMART WIRELESS, INC. By: /s/ G. CLAY MYERS --------------------------------- Name: G. Clay Myers Title: Vice President Finance, Chief Financial Officer and Treasurer 4 EX-10.3 3 2ND AMENDED & RESTATED SATELLITE SVCS SUPPL AGMT 1 EXHIBIT 10.3 SECOND AMENDED AND RESTATED SATELLITE SERVICES SUPPLEMENTAL AGREEMENT THIS SECOND AMENDED AND RESTATED SATELLITE SERVICES SUPPLEMENTAL AGREEMENT (this "Agreement") is made and entered into as of July 1, 1998 (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., a Delaware corporation (the "Customer" or "PageMart") with offices at 3333 Lee Parkway, Suite 100, Dallas, Texas 75219. RECITALS WHEREAS, AvData and PageMart, Inc. are parties to an Amended and Restated Satellite Services Supplemental Agreement, dated as of December 18, 1997 (the "Existing SSS Agreement"), concerning the purchase of certain satellite services; WHEREAS, Customer and AvData have entered into an Amended and Restated Master Agreement dated December 18, 1997 ("Master Agreement"); WHEREAS, this Agreement is 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; WHEREAS, as a result of a Satellite Capacity Failure, the Satellite Capacity with respect to the Galaxy IV Satellite was terminated pursuant to Section K.1.a of the Existing Agreement; WHEREAS, AvData continues to lease certain Ku-band satellite transponder capacity on GE-1, a satellite operated by GE Americom Communications, Inc. ("GE"), and has secured additional Ku-band transponder capacity on other satellites operated by GE, 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; and WHEREAS, the parties desire to amend and restate the Existing SSS Agreement to reflect the termination of capacity on Galaxy IV and the addition of new capacity on satellites operated by GE. AGREEMENT NOW, THEREFORE, in consideration of the premises, and other good and valuable consideration received and acknowledged, AvData and Customer agree 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 July 1, 1998. 2. "Termination Date": 11:59 p.m. (Eastern Time) on July 31, 2003, unless earlier terminated pursuant to this 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) in accordance with Schedule 1 attached hereto. 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 hereto. To the extent AvData receives credits from the Satellite Operator by reason of service interruption affecting the Second Amended and Restated Satellite Services Agreement Page 1 AvData Systems, Inc - Proprietary 2 SECOND AMENDED AND RESTATED SATELLITE SERVICES SUPPLEMENTAL AGREEMENT Satellite Capacity provided hereunder for a period of one (1) hour or more (measured from the AvData receives notice thereof from Customer), AvData agrees to promptly credit Customer with credits provided by the Satellite Operator for such interruption. The credit shall be equal to a pro rata portion (based on total bandwidth of the Satellite Capacity contracted for by Customer on the Satellite compared to total bandwidth of the Satellite Capacity contracted for by AvData for its own or third party use on the Satellite) of all amounts credited by the Satellite Operator to AvData with respect to any interruption in service. AvData will apply the credit promptly to any outstanding invoice between AvData and Customer under this Agreement or any other agreement between AvData and Customer, as selected by AvData in its sole discretion. D. DEPOSIT: The parties acknowledge that Customer has previously paid AvData a non-refundable satellite services deposit, which has been retained by AvData in consideration for the modifications contained in the Existing SSS Agreement. 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 SN-4, G-3R and GE-1, 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 or Transponder failure, including relocation of orbital position by FCC order). 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 particularly Second Amended and Restated Satellite Services Agreement Page 2 AvData Systems, Inc - Proprietary 3 SECOND AMENDED AND RESTATED SATELLITE SERVICES SUPPLEMENTAL AGREEMENT described in Paragraph J.2. hereof and Schedule 1 hereto. In addition, if PageMart requests additional satellite capacity as described in Schedule 1 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 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. 17. "GE-1 Satellite" shall mean a communications satellite owned and operated by GE and positioned at 103(Degree) west longitude orbital position. 18. "SN-4 Satellite" shall mean a communications satellite owned and operated by GE and positioned at 101 degrees W. L. orbital position. All references herein to the SN-4 Satellite shall be deemed to refer to the GE-4 communications satellite currently scheduled to be launched into geostationary orbit by GE during the second quarter of 1999 after AvData transitions its current capacity on SN-4 to GE-4. 19. "G-3R Satellite" shall mean a communications satellite owned and operated by PanAmSat and positioned at 95(Degree) west longitude orbital position. G-3R may be preempted in the event of a Satellite Capacity Failure of Galaxy 7 or Galaxy 8 (satellites owned and operated by PanAmSat). F. CERTAIN UNDERSTANDINGS 1. Ownership of Transponders. Customer understands and agrees that the Satellite Operators are the FCC-authorized operators of the Satellites. Neither this Agreement nor the provision of Customer's Satellite Capacity hereunder 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 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, and (iii) that neither any Transponder nor any Satellite, nor any right to use thereof nor any interest of any type therein, shall be subject to any claim, prior, subsequent or otherwise, of Customer or its creditors as a result of this Agreement. 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 Second Amended and Restated Satellite Services Agreement Page 3 AvData Systems, Inc - Proprietary 4 SECOND AMENDED AND RESTATED SATELLITE SERVICES SUPPLEMENTAL AGREEMENT 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. G. CONTINUITY OF SERVICE 1. Preemption/Interruption of Service. Customer recognizes and agrees with respect to each Satellite that for technical or safety reasons, 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 actions: (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 any such 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 any such 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 any credits provided pursuant to Section C herein and, in the case of a Satellite Capacity Failure, the termination of this 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 of Use shall be any credits provided pursuant to Section C herein and, in the case of a Satellite Capacity Failure, the termination of this Agreement or reduction in Customer's Satellite Capacity pursuant to Paragraph K herein. H. CUSTOMER'S OBLIGATIONS 1. Compliance With Agreement and Laws. During the Satellite Services Term, Customer shall comply with the terms of this 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 and regarding 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 Second Amended and Restated Satellite Services Agreement Page 4 AvData Systems, Inc - Proprietary 5 SECOND AMENDED AND RESTATED SATELLITE SERVICES SUPPLEMENTAL AGREEMENT FROM NEGLIGENCE) ARISING OUT OF OR RELATING TO THIS AGREEMENT AND/OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY ARE LIMITED TO TERMINATION OF THIS AGREEMENT FOR THE REASONS DESCRIBED IN PARAGRAPH G ABOVE, AND ALL OTHER REMEDIES OF ANY KIND ARE EXPRESSLY EXCLUDED. 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 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 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 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 July 1, 1998, PageMart shall pay [*] per month per Satellite Capacity Unit ("SCU") for satellite capacity on GE-1 Satellite and [*] per month per SCU for satellite capacity on SN-4 Satellite in accordance with Schedule 1 hereto. PageMart shall have the right to designate by written notice by PageMart that a portion of Customer's Satellite Capacity, not to exceed [*] SCUs (i.e., [*] High Power SCUs) on either GE-1 or SN-4, shall be provided as High Power SCUs. The provision of Customer's Satellite Capacity as High Power SCUs on either GE-1 or SN-4 shall be subject to availability of High Power SCUs on the Satellite(s) and regulatory approval by the FCC. Upon receipt of such written Second Amended and Restated Satellite Services Agreement Page 5 AvData Systems, Inc - Proprietary * CONFIDENTIAL INFORMATION HAS BEEN DELETED. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT. 6 SECOND AMENDED AND RESTATED SATELLITE SERVICES SUPPLEMENTAL AGREEMENT 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. AvData shall use commercially reasonable efforts to resell any SCUs (in increments of 1/4 SCUs, or 200 kHz) that PageMart specifies in writing to AvData to resell; provided, however, that PageMart in such written notice irrevocably releases the SCUs for the duration of this SSS Agreement. PageMart shall be required to continue to pay for the SCUs until such time, if any, as AvData is able to resell the SCUs, as set forth below in Paragraph J(2)(c). c. AvData shall reduce PageMart's minimum monthly payments in the amount of [*] for each [*] SCU that AvData resells on GE-1or [*] for each [*] SCU that AvData resells on SN-4; provided, however, that AvData resells such SCU at a rate equal or greater than [*] per [*] SCU that AvData resells on GE-1or [*] for each [*] SCU that AvData resells on SN-4. AvData shall be permitted to receive payments for such resold SCUs directly from the purchaser. d. AvData further agrees not to purchase additional satellite capacity for its own use from the time that PageMart gives AvData written notice of released satellite capacity pursuant to Paragraph J(2)(b) above if AvData determines, in its reasonable discretion, that AvData's satellite capacity needs can be reasonably satisfied from PageMart's released satellite capacity, and in such event AvData shall reduce PageMart's minimum monthly payments for satellite capacity by [*] for each [*] SCU that AvData that uses on GE-1or [*] for each [*] SCU that AvData uses on SN-4. 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 five (5) 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 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 July 31, 2003 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 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 Second Amended and Restated Satellite Services Agreement Page 6 AvData Systems, Inc - Proprietary * CONFIDENTIAL INFORMATION HAS BEEN DELETED. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT. 7 SECOND AMENDED AND RESTATED SATELLITE SERVICES SUPPLEMENTAL AGREEMENT 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 Agreement is a separate, free standing contract and is independent of the Master Agreement. This Agreement, and the parties rights and obligations hereunder, shall continue in full force and effect notwithstanding any termination of, or default by either party under, the Master Agreement. L. MISCELLANEOUS 1. Headings. The Paragraph headings used in this 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 Agreement is declared or found to be illegal, unenforceable or void, then both parties shall be relieved of all obligations arising under such provision, it being the intent and agreement of the parties that this Agreement shall be deemed amended by modifying such provision to the extent necessary to make it legal and enforceable while preserving its intent. If that is not possible, another provision that is legal and enforceable and achieves substantially the same objective shall be substituted. If the remainder of this Agreement is not affected by such declaration or finding and is capable of substantial performance then the remainder shall be enforced to the extent permitted by law. 4. Relationship of Parties. AvData is performing pursuant to this Agreement only as an independent contractor and nothing set forth in this Agreement shall be construed to create 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. 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 Second Amended and Restated Satellite Services Agreement Page 7 AvData Systems, Inc - Proprietary 8 SECOND AMENDED AND RESTATED SATELLITE SERVICES SUPPLEMENTAL AGREEMENT 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 Agreement, and, for a period of five (5) years following the termination of this Agreement, shall not be disclosed by such party, its agents or employees without the prior written consent of the other party, except as may be necessary by reason of legal, accounting or regulatory requirements beyond the reasonable control of the disclosing party. The obligations set forth in this Section shall survive termination of this Agreement. 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 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 Agreement shall be interpreted, construed and governed in accordance with the laws of the State of Georgia. This Agreement constitutes the entire agreement between the parties, supersedes all previous understandings, commitments or representations and is intended as the complete and exclusive statement of the terms of the agreement between the parties concerning the subject matter hereof. This Agreement may not be amended or modified in any way, and none of its provisions may be waived, except by a writing signed by each party hereto. 10. Attorney's Fees. In the event of any dispute or controversy arising hereunder, any court having jurisdiction in any such dispute or controversy shall determine which of the parties is the prevailing party and shall award to the prevailing party the reasonable fees and expenses of counsel, experts and other court costs incurred in connection with such dispute or controversy. 11. No right of Transfer. Customer shall not, and shall not have the right to, grant, sell, assign, encumber, permit the utilization of, license, lease, or otherwise convey, directly or indirectly, in whole or in part (individually, a "Transfer"), Customer's Satellite Capacity, or any of its rights under this Agreement, to any other entity or person. Notwithstanding the foregoing, Customer may assign its Satellite Capacity, and its rights under this 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 Agreement shall be binding on and shall inure to the benefit of any successors and assigns of the parties, provided that no assignment of this Agreement shall relieve either party hereto of its obligations to the other party. Any purported assignment by either party not in compliance with the provisions of this Agreement shall be null and void and of no force and effect. - -------------------------------------------------------------------------------- Second Amended and Restated Satellite Services Agreement Page 8 AvData Systems, Inc - Proprietary 9 SECOND AMENDED AND RESTATED SATELLITE SERVICES SUPPLEMENTAL AGREEMENT IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed on its behalf by an officer thereunto duly authorized, all as of the day and year first above written. AVDATA SYSTEMS, INC. By: /s/ HAROLD E. COWAN ------------------------------------------ Title: Vice President Account Management -------------------------------------- Date: 9/25/98 --------------------------------------- Signed: Harold E. Cowan ------------------------------------- PAGEMART WIRELESS, INC. By: /s/ JACK D. HANSON ------------------------------------------ Title: VP Network Operation -------------------------------------- Date: 9/24/98 --------------------------------------- Signed: Jack D. Hanson ------------------------------------- Second Amended and Restated Satellite Services Agreement Page 9 AvData Systems, Inc - Proprietary 10 SECOND AMENDED AND RESTATED SATELLITE SERVICES SUPPLEMENTAL AGREEMENT SCHEDULE 1 MONTHLY RECURRING CHARGES
- ------------------------------------------------------------------------------- SATELLITE SCU QUANTITY # UNIT PRICE EXTENDED PRICE - ------------------------------------------------------------------------------- GE-1 [*] [*] [*] - ------------------------------------------------------------------------------- SN-4/GE-4 [*] [*] [*] - ------------------------------------------------------------------------------- # - Satellite Capacity Unit (SCU) represents one (1) 128 Kbps outbound channel and two (2) 64 Kbps inbound channels which equate to 800 kHz of satellite capacity per SCU. - -------------------------------------------------------------------------------
CONDITIONS TO PRICING Satellite Capacity Unit charges will begin at [*] on GE-1 at [*] per SCU/month and [*] SCU's on SN-4 at [*] per SCU/month. Effective August 1, 1998, the SCU total on GE-1 will increase to [*] at [*] per SCU/month. Thereafter, a total of [*] SCUs per month shall be purchased until July 31, 2003, when the [*] SCU's on GE-1 shall terminate. SATELLITE(S) As of the Execution Date, AvData has commitments to provide PageMart [*] SCU's on GE-1 and [*] SCUs on SN-4. Provisioning of a High Power SCU option on either GE-1 or SN-4, if requested by PageMart, is subject to the approval of both the Satellite Operator and the FCC. Regarding the planned replacement of SN-4 with GE-4, the following additional qualifications apply: (a) Satellite Operator is planning for GE-4 to be launched in the second quarter of 1999, and to become "Commercially Operational" (date when GE-4 is fully operational and available for use at the assigned orbital position of 101 degrees W. L. and meets certain other requirements specified in the agreement between AvData and Satellite Operator) during the second calendar quarter of 1999. Satellite Operator has applied to the FCC for authorization to locate GE-4 at 101 degrees W. L. for the purpose of replacing SN-4. (b) The Satellite Operator has the right to modify the mission of GE-4 (for example, to replace another existing in-orbit satellite operated by the Satellite Operator due to a satellite failure) the Satellite Operator has represented to AvData that it would replace SN-4 with the next available satellite (currently GE-6). The Satellite Operator has represented to AvData that SN-4 has the fuel and capability to remain in orbit until December 2004. (c) Under AvData's agreement with Satellite Operator, the Satellite Operator may, at its sole discretion, offer certain capacity on SCPC Transponder(s) capable of supporting South American downlink and uplink coverage. Such revised service would be subject to mutually agreed upon pricing, allocated power and Transponder performance specifications. If Satellite Operator offers such capacity, AvData will notify Customer of the terms and conditions on which AvData would offer such capacity to Customer. Customer shall have thirty (30) days thereafter to accept such offer. AvData shall be under no obligation to make such capacity available on GE-4 or any other satellite. Second Amended and Restated Satellite Services Agreement Page 10 AvData Systems, Inc - Proprietary * CONFIDENTIAL INFORMATION HAS BEEN DELETED. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT. 11 SECOND AMENDED AND RESTATED SATELLITE SERVICES SUPPLEMENTAL AGREEMENT (d) Provided that this Agreement is still in effect on the date GE-4 becomes "Commercially Operational", AvData shall provide and Customer shall take, in lieu of [*] on SN-4, [*] SCUs on GE-4 for the remainder of the Service term of this Agreement. SCU service on GE-4 shall commence (and SCU service on SN-4 shall be discontinued) on the date AvData transitions its capacity on SN-4 to GE-4 in accordance wit its agreement with the Satellite Operator. (e) Neither the Satellite Operator nor AvData shall have any liability whatsoever in connection with the launch or manufacture of GE-4, including but not limited to, GE-4 launch delay or failure, GE-4 is delayed in operation, or GE-4 is positioned at an orbital location other than 101 W. L. (f) Until SN-4 is replaced by GE-4 (or other suitable satellite), AvData will provide to PageMart up to [*] of Satellite Capacity on G-3R with Hub services at [*]. Such capacity will be used to support PageMart VNI offshore sites (located in the Caribbean area, Hawaii and Alaska). Successful replacement of SN-4 with a satellite capable of supporting such offshore sites will relieve AvData of all responsibility regarding this temporary commitment. (g) If a Satellite Capacity Failure occurs with respect to Satellite Capacity provided by AvData on G-3R prior to SN-4 being replaced by GE-4 (or other suitable satellite), AvData will provide to PageMart up to [*] of Satellite Capacity on an alternative satellite with Hub services [*]. Such capacity will be used to support PageMart VNI offshore sites (located in the Caribbean area, Hawaii and Alaska). Successful replacement of SN-4 with a satellite capable of supporting such offshore sites will relieve AvData of all responsibility regarding this commitment. Second Amended and Restated Satellite Services Agreement Page 11 AvData Systems, Inc - Proprietary * CONFIDENTIAL INFORMATION HAS BEEN DELETED. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT. EX-10.5 4 CREDIT AGREEMENT, DATED AS OF MARCH 23, 1999 1 EXHIBIT 10.5 =============================================================================== CREDIT AGREEMENT among PAGEMART WIRELESS, INC., VARIOUS LENDERS, BANKERS TRUST COMPANY, as ADMINISTRATIVE AGENT, MORGAN STANLEY SENIOR FUNDING, INC., as SYNDICATION Agent, and BANKERS TRUST COMPANY and MORGAN STANLEY SENIOR FUNDING, INC., as CO-ARRANGERS ----------------------------------------------- Dated as of March 23, 1999 ----------------------------------------------- =============================================================================== 2 CREDIT AGREEMENT, dated as of March 23, 1999, among PAGEMART WIRELESS, INC., a Delaware corporation (the "Borrower"), the Lenders party hereto from time to time, BANKERS TRUST COMPANY, as Administrative Agent (in such capacity, the "Administrative Agent"), MORGAN STANLEY SENIOR FUNDING, INC., as Syndication Agent (in such capacity, the "Syndication Agent"), and BANKERS TRUST COMPANY and MORGAN STANLEY SENIOR FUNDING, INC., as Co-Arrangers (in such capacity, the "Co-Arrangers") (all capitalized terms used herein and defined in Section 11 are used herein as therein defined). W I T N E S S E T H : WHEREAS, the proceeds of the Loans under this Agreement will be used, in part, to refinance in full all of the Indebtedness under the Existing Credit Agreement; WHEREAS, the Existing Credit Agreement is currently the Credit Agreement under, and as defined in, the 11-1/4% Senior Subordinated Discount Note Indenture; WHEREAS, from and after the Initial Borrowing Date, this Agreement and the other Credit Documents shall constitute the "Credit Agreement" under, and as defined in, the 11-1/4% Senior Subordinated Discount Note Indenture and therefore constitutes "Designated Senior Indebtedness" thereunder; and WHEREAS, subject to and upon the terms and conditions set forth herein, the Lenders are willing to make available to the Borrower the respective credit facilities provided for herein; NOW, THEREFORE, IT IS AGREED: SECTION 1. Amount and Terms of Credit. 1.01 The Commitments. (a) Subject to and upon the terms and conditions set forth herein, each Lender with a Multiple Draw I Sub-Tranche A Term Loan Commitment severally agrees to make a term loan or term loans (each a "Multiple Draw I Sub-Tranche A Term Loan" and, collectively, the "Multiple Draw I Sub-Tranche A Term Loans") to the Borrower, which Multiple Draw I Sub-Tranche A Term Loans (i) may only be incurred by the Borrower on the Initial Borrowing Date, (ii) shall, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided that, (A) except as otherwise specifically provided in Section 1.10(b), all Multiple Draw I Sub-Tranche A Term Loans comprising the same Borrowing shall at all times be of the same Type and (B) no Multiple Draw I Sub-Tranche A Term Loans maintained as Eurodollar Loans may be incurred prior to the earlier of (1) the 90th day following the Initial Borrowing Date and (2) the Syndication Date and (iii) shall be made by each such Lender in that aggregate principal amount which does not exceed the Multiple Draw I Sub-Tranche A Term Loan Commitment of such Lender on the Initial 3 Borrowing Date (before giving effect to any reduction thereto on such date pursuant to Section 3.03(b)). Once repaid, Multiple Draw I Sub-Tranche A Term Loans incurred hereunder may not be reborrowed. (b) Subject to and upon the terms and conditions set forth herein, each Lender with a Multiple Draw I Sub-Tranche B Term Loan Commitment severally agrees to make on each Multiple Draw I Sub-Tranche B Term Loan Borrowing Date on or prior to the Multiple Draw I Term Loan Commitment Termination Date, a term loan or term loans (each a "Multiple Draw I Sub-Tranche B Term Loan" and, collectively, the "Multiple Draw I Sub-Tranche B Term Loans") to the Borrower, which Multiple Draw I Sub-Tranche B Term Loans (i) shall, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided that, (A) except as otherwise specifically provided in Section 1.10(b), all Multiple Draw I Sub-Tranche B Term Loans comprising the same Borrowing shall at all times be of the same Type and (B) no Multiple Draw I Sub-Tranche B Term Loans maintained as Eurodollar Loans may be incurred prior to the earlier of (1) the 90th day following the Initial Borrowing Date and (2) the Syndication Date and (ii) shall be made by each such Lender in that aggregate principal amount which does not exceed the Multiple Draw I Sub-Tranche B Term Loan Commitment of such Lender on any such Multiple Draw I Sub-Tranche B Term Loan Borrowing Date (before giving effect to any reduction thereto on such date pursuant to Section 3.03(c)(i)). Once repaid, Multiple Draw I Sub-Tranche B Term Loans incurred hereunder may not be reborrowed. (c) Subject to and upon the terms and conditions set forth herein, each Lender with a Multiple Draw I Sub-Tranche C Term Loan Commitment severally agrees to make on each Multiple Draw I Sub-Tranche C Term Loan Borrowing Date on or prior to the Multiple Draw I Term Loan Commitment Termination Date, a term loan or term loans (each a "Multiple Draw I Sub-Tranche C Term Loan" and, collectively, the "Multiple Draw I Sub-Tranche C Term Loans" and, together with the Multiple Draw I Sub-Tranche A Term Loans and the Multiple Draw I Sub-Tranche B Term Loans, the "Multiple Draw I Term Loans") to the Borrower, which Multiple Draw I Sub-Tranche C Term Loans (i) shall, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided that, (A) except as otherwise specifically provided in Section 1.10(b), all Multiple Draw I Sub-Tranche C Term Loans comprising the same Borrowing shall at all times be of the same Type and (B) no Multiple Draw I Sub-Tranche C Term Loans maintained as Eurodollar Loans may be incurred prior to the earlier of (1) the 90th day following the Initial Borrowing Date and (2) the Syndication Date and (ii) shall be made by each such Lender in that aggregate principal amount which does not exceed the Multiple Draw I Sub-Tranche C Term Loan Commitment of such Lender on any such Multiple Draw I Sub-Tranche C Term Loan Borrowing Date (before giving effect to any reduction thereto on such date pursuant to Section 3.03(c)(i)). Once repaid, Multiple Draw I Sub-Tranche C Term Loans incurred hereunder may not be reborrowed. (d) Subject to Section 1.14 and the other terms and conditions set forth herein, each Lender with a Multiple Draw II Sub-Tranche A Term Loan Commitment severally agrees to make on each Multiple Draw II Sub-Tranche A Term Loan Borrowing Date, a term loan or term loans (each a "Multiple Draw II Sub-Tranche A Term Loan" and, collectively, the "Multiple Draw II Sub-Tranche A Term Loans") to the Borrower, which Multiple Draw II Sub-Tranche A Term -2- 4 Loans (i) shall, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided that, except as otherwise specifically provided in Section 1.10(b), all Multiple Draw II Term Loans comprising the same Borrowing shall at all times be of the same Type, (ii) shall be made by each such Lender in that aggregate principal amount which does not exceed the Multiple Draw II Sub-Tranche A Term Loan Commitment of such Lender on any such Multiple Draw II Term Loan Borrowing Date (before giving effect to any reduction thereto on such date pursuant to Section 3.03(d)(i)) and (iii) may not be incurred prior to the Multiple Draw I Term Loan Full Utilization Date. Once repaid, Multiple Draw II Term Loans incurred hereunder may not be reborrowed. (e) Subject to Section 1.14 and the other applicable terms and conditions set forth herein, each Lender with a Multiple Draw II Sub-Tranche B Term Loan Commitment severally agrees to make on each Multiple Draw II Sub-Tranche B Term Loan Borrowing Date, a term loan or term loans (each a "Multiple Draw II Sub-Tranche B Term Loan" and, collectively, the "Multiple Draw II Sub-Tranche B Term Loans" and, together with the Multiple Draw II Sub-Tranche A Term Loans, the "Multiple Draw II Term Loans") to the Borrower, which Multiple Draw II Sub-Tranche B Term Loans (i) shall, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided that, except as otherwise specifically provided in Section 1.10(b), all Multiple Draw II Sub-Tranche B Term Loans comprising the same Borrowing shall at all times be of the same Type, (ii) shall be made by each such Lender in that aggregate principal amount which does not exceed the Multiple Draw II Sub-Tranche B Term Loan Commitment of such Lender on any such Multiple Draw II Term Loan Borrowing Date (before giving effect to any reduction thereto on such date pursuant to Section 3.03(d)(i)) and (iii) may not be incurred prior to the Multiple Draw I Term Loan Full Utilization Date. Once repaid, Multiple Draw II Sub-Tranche B Term Loans incurred hereunder may not be reborrowed. (f) Subject to and upon the terms and conditions set forth herein, each Lender with a Revolving Loan Commitment severally agrees to make, at any time and from time to time on or after the Initial Borrowing Date and prior to the Multiple Draw I/Revolver Maturity Date, a revolving loan or revolving loans (each a "Revolving Loan" and, collectively, the "Revolving Loans") to the Borrower, which Revolving Loans (i) shall, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided that, (A) except as otherwise specifically provided in Section 1.10(b), all Revolving Loans comprising the same Borrowing shall at all times be of the same Type and (B) no Revolving Loans maintained as Eurodollar Loans may be incurred prior to the earlier of (1) the 90th day following the Initial Borrowing Date and (2) the Syndication Date, (ii) may be repaid and reborrowed in accordance with the provisions hereof, (iii) shall not exceed for any such Lender at any time outstanding that aggregate principal amount which, when added to the product of (x) such Lender's RL Percentage and (y) the sum of (I) the aggregate amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) at such time and (II) the aggregate principal amount of all Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) then outstanding, equals the Available Revolving Loan Commitment of such Lender at such time and (iv) shall not exceed for all such Lenders at any -3- 5 time outstanding that aggregate principal amount which, when added to the sum of (I) the aggregate amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) at such time and (II) the aggregate principal amount of all Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) then outstanding, equals the Total Available Revolving Loan Commitment at such time. (g) Subject to and upon the terms and conditions set forth herein, the Swingline Lender agrees to make, at any time and from time to time on or after the Initial Borrowing Date and prior to the Swingline Expiry Date, a revolving loan or revolving loans (each a "Swingline Loan" and, collectively, the "Swingline Loans") to the Borrower, which Swingline Loans (i) shall be made and maintained as Base Rate Loans, (ii) may be repaid and reborrowed in accordance with the provisions hereof, (iii) shall not exceed in aggregate principal amount at any time outstanding, when combined with the aggregate principal amount of all Revolving Loans then outstanding and the aggregate amount of all Letter of Credit Outstandings at such time, an amount equal to the Total Available Revolving Loan Commitment and (iv) shall not exceed in aggregate principal amount at any time outstanding the Maximum Swingline Amount. Notwithstanding anything to the contrary contained in this Section 1.01(g), (i) the Swingline Lender shall not be obligated to make any Swingline Loans at a time when a Lender Default exists unless the Swingline Lender has entered into arrangements satisfactory to it and the Borrower to eliminate the Swingline Lender's risk with respect to the Defaulting Lender's or Lenders' participation in such Swingline Loans, including by cash collateralizing such Defaulting Lender's or Lenders' RL Percentage of the outstanding Swingline Loans and (ii) the Swingline Lender shall not make any Swingline Loan after it has received written notice from the Borrower or the Required Lenders stating that a Default or an Event of Default exists and is continuing until such time as the Swingline Lender shall have received written notice (A) of rescission of all such notices from the party or parties originally delivering such notice or notices, (B) of the waiver of such Default or Event of Default by the Required Lenders or (C) of the cure (as reasonably determined by the Administrative Agent) of such Default or Event of Default from the Administrative Agent. (h) On any Business Day, the Swingline Lender may, in its sole discretion, give notice to the RL Lenders that the Swingline Lender's outstanding Swingline Loans shall be funded with one or more Borrowings of Revolving Loans (provided that such notice shall be deemed to have been automatically given upon the occurrence of a Default or an Event of Default under Section 10.05 or upon the exercise of any of the remedies provided in the last paragraph of Section 10), in which case one or more Borrowings of Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory Borrowing") shall be made on the immediately succeeding Business Day by all RL Lenders pro rata based on each such RL Lender's RL Percentage (determined before giving effect to any termination of the Revolving Loan Commitments pursuant to the last paragraph of Section 10) and the proceeds thereof shall be applied directly by the Swingline Lender to repay the Swingline Lender for such outstanding Swingline Loans. Each RL Lender hereby irrevocably agrees to make Revolving Loans upon one Business Day's notice pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified in writing by the Swingline Lender -4- 6 notwithstanding (i) the amount of the Mandatory Borrowing may not comply with the Minimum Borrowing Amount otherwise required hereunder, (ii) whether any conditions specified in Section 6 are then satisfied, (iii) whether a Default or an Event of Default then exists, (iv) the date of such Mandatory Borrowing and (v) the amount of the Total Available Revolving Loan Commitment at such time. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower), then each RL Lender hereby agrees that it shall forthwith purchase (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Swingline Lender such participations in the outstanding Swingline Loans as shall be necessary to cause the RL Lenders to share in such Swingline Loans ratably based upon their respective RL Percentages (determined before giving effect to any termination of the Revolving Loan Commitments pursuant to the last paragraph of Section 10), provided that (x) all interest payable on the Swingline Loans shall be for the account of the Swingline Lender until the date as of which the respective participation is required to be purchased and, to the extent attributable to the purchased participation, shall be payable to the participant from and after such date and (y) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing RL Lender shall be required to pay the Swingline Lender interest on the principal amount of participation purchased for each day from and including the day upon which the Mandatory Borrowing would otherwise have occurred to but excluding the date of payment for such participation, at the overnight Federal Funds Rate for the first three days and at the rate otherwise applicable to Revolving Loans maintained as Base Rate Loans hereunder for each day thereafter. 1.02 Minimum Amount of Each Borrowing. The aggregate principal amount of each Borrowing of Loans under a respective Tranche shall not be less than the Minimum Borrowing Amount applicable to such Tranche. More than one Borrowing may occur on the same date, but at no time shall there be outstanding more than twelve Borrowings of Eurodollar Loans in the aggregate. 1.03 Notice of Borrowing. (a) Whenever the Borrower desires to incur (x) Eurodollar Loans hereunder, the Borrower shall give the Administrative Agent at the Notice Office at least three Business Days' prior notice of each Eurodollar Loan to be incurred hereunder and (y) Base Rate Loans hereunder (excluding Swingline Loans and Revolving Loans made pursuant to a Mandatory Borrowing), the Borrower shall give the Administrative Agent at the Notice Office at least one Business Day's prior notice of each Base Rate Loan to be incurred hereunder, provided that (in each case) any such notice shall be deemed to have been given on a certain day only if given before 11:00 A.M. (New York time) on such day. Each such notice (each a "Notice of Borrowing"), except as otherwise expressly provided in Section 1.10, shall be irrevocable and shall be given by the Borrower in writing, or by telephone promptly confirmed in writing, in the form of Exhibit A, appropriately completed to specify the aggregate principal amount of the Loans to be incurred pursuant to such Borrowing, the date of such Borrowing (which shall be a Business Day) whether the Loans being incurred pursuant to such Borrowing shall constitute Multiple Draw I Sub-Tranche A Term Loans, Multiple Draw I Sub-Tranche B Term Loans, Multiple Draw I Sub-Tranche C Term Loans, Multiple Draw II Sub-Tranche A Term Loans, Multiple Draw II Sub-Tranche B Term Loans or Revolving Loans and whether the -5- 7 Loans being incurred pursuant to such Borrowing are to be initially maintained as Base Rate Loans or, to the extent permitted hereunder, Eurodollar Loans and, if Eurodollar Loans, the initial Interest Period to be applicable thereto. The Administrative Agent shall promptly give each Lender which is required to make Loans of the Tranche specified in the respective Notice of Borrowing notice of such proposed Borrowing, of such Lender's proportionate share thereof and of the other matters required by the immediately preceding sentence to be specified in the Notice of Borrowing. (b) (i) Whenever the Borrower desires to incur Swingline Loans hereunder, the Borrower shall give the Swingline Lender no later than 1:00 P.M. (New York time) on the date that a Swingline Loan is to be incurred, written notice or telephonic notice promptly confirmed in writing of each Swingline Loan to be incurred hereunder. Each such notice shall be irrevocable and specify in each case (A) the date of Borrowing (which shall be a Business Day) and (B) the aggregate principal amount of the Swingline Loans to be incurred pursuant to such Borrowing. (ii) Mandatory Borrowings shall be made upon the notice specified in Section 1.01(h), with the Borrower irrevocably agreeing, by its incurrence of any Swingline Loan, to the making of the Mandatory Borrowings as set forth in Section 1.01(h). (c) Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice of any Borrowing, conversion or prepayment of Loans, the Administrative Agent or the Swingline Lender, as the case may be, may act without liability upon the basis of telephonic notice of such Borrowing, conversion or prepayment, as the case may be, believed by the Administrative Agent or the Swingline Lender, as the case may be, in good faith to be from the Chairman of the Board, the President, the Chief Financial Officer, the Treasurer or any Assistant Treasurer of the Borrower, or from any other authorized officer of the Borrower designated in writing by the Borrower to the Administrative Agent as being authorized to give such notices, prior to receipt of written confirmation. In each such case, the Borrower hereby agrees that the Administrative Agent's or Swingline Lender's record of the terms of such telephonic notice of such Borrowing, conversion or prepayment of Loans, as the case may be, shall be controlling in the event of a dispute, absent manifest error. 1.04 Disbursement of Funds. No later than 12:00 Noon (New York time) on the date specified in each Notice of Borrowing (or (x) in the case of Swingline Loans, no later than 3:00 P.M. (New York time) on the date specified pursuant to Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, no later than 1:00 P.M. (New York time) on the date specified in Section 1.01(h)), each Lender with a Commitment of the respective Tranche will make available its pro rata portion (determined in accordance with Section 1.07) of each such Borrowing requested to be made on such date (or in the case of Swingline Loans, the Swingline Lender will make available the full amount thereof). All such amounts will be made available in Dollars and in immediately available funds at the Payment Office, and the Administrative Agent will, except in the case of Revolving Loans made pursuant to a Mandatory Borrowing, make available to the Borrower at the Payment Office the aggregate of the amounts so made available by the Lenders. Unless the Administrative Agent shall have been notified by any Lender prior to the date of Borrowing that such Lender does not intend to make available to the Administrative Agent such -6- 8 Lender's portion of any Borrowing to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date of Borrowing and the Administrative Agent may (but shall not be obligated to), in reliance upon such assumption, make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall within two Business Days of such notice pay such corresponding amount (together with all interest payable as described in the immediately succeeding sentence) to the Administrative Agent. The Administrative Agent also shall be entitled to recover on demand from such Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower until the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (i) if recovered from such Lender, the overnight Federal Funds Rate for the first three days and at the interest rate otherwise applicable to such Loans for each day thereafter and (ii) if recovered from the Borrower, the rate of interest applicable to the respective Borrowing, as determined pursuant to Section 1.08. Nothing in this Section 1.04 shall be deemed to relieve any Lender from its obligation to make Loans hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any failure by such Lender to make Loans hereunder. 1.05 Notes. (a) The Borrower's obligation to pay the principal of, and interest on, the Loans made by each Lender shall be evidenced in the Register maintained by the Administrative Agent pursuant to Section 13.15 and shall, if requested by such Lender, also be evidenced (i) if Multiple Draw I Term Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-1, with blanks appropriately completed in conformity herewith (each a "Multiple Draw I Term Note" and, collectively, the "Multiple Draw I Term Notes"), (ii) if Multiple Draw II Term Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-2, with blanks appropriately completed in conformity herewith (each a "Multiple Draw II Term Note" and, collectively, the "Multiple Draw II Term Notes"), (iii) if Revolving Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-3, with blanks appropriately completed in conformity herewith (each a "Revolving Note" and, collectively, the "Revolving Notes") and (iv) if Swingline Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form Exhibit B-4, with blanks appropriately completed in conformity herewith (the "Swingline Note"). (b) The Multiple Draw I Term Note issued to each Lender that has a Multiple Draw I Term Loan Commitment or outstanding Multiple Draw I Term Loans shall (i) be executed by the Borrower, (ii) be payable to such Lender or its registered assigns and be dated the Initial Borrowing Date (or, if issued after the Initial Borrowing Date, be dated the date of issuance thereof), (iii) be in a stated principal amount equal to the Multiple Draw I Term Loan Commitment of such Lender on the Initial Borrowing Date (before giving effect to any Multiple Draw I Term Loans on such date by such Lender) (or, if issued after the Initial Borrowing Date, be in a stated principal amount equal to the outstanding Multiple Draw I Term Loan -7- 9 Commitment, if any, of such Lender at such time plus the outstanding principal amount of Multiple Draw I Term Loans of such Lender at such time) and be payable in the outstanding principal amount of Multiple Draw I Term Loans evidenced thereby, (iv) mature on the Multiple Draw I/Revolver Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (c) The Multiple Draw II Term Note issued to each Lender that has a Multiple Draw II Term Loan Commitment or outstanding Multiple Draw II Term Loans shall (i) be executed by the Borrower, (ii) be payable to such Lender or its registered assigns and be dated the date of the issuance thereof, (iii) be in a stated principal amount equal to the outstanding Multiple Draw II Term Loan Commitment, if any, of such Lender at such time plus the outstanding principal amount of Multiple Draw II Term Loans of such Lender at such time and be payable in the outstanding principal amount of Multiple Draw II Term Loans evidenced thereby, (iv) mature on the respective Multiple Draw II Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (d) The Revolving Note issued to each Lender that has a Revolving Loan Commitment or outstanding Revolving Loans shall (i) be executed by the Borrower, (ii) be payable to such Lender or its registered assigns and be dated the Initial Borrowing Date (or, if issued after the Initial Borrowing Date, be dated the date of the issuance thereof), (iii) be in a stated principal amount equal to the Revolving Loan Commitment of such Lender (or, if issued after the termination thereof, be in a stated principal amount equal to the outstanding Revolving Loans of such Lender at such time) and be payable in the outstanding principal amount of the Revolving Loans evidenced thereby, (iv) mature on the Multiple Draw I/Revolver Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (e) The Swingline Note issued to the Swingline Lender shall (i) be executed by the Borrower, (ii) be payable to the Swingline Lender or its registered assigns and be dated the Initial Borrowing Date, (iii) be in a stated principal amount equal to the Maximum Swingline Amount and be payable in the outstanding principal amount of the Swingline Loans evidenced thereby from time to time, (iv) mature on the Swingline Expiry Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans evidenced thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. -8- 10 (f) Each Lender will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will prior to any transfer of any of its Notes endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby. Failure to make any such notation or any error in such notation shall not affect the Borrower's obligations in respect of such Loans. 1.06 Conversions. The Borrower shall have the option to convert, on any Business Day occurring on or after the earlier of (i) the 90th day after the Initial Borrowing Date and (ii) the Syndication Date, all or a portion equal to at least the Minimum Borrowing Amount of the outstanding principal amount of Loans (other than Swingline Loans which may not be converted pursuant to this Section 1.06) made pursuant to one or more Borrowings (so long as of the same Tranche) of one or more Types of Loans into a Borrowing (of the same Tranche) of another Type of Loan, provided that, (i) except as otherwise provided in Section 1.10(b), Eurodollar Loans may be converted into Base Rate Loans only on the last day of an Interest Period applicable to the Loans being converted and no such partial conversion of Eurodollar Loans shall reduce the outstanding principal amount of such Eurodollar Loans made pursuant to a single Borrowing to less than the Minimum Borrowing Amount applicable thereto, (ii) unless the Required Lenders otherwise agree, Base Rate Loans may only be converted into Eurodollar Loans if no Default or Event of Default is in existence on the date of the conversion and (iii) no conversion pursuant to this Section 1.06 shall result in a greater number of Borrowings of Eurodollar Loans than is permitted under Section 1.02. Each such conversion shall be effected by the Borrower by giving the Administrative Agent at the Notice Office prior to 11:00 A.M. (New York time) at least three Business Days' prior notice (each a "Notice of Conversion") specifying the Loans to be so converted, the Borrowing or Borrowings pursuant to which such Loans were made and, if to be converted into Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall give each Lender prompt notice of any such proposed conversion affecting any of its Loans. 1.07 Borrowings. (a) All Borrowings of Multiple Draw I Term Loans under this Agreement shall be incurred (1) first, from the Lenders with Multiple Draw I Sub-Tranche A Term Loan Commitments pro rata on the basis of their Multiple Draw I Sub-Tranche A Term Loan Commitments, (2) second, to the extent no Multiple Draw I Sub-Tranche A Term Loan Commitments are outstanding, from the Lenders with Multiple Draw I Sub-Tranche B Term Loan Commitments pro rata on the basis of their Multiple Draw I Sub-Tranche B Term Loan Commitments and (3) third, to the extent no Multiple Draw I Sub-Tranche A Term Loan Commitments and no Multiple Draw I Sub-Tranche B Term Loan Commitments are outstanding, from the Lenders with Multiple Draw I Sub-Tranche C Term Loan Commitments pro rata on the basis of their Multiple Draw I Sub-Tranche C Term Loan Commitments. (b) All Borrowings of Multiple Draw II Term Loans under this Agreement shall be incurred (1) first, from the Lenders with Multiple Draw II Sub-Tranche A Term Loan Commitments pro rata on the basis of their Multiple Draw II Sub-Tranche A Term Loan Commitments, as in effect on the date of the respective Borrowing and (2) to the extent no Multiple Draw II Sub-Tranche A Term Loan Commitments are outstanding, from the Lenders with Multiple Draw II Sub-Tranche B Term Loan Commitments pro rata on the basis of their -9- 11 Multiple Draw II Sub-Tranche B Term Loan Commitments, as in effect on the date of the respective Borrowing. (c) All Borrowings of Revolving Loans under this Agreement shall be incurred from the RL Lenders pro rata on the basis of their Revolving Loan Commitments. 1.08 Interest. (a) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Base Rate Loan from the date of Borrowing thereof until the earlier of (i) the maturity thereof (whether by acceleration or otherwise) and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06 or 1.09, as applicable, at a rate per annum which shall be equal to the sum of the Applicable Margin plus the Base Rate in effect from time to time. (b) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Eurodollar Loan from the date of Borrowing thereof until the earlier of (i) the maturity thereof (whether by acceleration or otherwise) and (ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10, as applicable, at a rate per annum which shall, during each Interest Period applicable thereto, be equal to the sum of the Applicable Margin plus the Eurodollar Rate for such Interest Period. (c) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan and any other overdue amount payable hereunder shall, in each case, bear interest at a rate per annum equal to the greater of (x) the rate which is 2% in excess of the rate then borne by such Loans and (y) the rate which is 2% in excess of the rate otherwise applicable to Base Rate Loans of such Tranche from time to time. Interest which accrues under this Section 1.08(c) shall be payable on demand. (d) Accrued (and theretofore unpaid) interest shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on each Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period and (iii) in respect of each Loan, on any repayment or prepayment (on the amount repaid or prepaid), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand; provided, however, that in the case of Base Rate Loans of any Tranche, interest shall not be payable pursuant to preceding clause (iii) at the time of any repayment or prepayment thereof unless the respective repayment or prepayment is made either in conjunction with a permanent reduction of the Total Revolving Loan Commitment (in the case of a repayment or prepayment of Revolving Loans or Swingline Loans) or with a repayment or prepayment in full of all outstanding Loans of the respective Tranche. (e) Upon each Interest Determination Date, the Administrative Agent shall determine the Eurodollar Rate for each Interest Period applicable to the respective Eurodollar Loans and shall promptly notify the Borrower and the Lenders thereof. Each such determination shall, absent manifest error, be final and conclusive and binding on all parties hereto. -10- 12 1.09 Interest Periods. At the time the Borrower gives any Notice of Borrowing or Notice of Conversion in respect of the borrowing of, or conversion into, any Eurodollar Loan (in the case of the initial Interest Period applicable thereto) or on the third Business Day prior to the expiration of an Interest Period applicable to such Eurodollar Loan (in the case of any subsequent Interest Period), the Borrower shall have the right to elect, by giving the Administrative Agent notice thereof, the interest period (each an "Interest Period") applicable to such Eurodollar Loan, which Interest Period shall, at the option of the Borrower, be a one, two, three or six-month period, provided that (in each case): (i) all Eurodollar Loans comprising a Borrowing shall at all times have the same Interest Period; (ii) the initial Interest Period for any Eurodollar Loan shall commence on the date of Borrowing of such Eurodollar Loan (including the date of any conversion thereto from a Base Rate Loan) and each Interest Period occurring thereafter in respect of such Eurodollar Loan shall commence on the day on which the next preceding Interest Period applicable thereto expires; (iii) if any Interest Period for a Eurodollar Loan begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iv) if any Interest Period for a Eurodollar Loan would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, however, that if any Interest Period for a Eurodollar Loan would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (v) unless the Required Lenders otherwise agree, no Interest Period may be selected at any time when a Default or an Event of Default is then in existence; (vi) no Interest Period in respect of any Borrowing of any Tranche of Loans shall be selected which extends beyond the respective Maturity Date for such Tranche of Loans; (vii) no Interest Period in respect of any Borrowing of Multiple Draw I Term Loans or Multiple Draw II Term Loans, as the case may be, shall be selected which extends beyond any date upon which a mandatory repayment of such Tranche of Term Loans will be required to be made under Section 4.02(b)(i) or (ii), as the case may be, if the aggregate principal amount of Multiple Draw I Term Loans or Multiple Draw II Term Loans, as the case may be, which have Interest Periods which will expire after such date will be in excess of the aggregate principal amount of Multiple Draw I Term Loans or Multiple Draw II Term Loans, as the case may be, then outstanding less the aggregate amount of such required repayment; and -11- 13 (viii) no Interest Period may be selected until the earlier of (x) the 90th day after the Initial Borrowing Date or (y) the Syndication Date. If upon the expiration of any Interest Period applicable to a Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not permitted to elect, a new Interest Period to be applicable to such Eurodollar Loans as provided above, the Borrower shall be deemed to have elected to convert such Eurodollar Loans into Base Rate Loans effective as of the expiration date of such current Interest Period. 1.10 Increased Costs, Illegality, etc. (a) In the event that any Lender shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto but, with respect to clause (i) below, may be made only by the Administrative Agent): (i) on any Interest Determination Date that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or (ii) at any time, that such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loan because of (x) any change since the Effective Date in any applicable law or governmental rule, regulation, order, guideline or request (whether or not having the force of law) or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, order, guideline or request, such as, for example, but not limited to: (A) a change in the basis of taxation of payment to any Lender of the principal of or interest on the Loans or the Notes or any other amounts payable hereunder (except for changes in the rate of tax on, or determined by reference to, the net income or profits of such Lender pursuant to the laws of the jurisdiction in which it is organized or in which its principal office or applicable lending office is located or any subdivision thereof or therein) or (B) a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate and/or (y) other circumstances arising since the Effective Date affecting the interbank Eurodollar market; or (iii) at any time, that the making or continuance of any Eurodollar Loan has been made (x) unlawful by any law or governmental rule, regulation or order, (y) impossible by compliance by any Lender in good faith with any governmental request (whether or not having force of law) or (z) impracticable as a result of a contingency occurring after the Effective Date which materially and adversely affects the interbank Eurodollar market; then, and in any such event, such Lender (or the Administrative Agent, in the case of clause (i) above) shall promptly give notice (by telephone promptly confirmed in writing) to the Borrower and, except in the case of clause (i) above, to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Lenders). -12- 14 Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower with respect to Eurodollar Loans which have not yet been incurred (including by way of conversion) shall be deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to such Lender, upon such Lender's written request therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as shall be required to compensate such Lender for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Lender, showing in reasonable detail the basis for the calculation thereof, submitted to the Borrower by such Lender shall, absent manifest error, be final and conclusive and binding on all the parties hereto) and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in Section 1.10(b) as promptly as possible and, in any event, within the time period required by law. (b) At any time that any Eurodollar Loan is affected by the circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and in the case of a Eurodollar Loan affected by the circumstances described in Section 1.10(a)(iii) shall) either (x) if the affected Eurodollar Loan is then being made initially or pursuant to a conversion, cancel such Borrowing by giving the Administrative Agent telephonic notice (confirmed in writing) on the same date that the Borrower was notified by the affected Lender or the Administrative Agent pursuant to Section 1.10(a)(ii) or (iii) or (y) if the affected Eurodollar Loan is then outstanding, upon at least three Business Days' written notice to the Administrative Agent, require the affected Lender to convert such Eurodollar Loan into a Base Rate Loan, provided that, if more than one Lender is affected at any time, then all affected Lenders must be treated the same pursuant to this Section 1.10(b). (c) If any Lender determines that after the Effective Date the introduction of or any change in any applicable law or governmental rule, regulation, order, guideline, directive or request (whether or not having the force of law) concerning capital adequacy, or any change in interpretation or administration thereof by the NAIC or any governmental authority, central bank or comparable agency, will have the effect of increasing the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender based on the existence of such Lender's Commitments hereunder or its obligations hereunder, then the Borrower shall pay to such Lender, upon its written demand therefor, such additional amounts as shall be required to compensate such Lender or such other corporation for the increased cost to such Lender or such other corporation or the reduction in the rate of return to such Lender or such other corporation as a result of such increase of capital. In determining such additional amounts, each Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided that such Lender's determination of compensation owing under this Section 1.10(c) shall, absent manifest error, be final and conclusive and binding on all the parties hereto. Each Lender, upon determining that any additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written notice thereof to the Borrower, which notice shall show in reasonable detail the basis for calculation of such additional amounts. -13- 15 1.11 Compensation. The Borrower shall compensate each Lender, upon its written request (which request shall set forth in reasonable detail the basis for requesting such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its Eurodollar Loans but excluding loss of anticipated profits) which such Lender may sustain: (i) if for any reason (other than a default by such Lender or the Administrative Agent) a Borrowing of, or conversion from or into, Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any repayment (including any repayment made pursuant to Section 4.01, Section 4.02 or as a result of an acceleration of the Loans pursuant to Section 10) or conversion of any of its Eurodollar Loans occurs on a date which is not the last day of an Interest Period with respect thereto; (iii) if any prepayment of any of its Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any other default by the Borrower to repay its Loans when required by the terms of this Agreement or any Note held by such Lender or (y) any election made pursuant to Section 1.10(b). 1.12 Change of Lending Office. Each Lender agrees that on the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.06 or Section 4.04 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans or Letters of Credit affected by such event, provided that such designation is made on such terms that such Lender and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of such Section. Nothing in this Section 1.12 shall affect or postpone any of the obligations of the Borrower or the right of any Lender provided in Sections 1.10, 2.06 and 4.04. 1.13 Replacement of Lenders. (x) If any Lender becomes a Defaulting Lender or otherwise defaults in its obligations to make Loans, (y) upon the occurrence of an event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.06 or Section 4.04 with respect to any Lender which results in such Lender charging to the Borrower increased costs in excess of those being generally charged by the other Lenders or (z) in the case of a refusal by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders as (and to the extent) provided in Section 13.12(b), the Borrower shall have the right, if no Default or Event of Default then exists (or, in the case of preceding clause (z), no Default or Event of Default will exist immediately after giving effect to such replacement), to replace such Lender (the "Replaced Lender") with one or more other Eligible Transferees, none of whom shall constitute a Defaulting Lender at the time of such replacement (collectively, the "Replacement Lender") and each of whom shall be required to be reasonably acceptable to the Administrative Agent, provided that (i) at the time of any replacement pursuant to this Section 1.13, the Replacement Lender shall enter into one or more Assignment and Assumption Agreements pursuant to Section 13.04(b) (and with all fees payable pursuant to said Section 13.04(b) to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the Commitments and outstanding Loans of, and in each case participations in Letters of Credit by, the Replaced Lender and, in connection therewith, shall pay to (x) the Replaced Lender in respect thereof an amount equal to the sum of -14- 16 (I) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Replaced Lender, (II) an amount equal to all Unpaid Drawings that have been funded by (and not reimbursed to) such Replaced Lender, together with all then unpaid interest with respect thereto at such time, and (III) an amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced Lender pursuant to Section 3.01, (y) the Issuing Lender an amount equal to such Replaced Lender's RL Percentage of any Unpaid Drawing (which at such time remains an Unpaid Drawing) to the extent such amount was not theretofore funded by such Replaced Lender to the Issuing Lender and (z) the Swingline Lender an amount equal to such Replaced Lender's RL Percentage of any Mandatory Borrowing to the extent such amount was not theretofore funded by such Replaced Lender to the Swingline Lender and (ii) all obligations of the Borrower due and owing to the Replaced Lender at such time (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid) shall be paid in full to such Replaced Lender concurrently with such replacement. Upon the execution of the respective Assignment and Assumption Agreement, the payment of amounts referred to in clauses (i) and (ii) above and, if so requested by the Replacement Lender, delivery to the Replacement Lender of the appropriate Note or Notes executed by the Borrower, the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.06, 4.04, 12.06 and 13.01), which shall survive as to such Replaced Lender. 1.14 Multiple Draw II Term Loan Commitments. So long as no Default or Event of Default then exists or would result therefrom, the Borrower shall, in consultation with the Administrative Agent, have the right to request on one or more occasions that one or more Lenders (and/or one or more other Persons which will become Lenders as provided below) provide Multiple Draw II Sub-Tranche A Term Loan Commitments and/or Multiple Draw II Sub-Tranche B Term Loan Commitments and, subject to the applicable terms and conditions contained in this Agreement and the relevant Multiple Draw II Term Loan Commitment Agreement, make Multiple Draw II Term Loans pursuant thereto, it being understood and agreed, however, that (i) no Lender shall be obligated to provide a Multiple Draw II Term Loan Commitment as a result of any request by the Borrower, and until such time, if any, as such Lender has agreed in its sole discretion to provide a Multiple Draw II Term Loan Commitment and executed and delivered to the Administrative Agent a Multiple Draw II Term Loan Commitment Agreement as provided in the immediately succeeding sentence, such Lender shall not be obligated to fund any Multiple Draw II Term Loans, (ii) any Lender (or, in the circumstances contemplated by clause (viii) below, any other Person which will qualify as an Eligible Transferee) may so provide a Multiple Draw II Term Loan Commitment without the consent of any other Lender, (iii) each provision of Multiple Draw II Term Loan Commitments pursuant to this Section 1.14 on a given date, and the amount of each Multiple Draw II Term Loan Sub-Facility, shall be in a minimum aggregate amount (for all Lenders (including, in the circumstances contemplated by clause (viii) below, Eligible Transferees who will become Lenders)) of at least $5,000,000, (iv) the aggregate amount of all Multiple Draw II Term Loan Commitments permitted to be provided pursuant to this Section 1.14 and the aggregate principal amount of Multiple Draw II Term Loans permitted to be made pursuant to Section 1.01(b) shall not, in either case, exceed $50,000,000, (v) the maturity date and the scheduled amortization of -15- 17 the Multiple Draw II Term Loans under a Multiple Draw II Term Loan Sub-Facility shall be as set forth in the Multiple Draw II Term Loan Commitment Agreement for such Multiple Draw II Term Loan Sub-Facility, provided that no Multiple Draw II Term Loan shall or have a Weighted Average Life to Maturity less than the Weighted Average Life to Maturity of the Multiple Draw I Term Loans, (vi) the interest rate, facility fees, commitment commission and other amounts payable in respect of the Multiple Draw II Term Loan Commitments and Multiple Draw II Term Loans under a Multiple Draw II Term Loan Sub-Facility shall be as set forth in the Multiple Draw II Term Loan Commitment Agreement for such Multiple Draw II Term Loan Sub-Facility, provided that any such interest rate shall be expressed as a margin in excess of the Base Rate or Eurodollar Rate, as the case may be, (vii) the relevant Multiple Draw II Term Loan Commitment Agreements for any Multiple Draw II Term Loan Sub-Facility shall specifically set forth whether the Multiple Draw II Term Loan Commitments in respect thereof shall constitute either Multiple Draw II Sub-Tranche A Term Loan Commitments or Multiple Draw II Sub-Tranche B Term Loan Commitments (with all of the Commitments to be provided in respect of any Multiple Draw II Term Loan Sub-Facility to be of the same Tranche), (viii) if, after the Borrower has requested the then existing Lenders (other than Defaulting Lenders) to provide Multiple Draw II Term Loan Commitments pursuant to this Section 1.14 on the terms to be applicable to the respective Multiple Draw II Term Loan Sub-Facility, the Borrower has not received Multiple Draw Term Loan Commitments in an aggregate amount equal to that amount of Multiple Draw II Term Loan Commitments which the Borrower desires to obtain pursuant to such request (as set forth in the notice provided by the Borrower as provided below), then the Borrower may, with the consent of the Administrative Agent (which consent shall not be unreasonably withheld), request Multiple Draw II Term Loan Commitments from Persons which would qualify as Eligible Transferees hereunder in aggregate amount equal to such deficiency on terms which are no more favorable to such Eligible Transferee in any respect than the terms offered to the Lenders, provided that any such Multiple Draw II Term Loan Commitments provided by any such Eligible Transferee which is not already a Lender shall be in a minimum amount (for such Eligible Transferee) of at least $5,000,000, and (ix) all actions taken by the Borrower pursuant to this Section 1.14 shall be done in coordination with the Administrative Agent. At the time of any provision of Multiple Draw II Term Loan Commitments pursuant to this Section 1.14, (i) the Borrower, the Administrative Agent and each such Lender or other Eligible Transferee (each a "Multiple Draw II Term Loan Lender") which agrees to provide a Multiple Draw II Term Loan Commitment shall execute and deliver to the Administrative Agent a Multiple Draw II Term Loan Commitment Agreement substantially in the form of Exhibit C, subject to such modifications in form and substance satisfactory to the Administrative Agent as may be necessary or appropriate in the case of any Multiple Draw II Term Loan Sub-Facility (with the effectiveness of such Multiple Draw II Term Loan Lender's Multiple Draw II Term Loan Commitment to occur upon delivery of such Multiple Draw II Term Loan Commitment Agreement to the Administrative Agent and the payment of any fees (including, without limitation, any fees payable pursuant to clause (ii) below) required in connection therewith), (ii) the Administrative Agent shall receive from the Borrower (or, to the extent agreed to by the Borrower and the respective Multiple Draw II Term Loan Lender, from such respective Multiple Draw II Term Loan Lender) the payment of a non-refundable fee of $3,500 for each Lender (including any Eligible Transferee which becomes a Lender) providing a new (or increased) Multiple Draw II Term Loan Commitment and (iii) the Borrower shall deliver to the Administrative Agent an opinion, in form and substance satisfactory to the Agents, from -16- 18 counsel to the Borrower satisfactory to the Agents and dated such date, covering such matters similar to those set forth in the opinion of counsel delivered to the Administrative Agent on the Initial Borrowing Date pursuant to Section 5.03 and such other matters as the Agents may reasonably request. The Administrative Agent shall promptly notify each Lender as to the occurrence of each Multiple Draw II Term Loan Commitment Date, and (i) on each such date Schedule I shall be deemed modified to reflect the Multiple Draw II Sub-Tranche A Term Loan Commitments and/or Multiple Draw II Sub-Tranche B Term Loan Commitments, as the case may be, of such Multiple Draw Term Loan Lenders and (ii) to the extent requested by such Multiple Draw II Term Loan Lenders, Multiple Draw II Term Notes will be issued, at the Borrower's expense, to such Multiple Draw II Term Loan Lenders, to be in conformity with the requirements of Section 1.05 (with appropriate modifications) to the extent needed to reflect the new Multiple Draw II Term Loan Commitments. SECTION 2. Letters of Credit. 2.01 Letters of Credit. (a) Subject to and upon the terms and conditions set forth herein, the Borrower may request that the Issuing Lender issue, at any time and from time to time on and after the Initial Borrowing Date and prior to the 30th day prior to the Multiple Draw I/Revolver Maturity Date, for the account of the Borrower and for the benefit of (x) any holder (or any trustee, agent or other similar representative for any such holders) of L/C Supportable Obligations of the Borrower or any of its Subsidiaries, an irrevocable standby letter of credit, in a form customarily used by the Issuing Lender or in such other form as has been approved by the Issuing Lender and (y) sellers of goods to the Borrower or any of its Subsidiaries, an irrevocable trade letter of credit, in a form customarily used by the Issuing Lender or in such other form as has been approved by such Issuing Lender (each such letter of credit, a "Letter of Credit" and, collectively, the "Letters of Credit"). All Letters of Credit shall be denominated in Dollars and shall be issued on a sight basis only. (b) Subject to and upon the terms and conditions set forth herein, the Issuing Lender agrees that it will, at any time and from time to time on and after the Initial Borrowing Date and prior to the 30th day prior to the Multiple Draw I/Revolver Maturity Date, following its receipt of the respective Letter of Credit Request, issue for the account of the Borrower, one or more Letters of Credit as are permitted to remain outstanding hereunder without giving rise to a Default or an Event of Default, provided that the Issuing Lender shall be under no obligation to issue any Letter of Credit of the types described above if at the time of such issuance: (i) any order, judgment or decree of any governmental authority or arbitrator shall purport by its terms to enjoin or restrain the Issuing Lender from issuing such Letter of Credit or any requirement of law applicable to the Issuing Lender or any request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing Lender refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Lender with respect to such Letter of Credit any restriction or reserve or capital requirement (for which the Issuing Lender is not otherwise compensated) not in effect with respect to the Issuing Lender on the date hereof, or any unreimbursed loss, cost or expense which was not applicable or in effect with respect to -17- 19 the Issuing Lender as of the date hereof and which the Issuing Lender reasonably and in good faith deems material to it; or (ii) the Issuing Lender shall have received notice, from the Borrower or the Required Lenders prior to the issuance of such Letter of Credit, of the type described in the second sentence of Section 2.03(b). 2.02 Maximum Letter of Credit Outstandings; Final Maturities. Notwithstanding anything to the contrary contained in this Agreement, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and prior to the issuance of, the respective Letter of Credit) at such time would exceed either (x) $10,000,000 or (y) when added to the sum of (I) the aggregate principal amount of all Revolving Loans then outstanding and (II) the aggregate principal amount of all Swingline Loans then outstanding, an amount equal to the Total Available Revolving Loan Commitment and (ii) each Letter of Credit shall by its terms terminate on or before the earlier of (x) in the case of standby Letters of Credit, (A) the date which occurs 12 months after the date of the issuance thereof (although any such standby Letter of Credit may be extendible for successive periods of up to 12 months, but, in each case, not beyond the tenth Business Day prior to the Multiple Draw I/Revolver Maturity Date, on terms acceptable to the Issuing Lender) and (B) the tenth Business Day prior to the Multiple Draw I/Revolver Maturity Date and (y) in the case of trade Letters of Credit, (A) the date which occurs 180 days after the date of issuance thereof, and (B) 30 days prior to the Multiple Draw I/Revolver Maturity Date. 2.03 Letter of Credit Requests; Minimum Stated Amount. (a) Whenever the Borrower desires that a Letter of Credit be issued for its account, the Borrower shall give the Administrative Agent and the Issuing Lender at least five Business Days' (or such shorter period as is acceptable to the Issuing Lender) written notice thereof. Each notice shall be in the form of Exhibit D (each a "Letter of Credit Request"). (b) The making of each Letter of Credit Request shall be deemed to be a representation and warranty by the Borrower that such Letter of Credit may be issued in accordance with, and will not violate the requirements of, Section 2.02. Unless the Issuing Lender has received notice from the Borrower or the Required Lenders before it issues a Letter of Credit that one or more of the conditions specified in Section 5 or 6 are not then satisfied, or that the issuance of such Letter of Credit would violate Section 2.02, then the Issuing Lender shall, subject to the terms and conditions of this Agreement, issue the requested Letter of Credit for the account of the Borrower in accordance with the Issuing Lender's usual and customary practices. Upon the issuance of or modification or amendment to any standby Letter of Credit, the Issuing Lender shall promptly notify the Borrower, the Administrative Agent and each Participant of such issuance, modification or amendment, as the case may be. Notwithstanding anything to the contrary contained in this Agreement, in the event that a Lender Default exists, the Issuing Lender shall not be required to issue any Letter of Credit unless the Issuing Lender has entered into arrangements satisfactory to it and the Borrower to eliminate the Issuing Lender's risk with respect to the participation in Letters of Credit by the Defaulting Lender or Lenders, including by cash collateralizing such Defaulting Lender's or Lenders' RL Percentage of the Letter of Credit Outstandings. -18- 20 (c) The initial Stated Amount of each Letter of Credit shall not be less than $100,000 or such lesser amount as is acceptable to the Issuing Lender. 2.04 Letter of Credit Participations. (a) Immediately upon the issuance by the Issuing Lender of any Letter of Credit, the Issuing Lender shall be deemed to have sold and transferred to each RL Lender, other than the Issuing Lender (each such Lender, in its capacity under this Section 2.04, a "Participant"), and each such Participant shall be deemed irrevocably and unconditionally to have purchased and received from the Issuing Lender, without recourse or warranty, an undivided interest and participation, to the extent of such Participant's RL Percentage, in such Letter of Credit, each drawing or payment made thereunder and the obligations of the Borrower under this Agreement with respect thereto, and any security therefor or guaranty pertaining thereto. Upon any change in the Revolving Loan Commitments or RL Percentages of the Lenders pursuant to Section 1.13 or 13.04, it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings with respect thereto, there shall be an automatic adjustment to the participations pursuant to this Section 2.04 to reflect the new RL Percentages of the assignor and assignee Lender, as the case may be. (b) In determining whether to pay under any Letter of Credit, the Issuing Lender shall not have an obligation relative to the other Lenders other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to substantially comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by the Issuing Lender under or in connection with any Letter of Credit shall not create for the Issuing Lender any resulting liability to the Borrower, any other Credit Party, any Lender or any other Person unless such action is taken or omitted with gross negligence or willful misconduct (as finally determined by a court of competent jurisdiction). (c) In the event that the Issuing Lender makes any payment under any Letter of Credit and the Borrower shall not have reimbursed such amount in full to the Issuing Lender pursuant to Section 2.05(a), the Issuing Lender shall promptly notify the Administrative Agent, which shall promptly notify each Participant of such failure, and each Participant shall promptly and unconditionally pay to the Issuing Lender the amount of such Participant's RL Percentage of such unreimbursed payment in Dollars and in same day funds. If the Administrative Agent so notifies, prior to 11:00 A.M. (New York City time) on any Business Day, any Participant required to fund a payment under a Letter of Credit, such Participant shall make available to the Issuing Lender in Dollars such Participant's RL Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Participant shall not have so made its RL Percentage of the amount of such payment available to the Issuing Lender, such Participant agrees to pay to the Issuing Lender, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Issuing Lender at the overnight Federal Funds Rate for the first three days and at the interest rate applicable to Revolving Loans maintained as Base Rate Loans for each day thereafter. The failure of any Participant to make available to the Issuing Lender its RL Percentage of any payment under any Letter of Credit shall not relieve any other Participant of its obligation hereunder to make available to the Issuing Lender its RL Percentage of any payment under any Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any -19- 21 other Participant to make available to the Issuing Lender such other Participant's RL Percentage of any such payment. (d) Whenever the Issuing Lender receives a payment of a reimbursement obligation as to which it has received any payments from the Participants pursuant to clause (c) above, the Issuing Lender shall pay to each such Participant which has paid its RL Percentage thereof, in Dollars and in same day funds, an amount equal to such Participant's share (based upon the proportionate aggregate amount originally funded by such Participant to the aggregate amount funded by all Participants) of the principal amount of such reimbursement obligation and interest thereon accruing after the purchase of the respective participations. (e) Upon the request of any Participant, the Issuing Lender shall furnish to such Participant copies of any Letter of Credit issued by it and such other documentation as may reasonably be requested by such Participant. (f) The obligations of the Participants to make payments to the Issuing Lender with respect to Letters of Credit issued by it shall be irrevocable and not subject to any qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Credit Documents; (ii) the existence of any claim, setoff, defense or other right which the Borrower or any of its Subsidiaries may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), any Agent, any Participant, any other Lender or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower or any Subsidiary of the Borrower and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; or (v) the occurrence of any Default or Event of Default. 2.05 Agreement to Repay Letter of Credit Drawings. (a) The Borrower agrees to reimburse the Issuing Lender, by making payment to the Administrative Agent in immediately available funds at the Payment Office, for any payment or disbursement made by the Issuing Lender under any Letter of Credit (each such amount, so paid until reimbursed, an "Unpaid Drawing"), not later than one Business Day following receipt by the Borrower of notice of such -20- 22 payment or disbursement (provided that no such notice shall be required to be given if a Default or an Event of Default under Section 10.05 shall have occurred and be continuing, in which case the Unpaid Drawing shall be due and payable immediately without presentment, demand, protest or notice of any kind (all of which are hereby waived by the Borrower)), with interest on the amount so paid or disbursed by the Issuing Lender, to the extent not reimbursed prior to 12:00 Noon (New York City time) on the date of such payment or disbursement, from and including the date paid or disbursed to but excluding the date the Issuing Lender was reimbursed by the Borrower therefor at a rate per annum equal to the Base Rate in effect from time to time plus the Applicable Margin for Revolving Loans maintained as Base Rate Loans; provided, however, to the extent such amounts are not reimbursed prior to 12:00 Noon (New York City time) on the third Business Day following the receipt by the Borrower of notice of such payment or disbursement or following the occurrence of a Default or an Event of Default under Section 10.05, interest shall thereafter accrue on the amounts so paid or disbursed by the Issuing Lender (and until reimbursed by the Borrower) at a rate per annum equal to the Base Rate in effect from time to time plus the Applicable Margin for Revolving Loans maintained as Base Rate Loans plus 2%, with interest to be payable on demand. The Issuing Lender shall give the Borrower prompt written notice of each Drawing under any Letter of Credit, provided that the failure to give any such notice shall in no way affect, impair or diminish the Borrower's obligations hereunder. (b) The obligations of the Borrower under this Section 2.05 to reimburse the Issuing Lender with respect to drawings under Letters of Credit (each a "Drawing") (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower or any Subsidiary of the Borrower may have or have had against any Lender (including in its capacity as the Issuing Lender or as a Participant), including, without limitation, any defense based upon the failure of any drawing under a Letter of Credit to conform to the terms of the Letter of Credit or any nonapplication or misapplication by the beneficiary of the proceeds of such Drawing; provided, however, that the Borrower shall not be obligated to reimburse the Issuing Lender for any wrongful payment made by the Issuing Lender under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of the Issuing Lender (as finally determined by court of competent jurisdiction). 2.06 Increased Costs. If at any time after the Effective Date, the introduction of or any change in any applicable law, rule, regulation, order, guideline or request or in the interpretation or administration thereof by the NAIC or any governmental authority charged with the interpretation or administration thereof, or compliance by the Issuing Lender or any Participant with any request or directive by the NAIC or by any such authority (whether or not having the force of law), shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against letters of credit issued by the Issuing Lender or participated in by any Participant or (ii) impose on the Issuing Lender or any Participant any other conditions relating, directly or indirectly, to this Agreement or any Letter of Credit or such Participant's participation therein; and the result of any of the foregoing is to increase the cost to the Issuing Lender or any Participant of issuing, maintaining or participating in any Letter of Credit or reduce the amount of any sum received or receivable by the Issuing Lender or any Participant hereunder or reduce the rate of return on its capital with respect to Letters of Credit (except for changes in the rate of tax on, or determined by reference to, the net income or profits -21- 23 of the Issuing Lender or such Participant pursuant to the laws of the jurisdiction in which it is organized or in which its principal office or applicable lending office is located or any subdivision thereof or therein), then, upon the delivery of the certificate referred to below to the Borrower by the Issuing Lender or any Participant (a copy of which certificate shall be sent by the Issuing Lender or such Participant to the Administrative Agent), the Borrower shall pay to the Issuing Lender or such Participant such additional amount or amounts as will compensate such Lender for such increased cost or reduction in the amount receivable or reduction on the rate of return on its capital. The Issuing Lender or any Participant, upon determining that any additional amounts will be payable pursuant to this Section 2.06, will give prompt written notice thereof to the Borrower, which notice shall include a certificate submitted to the Borrower by the Issuing Lender or such Participant (a copy of which certificate shall be sent by the Issuing Lender or such Participant to the Administrative Agent), setting forth in reasonable detail the basis for the calculation of such additional amount or amounts necessary to compensate the Issuing Lender or such Participant. The certificate required to be delivered pursuant to this Section 2.06 shall, absent manifest error, be final and conclusive and binding on the Borrower. SECTION 3. Commitment Commission; Fees; Reductions of Commitment. 3.01 Fees. (a) The Borrower agrees to pay to the Administrative Agent for distribution to each Non-Defaulting Lender with a Multiple Draw I Sub-Tranche B Term Loan Commitment a commitment commission (the "Multiple Draw I Sub-Tranche B Commitment Commission") for the period from and including the Effective Date to but excluding the Multiple Draw I/Revolver Maturity Date (or such earlier date on which the Total Multiple Draw I Sub-Tranche B Term Loan Commitment has been terminated) computed at a rate for each day equal to 1.75% on the daily Multiple Draw I Sub-Tranche B Term Loan Commitment of such Non-Defaulting Lender. Accrued Multiple Draw I Sub-Tranche B Commitment Commission shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the date upon which the Total Multiple Draw I Sub-Tranche B Term Loan Commitment has been terminated. (b) The Borrower agrees to pay to the Administrative Agent for distribution to each Non-Defaulting Lender with a Multiple Draw I Sub-Tranche C Term Loan Commitment a commitment commission (the "Multiple Draw I Sub-Tranche C Commitment Commission") for the period from and including the Effective Date to but excluding the Multiple Draw I/Revolver Maturity Date (or such earlier date on which the Total Multiple Draw I Sub-Tranche C Term Loan Commitment has been terminated) computed at a rate for each day equal to 1.50% on the daily Multiple Draw I Sub-Tranche C Term Loan Commitment of such Non-Defaulting Lender. Accrued Multiple Draw I Sub-Tranche C Commitment Commission shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the date upon which the Total Multiple Draw I Sub-Tranche C Term Loan Commitment has been terminated. (c) The Borrower agrees to pay to the Administrative Agent for distribution to each Non-Defaulting RL Lender a commitment commission (the "RL Commitment Commission") for the period from and including the Effective Date to but excluding the Multiple Draw I/Revolver Maturity Date (or such earlier date on which the Total Revolving Loan Commitment has been terminated) computed at a rate for each day equal to the Applicable RL Commitment Commission Percentage on the daily Unutilized Revolving Loan Commitment of such -22- 24 Non-Defaulting Lender. Accrued RL Commitment Commission shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the date upon which the Total Revolving Loan Commitment has been terminated. (d) The Borrower agrees to pay to the Administrative Agent for distribution to each Non-Defaulting Multiple Draw II Term Loan Lender with a Multiple Draw II Term Loan Commitment under a Multiple Draw II Term Loan Sub-Facility such facility fees, commitment commission and other amounts, if any, as are specified in the Multiple Draw II Term Loan Commitment Agreement for the respective Multiple Draw II Term Loan Sub-Facility, with such facility fees, commitment commission and other amounts, if any, to be payable at the times set forth in such Multiple Draw II Term Loan Commitment Agreement. (e) The Borrower agrees to pay to the Administrative Agent for distribution to each RL Lender (based on each such RL Lender's respective RL Percentage) a fee in respect of each Letter of Credit (the "Letter of Credit Fee") for the period from and including the date of issuance of such Letter of Credit to and including the date of termination or expiration of such Letter of Credit, computed at a rate per annum equal to the Applicable Margin then in effect with respect to Revolving Loans that are maintained as Eurodollar Loans on the daily Stated Amount of each such Letter of Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the first day on or after the termination of the Total Revolving Loan Commitment upon which no Letters of Credit remain outstanding. (f) The Borrower agrees to pay to the Issuing Lender, for its own account, a facing fee in respect of each Letter of Credit (the "Facing Fee") for the period from and including the date of issuance of such Letter of Credit to and including the date of termination or expiration of such Letter of Credit, computed at a rate equal to 1/4 of 1% per annum on the daily Stated Amount of such Letter of Credit, provided that in any event the minimum amount of the Facing Fee payable in any 12 month period for each Letter of Credit shall be $500; it being agreed that, on the date of issuance of any Letter of Credit and on each anniversary thereof prior to the termination of such Letter of Credit, if $500 will exceed the amount of Facing Fees that will accrue with respect to such Letter of Credit for the immediately succeeding 12 month period, the full $500 shall be payable on the date of issuance of such Letter of Credit and on each such anniversary thereof. Except as otherwise provided in the proviso to the immediately preceding sentence, accrued Facing Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and upon the first day on or after the termination of the Total Revolving Loan Commitment upon which no Letters of Credit remain outstanding. (g) The Borrower agrees to pay to the Issuing Lender, for its own account, upon each payment under, issuance of, or amendment to, any Letter of Credit, such amount as shall at the time of such event be the administrative charge and the reasonable expenses which the Issuing Lender is generally imposing in connection with such occurrence with respect to letters of credit. (h) The Borrower agrees to pay to each Agent, for its respective account, such other fees as have been agreed to in writing by the Borrower and such Agent. -23- 25 3.02 Voluntary Termination of Multiple Draw I Term Loan Commitments, Multiple Draw II Term Loan Commitments, Unutilized Revolving Loan Commitments. (a) At any time after the Initial Borrowing Date and prior to the termination of the Total Multiple Draw I Term Loan Commitment, upon at least three Business Days' prior written notice to the Administrative Agent at the Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), the Borrower shall have the right, at any time or from time to time, without premium or penalty, to terminate the Total Multiple Draw I Term Loan Commitment then in effect, in whole or in part, pursuant to this Section 3.02(a), in a minimum amount of $1,000,000, or an integral multiple of $1,000,000 in excess thereof in the case of partial reductions to the Total Multiple Draw I Term Loan Commitment, provided that each such reduction shall apply (1) first, proportionately to permanently reduce the Multiple Draw I Sub-Tranche C Term Loan Commitment of each Lender with such a Commitment, (2) second, to the extent the amount of the reduction to the Total Multiple Draw I Term Loan Commitment exceeds the Total Multiple Draw I Sub-Tranche C Term Loan Commitment as in effect immediately before the respective reduction, proportionately to permanently reduce the Multiple Draw I Sub-Tranche B Term Loan Commitment of each such Lender with such a Commitment and (3) third, to the extent the amount of the reduction to the Total Multiple Draw I Term Loan Commitment exceeds the sum of the Total Multiple Draw I Sub-Tranche C Term Loan Commitment and the Total Multiple Draw I Sub-Tranche B Term Loan Commitment as in effect immediately before the respective reduction, proportionately to permanently reduce the Multiple Draw I Sub-Tranche A Term Loan Commitment of each Lender with such a Commitment. (b) At any time after any Multiple Draw II Term Loan Commitments have been provided pursuant to Section 1.14, and prior to the termination of the Total Multiple Draw II Term Loan Commitment, upon at least three Business Days' prior written notice to the Administrative Agent at the Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), the Borrower shall have the right, at any time or from time to time, without premium or penalty, to terminate the Total Multiple Draw II Term Loan Commitment then in effect, in whole or in part, pursuant to this Section 3.02(b), in a minimum amount of $1,000,000, or an integral multiple of $1,000,000 in excess thereof in the case of partial reductions to the Total Multiple Draw II Term Loan Commitment, provided that each such reduction shall apply (1) first, proportionately to permanently reduce the Multiple Draw II Sub-Tranche B Term Loan Commitment of each Lender with such a Commitment and (2) second, to the extent the amount of the reduction to the Total Multiple Draw II Term Loan Commitment exceeds the Total Multiple Draw II Sub-Tranche B Term Loan Commitment as in effect immediately before the respective reduction, proportionately to permanently reduce the Multiple Draw II Sub-Tranche A Term Loan Commitment of each Lender with such a Commitment. (c) Upon at least three Business Days' prior written notice to the Administrative Agent at the Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders), the Borrower shall have the right, at any time or from time to time, without premium or penalty, to terminate the Total Unutilized Revolving Loan Commitment, in whole or in part, pursuant to this Section 3.02(c), in an integral multiple of $1,000,000 in the case of partial reductions to the Total Unutilized Revolving Loan Commitment, provided that each such reduction shall apply proportionately to permanently reduce the Revolving Loan Commitment of each RL Lender. -24- 26 (d) In the event of a refusal by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders as (and to the extent) provided in Section 13.12(b), the Borrower may, subject to its compliance with the requirements of Section 13.12(b), upon five Business Days' prior written notice to the Administrative Agent at the Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders) terminate all of the Commitments of such Lender, so long as all Loans, together with accrued and unpaid interest, Fees and all other amounts, owing to such Lender are repaid concurrently with the effectiveness of such termination pursuant to Section 4.01(b) (at which time Schedule I shall be deemed modified to reflect such changed amounts) and such Lender's RL Percentage of all outstanding Letters of Credit is cash collateralized in a manner satisfactory to the Administrative Agent and the Issuing Lender, and at such time, such Lender shall no longer constitute a "Lender" for purposes of this Agreement, except with respect to indemnifications under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.06, 4.04, 12.06 and 13.01), which shall survive as to such repaid Lender. 3.03 Mandatory Reduction of Commitments. (a) The Total Commitment (and the Commitments of each Lender) shall terminate in its entirety on May 15, 1999 unless the Initial Borrowing Date has occurred on or before such date. (b) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Multiple Draw I Sub-Tranche A Term Loan Commitment (and the Multiple Draw I Sub-Tranche A Term Loan Commitment of each Lender) shall terminate in its entirety on the Initial Borrowing Date (after giving effect to the making of Multiple Draw I Sub-Tranche A Term Loans on such date). (c) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Multiple Draw I Term Loan Commitment shall (i) be reduced on each Multiple Draw I Sub-Tranche B Term Loan Borrowing Date and each Multiple Draw Sub-Tranche C Term Loan Borrowing Date (in each case, after giving effect to the making of Multiple Draw I Term Loans on each such date) in an amount equal to the aggregate principal amount of Multiple Draw I Sub-Tranche B Term Loans and Multiple Draw I Sub-Tranche C Term Loans incurred on each such date, (ii) terminate in its entirety (to the extent not theretofore terminated) on the earlier of (x) 5:00 P.M. (New York City time) on the Multiple Draw I Term Loan Commitment Termination Date, whether or not any Multiple Draw I Term Loans are incurred on such date, (y) the Initial Multiple Draw II Term Loan Borrowing Date (after giving effect to the making of any Multiple Draw I Term Loans on such date) and (z) unless the Required Lenders otherwise agree, the date on which a Change of Control occurs, and (iii) be reduced from time to time to the extent required by Section 4.02. (d) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Multiple Draw II Term Loan Commitment shall (i) be reduced on each Multiple Draw II Term Loan Borrowing Date (after giving effect to the making of Multiple Draw II Term Loans on each such date) in an amount equal to the aggregate principal amount of Multiple Draw II Term Loans incurred on each such date, (ii) unless the Required Lenders otherwise agree, terminate in its entirety (to the extent not theretofore terminated) on the date on -25- 27 which a Change of Control occurs, and (iii) be reduced from time to time to the extent required by Section 4.02. (e) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the Revolving Loan Commitment of each Lender) shall terminate in its entirety on the earlier of (i) the date on which a Change of Control occurs unless the Required Lenders otherwise agree and (ii) the Multiple Draw I/Revolver Maturity Date. (f) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, on each date after the Initial Borrowing Date upon which a mandatory repayment of Term Loans, a mandatory reduction to the Total Multiple Draw I Term Loan Commitment and/or a mandatory reduction to the Total Multiple Draw II Term Loan Commitment, in each such case pursuant to any of Sections 4.02(c) through (g), inclusive, is required (and exceeds the sum of (I) the aggregate principal amount of Term Loans then outstanding, (II) the Total Multiple Draw I Term Loan Commitment then in effect and (III) the Total Multiple Draw II Term Loan Commitment then in effect) or would be required if Term Loans were then outstanding and/or the Total Multiple Draw I Term Loan Commitment or the Total Multiple Draw II Term Loan Commitment was then in effect in an amount greater than $0, the Total Revolving Loan Commitment shall be permanently reduced by the amount, if any, by which the amount required to be applied pursuant to said Sections (determined as if an unlimited amount of Term Loans were actually outstanding) exceeds the sum of (I) the aggregate principal amount of Term Loans then outstanding, (II) the Total Multiple Draw I Term Loan Commitment then in effect and (III) the Total Multiple Draw II Term Loan Commitment then in effect. (g) Upon any termination of the Total Multiple Draw I Term Loan Commitment pursuant to this Section 3.03, the Multiple Draw I Sub-Tranche A Term Loan Commitment, the Multiple Draw I Sub-Tranche B Term Loan Commitment and the Multiple Draw I Sub-Tranche C Term Loan Commitment of each Lender shall, concurrently with such termination, be terminated in its entirety. Each reduction to the Total Multiple Draw I Term Loan Commitment pursuant to Section 3.03(c)(i) shall apply to reduce the relevant Commitments pursuant to which the respective Tranche or Tranches of the Multiple Draw I Term Loans are being made by an amount which is equal to the Loans of such Tranche being made at such time, with (x) the Multiple Draw I Sub-Tranche B Term Loan Commitment of each Lender to be reduced by the principal amount of the Multiple Draw I Sub-Tranche B Term Loan made by such Lender on such date and (y) the Multiple Draw I Sub-Tranche C Term Loan Commitment of each Lender to be reduced by the principal amount of the Multiple Draw I Sub-Tranche C Term Loan made by such Lender on such date. (h) Upon any termination of the Total Multiple Draw II Term Loan Commitment pursuant to this Section 3.03, the Multiple Draw II Sub-Tranche A Term Loan Commitment and the Multiple Draw II Sub-Tranche B Term Loan Commitment of each Lender shall, concurrently with such termination, be terminated in its entirety. Each reduction to the Total Multiple Draw II Term Loan Commitment pursuant to Section 3.03(d)(i) shall apply to reduce the relevant Commitments pursuant to which the respective Tranche or Tranches of the Multiple Draw II Term Loans are being made by an amount which is equal to the Loans of such -26- 28 Tranche being made at such time, with (x) the Multiple Draw II Sub-Tranche A Term Loan Commitment of each Lender to be reduced by the principal amount of the Multiple Draw II Sub-Tranche A Term Loan made by such Lender on such date and (y) the Multiple Draw II Sub-Tranche B Term Loan Commitment of each Lender to be reduced by the principal amount of the Multiple Draw II Sub-Tranche B Term Loan made by such Lender on such date. (i) Each reduction to the Total Revolving Loan Commitment pursuant to this Section 3.03 shall be applied proportionately to permanently reduce the Revolving Loan Commitment of each Lender with such a Commitment. SECTION 4. Prepayments; Payments; Taxes. 4.01 Voluntary Prepayments. (a) The Borrower shall have the right to prepay the Loans, without premium or penalty, in whole or in part at any time and from time to time on the following terms and conditions: (i) the Borrower shall give the Administrative Agent prior to 12:00 Noon (New York City time) at the Notice Office at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay Loans, which notice (in each case) shall specify whether Multiple Draw I Term Loans, Multiple Draw II Term Loans, Revolving Loans or Swingline Loans shall be prepaid, the amount of such prepayment and the Types of Loans to be prepaid and, in the case of Eurodollar Loans, the specific Borrowing or Borrowings pursuant to which made, and which notice the Administrative Agent shall, except in the case of Swingline Loans, promptly transmit to each of the Lenders; (ii) (x) each partial prepayment of Term Loans pursuant to this Section 4.01(a) shall be in an aggregate principal amount of at least $5,000,000, (y) each partial prepayment of Revolving Loans pursuant to this Section 4.01(a) shall be in an aggregate principal amount of at least $1,000,000 and (z) each partial prepayment of Swingline Loans pursuant to this Section 4.01(a) shall be in an aggregate principal amount of at least $500,000, provided that if any partial prepayment of Eurodollar Loans made pursuant to any Borrowing shall reduce the outstanding principal amount of Eurodollar Loans made pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount applicable thereto, then such Borrowing may not be continued as a Borrowing of Eurodollar Loans and any election of an Interest Period with respect thereto given by the Borrower shall have no force or effect; (iii) each prepayment pursuant to this Section 4.01(a) in respect of any Loans made pursuant to a Borrowing shall be applied pro rata among such Loans, provided that at the Borrower's election in connection with any prepayment of Revolving Loans pursuant to this Section 4.01(a), such prepayment shall not, so long as no Default or Event of Default then exists, be applied to any Revolving Loan of a Defaulting Lender; (iv) each voluntary prepayment of Term Loans pursuant to this Section 4.01(a) shall be applied pro rata to each Tranche of outstanding Term Loans, with the Multiple Draw I Term Loans to be allocated the Multiple Draw I Term Loan Percentage of the amount of such prepayment and the Multiple Draw II Term Loans to be allocated the Multiple Draw II Term Loan Percentage of the amount of such prepayment; (v) each voluntary prepayment of any Multiple Draw I Term Loans pursuant to this Section 4.01(a) occurring after the Multiple Draw I Term Loan Commitment Termination Date shall be applied to reduce the then remaining Scheduled Repayments of Multiple Draw I Term Loans on a pro rata basis (based upon the then remaining unpaid principal amounts of such Scheduled Repayments after giving effect to all prior reductions thereto); and (vi) each voluntary prepayment of any Multiple Draw II Term Loans pursuant to this Section -27- 29 4.01(a) shall be applied on a pro rata basis to the Multiple Draw II Term Loans then outstanding pursuant to the various Multiple Draw II Term Loan Sub-Facilities and, within each Multiple Draw II Term Loan Sub-Facility such payments shall be applied to reduce the respective Scheduled Repayments applicable thereto on a pro rata basis (based upon the then remaining unpaid principal amount of such Scheduled Repayments after giving effect to all prior reductions thereto); provided that (x) if the Scheduled Repayments applicable to any Multiple Draw II Term Loan Sub-Facility are expressed as a percentage of the principal amount of Multiple Draw II Term Loans outstanding thereunder as of a given date, voluntary prepayments shall only reduce such Scheduled Repayments if same occur after such specified date and (y) the provisions contained above in this clause (vi), to the extent relating to the application of voluntary repayments to the Scheduled Repayments applicable to any Multiple Draw II Term Loan Sub-Facility, shall be subject to any contrary agreements with respect thereto contained in the relevant Multiple Draw II Term Loan Commitment Agreements. (b) In the event of a refusal by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders as (and to the extent) provided in Section 13.12(b), the Borrower may, upon five Business Days' prior written notice to the Administrative Agent at the Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders) repay all Loans, together with accrued and unpaid interest, Fees, and other amounts owing to such Lender in accordance with, and subject to the requirements of, said Section 13.12(b) so long as (I) in the case of the repayment of Revolving Loans of any Lender pursuant to this Section 4.01(b), (x) the Revolving Loan Commitment of such Lender is terminated concurrently with such repayment pursuant to Section 3.02(d) (at which time Schedule I shall be deemed modified to reflect the changed Revolving Loan Commitments) and (y) such Lender's RL Percentage of all outstanding Letters of Credit is cash collateralized in a manner satisfactory to the Administrative Agent and the Issuing Lender, (II) in the case of the repayment of Term Loans of any Lender pursuant to this Section 4.01(b), the Multiple Draw I Term Loan Commitment (and each of the related Commitments) of such Lender and the Multiple Draw II Term Loan Commitment (and each of the related Commitments) of such Lender is terminated concurrently with such repayment pursuant to Section 3.02(d) (to the extent not theretofore terminated) (at which time Schedule I shall be deemed modified to reflect the changed Commitments), and (III) the consents, if any, required under Section 13.12(b) in connection with the repayment pursuant to this clause (b) have been obtained. 4.02 Mandatory Repayments and Commitment Reductions. (a) On any day on which the sum of (I) the aggregate outstanding principal amount of all Revolving Loans (after giving effect to all other repayments thereof on such date), (II) the aggregate outstanding principal amount of all Swingline Loans (after giving effect to all other repayments thereof on such date) and (III) the aggregate amount of all Letter of Credit Outstandings exceeds the Total Available Revolving Loan Commitment at such time, the Borrower shall prepay on such day the principal of Swingline Loans and, after all Swingline Loans have been repaid in full or if no Swingline Loans are outstanding, Revolving Loans in an amount equal to such excess. If, after giving effect to the prepayment of all outstanding Swingline Loans and Revolving Loans, the aggregate amount of the Letter of Credit Outstandings exceeds the Total Available Revolving Loan Commitment at such time, the Borrower shall pay to the Administrative Agent at the -28- 30 Payment Office on such day an amount of cash and/or Cash Equivalents equal to the amount of such excess (up to a maximum amount equal to the Letter of Credit Outstandings at such time), such cash and/or Cash Equivalents to be held as security for all obligations of the Borrower to the Issuing Lender and the Lenders hereunder in a cash collateral account to be established by the Administrative Agent. (b) (i) In addition to any other mandatory repayments pursuant to this Section 4.02, on each date set forth below, the Borrower shall be required to repay that principal amount of Multiple Draw I Term Loans, to the extent then outstanding, as is equal to the product of (i) the aggregate principal amount of all Multiple Draw I Term Loans outstanding on the Multiple Draw I Term Loan Commitment Termination Date (after giving effect to any Multiple Draw I Term Loans made on such date) and (ii) the respective percentage set forth opposite each such date below (each such repayment, as the same may be reduced as provided in Sections 4.01(a) and 4.02(h), a "Multiple Draw I Term Loan Scheduled Repayment"):
Multiple Draw I Term Loan Scheduled Repayment Date Percentage ------------------------ ---------- March 31, 2002 16.6% June 30, 2002 16.6% September 30, 2002 16.6% December 31, 2002 16.6% March 31, 2003 16.6% Multiple Draw I/Revolver Maturity Date 17%
(ii) In addition to any other mandatory repayments pursuant to this Section 4.02, the Borrower shall be required to repay the principal amount of Multiple Draw II Term Loans made under each Multiple Draw II Term Loan Sub-Facility on the dates and in the amounts set forth in the respective Multiple Draw II Term Loan Commitment Agreement or Agreements for such Multiple Draw II Term Loan Sub-Facility (each such repayment as the same may be reduced as provided in Sections 4.01(a) and 4.02(h), a "Multiple Draw II Term Loan Scheduled Repayment"; with the Multiple Draw I Term Loan Scheduled Repayments and the Multiple Draw II Term Loan Scheduled Repayments being collectively referred to as the "Scheduled Repayments"), provided that in no event may the Weighted Average Life to Maturity of any Multiple Draw II Term Loan Sub-Facility (for this purpose, calculated assuming that all Multiple Draw II Term Loans permitted to be incurred pursuant to such Multiple Draw II Term Loan Sub-Facility have been incurred) be permitted to be less than the Weighted Average Life to Maturity applicable to the Multiple Draw I Term Loans (for this purpose, calculated assuming that all Multiple Draw I Term Loans permitted to be incurred pursuant to this Agreement have been incurred). (c) In addition to any other mandatory repayments pursuant to this Section 4.02, on each date on or after the Initial Borrowing Date upon which the Borrower or any of its Subsidiaries receives any cash proceeds from any capital contribution or any sale or issuance of its -29- 31 equity (other than cash proceeds received (i) from the issuance by the Borrower of shares of its common stock (including as a result of the exercise of any options with regard thereto), or options to purchase shares of its common stock, to officers, directors and employees of the Borrower and its Subsidiaries, (ii) from the exercise of any warrants to purchase common stock of the Borrower outstanding on the Effective Date, so long as the aggregate amount excluded pursuant to this clause (ii) does not exceed $4,000,000, (iii) from the issuance by any Foreign Subsidiary of shares of its common stock, so long as the aggregate amount excluded pursuant to this clause (iii) does not exceed $5,000,000 or (iv) from equity contributions to any Subsidiary of the Borrower to the extent made by the Borrower or another Subsidiary of the Borrower), an amount equal to 50% of the Net Equity Proceeds of such capital contribution or sale or issuance of equity shall be applied as a mandatory repayment of principal of outstanding Term Loans and/or as a mandatory reduction to the Total Multiple Draw I Term Loan Commitment or the Total Multiple Draw II Term Loan Commitment in accordance with the requirements of Sections 4.02(h) and (i). (d) In addition to any other mandatory repayments pursuant to this Section 4.02, on each date on or after the Initial Borrowing Date upon which the Borrower or any of its Subsidiaries receives any cash proceeds from any incurrence by the Borrower or any of its Subsidiaries of Indebtedness for borrowed money (other than Indebtedness for borrowed money permitted to be incurred pursuant to Section 9.04 as such Section is in effect on the Effective Date), an amount equal to 100% of the Net Debt Proceeds of the respective incurrence of Indebtedness shall be applied as a mandatory repayment of principal of outstanding Term Loans and/or as a mandatory reduction to the Total Multiple Draw I Term Loan Commitment or the Total Multiple Draw II Term Loan Commitment in accordance with the requirements of Sections 4.02(h) and (i). (e) In addition to any other mandatory repayments pursuant to this Section 4.02, on each date on or after the Initial Borrowing Date upon which the Borrower or any of its Subsidiaries receives any cash proceeds from any Asset Sale, an amount equal to 100% of the Net Sale Proceeds therefrom shall be applied as a mandatory repayment of principal of outstanding Term Loans and/or as a mandatory reduction to the Total Multiple Draw I Term Loan Commitment or the Total Multiple Draw II Term Loan Commitment in accordance with the requirements of Sections 4.02(h) and (i); provided that with respect to no more than $5,000,000 in the aggregate of cash proceeds from Asset Sales in any fiscal year of the Borrower, the Net Sale Proceeds therefrom shall not be required to be so applied on such date so long as no Default or Event of Default then exists and the Borrower has delivered a certificate to the Administrative Agent on or prior to such date stating that such Net Sale Proceeds shall be used to purchase assets used or to be used in the businesses referred to in Section 9.15(a) within 180 days following the date of such Asset Sale (which certificate shall set forth the estimates of the proceeds to be so expended), and provided further, that if all or any portion of such Net Sale Proceeds not required to be applied as a mandatory repayment of principal of outstanding Term Loans and/or as a mandatory reduction to the Total Multiple Draw I Term Loan Commitment or the Total Multiple Draw II Term Loan Commitment are not so reinvested in assets used or to be used in the businesses referred to in Section 9.15(a) within such 180-day period, such remaining portion shall be applied on the last day of such period as a mandatory repayment of principal of outstanding Term Loans and/or as a mandatory reduction to the Total Multiple Draw I Term -30- 32 Loan Commitment or the Total Multiple Draw II Term Loan Commitment as provided above in this Section 4.02(e) without regard to this proviso. (f) In addition to any other mandatory repayments pursuant to this Section 4.02, on each Excess Cash Payment Date, an amount equal to 75% of the Excess Cash Flow for the relevant Excess Cash Payment Period shall be applied as a mandatory repayment of principal of outstanding Term Loans and/or as a mandatory reduction to the Total Multiple Draw I Term Loan Commitment or the Total Multiple Draw II Term Loan Commitment in accordance with the requirements of Sections 4.02(h) and (i). (g) In addition to any other mandatory repayments pursuant to this Section 4.02, within 10 days following each date on or after the Initial Borrowing Date upon which the Borrower or any of its Subsidiaries receives any cash proceeds from any Recovery Event, an amount equal to 100% of the Net Insurance Proceeds from such Recovery Event shall be applied as a mandatory repayment of principal of outstanding Term Loans and/or as a mandatory reduction to the Total Multiple Draw I Term Loan Commitment or the Total Multiple Draw II Term Loan Commitment in accordance with the requirements of Sections 4.02(h) and (i), provided that so long as no Default or Event of Default then exists and such Net Insurance Proceeds do not exceed (A) in the case of any Recovery Event when the aggregate amount of outstanding Loans and Letter of Credit Outstandings is less than $50,000,000 at such time, $20,000,000 and (B) in the case of any Recovery Event when the aggregate amount of outstanding Loans and Letter of Credit Outstandings is equal to or greater than $50,000,000 at such time, $10,000,000, such Net Insurance Proceeds (in either case) shall not be required to be so applied on such date to the extent that the Borrower has delivered a certificate to the Administrative Agent on or prior to such date stating that such Net Insurance Proceeds shall be used to replace or restore any properties or assets in respect of which such Net Insurance Proceeds were paid within 270 days following the date of the receipt of such Net Insurance Proceeds (which certificate shall set forth the estimates of the Net Insurance Proceeds to be so expended), and provided further, that (i) if the amount of such Net Insurance Proceeds exceeds (x) in the case of Recovery Events described in clause (A) above, $20,000,000 or (y) in the case of Recovery Events described in clause (B) above, $10,000,000 then (in either case), the entire amount of such Net Insurance Proceeds (and not only the portion thereof in excess of $20,000,000 or $10,000,000, as the case may be), shall be applied as a mandatory repayment of principal of outstanding Term Loans and/or as a mandatory reduction to the Total Multiple Draw I Term Loan Commitment or the Total Multiple Draw II Term Loan Commitment as provided above in this Section 4.02(g) and (ii) if all or any portion of such Net Insurance Proceeds not required to be applied as a mandatory repayment of principal of outstanding Term Loans and/or as a mandatory reduction to the Total Multiple Draw I Term Loan Commitment or the Total Multiple Draw II Term Loan Commitment pursuant to the preceding proviso are not so used within 270 days after the date of the receipt of such Net Insurance Proceeds, such remaining portion shall be applied on the last day of such period as a mandatory repayment of principal of outstanding Term Loans and/or as a mandatory reduction to the Total Multiple Draw I Term Loan Commitment or the Total Multiple Draw II Term Loan Commitment as provided above in this Section 4.02(g) without regard to the preceding proviso. -31- 33 (h) Each amount required to be applied to outstanding Term Loans, the Total Multiple Draw I Term Loan Commitment and/or the Total Multiple Draw II Term Loan Commitment pursuant to Sections 4.02(c), (d), (e), (f) and (g) shall be applied (1) first, as a mandatory prepayment of outstanding Term Loans pro rata to each Tranche of Term Loans, with the Multiple Draw I Term Loans to be allocated the Multiple Draw I Term Loans Percentage of the amount of such prepayment and the Multiple Draw II Term Loans to be allocated the Multiple Draw II Term Loan Percentage of the amount of such prepayment; (2) second, to the extent that all outstanding Term Loans have been repaid, to reduce the Total Multiple Draw I Term Loan Commitment as provided below; and (3) third, to the extent all outstanding Term Loans have been repaid and the Total Multiple Draw I Term Loan Commitment has been reduced to zero, to reduce the Total Multiple Draw II Term Loan Commitment as provided below. Each amount required to be applied to reduce the Total Multiple Draw I Term Loan Commitment pursuant to Sections 4.02(c), (d), (e), (f) and (g) shall be applied pro rata to the related Commitments, with the Total Multiple Draw I Sub-Tranche A Term Loan Commitment to be allocated the Multiple Draw I Sub-Tranche A Term Loan Commitment Percentage of the amount of such prepayment, the Total Multiple Draw I Sub-Tranche B Term Loan Commitment to be allocated the Multiple Draw I Sub-Tranche B Term Loan Commitment Percentage of such prepayment and the Total Multiple Draw I Sub-Tranche C Term Loan Commitment to be allocated the Multiple Draw I Sub-Tranche C Term Loan Commitment Percentage of such prepayment. Each amount required to be applied to reduce the Total Multiple Draw II Term Loan Commitment pursuant to Sections 4.02(c), (d), (e), (f) and (g) shall be applied pro rata to the related Commitments, with the Total Multiple Draw II Sub-Tranche A Term Loan Commitment to be allocated the Multiple Draw II Sub-Tranche A Term Loan Commitment Percentage of such prepayment and the Total Multiple Draw II Sub-Tranche B Term Loan Commitment to be allocated the Multiple Draw II Sub-Tranche B Term Loan Commitment of such prepayment. Each amount applied as described in the two preceding sentences to reduce the Total Multiple Draw I Sub-Tranche C Term Loan Commitment, the Total Multiple Draw I Sub-Tranche B Term Loan Commitment, the Total Multiple Draw I Sub-Tranche A Term Loan Commitment, the Total Multiple Draw II Sub-Tranche B Term Loan Commitment or the Total Multiple Draw II Sub-Tranche A Term Loan Commitment shall be applied on a pro rata basis to reduce the related Commitments of the various Lenders. The amount of each principal repayment made as required by said Sections 4.02(c), (d), (e), (f) and (g) and, in accordance with the requirements of this clause (h), applied to the repayment of (i) Multiple Draw I Term Loans after the Multiple Draw I Term Loan Commitment Termination Date, shall be applied to reduce the then remaining Scheduled Repayments of such Multiple Draw I Term Loans on a pro rata basis (based upon the then remaining unpaid principal amounts of such Scheduled Repayments after giving effect to all prior reductions thereto) or (ii) Multiple Draw II Term Loans, shall be applied on a pro rata basis to the Multiple Draw II Term Loans then outstanding pursuant to the various Multiple Draw II Term Loan Sub-Facilities and, within each Multiple Draw II Term Loan Sub-Facility such payments shall be applied to reduce the respective Scheduled Repayments applicable thereto on a pro rata basis (based upon the then remaining unpaid principal amount of such Scheduled Repayments after giving effect to all prior reductions thereto); provided that (x) if the Scheduled Repayments applicable to any Multiple Draw II Term Loan Sub-Facility are expressed as a percentage of the principal amount of Multiple Draw II Term Loans outstanding thereunder as of a given date, voluntary prepayments shall only reduce such Scheduled Repayments if same occur after such specified date and (y) the -32- 34 provisions contained above in this clause (ii), to the extent relating to the application of mandatory repayments to the Scheduled Repayments applicable to any Multiple Draw II Term Loan Sub-Facility, shall be subject to any contrary agreements with respect thereto contained in the relevant Multiple Draw II Term Loan Commitment Agreements. (i) With respect to each repayment of Loans required by this Section 4.02, the Borrower may designate the Types of Loans of the respective Tranche which are to be repaid and, in the case of Eurodollar Loans, the specific Borrowing or Borrowings of the respective Tranche pursuant to which made, provided that: (i) repayments of Eurodollar Loans pursuant to this Section 4.02 may only be made on the last day of an Interest Period applicable thereto unless all Eurodollar Loans of the respective Tranche with Interest Periods ending on such date of required repayment and all Base Rate Loans of the respective Tranche have been paid in full; (ii) if any repayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount applicable thereto, such Borrowing shall be converted at the end of the then current Interest Period into a Borrowing of Base Rate Loans; and (iii) each repayment of any Loans made pursuant to a Borrowing shall be applied pro rata among such Loans. In the absence of a designation by the Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion. (j) Notwithstanding anything to the contrary contained in this Agreement or in any other Credit Document, (i) all then outstanding Loans (other than Swingline Loans) of any Tranche shall be repaid in full on the respective Maturity Date for such Tranche of Loans, (ii) all then outstanding Swingline Loans shall be repaid in full on the Swingline Expiry Date and (iii) unless, the Required Lenders otherwise agree, all then outstanding Loans shall be repaid in full on the date on which a Change of Control occurs. 4.03 Method and Place of Payment. Except as otherwise specifically provided herein, all payments under this Agreement or under any Note shall be made to the Administrative Agent for the account of the Lender or Lenders entitled thereto not later than 12:00 Noon (New York City time) on the date when due and shall be made in Dollars in immediately available funds at the Payment Office. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension. 4.04 Net Payments. (a) All payments made by the Borrower hereunder or under any Note will be made without setoff, counterclaim or other defense. Except as provided in Section 4.04(b), all such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, except as provided in the second succeeding sentence, any tax imposed on or measured by the net income or profits of a Lender pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction in which the principal office or applicable lending office of such Lender is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect to -33- 35 such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse each Lender, upon the written request of such Lender, for taxes imposed on or measured by the net income or profits of such Lender pursuant to the laws of the jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located and for any withholding of taxes as such Lender shall determine are payable by, or withheld from, such Lender, in respect of such amounts so paid to or on behalf of such Lender pursuant to the preceding sentence and in respect of any amounts paid to or on behalf of such Lender pursuant to this sentence. The Borrower will furnish to the Administrative Agent within 45 days after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by the Borrower. The Borrower agrees to indemnify and hold harmless each Lender, and reimburse such Lender upon its written request, for the amount of any Taxes so levied or imposed and paid by such Lender. (b) Each Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes agrees to deliver to the Borrower and the Administrative Agent on or prior to the Effective Date or, in the case of a Lender that is an assignee or transferee of an interest under this Agreement pursuant to Section 1.13 or 13.04(b) (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Lender, (i) two accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying to such Lender's entitlement as of such date to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note, or (ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate substantially in the form of Exhibit E (any such certificate, a "Section 4.04(b)(ii) Certificate") and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8 (or successor form) certifying to such Lender's entitlement as of such date to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement and under any Note. In addition, each Lender agrees that from time to time after the Effective Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, such Lender will deliver to the Borrower and the Administrative Agent two new accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms), or Form W-8 (or successor form) and a Section 4.04(b)(ii) Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States -34- 36 withholding tax with respect to payments under this Agreement and any Note, or such Lender shall immediately notify the Borrower and the Administrative Agent of its inability to deliver any such Form or Certificate, in which case such Lender shall not be required to deliver any such Form or Certificate pursuant to this Section 4.04(b). Notwithstanding anything to the contrary contained in Section 4.04(a), but subject to Section 13.04(b) and the immediately succeeding sentence, (x) the Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, Fees or other amounts payable hereunder for the account of any Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that such Lender has not provided to the Borrower U.S. Internal Revenue Service Forms that establish a complete exemption from such deduction or withholding and (y) the Borrower shall not be obligated pursuant to Section 4.04(a) to gross-up payments to be made to a Lender in respect of income or similar taxes imposed by the United States if (I) such Lender has not provided to the Borrower the Internal Revenue Service Forms required to be provided to the Borrower pursuant to this Section 4.04(b) or (II) in the case of a payment, other than interest, to a Lender described in clause (ii) above, to the extent that such Forms do not establish a complete exemption from withholding of such taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 4.04 and except as set forth in Section 13.04(b), the Borrower agrees to pay any additional amounts and to indemnify each Lender in the manner set forth in Section 4.04(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any Taxes deducted or withheld by it as described in the immediately preceding sentence as a result of any changes that are effective after the Effective Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of such Taxes. (c) If the Borrower pays any additional amount under this Section 4.04 to a Lender and such Lender determines in its sole discretion that it has actually received or realized in connection therewith any refund or any reduction of, or credit against, its Tax liabilities in or with respect to the taxable year in which the additional amount is paid (a "Tax Benefit"), such Lender shall pay to the Borrower an amount that the Lender shall, in its sole discretion, determine is equal to the net benefit, after tax, which was obtained by the Lender in such year as a consequence of such Tax Benefit; provided, however, that (i) any Lender may determine, in its sole discretion consistent with the policies of such Lender, whether to seek a Tax Benefit; (ii) any Taxes that are imposed on a Lender as a result of a disallowance or reduction (including through the expiration of any tax credit carryover or carryback of such Lender that otherwise would not have expired) of any Tax Benefit with respect to which such Lender has made a payment to the Borrower pursuant to this Section 4.04(c) shall be treated as a Tax for which the Borrower is obligated to indemnify such Lender pursuant to this Section 4.04 without any exclusions or defenses; and (iii) nothing in this Section 4.04(c) shall require any Lender to disclose any confidential information to the Borrower (including, without limitation, such Lender's tax returns). SECTION 5. Conditions Precedent to Credit Events on the Initial Borrowing Date. The obligation of each Lender to make Loans, and the obligation of the Issuing Lender to -35- 37 issue Letters of Credit, on the Initial Borrowing Date, is subject at the time of the making of such Loans or the issuance of such Letters of Credit to the satisfaction of the following conditions: 5.01 Execution of Agreement; Notes. On or prior to the Initial Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall have been delivered to the Administrative Agent for the account of each of the Lenders that has requested same the appropriate Multiple Draw I Term Note and/or Revolving Note executed by the Borrower and, to the extent requested by the Swingline Lender, the Swingline Note executed by the Borrower, in each case, in the amount, maturity and as otherwise provided herein. 5.02 Officer's Certificate. On the Initial Borrowing Date, the Administrative Agent shall have received a certificate, dated the Initial Borrowing Date and signed on behalf of the Borrower by the Chairman of the Board, the President or any Vice President of the Borrower, certifying on behalf of the Borrower that all of the conditions in Sections 5.06, 5.07, 5.08 and 6.01 have been satisfied on such date. 5.03 Opinions of Counsel. On the Initial Borrowing Date, the Administrative Agent shall have received (i) from Davis Polk & Wardwell, counsel to the Borrower and its Subsidiaries, an opinion addressed to the Agents, the Collateral Agent and each of the Lenders and dated the Initial Borrowing Date covering the matters set forth in Exhibit F-1 and such other matters incident to the transactions contemplated herein as the Agents may reasonably request, (ii) from Frederick G. Anderson, Esq., General Counsel to the Borrower, an opinion addressed to the Agents, the Collateral Agent and each of the Lenders and dated the Initial Borrowing Date covering the matters set forth in Exhibit F-2 and such other matters incident to the transactions contemplated herein as the Agents may reasonably request and (iii) from Paul, Weiss, Rifkind, Wharton & Garrison, special FCC counsel to the Borrower and its Subsidiaries, an opinion addressed to the Agents, the Collateral Agent and each of the Lenders and dated the Initial Borrowing Date covering matters set forth in Exhibit F-3 and such other matters incident to the transactions contemplated herein as the Agents may reasonably request. 5.04 Corporate Documents; Proceedings; etc. (a) On the Initial Borrowing Date, the Administrative Agent shall have received a certificate from the Borrower and each Subsidiary thereof, dated the Initial Borrowing Date, signed by the Chairman of the Board, the President, any Vice President or, in the case of any certificate from any Subsidiary of the Borrower only, the Secretary of each such Person, and attested to by the Secretary or any Assistant Secretary of such Person, in the form of Exhibit G with appropriate insertions, together with copies of the certificate of incorporation (or equivalent organizational document) and by-laws of such Person and the resolutions of such Person referred to in such certificate, and each of the foregoing shall be in form and substance reasonably acceptable to the Agents. (b) All corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be reasonably satisfactory in form and substance to the Agents and the Required Lenders, and the Administrative Agent shall have received all information and copies of all documents and papers, including records of corporate proceedings, governmental approvals, good standing certificates and bring-down telegrams or facsimiles, if any, which either Agent reasonably may -36- 38 have requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate or governmental authorities. (c) On the Initial Borrowing Date, the corporate, ownership and capital structure (including, without limitation, the terms of any capital stock, options, warrants or other securities issued by the Borrower or any of its Subsidiaries) of the Borrower and its Subsidiaries shall be in form and substance reasonably satisfactory to the Agents and the Required Lenders. 5.05 Plans; Shareholders' Agreements; Management Agreements; Employment Agreements; Non-Compete Agreements; Existing Indebtedness Agreements. On or prior to the Initial Borrowing Date, there shall have been delivered to the Administrative Agent true and correct copies of the following documents: (i) all Plans (and for each Plan that is required to file an annual report on Internal Revenue Service Form 5500-series, a copy of the most recent such report (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information), and for each Plan that is a "single-employer plan," as defined in Section 4001(a)(15) of ERISA, the most recently prepared actuarial valuation therefor) and any other material "employee benefit plans," as defined in Section 3(3) of ERISA, and any other agreements, plans or arrangements, with or for the benefit of current or former employees of the Borrower or any of its Subsidiaries or any ERISA Affiliate (provided that the foregoing shall apply in the case of any multiemployer plan, as defined in Section 4001(a)(3) of ERISA, only to the extent that any document described therein is in the possession of the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate or reasonably available thereto from the sponsor or trustee of any such Plan); (ii) all material agreements entered into by the Borrower or any of its Subsidiaries governing the terms and relative rights of its capital stock and any agreements entered into by shareholders relating to any such entity with respect to its capital stock (collectively, the "Shareholders' Agreements"); (iii) all material agreements with members of, or with respect to, the management of the Borrower or any of its Subsidiaries (collectively, the "Management Agreements"); (iv) all material employment agreements entered into by the Borrower, any of its Subsidiaries (collectively, the "Employment Agreements"); (v) the form of non-compete agreements entered into by the Borrower or any of its Subsidiaries or any of their respective employees (the "Non-Compete Agreement"); and (vi) all agreements evidencing or relating to Indebtedness of the Borrower or any of its Subsidiaries which is to remain outstanding after giving effect to the incurrence -37- 39 of Loans on the Initial Borrowing Date (collectively, the "Existing Indebtedness Agreements"); all of which Plans, Shareholders' Agreements, Management Agreements, Employment Agreements, the Non-Compete Agreement and Existing Indebtedness Agreements shall be in form and substance reasonably satisfactory to the Agents and the Required Lenders. 5.06 Existing Credit Agreement. (a) On the Initial Borrowing Date, the total commitments in respect of the Existing Credit Agreement shall have been terminated, and all loans and notes with respect thereto shall have been repaid in full (together with interest thereon), all letters of credit issued thereunder shall have been terminated (or fully supported with Letters of Credit issued hereunder) and all other amounts (including premiums) owing pursuant to the Existing Credit Agreement shall have been repaid in full and all documents in respect of the Existing Credit Agreement and all guarantees with respect thereto shall have been terminated (except as to indemnification and similar provisions, which may survive to the extent provided therein) and be of no further force and effect. (b) On the Initial Borrowing Date, the creditors in respect of the Existing Credit Agreement shall have terminated and released all security interests and Liens on the assets owned by the Borrower and its Subsidiaries. The Administrative Agent shall have received such releases of security interests in, and Liens on, the assets owned by the Borrower and its Subsidiaries as may have been requested by the Agents, which releases shall be in form and substance reasonably satisfactory to the Agents. Without limiting the foregoing, there shall have been delivered (i) proper termination statements (Form UCC-3 or the appropriate equivalent) for filing under the UCC of each jurisdiction where a financing statement (Form UCC-1 or the appropriate equivalent) was filed with respect to the Borrower or any of its Subsidiaries in connection with the security interests created with respect to the Existing Credit Agreement and the documentation related thereto, (ii) termination or reassignment of any security interest in, or Lien on, any Real Property, patents, trademarks, copyrights, or similar interests of the Borrower or any of is Subsidiaries on which filings have been made, and (iii) all collateral owned by the Borrower or any of its Subsidiaries in the possession of any of the creditors in respect of the Existing Credit Agreement or any collateral agent or trustee under any related security document shall have been returned to the Borrower or such Subsidiary, as the case may be. (c) The Administrative Agent shall have received evidence, in form and substance reasonably satisfactory to the Agents, that the matters set forth in Sections 5.06(a) and (b) have been satisfied as of the Initial Borrowing Date. 5.07 Adverse Change, etc. (a) Since December 31, 1998, nothing shall have occurred (and no Agent nor any Lender shall have become aware of any facts or conditions not previously known, whether as a result of their due diligence investigations or otherwise) which either Agent or the Required Lenders shall reasonably determine (i) has had, or could reasonably be expected to have, a material adverse effect on the rights or remedies of the Lenders or any Agent, or on the ability of any Credit Party to perform its obligations to them hereunder or under any other Credit Document or (ii) has had, or could reasonably be expected to have, a material -38- 40 adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. (b) On or prior to the Initial Borrowing Date, all necessary governmental (domestic and foreign) and third party approvals and/or consents (including, without limitation, all FCC approvals and/or consents) in connection with the transactions contemplated by the Credit Documents and otherwise referred to herein or therein shall have been obtained and remain in effect, and all applicable waiting periods with respect thereto shall have expired without any action being taken by any competent authority which restrains, prevents or imposes materially adverse conditions upon the consummation of the transactions contemplated by the Credit Documents or otherwise referred to herein or therein. Additionally, there shall not exist any judgment, order, injunction or other restraint issued or filed or a hearing seeking injunctive relief or other restraint pending or notified prohibiting or imposing materially adverse conditions upon the transactions contemplated by the Credit Documents or otherwise referred to herein or therein. 5.08 Litigation. On the Initial Borrowing Date, there shall be no actions, suits or proceedings pending or threatened (i) with respect to this Agreement or any other Credit Document or (ii) which either Agent or the Required Lenders shall reasonably determine could reasonably be expected to have a material adverse effect on (a) the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole, (b) the rights or remedies of the Lenders or any Agent hereunder or under any other Credit Document or (c) the ability of any Credit Party to perform its respective obligations to the Lenders or any Agent hereunder or under any other Credit Document. 5.09 Pledge Agreement. On the Initial Borrowing Date, the Borrower shall have duly authorized, executed and delivered the Pledge Agreement in the form of Exhibit H (as amended, modified or supplemented from time to time, the "Pledge Agreement") and shall have delivered to the Collateral Agent, as Pledgee thereunder, all of the Certificated Securities, if any, referred to therein and owned by such Credit Party, (x) endorsed in blank in the case of promissory notes constituting Certificated Securities and (y) together with executed and undated stock powers in the case of capital stock constituting Certificated Securities. 5.10 Security Agreement. On the Initial Borrowing Date, the Borrower shall have duly authorized, executed and delivered the Security Agreement in the form of Exhibit I (as modified, supplemented or amended from time to time, the "Security Agreement") covering all of the Borrower's present and future Security Agreement Collateral, together with: (i) proper Financing Statements (Form UCC-1 or the equivalent) fully executed for filing under the UCC or other appropriate filing offices of each jurisdiction as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interests purported to be created by the Security Agreement; (ii) to the extent received by the Borrower, certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, listing all effective financing statements that name the Borrower or any of its Subsidiaries as debtor and that are filed in -39- 41 the jurisdictions referred to in clause (i) above, together with copies of such other financing statements that name the Borrower or any of its Subsidiaries as debtor (none of which shall cover any of the Collateral except to the extent evidencing Permitted Liens or in respect of which the Collateral Agent shall have received termination statements (Form UCC-3) or such other termination statements as shall be required by local law fully executed for filing); (iii) evidence of the completion of all other recordings and filings of, or with respect to, the Security Agreement as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interests intended to be created by the Security Agreement; and (iv) evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect and protect the security interests purported to be created by the Security Agreement have been taken. 5.11 Officer's Certificate as to "Senior Indebtedness" under the 11-1/4% Senior Subordinated Discount Notes. On the Initial Borrowing Date, the Administrative Agent shall have received a certificate, dated the Initial Borrowing Date and signed on behalf of the Borrower by the Chairman of the Board, the President or any Vice President of the Borrower certifying that this Agreement and the incurrence of all Loans and the issuance of all Letters of Credit as permitted under this Agreement are, and when incurred or issued will be, permitted under Sections 4.03 and 4.04 of the 11-1/4% Senior Subordinated Discount Note Indenture. 5.12 Board Approval. On or prior to the Initial Borrowing Date, a majority of the disinterested members of the Board of Directors of the Borrower shall have approved the execution, delivery and performance by the Borrower of each of the Credit Documents to which it is a party, and the Administrative Agent shall have received evidence, in form and substance satisfactory to it, of such approval. 5.13 Financial Statements; Pro Forma Balance Sheet; Projections. On or prior to the Initial Borrowing Date, the Administrative Agent shall have received true and correct copies of the historical financial statements and the Projections referred to in Sections 7.05(a) and (d), which historical financial statements and Projections shall be in form and substance reasonably satisfactory to the Agents and the Required Lenders. 5.14 Solvency Certificate; Insurance Certificates. On the Initial Borrowing Date, the Borrower shall have delivered to the Administrative Agent: (i) a solvency certificate from a financial officer of the Borrower in the form of Exhibit J; and (ii) certificates of insurance complying with the requirements of Section 8.03 for the business and properties of the Borrower and its Subsidiaries, in form and substance reasonably satisfactory to the Agents and naming the Collateral Agent as an additional insured and as loss payee, and stating that such insurance shall not be canceled without at -40- 42 least 30 days prior written notice by the insurer to the Collateral Agent (or at least 10 days in the case of nonpayment of premium). 5.15 Fees, etc. On the Initial Borrowing Date, the Borrower shall have paid to each Agent and each Lender all costs, fees and expenses (including, without limitation, legal fees and expenses) payable to such Agent and such Lender to the extent then due. SECTION 6. Conditions Precedent to All Credit Events. The obligation of each Lender to make Loans (including Loans made on the Initial Borrowing Date and the Initial Multiple Draw II Term Loan Borrowing Date but excluding any Mandatory Borrowings made pursuant to Section 1.01(e)), and the obligation of the Issuing Lender to issue Letters of Credit, is subject, at the time of each such Credit Event (except as hereinafter indicated), to the satisfaction of the following conditions: 6.01 No Default; Representations and Warranties. At the time of each such Credit Event and also after giving effect thereto (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein and in the other Credit Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on the date of such Credit Event (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date). 6.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to the making of each Loan (other than a Swingline Loan or a Revolving Loan made pursuant to a Mandatory Borrowing), the Administrative Agent shall have received a Notice of Borrowing meeting the requirements of Section 1.03(a). Prior to the making of each Swingline Loan, the Swingline Lender shall have received the notice referred to in Section 1.03(b)(i). (b) Prior to the issuance of each Letter of Credit, the Administrative Agent and the Issuing Lender shall have received a Letter of Credit Request meeting the requirements of Section 2.03(a). 6.03 Advanced Messaging Units Thresholds. (a) At the time of any Credit Event where, after giving effect to such Credit Event, the aggregate amount of Loans outstanding plus the Letter of Credit Outstandings will exceed $50,000,000, (i) the number of Advanced Messaging Units in service by the Borrower shall exceed 15,000 and (ii) the Borrower shall have delivered to the Administrative Agent an officer's certificate of the Borrower certifying the number of Advance Messaging Units in service by the Borrower at such time. (b) At the time of any Credit Event where, after giving effect to such Credit Event, the aggregate amount of Loans outstanding plus the Letter of Credit Outstandings at such time will exceed $75,000,000, (i) the number of Advanced Messaging Units in service by the Borrower shall exceed (x) in the case of any Credit Event which is an incurrence of Term Loans, the applicable Minimum Advanced Messaging Units Amount and (y) in the case of any Credit Event which is an incurrence of Revolving Loans, Swingline Loans or an issuance of a Letter of -41- 43 Credit, 75,000 less any Migrated Units and (ii) the Borrower shall have delivered to the Administrative Agent an officer's certificate of the Borrower certifying as to the number of Advanced Messaging Units in service by the Borrower at such time. 6.04 Officer's Certificate as to Compliance under the 11-1/4% Senior Subordinated Discount Notes and the 15% Senior Discount Notes. At the time of the making of any Multiple Draw II Term Loans, the Borrower shall have delivered to the Administrative Agent (i) an officer's certificate of the Borrower (accompanied by any required financial calculations in reasonable detail) and (ii) to the extent reasonably requested by either Agent, an opinion in form and substance satisfactory to the Agents from counsel to the Borrower satisfactory to the Agents certifying (or, in the case of preceding clause (ii), opining) that the incurrence of such Multiple Draw II Term Loans will not violate the terms of either the 11-1/4% Senior Subordinated Discount Note Documents or the 15% Senior Discount Note Documents. 6.05 Special Conditions To Multiple Draw II Term Loans. At the time of the making of any Multiple Draw II Term Loans, (i) each Lender making any Multiple Draw II Term Loans which has theretofore requested that a promissory note with respect thereto be executed and delivered in accordance with the requirements of Section 1.05 shall have received its respective Multiple Draw II Term Note executed (and appropriately completed) in accordance with the relevant requirements of Section 1.05 and (ii) any additional conditions with respect to the relevant Multiple Draw II Term Loan Sub-Facility specified in the respective Multiple Draw II Term Loan Commitment Agreements shall have been satisfied. The acceptance of the benefits of each Credit Event shall constitute a representation and warranty by the Borrower to the Administrative Agent and each of the Lenders that all the conditions specified in Section 5 (with respect to Credit Events on the Initial Borrowing Date) and in this Section 6 (with respect to Credit Events on or after the Initial Borrowing Date) and applicable to such Credit Event exist as of that time. All of the Notes, certificates, legal opinions and other documents and papers referred to in Section 5 and in this Section 6, unless otherwise specified, shall be delivered to the Administrative Agent at the Notice Office for the account of each of the Lenders and, except for the Notes, in sufficient counterparts or copies for each of the Lenders and shall be in form and substance reasonably satisfactory to the Agents and the Required Lenders. SECTION 7. Representations, Warranties and Agreements. In order to induce the Lenders to enter into this Agreement and to make the Loans, and issue (or participate in) the Letters of Credit as provided herein, the Borrower makes the following representations, warranties and agreements, all of which shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans and issuance of the Letters of Credit, with the occurrence of each Credit Event on or after the Initial Borrowing Date being deemed to constitute a representation and warranty that the matters specified in this Section 7 are true and correct in all material respects on and as of the Initial Borrowing Date and on the date of each such other Credit Event (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date). -42- 44 7.01 Corporate Status. Each of the Borrower and each of its Subsidiaries (i) is a duly organized and validly existing corporation, partnership or limited liability company, as the case may be, in good standing under the laws of the jurisdiction of its organization, (ii) has the corporate, partnership or limited liability company power and authority, as the case may be, to own its property and assets and to transact the business in which it is engaged and presently proposes to engage and (iii) is duly qualified and is authorized to do business and is in good standing in each jurisdiction where the ownership, leasing or operation of its property or the conduct of its business requires such qualifications except for failures to be so qualified which, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. 7.02 Corporate and Other Power and Authority. Each Credit Party has the corporate, partnership or limited liability company power and authority, as the case may be, to execute, deliver and perform the terms and provisions of each of the Credit Documents to which it is party and has taken all necessary action to authorize the execution, delivery and performance by it of each of such Credit Documents. Each Credit Party has duly executed and delivered each of the Credit Documents to which it is party, and each of such Credit Documents constitutes its legal, valid and binding obligation enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 7.03 No Violation. Neither the execution, delivery or performance by any Credit Party of the Credit Documents to which it is a party, nor compliance by it with the terms and provisions thereof, (i) will contravene any provision of any law, statute, rule or regulation or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (except pursuant to the Security Documents) upon any of the property or assets of the Borrower or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement or loan agreement, or any other material agreement, contract or instrument, in each case to which the Borrower or any of its Subsidiaries is a party or by which it or any of its property or assets is bound or to which it may be subject or (iii) will violate any provision of the certificate or articles of incorporation or by-laws (or equivalent organizational documents) of the Borrower or any of its Subsidiaries. 7.04 Approvals. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with (except for (i) those that have otherwise been obtained or made on or prior to the Initial Borrowing Date and which remain in full force and effect on the Initial Borrowing Date or (ii) filings and recordings required to perfect the security interests under the Security Documents and releases of certain existing liens on assets of the Borrower or any of its Subsidiaries, in each case which shall be made within 10 days following the Initial Borrowing Date), or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the execution, delivery and -43- 45 performance of any Credit Document or (ii) the legality, validity, binding effect or enforceability of any such Credit Document. 7.05 Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc. (a) The consolidated balance sheet of the Borrower and its Subsidiaries for its fiscal year ended on December 31, 1998 and the related consolidated statements of income, cash flows and shareholders' equity of the Borrower and its Subsidiaries for the fiscal year ended on such date, copies of which have been furnished to the Lenders prior to the Initial Borrowing Date, present fairly in all material respects the financial position of the Borrower and its Subsidiaries at the dates of such balance sheet and the consolidated results of the operations of the Borrower and its Subsidiaries for the periods covered thereby. All of the foregoing financial statements have been prepared in accordance with generally accepted accounting principles consistently applied (except, in the case of the aforementioned quarterly financial statements, for normal year-end audit adjustments and the absence of footnotes). After giving effect to the transactions contemplated herein (but for this purpose assuming that such transactions and the related financing had occurred prior to December 31, 1998), since December 31, 1998, there has been no material adverse change in the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. (b) On and as of the Initial Borrowing Date and after giving effect to the transactions contemplated herein and to all Indebtedness (including the Loans) being incurred or assumed and Liens created by the Borrower in connection therewith (i) the sum of the assets, at a fair valuation, of each of the Borrower on a stand-alone basis and of the Borrower and its Subsidiaries taken as a whole will exceed its debts; (ii) each of the Borrower on a stand-alone basis and the Borrower and its Subsidiaries taken as a whole has not incurred and does not intend to incur, and does not believe that it will incur, debts beyond its ability to pay such debts as such debts mature; and (iii) each of the Borrower on a stand-alone basis and the Borrower and its Subsidiaries taken as a whole will have sufficient capital with which to conduct its business. For purposes of this Section 7.05(b), "debt" means any liability on a claim, and "claim" means (a) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured or (b) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. (c) Except as fully disclosed in the financial statements delivered pursuant to Section 7.05(a), there were as of the Initial Borrowing Date no liabilities or obligations with respect to the Borrower or any of its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in aggregate, could reasonably be expected to be material to the Borrower or to the Borrower and its Subsidiaries taken as a whole. As of the Initial Borrowing Date, the Borrower does not know of any basis for the assertion against it or any of its Subsidiaries of any liability or obligation of -44- 46 any nature whatsoever that is not fully disclosed in the financial statements delivered pursuant to Section 7.05(a) which, either individually or in the aggregate, could reasonably be expected to be material to the Borrower or to the Borrower and its Subsidiaries taken as a whole. (d) The Projections delivered to the Agents and the Lenders prior to the Initial Borrowing Date have been prepared in good faith and are based on reasonable assumptions, and there are no statements or conclusions in the Projections which are based upon or include information known to the Borrower to be misleading in any material respect or which fail to take into account material information known to the Borrower regarding the matters reported therein. On the Initial Borrowing Date, the Borrower believes that the Projections are reasonable and attainable, it being recognized by the Lenders, however, that projections as to future events are not to be viewed as facts and that the actual results during the period or periods covered by the Projections may differ from the projected results and that the differences may be material. 7.06 Litigation. There are no actions, suits or proceedings pending or, to the best knowledge of the Borrower, threatened (i) with respect to any Credit Document, (ii) with respect to any material Indebtedness of the Borrower or any of its Subsidiaries or (iii) that are reasonably likely to materially and adversely affect the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. 7.07 True and Complete Disclosure. All factual information (taken as a whole) furnished by or on behalf of any Credit Party in writing to any Agent or any Lender (including, without limitation, all information contained in the Credit Documents) for purposes of or in connection with this Agreement, the other Credit Documents or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of any Credit Party in writing to any Agent or any Lender will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided. 7.08 Use of Proceeds; Margin Regulations. (a) All proceeds of the Multiple Draw I Term Loans and Revolving Loans will be used by the Borrower (i) to refinance the Existing Credit Agreement and to pay fees and expenses related thereto, (ii) to fund the buildout of the Borrower's "NPCS" network and related equipment and (iii) for working capital and general corporate purposes of the Borrower and its Subsidiaries. (b) All proceeds of the Multiple Draw II Term Loans will be used by the Borrower (i) to fund the buildout of the Borrower's "NPCS" network and related equipment, (ii) to finance the redemption, repurchase or other retirement of outstanding 15% Senior Discount Notes in an aggregate principal amount not to exceed $50,000,000 and (iii) for working capital and general corporate purposes of the Borrower and its Subsidiaries. (c) No part of any Credit Event (or the proceeds thereof) will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying -45- 47 any Margin Stock. Neither the making of any Loan nor the use of the proceeds thereof nor the occurrence of any other Credit Event will violate or be inconsistent with the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System. 7.09 Tax Returns and Payments. Each of the Borrower and each of its Subsidiaries has filed all federal and state income tax returns and all other material tax returns, domestic and foreign, required to be filed by it and has paid all taxes and assessments payable by it which have become due, except for those contested in good faith and adequately disclosed and fully provided for on the financial statements of the Borrower and its Subsidiaries in accordance with generally accepted accounting principles. Each of the Borrower and each of its Subsidiaries has at all times paid, or have provided adequate reserves (in the good faith judgment of the management of the Borrower) for the payment of, all federal, state, local and foreign income taxes applicable for all prior fiscal years and for the current fiscal year to date. There is no material action, suit, proceeding, investigation, audit, or claim now pending or, to the best knowledge of the Borrower threatened, by any authority regarding any taxes relating to the Borrower or any of its Subsidiaries. As of the Initial Borrowing Date, neither the Borrower nor any of its Subsidiaries has entered into an agreement (other than the Consent Extending the Time for Assessment of Taxes, dated as of January 11, 1999, between the Borrower and the Commonwealth of Massachusetts Department of Revenue Audit Division) or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of taxes of the Borrower or any of its Subsidiaries, or is aware of any circumstances that would cause the taxable years or other taxable periods of the Borrower or any of its Subsidiaries not to be subject to the normally applicable statute of limitations. 7.10 Compliance with ERISA. (i) Schedule IV sets forth, as of the Initial Borrowing Date, each Plan. Each Plan (and each related trust, insurance contract or fund) is in compliance with its terms and with all applicable laws, including, without limitation, ERISA and the Code except to the extent that any failure to so comply would not result in a material liability to the Borrower, any of its Subsidiaries or any ERISA Affiliates; each Plan (and each related trust, if any) which is intended to be qualified under Section 401(a) of the Code has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred; no Plan which is a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) is insolvent or in reorganization; no Plan has an Unfunded Current Liability except to the extent that any such Unfunded Current Liability could not reasonably be expected to result in a material liability to the Borrower, any of its Subsidiaries or any ERISA Affiliates; no Plan which is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated funding deficiency, within the meaning of such sections of the Code or ERISA, or has applied for or received a waiver of an accumulated funding deficiency or an extension of any amortization period, within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all contributions required to be made with respect to a Plan have been timely made except to the extent that any failure to do so would not result in a material liability to the Borrower, any of its Subsidiaries or any ERISA Affiliates; neither the Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate has incurred any material liability (including any indirect, contingent or secondary liability) to or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any such material -46- 48 liability under any of the foregoing sections with respect to any Plan; no condition exists which presents a material risk to the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate of incurring a material liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and the Code; no proceedings have been instituted by the PBGC to terminate or appoint a trustee to administer any Plan which is subject to Title IV of ERISA; no action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any Plan (other than routine claims for benefits) is pending, expected or, to the knowledge of the Borrower, threatened except to the extent that any such action, suit, proceeding, hearing, audit or investigation would not result in a material liability to the Borrower or any of its Subsidiaries; using actuarial assumptions and computation methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the Borrower and its Subsidiaries and its ERISA Affiliates to all Plans which are multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan ended prior to the date of the most recent Credit Event, would not exceed an amount that is material to the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate; each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of the Borrower, any Subsidiary of the Borrower, or any ERISA Affiliate has at all times been operated in compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code except as would not result in any material liability; no lien imposed under the Code or ERISA on the assets of the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate exists or is likely to arise on account of any Plan; and the Borrower and its Subsidiaries do not maintain or contribute to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) which provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or any Plan the obligations with respect to which could reasonably be expected to have a material adverse effect on the ability of the Borrower to perform its obligations to the Agents and the Lenders hereunder. (ii) Each Foreign Pension Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities except to the extent that any failure to do so would not result in a material liability to the Borrower or any of its Subsidiaries. All contributions required to be made with respect to a Foreign Pension Plan have been timely made except to the extent that any failure to do so would not result in a material liability to the Borrower or any of its Subsidiaries. Neither the Borrower nor any of its Subsidiaries has incurred any obligation in connection with the termination of or withdrawal from any Foreign Pension Plan. The present value of the accrued benefit liabilities (whether or not vested) under each Foreign Pension Plan, determined as of the end of the Borrowers' recently ended fiscal year on the basis of actuarial assumptions, each of which is reasonable, did not exceed the current value of the assets of such Foreign Pension Plan allocable to such benefit liabilities by more than an amount that is material to the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate. 7.11 The Security Documents. (a) The provisions of the Security Agreement are effective to create in favor of the Collateral Agent for the benefit of the Secured Creditors a legal, valid and enforceable security interest in all right, title and interest of the Credit Parties in the -47- 49 Security Agreement Collateral described therein, and the Collateral Agent, for the benefit of the Secured Creditors, has a fully perfected first (or, in the case of the "Collateral" under, and as defined in, the Vendor Financing Agreement, a second) lien on, and security interest in, all right, title and interest in all of the Security Agreement Collateral described therein, subject to no other Liens other than Permitted Liens. The recordation of (x) the Grant of Security Interest in U.S. Patents and (y) the Grant of Security Interest in U.S. Trademarks in the form attached to the Security Agreement, in each case in the United States Patent and Trademark Office, together with filings on Form UCC-1 made pursuant to the Security Agreement, will create, as may be perfected by such filings and recordation, a perfected security interest in the United States trademarks and patents covered by the Security Agreement, and the recordation of the Grant of Security Interest in U.S. Copyrights in the form attached to the Security Agreement with the United States Copyright Office, together with filings on Form UCC-1 made pursuant to the Security Agreement, will create, as may be perfected by such filings and recordation, a perfected security interest in the United States copyrights covered by the Security Agreement. (b) The security interests created in favor of the Collateral Agent, as Pledgee, for the benefit of the Secured Creditors, under the Pledge Agreement constitute first priority perfected security interests in the Pledge Agreement Collateral described in the Pledge Agreement, subject to no security interests of any other Person. No filings or recordings are required in order to perfect (or maintain the perfection or priority of) the security interests created in the Pledge Agreement Collateral under the Pledge Agreement. 7.12 Properties. All Real Property owned or leased by the Borrower or any of its Subsidiaries as of the Initial Borrowing Date (other than such Real Property consisting of the Borrower's or any of its Subsidiaries' transmitter sites), and the nature of the interest therein, is correctly set forth in Schedule III. Each of the Borrower and each of its Subsidiaries has good and marketable title to all material properties owned by them, including all property reflected in Schedule III and in the balance sheets referred to in Section 7.05(a) (except as sold or otherwise disposed of since the date of such balance sheet in the ordinary course of business or as permitted by the terms of this Agreement), free and clear of all Liens, other than Permitted Liens. 7.13 Capitalization. (a) As of December 31, 1998, the authorized capital stock of the Borrower consists of (i) 60,000,000 shares of Class A common stock, $.0001 par value per share, of which 34,536,512 shares are issued and outstanding, (ii) 12,000,000 shares of Class B common stock, $.0001 par value per share, of which 3,809,363 shares are issued and outstanding, (iii) 2,000,000 shares of Class C common stock, $.0001 par value per share, of which 1,428,472 shares are issued and outstanding, (iv) 1,000,000 shares of Class D common stock, $.0001 par value per share, of which 623,945 shares are issued and outstanding and (v) 10,000,000 shares of preferred stock, $.0001 par value per share, of which no shares are issued and outstanding. All outstanding shares of the capital stock of the Borrower have been duly and validly issued and are fully paid and non-assessable. Except as set forth on Schedule V, on the Initial Borrowing Date, the Borrower does not have outstanding any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock, except for options to purchase shares of the Borrower's common stock which may be issued from time to time. -48- 50 7.14 Subsidiaries. As of the Initial Borrowing Date, the corporations, partnerships and limited liability companies listed on Schedule VI are all of the Subsidiaries of the Borrower. Schedule VI correctly sets forth, as of the Initial Borrowing Date, the percentage ownership (direct or indirect) of the Borrower in each class of capital stock or other equity of each of its Subsidiaries and also identifies the direct owner thereof. 7.15 Compliance with Statutes, etc. Each of the Borrower and each of its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business, the holding of the FCC Licenses, and the ownership of its property (including, without limitation, applicable statutes, regulations, orders and restrictions relating to environmental standards and controls), except such noncompliances as could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. 7.16 Investment Company Act. Neither the Borrower nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 7.17 Public Utility Holding Company Act. Neither the Borrower nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 7.18 Environmental Matters. (a) Each of the Borrower and each of its Subsidiaries has complied with, and on the date of each Credit Event is in compliance with, all applicable Environmental Laws and the requirements of any permits issued under such Environmental Laws. There are no pending or, to the best knowledge of the Borrower, threatened Environmental Claims against the Borrower or any of its Subsidiaries (including any such claim arising out of the ownership, lease or operation by the Borrower or any of its Subsidiaries of any Real Property no longer owned, leased or operated by the Borrower or any of its Subsidiaries) or any Real Property owned, leased or operated by the Borrower or any of its Subsidiaries. There are no facts, circumstances, conditions or occurrences with respect to the business or operations of the Borrower or any of its Subsidiaries, or any Real Property owned, leased or operated by the Borrower or any of its Subsidiaries (including, to the best knowledge of the Borrower, any Real Property formerly owned, leased or operated by the Borrower or any of its Subsidiaries but no longer owned, leased or operated by the Borrower or any of its Subsidiaries) or, to the best knowledge of the Borrower, any property adjoining or adjacent to any such Real Property that could be reasonably expected (i) to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries or any Real Property owned, leased or operated by the Borrower or any of its Subsidiaries or (ii) to cause any Real Property owned, leased or operated by the Borrower or any of its Subsidiaries to be subject to any restrictions on the ownership, lease, occupancy or transferability of such Real Property by the Borrower or any of its Subsidiaries under any applicable Environmental Law. -49- 51 (b) Neither the Borrower nor any of its Subsidiaries has at any time generated, used, treated or stored Hazardous Materials on, or transported Hazardous Materials to or from, any Real Property owned, leased or operated by the Borrower or any of its Subsidiaries where such generation, use, treatment, storage or transportation has violated or could reasonably be expected to violate any Environmental Law or give rise to an Environmental Claim. Neither the Borrower nor any of its Subsidiaries has at any time Released any Hazardous Materials on or from any Real Property owned, leased or operated by the Borrower or any of its Subsidiaries where such Release has violated or could reasonably be expected to violate any applicable Environmental Law. (c) Notwithstanding anything to the contrary in this Section 7.18, the representations and warranties made in this Section 7.18 shall not be untrue unless the effect of any or all conditions, violations, claims, restrictions, failures and noncompliances of the types described above could, either individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. 7.19 Labor Relations. Neither the Borrower nor any of its Subsidiaries is engaged in any unfair labor practice that could reasonably be expected to have a material adverse effect on the Borrower or on the Borrower and its Subsidiaries taken as a whole. There is (i) no unfair labor practice complaint pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened against any of them, before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against the Borrower or any of its Subsidiaries or, to the best knowledge the Borrower, threatened against the Borrower or any of its Subsidiaries and (iii) no union representation question exists with respect to the employees of the Borrower or any of its Subsidiaries, except (with respect to any matter specified in clause (i), (ii) or (iii) above, either individually or in the aggregate) such as could not reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. 7.20 Patents, Licenses, Franchises and Formulas. Each of the Borrower and each of its Subsidiaries owns or has the right to use all the patents, trademarks, permits, service marks, trade names, copyrights, licenses, franchises, proprietary information (including but not limited to rights in computer programs and databases) and formulas, or rights with respect to the foregoing, and has obtained assignments of all leases and other rights of whatever nature, necessary for the present conduct of its business, without any known conflict with the rights of others which, or the failure to obtain which, as the case may be, could reasonably be expected to result in a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. 7.21 Indebtedness. Schedule VII sets forth a true and complete list of all Indebtedness (including Contingent Obligations) of the Borrower and its Subsidiaries as of -50- 52 the Initial Borrowing Date and which is to remain outstanding after the Initial Borrowing Date (excluding the Loans, the Letters of Credit, the 11-1/4% Senior Subordinated Discount Notes, the 15% Senior Discount Notes and the Vendor Financing Agreement, the "Existing Indebtedness"), in each case showing the aggregate principal amount thereof and the name of the respective borrower and any Credit Party or any of its Subsidiaries which directly or indirectly guarantees such debt. 7.22 FCC Licenses. The License Subsidiaries hold all FCC licenses and authorizations as are necessary to the Borrower's business (collectively, the "FCC Licenses"). Each of the FCC Licenses has been validly issued and is in full force and effect. All FCC Licenses existing on the Initial Borrowing Date and their respective expiration dates are listed on Schedule VIII and true copies of all such material FCC Licenses, together with any and all modifications, amendments, and pending applications therefor or relating thereto, as of the Initial Borrowing Date have been furnished to the Administrative Agent. The Borrower has no knowledge of any condition imposed by the FCC as part of any FCC License which is neither set forth on the face thereof as issued by the FCC nor contained in the FCC Rules applicable generally to businesses of the type, nature, class or location of the Borrower and its Subsidiaries. The Borrower and its Subsidiaries are in compliance in all material respects with the terms and conditions of the FCC Licenses applicable generally to businesses of the type, nature, class or location of the Borrower and its Subsidiaries. The Borrower and its Subsidiaries are in compliance in all material respects with the terms and conditions of the FCC Licenses applicable to it and with the FCC Rules and the Communications Act. No proceedings are pending or are, to the best knowledge of the Borrower, threatened which may reasonably be expected to result in (i) the revocation, rescission, adverse modification, non-renewal or suspension of any of the FCC Licenses, (ii) the denial of any pending material applications, (iii) the issuance of any cease and desist order or (iv) the imposition of any material fines, forfeitures or other administrative actions by the FCC with respect to the Borrower or any of its Subsidiaries, other than proceedings affecting the wireless messaging services industry in general. All material reports, applications and other documents required to be filed by the Borrower or any of its Subsidiaries, as appropriate, with the FCC have in all material respects been timely filed and all such reports, applications and documents are true, correct and complete in all respects, and the Borrower has no knowledge of any matters (i) which could reasonably be expected to result in the adverse modification, suspension or revocation of or the refusal to renew any of the FCC Licenses or the imposition on the Borrower or any of its Subsidiaries of any material fines or forfeitures by the FCC or (ii) which could reasonably be expected to result in the revocation, rescission, reversal or adverse modification of any of the Borrower's or any of its Subsidiaries' authorizations to operate as currently authorized as applicable, under the Communications Act, as well as the FCC Rules. There are no unsatisfied or otherwise outstanding citations issued by the FCC with respect to the Borrower or any of its Subsidiaries or any of their respective operations. 7.23 Other Governmental Authorizations. In addition to the FCC Licenses issued by the FCC, the Borrower and its Subsidiaries hold all material licenses and authorizations issued by any other governmental entity necessary to operate their respective businesses (collectively, the "Governmental Authorizations"). Each of the Governmental Authorizations has been validly issued and is in full force and effect. The Governmental Authorizations as of the Initial Borrowing Date are listed on Schedule IX, with any expiration date for any such authorization -51- 53 identified on Schedule IX. The Borrower has no knowledge of any condition imposed by any governmental entity on any of the Governmental Authorizations which is neither set forth on the face thereof nor contained in the rules, policies, and regulations of the particular governmental entity issuing the authorization. The Borrower and its Subsidiaries have been and are in compliance in all material respects with the terms and conditions of the Governmental Authorizations applicable to them. Other than proceedings of a general nature, no proceedings are pending or are, to the best knowledge of the Borrower, threatened which may reasonably be expected to result in (i) the revocation, rescission, adverse modification, non-renewal or suspension of any Governmental Authorizations, (ii) the denial of any pending applications therefor, (iii) the issuance of any cease and desist order, or (iv) the imposition of any material fines, forfeitures, or other administrative actions by a governmental entity. All material reports, applications and other documents required to be filed by the Borrower or any of its Subsidiaries, as appropriate, with the governmental entity issuing a Government Authorization have in all material respects been timely filed, and all such reports, applications and documents are true, correct and complete in all material respects, and the Borrower has no knowledge of any matters which could reasonably be expected to result in (i) the suspension, revocation, rescission, adverse modification of or the refusal to renew any of the Governmental Authorizations or (ii) the imposition on the Borrower or any of its Subsidiaries of any material fines or forfeitures. There are no material unsatisfied or otherwise outstanding citations issued by any governmental entity with the respect to the Borrower or any of its Subsidiaries. 7.24 Qualification. The Borrower has no knowledge of any fact which would, upon completion of the transactions contemplated herein, under present law (including the Communications Act) and present FCC Rules, disqualify the Borrower or any of its Subsidiaries as an assignee or transferee of the FCC Licenses or result in the imposition of any adverse condition on, or adverse modification of, the FCC Licenses, and the Borrower shall not take, or fail to take, any action which the Borrower knows or has reason to know would cause such disqualification, condition or modification. Should any facts which would cause such disqualification, condition, or modification become known to the Borrower, the Borrower will promptly notify the Administrative Agent in writing thereof. 7.25 Insurance. Schedule X sets forth a true and complete listing of all insurance maintained by the Borrower and its Subsidiaries as of the Initial Borrowing Date, with the amounts insured (and any deductibles) set forth thereon. 7.26 Year 2000. All of the Borrower's and its Subsidiaries' Information Systems and Equipment are either Year 2000 Compliant, or any reprogramming, remediation or any other corrective action, including the internal testing of all such Information Systems and Equipment, will be completed by September 30, 1999. Further, to the extent that any such reprogramming, remediation or other corrective action is required, the cost thereof (as well as the cost of the reasonably foreseeable consequences of the failure to become Year 2000 Compliant) to the Borrower and its Subsidiaries (including, without limitation, reprogramming errors and the failure of other systems or equipment) will not have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. -52- 54 7.27 11-1/4% Senior Subordinated Discount Notes. The subordination provisions contained in the 11-1/4% Senior Subordinated Discount Notes and the other 11-1/4% Senior Subordinated Discount Note Documents are enforceable against the respective Credit Parties party thereto and the respective holders of the 11-1/4% Senior Subordinated Discount Notes and all Obligations are within the definitions of "Designated Senior Indebtedness" and "Senior Indebtedness" included in such subordination provisions. In addition, this Agreement constitutes the "Credit Agreement" under, and as defined in, the 11-1/4% Senior Subordinated Discount Note Indenture. 7.28 License Subsidiaries. The License Subsidiaries have no significant assets other than the respective FCC Licenses held by them and any subsequent renewals thereof. In addition, all the FCC Licenses used in the business of the Borrower or any Subsidiary thereof shall be held by one or more of the License Subsidiaries. SECTION 8. Affirmative Covenants. The Borrower hereby covenants and agrees that on and after the Effective Date and until the Total Commitment and all Letters of Credit created thereunder have terminated and the Loans, Notes and Unpaid Drawings (in each case together with interest thereon), Fees and all other Obligations (other than indemnities described in Section 13.13 which are not then due and payable) incurred hereunder and thereunder, are paid in full: 8.01 Information Covenants. The Borrower will furnish to each Lender: (a) Monthly Reports. Within 30 days after the end of the first two fiscal months of each fiscal quarter of the Borrower (commencing with its fiscal month ending on April 30, 1999), (i) the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal month and the related consolidated statements of income and retained earnings and statement of cash flows for such fiscal month and for the elapsed portion of the fiscal year ended with the last day of such fiscal month, setting forth comparative figures for the corresponding fiscal month in the prior fiscal year and comparable budgeted figures for such fiscal month, all of which shall be certified by the chief financial officer of the Borrower, subject to normal year-end audit adjustments and the absence of footnotes, and (ii) a certification of the number of (x) Advanced Messaging Units and (y) other wireless messaging devices in service by the Borrower, in each case on the last day of such fiscal month. (b) Quarterly Financial Statements. Within 45 days after the close of the first three quarterly accounting periods in each fiscal year of the Borrower (commencing with its quarterly accounting period ending on March 31, 1999), (i) the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such quarterly accounting period and the related consolidated statements of income and retained earnings and statement of cash flows for such quarterly accounting period and for the elapsed portion of the fiscal year ended with the last day of such quarterly accounting period, (ii) the consolidated statements of income attributable to each of Traditional Messaging Services and Advanced Messaging Services for such quarterly accounting period and for the elapsed portion of the fiscal year ended with the last day of such quarterly accounting period, in each case in respect of clauses (i) and (ii) above setting forth comparative figures for the related periods in the prior fiscal year and comparable budgeted -53- 55 figures for such quarterly accounting period, all of which shall be certified by the chief financial officer of the Borrower, subject to normal year-end audit adjustments and the absence of footnotes, (iii) management's discussion and analysis of the material operational and financial developments during such quarterly accounting period, and (iv) a certification of the number of (x) Advanced Messaging Units and (y) other wireless messaging devices in service by the Borrower, in each case on the last day of such quarterly accounting period. (c) Annual Financial Statements. Within 90 days after the close of each fiscal year of the Borrower, (i) the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income and retained earnings and statement of cash flows for such fiscal year setting forth comparative figures for the preceding fiscal year and certified by Arthur Andersen LLP or such other independent certified public accountants of recognized national standing reasonably acceptable to the Agents, together with a report of such accounting firm stating that in the course of its regular audit of the financial statements of the Borrower and its Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm obtained no knowledge of any Default or an Event of Default which has occurred and is continuing or, if in the opinion of such accounting firm such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof, (ii) the consolidated statements of income attributable to the Borrower's Traditional Messaging Services and Advanced Messaging Services for such fiscal year and setting forth comparative figures for the prior fiscal year, and (iii) management's discussion and analysis of the material operational and financial developments during such fiscal year. (d) Management Letters. Promptly after the Borrower's or any of its Subsidiaries' receipt thereof, a copy of any "management letter" received from its certified public accountants and management's response thereto. (e) Budgets and Projections. No later than 45 days following the first day of each fiscal year of the Borrower, a budget in form reasonably satisfactory to the Agents (including budgeted statements of income, sources and uses of cash and balance sheets) prepared by the Borrower (i) for each of the twelve months of such fiscal year prepared in detail and (ii) for each of the immediately three succeeding fiscal years prepared in summary form, in each case setting forth, with appropriate discussion, the principal assumptions upon which such budgets are based. (f) Officer's Certificates. At the time of the delivery of the financial statements provided for in Sections 8.01(b) and (c), a certificate of the chief financial officer of the Borrower certifying on behalf of the Borrower that, to the best of such officer's knowledge, no Default or Event of Default has occurred and is continuing or, if any Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof, which certificate shall (I) set forth in reasonable detail the calculations required to establish (A) whether the Borrower and its Subsidiaries were in compliance with the provisions of Sections 4.02(e), 4.02(f) (to the extent delivered with the financial statements required by Section 8.01(c)), 4.02(g), 9.02(ii), 9.02(vi), 9.03, 9.04, 9.05 and 9.07 through 9.10, inclusive, at the end of such fiscal quarter or year, as the case may be, (B) whether the provisions of Section 8.14 are applicable and (C) commencing with the financial statements delivered for the Borrower's fiscal quarter ending on September 30, 1999, the Applicable Margin for the Margin Reduction Period commencing -54- 56 with the delivery of such financial statements, and (II) if delivered with the financial statements required by Section 8.01(c), set forth in reasonable detail the amount of (and the calculations required to establish the amount of) Excess Cash Flow for the respective Excess Cash Payment Period. (g) Notice of Default or Litigation; etc. Promptly, and in any event within five Business Days' after any Senior Officer of any Credit Party obtains knowledge thereof, notice of (i) the occurrence of any event which constitutes a Default or an Event of Default, (ii) the commencement of, or threat of, or any development in, the revocation, material adverse modification, non-renewal or suspension of, or the filing of any petitions to deny or similar pleadings against any renewal or other application filed on behalf of the Borrower, a License Subsidiary, or with respect to any of the FCC Licenses material to the Borrower or any of its Subsidiaries, (iii) the issuance of, or the threat of, any cease and desist order or the imposition of any material fines, forfeitures or other administrative actions by the FCC or any other governmental entity with respect to the Borrower or any of its Subsidiaries and (iv) any litigation or governmental investigation or proceeding pending (x) against the Borrower or any of its Subsidiaries which could reasonably be expected to materially and adversely affect the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole, (y) with respect to any material Indebtedness of the Borrower or any of its Subsidiaries or (z) with respect to any Credit Document. In addition, the Borrower agrees to provide the Administrative Agent with copies of all material communications with the FCC concerning the FCC Licenses. (h) Other Reports and Filings. Promptly after the filing or delivery thereof, copies of (i) all financial information, proxy materials and reports, if any, which the Borrower or any of its Subsidiaries shall publicly file with the Securities and Exchange Commission or any successor thereto (the "SEC") or deliver to holders (or any trustee, agent or other representative therefor) of its material Indebtedness pursuant to the terms of the documentation governing such Indebtedness and (ii) any non-routine reports, applications, petitions, or other communications filed with or received from the FCC with respect to the Borrower or the License Subsidiaries, including, without limitation, the FCC notification on or prior to September 29, 1999 (or such other date as may be provided by the FCC) that the five-year build out requirements have been met for the PageMart II, Inc. nationwide narrowband personal communication systems license (call sign KNKV210) and the FCC notification on or prior to January 27, 2000 (or such other date as may be provided by the FCC) that the five-year build out requirements have been met for the PageMart PCS, Inc. regional narrowband personal communication systems licenses (call signs KNKV212, KNKV218, KNKV224, KNKV230, and KNKV236). (i) Environmental Matters. Promptly after any officer of any Credit Party obtains knowledge thereof, notice of one or more of the following environmental matters, unless such environmental matters could not, individually or when aggregated with all other such environmental matters, be reasonably expected to materially and adversely affect the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole: -55- 57 (i) any pending or threatened Environmental Claim against the Borrower or any of its Subsidiaries or any Real Property owned, leased or operated by the Borrower or any of its Subsidiaries; (ii) any condition or occurrence on or arising from any Real Property owned, leased or operated by the Borrower or any of its Subsidiaries that (a) results in noncompliance by the Borrower or any of its Subsidiaries with any applicable Environmental Law or (b) could be expected to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries or any such Real Property; (iii) any condition or occurrence on any Real Property owned, leased or operated by the Borrower or any of its Subsidiaries that could be expected to cause such Real Property to be subject to any restrictions on the ownership, lease, occupancy, use or transferability by the Borrower or any of its Subsidiaries of such Real Property under any Environmental Law; and (iv) the taking of any removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any Real Property owned, leased or operated by the Borrower or any of its Subsidiaries as required by any Environmental Law or any governmental or other administrative agency; provided that in any event the Borrower shall deliver to each Lender all notices received by the Borrower or any of its Subsidiaries from any government or governmental agency under, or pursuant to, CERCLA which identify the Borrower or any of its Subsidiaries as potentially responsible parties for remediation costs or which otherwise notify the Borrower or any of its Subsidiaries of potential liability under CERCLA. All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and the Borrower or such Subsidiary's response thereto. (j) Other Information. From time to time, such other information or documents (financial or otherwise) with respect to the Borrower or any of its Subsidiaries as any Agent or any Lender (through the Administrative Agent) may reasonably request. 8.02 Books, Records and Inspections; Annual Meetings. (a) The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and accounts in which full, true and correct entries in conformity with generally accepted accounting principles and all requirements of law shall be made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit officers and designated representatives of any Agent (at the expense of the Agent or, if any Default or Event of Default then exists, at the expense of the Borrower) or any Lender (at the expense of such Lender) to visit and inspect, under guidance of officers of the Borrower or such Subsidiary, any of the properties of the Borrower or such Subsidiary, and to examine the books of account of the Borrower or such Subsidiary and discuss the affairs, finances and accounts of the Borrower or such Subsidiary with, and be advised as to the same by, its and their officers and independent -56- 58 accountants, all upon reasonable prior notice and at such reasonable times and intervals and to such reasonable extent as such Agent or such Lender may reasonably request. (b) At a date to be mutually agreed upon between the Agents and the Borrower occurring on or prior to the 120th day after the close of each fiscal year of the Borrower, the Borrower shall, at the request of the Agents, hold a meeting to which all of the Lenders shall be invited to attend at each respective Lender's expense, at which meeting shall be reviewed the financial results of the Borrower and its Subsidiaries for the previous fiscal year and the budgets presented for the current fiscal year of the Borrower. 8.03 Maintenance of Property; Insurance. (a) The Borrower will, and will cause each of its Subsidiaries to, (i) keep all property necessary to the business of the Borrower and its Subsidiaries in reasonably good working order and condition, ordinary wear and tear excepted, (ii) maintain with financially sound and reputable insurance companies insurance on all such property in at least such amounts and against at least such risks as is consistent and in accordance with industry practice for companies similarly situated owning similar properties in the same general areas in which the Borrower or any of its Subsidiaries operates, and (iii) furnish to the Administrative Agent, together with each set of financial statements delivered pursuant to Section 8.01(c), full information as to the insurance carried. At any time that insurance at or above the levels described on Schedule IX is not being maintained by the Borrower or any Subsidiary of the Borrower, the Borrower will, or will cause one of its Subsidiaries to, promptly notify the Administrative Agent in writing and, if thereafter reasonably requested by any Agent or the Required Lenders to do so, the Borrower or any such Subsidiary, as the case may be, shall obtain such insurance at such levels and coverage which are at least as great as those described in Schedule IX to the extent such insurance is reasonably available at a reasonable expense. (b) The Borrower will, and will cause each of its Subsidiaries to, at all times keep its property insured in favor of the Collateral Agent, and all policies or certificates (or certified copies thereof) with respect to such insurance (i) shall name the Collateral Agent as loss payee and/or additional insured, (ii) shall state that such insurance policies shall not be canceled without at least 30 days' prior written notice thereof by the respective insurer to the Collateral Agent (or at least 10 days in the case of nonpayment of premium), (iii) shall provide that the respective insurers irrevocably waive any and all rights of subrogation with respect to the Collateral Agent and the Secured Creditors and (iv) shall contain the standard non-contributing mortgage clause endorsement in favor of the Collateral Agent with respect to hazard liability insurance, (v) shall, except in the case of public liability insurance, provide that any losses shall be payable notwithstanding (A) any act or neglect of the Borrower or any of its Subsidiaries, (B) the occupation or use of the properties for purposes more hazardous than those permitted by the terms of the respective policy if such coverage is obtainable at commercially reasonable rates and is of the kind from time to time customarily insured against by Persons owning or using similar property and in such amounts as are customary, (C) any foreclosure or other proceeding relating to the insured properties or (D) any change in the title to or ownership or possession of the insured properties. (c) If the Borrower or any of its Subsidiaries shall fail to insure its property in accordance with this Section 8.03, or if the Borrower or any of its Subsidiaries shall fail to so -57- 59 endorse and deposit all policies or certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance and the Borrower agrees to reimburse the Collateral Agent for all reasonable costs and expenses of procuring such insurance. 8.04 Corporate Franchises. The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises, licenses and patents; provided, however, that nothing in this Section 8.04 shall prevent (i) sales of assets and other transactions by the Borrower or any of its Subsidiaries in accordance with Section 9.02 or (ii) the withdrawal by the Borrower or any of its Subsidiaries of its qualification as a foreign corporation in any jurisdiction where such withdrawal could not, either individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. 8.05 Compliance with Statutes, etc. The Borrower will, and will cause each of its Subsidiaries to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property and the retention of its FCC Licenses (including applicable statutes, regulations, orders and restrictions relating to environmental standards and controls), except such noncompliances as could not, either individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. 8.06 Compliance with Environmental Laws. The Borrower will comply, and will cause each of its Subsidiaries to comply, in all material respects with all Environmental Laws and permits applicable to, or required by, the ownership, lease or use of its Real Property now or hereafter owned, leased or operated by the Borrower or any of its Subsidiaries, will promptly pay or cause to be paid all costs and expenses incurred in connection with such compliance, and will keep or cause to be kept all such Real Property free and clear of any Liens imposed pursuant to such Environmental Laws. Neither the Borrower nor any of its Subsidiaries will generate, use, treat, store, Release or dispose of, or permit the generation, use, treatment, storage, Release or disposal of Hazardous Materials on any Real Property now or hereafter owned, leased or operated by the Borrower or any of its Subsidiaries, or transport or permit the transportation of Hazardous Materials to or from any such Real Property, except for Hazardous Materials generated, used, treated, stored, Released or disposed of at any such Real Properties in compliance in all material respects with all applicable Environmental Laws and as required in connection with the normal operation, use and maintenance of the business or operations of the Borrower or any of its Subsidiaries. 8.07 ERISA As soon as possible and, in any event, within ten (10) days after the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate knows or has reason to know of the occurrence of any of the following, the Borrower will deliver to the Administrative Agent a certificate of the chief financial officer of the Borrower setting forth the full details as to such occurrence and the action, if any, that the Borrower, such Subsidiary or such ERISA Affiliate is -58- 60 required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Borrower, the Subsidiary, the ERISA Affiliate, the PBGC or any other governmental agency, a Plan participant or the Plan administrator with respect thereto: that a Reportable Event has occurred (except to the extent that the Borrower has previously delivered to the Lenders a certificate and notices (if any) concerning such event pursuant to the next clause hereof); that a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof), and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected to occur with respect to such Plan within the following 30 days; that an accumulated funding deficiency, within the meaning of Section 412 of the Code or Section 302 of ERISA, has been incurred or an application may be or has been made for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code or Section 303 or 304 of ERISA with respect to a Plan; that any contribution required to be made with respect to a Plan or Foreign Pension Plan has not been timely made except to the extent that any failure to do so would not result in a material liability to the Borrower, any of its Subsidiaries or any ERISA Affiliates; that a Plan has been or may be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability; that proceedings may be or have been instituted to terminate or appoint a trustee to administer a Plan which is subject to Title IV of ERISA; that a proceeding has been instituted by the PBGC pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan; that the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate may reasonably be expected to incur any material liability (including any indirect, contingent, or secondary liability) to or on account of the termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(l) of ERISA or with respect to a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code; or that the Borrower or any Subsidiary of the Borrower may reasonably be expected to incur any material liability pursuant to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) that provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or any Plan or any Foreign Pension Plan. The Borrower will deliver to the Administrative Agent copies of any records, documents or other information that must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA. The Borrower will also deliver to the Administrative Agent a complete copy of the annual report (on Internal Revenue Service Form 5500-series) of each Plan (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information) required to be filed with the Internal Revenue Service. In addition to any certificates or notices delivered to the Administrative Agent pursuant to the first sentence hereof, copies of annual reports and any records, documents or other information required to be furnished to the PBGC or any other governmental agency, and any material notices received by the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate with respect to any Plan or Foreign Pension Plan shall be delivered to the Administrative Agent no later than ten (10) days after such notice has been received by the Borrower, the respective Subsidiary or the ERISA Affiliate. The Borrower and each of its applicable Subsidiaries shall insure that all Foreign -59- 61 Pension Plans administered by it or into which it makes payments obtains or retains (as applicable) registered status under and as required by applicable law and is administered in a timely manner in all respects in compliance with all applicable laws except where the failure to do any of the foregoing would not be reasonably likely to result in a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. 8.08 End of Fiscal Years; Fiscal Quarters. The Borrower will cause (i) each of its, and each of its Subsidiaries', fiscal years to end on December 31 of each year and (ii) each of its, and each of its Subsidiaries', fiscal quarters to end on March 31, June 30, September 30 and December 31. 8.09 Performance of Obligations. The Borrower will, and will cause each of its Subsidiaries to, perform all of its obligations under the terms of each mortgage, indenture, security agreement, loan agreement or credit agreement and each other material agreement, contract or instrument by which it is bound, except such non-performances as could not, either individually or in the aggregate, reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. 8.10 Payment of Taxes. The Borrower will pay and discharge, and will cause each of its Subsidiaries to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims for sums that have become due and payable which, if unpaid, might become a Lien not otherwise permitted under Section 9.01(i); provided that neither the Borrower nor any of its Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with generally accepted accounting principles. 8.11 Additional Security; Further Assurances. (a) The Borrower will, and will cause each Subsidiary Guarantor, if any, to grant to the Collateral Agent security interests and mortgages in such assets and properties of the Borrower and the Subsidiary Guarantors as are not covered by the original Security Documents, and as may be reasonably requested from time to time by any Agent or the Required Lenders (collectively, the "Additional Security Documents") , provided that neither the Borrower nor any of its Subsidiaries shall be required to grant a security interest in any of its assets to the extent same would not be permitted under any law applicable to the Borrower or such Subsidiary, as such determination is reasonably agreed to by the Administrative Agent. All such security interests and mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to the Agents and shall constitute valid and enforceable perfected security interests and mortgages superior to and prior to the rights of all third Persons and subject to no other Liens except for Permitted Liens. The Additional Security Documents or instruments related thereto shall have been duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Additional Security -60- 62 Documents and all taxes, fees and other charges payable in connection therewith shall have been paid in full. (b) The Borrower will, and will cause each of its Subsidiaries to, at the expense of the Borrower or such respective Subsidiary, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, real property surveys, reports and other assurances or instruments and take such further steps relating to the Collateral covered by any of the Security Documents as the Collateral Agent may reasonably require. In addition, the Borrower shall, upon the reasonable request of the Collateral Agent to assure itself that Section 5.10(i) has been complied with, provide the Collateral Agent with information as to Real Property consisting of the Borrower's or any of its Subsidiaries' transmitter sites. Furthermore, the Borrower will use its reasonable best efforts to cause to be delivered to the Collateral Agent such opinions of counsel, title insurance and other related documents as may be reasonably requested by any Agent to assure itself that this Section 8.11 has been complied with. (c) If any Agent or the Required Lenders are advised in writing by counsel that they are required by law or regulation to have appraisals prepared in respect of the Real Property of the Borrower and its Subsidiaries constituting Collateral, the Borrower will, at its own expense, provide to the Administrative Agent appraisals which satisfy the applicable requirements of the Real Estate Appraisal Reform Amendments of the Financial Institution Reform, Recovery and Enforcement Act of 1989, as amended, and which shall otherwise be in form and substance reasonably satisfactory to the Agents. (d) To the extent not delivered by the Borrower to the Administrative Agent on the Effective Date pursuant to Section 5.10(ii), within 90 days following the Effective Date, the Borrower shall have delivered to the Administrative Agent certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports listing all effective financing statements that name the Borrower or any of its Subsidiaries as debtor and that are filed in the jurisdictions referred to in Section 5.10(ii), together with copies of such other financing statements that name the Borrower or any of its Subsidiaries as debtor, none of which shall cover any of the Collateral except to the extent evidencing Permitted Liens, provided, to the extent that any such financing statements evidence Liens not permitted under Section 9.01, the Borrower will, and will cause each of its Subsidiaries to, promptly terminate any such financing statements and the underlying Liens or security interests related thereto. (e) On or prior to the 30th day following the Initial Borrowing Date, the Collateral Agent shall have received landlord waivers with respect of the Leaseholds of the Borrower and its Subsidiaries as designated on Schedule III, which landlord waivers shall be in form and substance reasonably satisfactory to the Agents. (f) The Borrower agrees that each action required above by clauses (a) through (d), inclusive, of this Section 8.11 shall be completed as soon as possible, but in no event later than 90 days after such action is either requested to be taken by the respective Agent or the Required Lenders or required to be taken by the Borrower and/or its Subsidiaries pursuant to the -61- 63 terms of this Section 8.11; provided that, except in respect of the consents required by preceding clause (e), in no event will the Borrower or any of its Subsidiaries be required to (i) take any action, other than using commercially reasonable efforts, to obtain consents from third parties with respect to its compliance with this Section 8.11 or (ii) pay any consideration (other than de minimus amounts), incur any material obligation or relinquish any material right in connection with obtaining any such consent from third parties. 8.12 Information Systems and Equipment. The Borrower will, and will cause each of its Subsidiaries to, (i) ensure that its Information Systems and Equipment are at all times after September 30, 1999 Year 2000 Compliant, except insofar as the failure to do so could not reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole, and (ii) notify the Administrative Agent and each Lender promptly upon detecting any material failure of its Information Systems and Equipment to be Year 2000 Compliant. In addition, the Borrower shall, and shall cause each its Subsidiaries to, provide any Agent and any Lender with such information about the Borrower's or such Subsidiaries' year 2000 computer readiness (including, without limitation, information as to contingency plans, budgets and testing results) as any Agent or any Lender shall reasonably request. 8.13 Actions with Respect to Non-Guarantor Subsidiaries. If at any time any Domestic Subsidiary of the Borrower which was theretofore a Non-Guarantor Subsidiary ceases to qualify as such in accordance with the definition thereof, such Non-Guarantor Subsidiary shall on such date be required to execute and deliver counterparts of the Subsidiaries Guaranty, the Pledge Agreement and the Security Agreement, and take all action in connection therewith as would otherwise have been required to be taken pursuant to Section 5 if such Subsidiary had been a Credit Party on the Initial Borrowing Date. Furthermore, if the aggregate assets of all Non-Guarantor Subsidiaries (excluding for this purpose (i) any assets constituting Investments of such Non-Guarantor Subsidiaries in a Foreign Person to the extent such Investments were made prior to the Effective Date or are permitted under Section 9.05(xi) or (xiii), (ii) Foreign Subsidiaries and (iii) the License Subsidiaries) and/or the portion of Consolidated EBITDA attributable to all such Non-Guarantor Subsidiaries (including for this purpose the License Subsidiaries but excluding (i) Foreign Subsidiaries and (ii) the Consolidated EBITDA attributable to any Foreign Person unless such Consolidated EBITDA is distributed or paid to the Borrower or one of its Domestic Subsidiaries) for the Test Period of the Borrower then most recently ended exceed the respective thresholds provided for in the definition of Non-Guarantor Subsidiaries contained herein, then one or more such Domestic Subsidiaries (other than the License Subsidiaries) which theretofore constituted Non-Guarantor Subsidiaries (if any such Domestic Subsidiaries are then in existence) shall cease to constitute same (as designated by the Borrower or the Administrative Agent in accordance with the definition of Non-Guarantor Subsidiaries contained herein) and each such Domestic Subsidiary, as well as any other Domestic Subsidiary of the Borrower which the Borrower at any time notifies the Administrative Agent in writing shall no longer constitute a Non-Guarantor Subsidiary, shall take all actions specified in the immediately preceding sentence. 8.14 Section 310(b)(4) of the Communications Act, 47 U.S.C. ss. 310(b)(4); Certain Actions Related thereto, etc. The Borrower will adopt and maintain procedures for the -62- 64 monitoring of the level of ownership and control of its issued and outstanding capital stock by Non-U.S. Persons sufficient under applicable rules and policies of the FCC to demonstrate compliance with applicable restrictions on foreign ownership and control pursuant to Section 310(b)(4) of the Communications Act, 47 U.S.C. ss.310(b)(4). In addition, within ten Business Days thereof, the Borrower shall provide the Administrative Agent with written notice of any knowledge of the Borrower of facts or circumstances indicating that ownership or control of the Borrower's issued and outstanding capital stock by Non-U.S. Persons may increase so as to exceed the 25% limit set forth in such Section 310(b)(4). At any time that the Borrower has reason to anticipate that the foreign ownership or control of its issued and outstanding capital stock may increase so as to exceed such 25% limit, the Borrower shall promptly file with the FCC a petition for declaratory order (or other form of petition of application as may be provided under FCC rules then in effect), complete in all material respects, requesting a determination that foreign ownership or control of the Borrower in excess of limit set forth in such Section 310(b)(4) is not contrary to the public interest. SECTION 9. Negative Covenants. The Borrower hereby covenants and agrees that on and after the Effective Date and until the Total Commitment and all Letters of Credit created thereunder have terminated and the Loans, Notes and Unpaid Drawings (in each case, together with interest thereon), Fees and all other Obligations (other than any indemnities described in Section 13.13 which are not then due and payable) incurred hereunder and thereunder, are paid in full: 9.01 Liens. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets (real or personal, tangible or intangible) of the Borrower or any of its Subsidiaries, whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable with recourse to the Borrower or any of its Subsidiaries), or assign any right to receive income or permit the filing of any effective financing statement or consent to the filing of any financing statement under the UCC or any other similar notice of Lien under any similar recording or notice statute; provided that the provisions of this Section 9.01 shall not prevent the creation, incurrence, assumption or existence of the following (Liens described below are herein referred to as "Permitted Liens"): (i) inchoate Liens for taxes, assessments or governmental charges or levies not yet due or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting principles; (ii) Liens in respect of property or assets of the Borrower or any of its Subsidiaries imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers', warehousemen's, materialmen's and mechanics' liens and other similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of the Borrower's or such Subsidiary's property or assets or materially impair the use thereof in the operation of the business of the Borrower or such Subsidiary or (y) which are being -63- 65 contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien; (iii) Liens in existence on the Initial Borrowing Date which are listed, and the property subject thereto described, in Schedule XI, but only to the respective date, if any, set forth in such Schedule XI for the removal, replacement and termination of any such Liens, plus renewals, replacements and extensions of such Liens to the extent set forth on Schedule XI, provided that (x) the aggregate principal amount of the Indebtedness, if any, secured by such Liens does not increase from that amount outstanding at the time of any such renewal, replacement or extension and (y) any such renewal, replacement or extension does not encumber any additional assets or properties of the Borrower or any of its Subsidiaries; (iv) Liens created pursuant to the Security Documents; (v) leases or subleases granted to other Persons not materially interfering with the conduct of the business of the Borrower or any of its Subsidiaries; (vi) Liens upon assets of the Borrower or any of its Subsidiaries subject to Capitalized Lease Obligations to the extent such Capitalized Lease Obligations are permitted by Section 9.04(iv), provided that (x) such Liens only serve to secure the payment of Indebtedness arising under such Capitalized Lease Obligation and (y) the Lien encumbering the asset giving rise to the Capitalized Lease Obligation does not encumber any other asset of the Borrower or any Subsidiary of the Borrower; (vii) Liens upon assets of the Borrower or any of its Subsidiaries pursuant to the Vendor Financing Agreement, provided that (x) such Liens only secure the payment of Indebtedness incurred pursuant to the Vendor Financing Agreement and (y) such Liens only encumber the "Collateral" under, and as defined in, the Vendor Financing Agreement and shall not encumber any other asset of the Borrower or any Subsidiary of the Borrower; (viii) Liens placed upon equipment or machinery acquired after the Initial Borrowing Date and used in the ordinary course of business of the Borrower or any of its Subsidiaries at the time of the acquisition thereof by the Borrower or any such Subsidiary or within 90 days thereafter to secure Indebtedness incurred to pay all or a portion of the purchase price thereof or to secure Indebtedness incurred solely for the purpose of financing the acquisition of any such equipment or machinery or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided that (x) the aggregate outstanding principal amount of all Indebtedness secured by Liens permitted by this clause (viii) shall not at any time exceed that amount permitted under Section 9.04(iv) and (y) in all events, the Lien encumbering the equipment or machinery so acquired does not encumber any other asset of the Borrower or such Subsidiary; (ix) easements, rights-of-way, restrictions, encroachments and other similar charges or encumbrances, and minor title deficiencies, in each case not securing -64- 66 Indebtedness and not materially interfering with the conduct of the business of the Borrower or any of its Subsidiaries; (x) Liens arising from precautionary UCC financing statement filings regarding operating leases; (xi) Liens arising out of the existence of judgments or awards in respect of which the Borrower or any of its Subsidiaries shall in good faith be prosecuting an appeal or proceedings for review and in respect of which there shall have been secured a subsisting stay of execution pending such appeal or proceedings, provided that the aggregate amount of any cash and the fair market value of any property subject to such Liens does not exceed $10,000,000 at any time outstanding; (xii) statutory and common law landlords' liens under leases to which the Borrower or any of its Subsidiaries is a party; (xiii) Liens (other than Liens created under relevant Federal, State, foreign or local statutes to the extent, and only to the extent, that neither the Borrower nor any of its Subsidiaries has delivered any collateral subject to such Lien to the holder of such Lien or to any other third Person for the purpose of perfecting such Lien, or taken any other action to perfect, or consent to the perfection of, any such Lien) incurred in the ordinary course of business in connection with workers compensation claims, unemployment insurance and social security benefits and Liens securing the performance of bids, tenders, leases and contracts in the ordinary course of business, statutory obligations, surety bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business (exclusive of obligations in respect of the payment for borrowed money), provided that the aggregate outstanding amount of obligations secured by Liens permitted by this clause (xiii) (and the value of all cash and property encumbered by Liens permitted pursuant to this clause (xiii)) shall not at any time exceed $10,000,000; and (xiv) additional Liens incurred by the Borrower and its Subsidiaries so long as the value of the properties subject to such Liens, and the Indebtedness and other obligations secured thereby, do not at any time exceed $5,000,000. In connection with the granting of Liens of the type described in clauses (vi), (vii) and (viii) of this Section 9.01 by the Borrower or any of its Subsidiaries, the Administrative Agent and the Collateral Agent shall be authorized to take any actions deemed appropriate by it in connection therewith (including, without limitation, by executing appropriate lien releases or lien subordination agreements in favor of the holder or holders of such Liens, in either case solely with respect to the item or items of equipment or other assets subject to such Liens). 9.02 Consolidation, Merger, Purchase or Sale of Assets, etc. The Borrower will not, and will not permit any of its Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of all or any part of its property or assets, or enter into any sale-leaseback transactions, or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets -65- 67 (other than purchases or other acquisitions of inventory, materials and equipment in the ordinary course of business) of any Person (or agree to do any of the foregoing at any future time), except that: (i) Capital Expenditures by the Borrower and its Subsidiaries shall be permitted to the extent not in violation of Section 9.07; (ii) each of the Borrower and its Subsidiaries may sell assets (other than the capital stock of any Subsidiary Guarantor), so long as (v) no Default or Event of Default then exists or would result therefrom, (w) each such sale is in an arm's-length transaction and the Borrower or the respective Subsidiary receives at least fair market value (as determined in good faith by the Borrower or such Subsidiary, as the case may be), (x) at least 50% of total consideration received by the Borrower or such Subsidiary is cash and is paid at the time of the closing of such sale and any other consideration received by the Borrower in connection with such sale is Qualified Proceeds, (y) the Net Sale Proceeds therefrom are applied and/or reinvested as (and to the extent) required by Section 4.02(e) and (z) the aggregate amount of the proceeds received from all assets sold pursuant to this clause (ii) shall not exceed $5,000,000 in any fiscal year of the Borrower; (iii) Investments may be made to the extent permitted by Section 9.05; (iv) each of the Borrower and its Subsidiaries may lease (as lessee) real or personal property (so long as any such lease does not create a Capitalized Lease Obligation except to the extent permitted by Section 9.04(iv)); (v) each of the Borrower and its Subsidiaries may make sales, leases or other dispositions of inventory (including wireless messaging devices, regardless of whether the Borrower or such Subsidiary accounts for same as inventory or otherwise) in the ordinary course of business; (vi) each of the Borrower and its Subsidiaries may sell obsolete, uneconomic or worn-out equipment or materials in the ordinary course of business, provided that the aggregate amount of the proceeds received from all assets sold pursuant to this clause (vi) shall not exceed $10,000,000 in any fiscal year of the Borrower; (vii) each of the Borrower and its Subsidiaries may sell or discount, in each case without recourse and in the ordinary course of business, accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof and not as part of any financing transaction; (viii) each of the Borrower and its Subsidiaries may grant leases or subleases to other Persons not materially interfering with the conduct of the business of the Borrower or any of its Subsidiaries; (ix) the GTE Transaction shall be permitted; and -66- 68 (x) (a) any Wholly-Owned Subsidiary Guarantor of the Borrower (other than a License Subsidiary) may merge into the Borrower (so long as the Borrower is the surviving corporation thereof) or with or into any other Wholly-Owned Subsidiary Guarantor (other than a License Subsidiary) and (b) the Borrower and one or more Wholly-Owned Subsidiary Guarantors (other than a License Subsidiary) may sell or transfer assets to each other, in each case so long as the action or actions taken pursuant to this clause (ix) does not, or do not, adversely affect the Lenders or the security interests in assets or guarantees given in respect of the Obligations hereunder. To the extent the Required Lenders waive the provisions of this Section 9.02 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 9.02 (other than to the Borrower or a Subsidiary thereof), such Collateral shall be sold free and clear of the Liens created by the Security Documents, and the Administrative Agent and the Collateral Agent shall be authorized to take any actions deemed appropriate in order to effect the foregoing. 9.03 Dividends. The Borrower will not, and will not permit any of its Subsidiaries to, authorize, declare or pay any Dividends with respect to the Borrower or any of its Subsidiaries, except that: (i) any Subsidiary of the Borrower may pay cash Dividends to the Borrower or to any Wholly-Owned Subsidiary of the Borrower; (ii) so long as no Default or Event of Default then exists (both before and after giving effect to the payment thereof), any non-Wholly-Owned Subsidiary of the Borrower may pay cash Dividends to its shareholders or partners generally so long as the Borrower or its respective Subsidiary which owns the equity interest or interests in the Subsidiary paying such Dividends receives at least its proportionate share thereof (based upon its relative holdings of equity interests in the Subsidiary paying such Dividends and taking into account and the relative preferences, if any, of the various classes of equity interests in such Subsidiary); (iii) so long as there shall exist no Default or Event of Default (both before and after giving effect to the payment thereof), the Borrower may repurchase outstanding shares of its common stock (or options to purchase such common stock) following the death, disability or termination of employment of officers, directors or employees of the Borrower or any of its Subsidiaries, provided that the aggregate amount of Dividends paid by the Borrower pursuant to this clause (ii) shall not exceed in any fiscal year of the Borrower the sum of (x) $2,000,000 and (y) the aggregate amount of net cash proceeds received by the Borrower during such fiscal year from the exercise of any options to purchase shares of its common stock held by any of its officers, directors or employees; (iv) the Borrower may pay regularly scheduled Dividends on Qualified Preferred Stock pursuant to the terms thereof solely through the issuance of additional shares of such Qualified Preferred Stock and not in cash; and -67- 69 (v) for the sole purpose of avoiding or remedying a violation of Section 301(b)(4) of the Communications Act, 47 U.S. ss.310(b)(4) resulting from excessive ownership or control of the Borrower's capital stock by Non-U.S. Persons, the Borrower may redeem or repurchase for cash any issued and outstanding shares of the Borrower's or any Subsidiary's capital stock to the extent necessary to maintain the required percentage of ownership of such stock, beneficially and of record, as minimally required to avoid or remedy such violation so long as: (A) there shall exist no Default or Event of Default (both before and after giving effect to any such redemption or repurchase); (B) the Borrower shall have (i) filed with the FCC a petition for declaratory order (or other form or petition or application as may be provided under FCC rules then in effect), complete in all material respects, requesting a determination that foreign ownership or control of the Borrower in excess of the limitation set forth in such Section 310(b)(4) is not contrary to the public interest such that no redemption or repurchase is necessary and (ii) prosecuted such petition in good faith, exhausted all of its remedies before the FCC to obtain a determination obviating a need to make such redemption or repurchase, and had such petition denied by the FCC; (C) prior to the date of any such redemption or repurchase, the Administrative Agent shall have received (i) written notice of such redemption or repurchase, (ii) evidence reasonably satisfactory to the Administrative Agent that the condition in clause (B) above has been met, and (iii) the written opinion of legal counsel to the Borrower for FCC matters to the effect that, based on reasonable procedures used by the FCC to determine compliance with such ownership restrictions, the Borrower would likely be in material violation of such Section 310(b)(4) unless such redemption or purchase is made; and (D) the aggregate amount expended in connection with all redemptions and/or repurchases pursuant to this clause (v) shall not exceed $5,000,000. 9.04 Indebtedness. The Borrower will not, and will not permit any of its Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except: (i) Indebtedness incurred pursuant to this Agreement and the other Credit Documents; (ii) Existing Indebtedness outstanding on the Initial Borrowing Date and listed on Schedule VII, without giving effect to any subsequent extension, renewal or refinancing thereof except to the extent set forth on Schedule VII, provided that the aggregate principal amount of the Indebtedness to be extended, renewed or refinanced does not increase from that amount outstanding at the time of any such extension, renewal or refinancing; -68- 70 (iii) Indebtedness under Interest Rate Protection Agreements entered into with respect to other Indebtedness permitted under this Section 9.04 so long as all of the terms and conditions of such Interest Rate Protection Agreements are reasonably satisfactory to the Agents; (iv) Indebtedness of the Borrower and its Subsidiaries (x) evidenced by Capitalized Lease Obligations to the extent permitted pursuant to Section 9.07 or (y) secured by Liens permitted under Section 9.01(viii), provided that in no event shall the aggregate principal amount of all Indebtedness permitted by this clause (iv) exceed $10,000,000 at any time outstanding; (v) intercompany Indebtedness among the Borrower and its Subsidiaries to the extent permitted by Sections 9.05(ix), (x) and (xi); (vi) Indebtedness of the Borrower under the 11-1/4% Senior Subordinated Discount Notes in an aggregate principal amount not to exceed the aggregate principal amount of 11-1/4% Senior Subordinated Discount Notes outstanding on the Effective Date (which amount shall be increased by any accretion of original issue discount in respect thereof and shall be permanently reduced by any repayments of principal thereof); (vii) Indebtedness of the Borrower under the 15% Senior Discount Notes in an aggregate principal amount not to exceed the aggregate principal amount of 15% Senior Discount Notes outstanding on the Effective Date (which amount shall be increased by any accretion of original issue discount in respect thereof and shall be permanently reduced by any repayments of principal thereof); (viii) Indebtedness of the Borrower under the Vendor Financing Agreement in an aggregate principal amount not to exceed at any time outstanding (x) $30,000,000 minus (y) the aggregate amount, if any, theretofore applied to repay Indebtedness outstanding under the Vendor Financing Agreement as contemplated by the proviso to the definition of Net Equity Proceeds contained herein, provided, however, until such time as the Borrower and Glenayre shall have entered into the VFA Amendment, no Indebtedness shall be permitted to be incurred by the Borrower, or at any time after the Initial Borrowing Date be permitted by the Borrower to remain outstanding, under the Vendor Financing Agreement; (ix) Replacement Senior Notes of the Borrower issued after the Initial Borrowing Date, 100% of the Net Debt Proceeds of which are used to permanently redeem all or a portion of the 15% Senior Discount Notes then outstanding; provided that Replacement Senior Notes may only be issued if (i) the principal amount thereof (or, if issued at a discount, the face amount thereof less the amount of such discount) does not exceed the amount of the proceeds therefrom to be used to redeem principal of then outstanding 15% Senior Discount Notes plus the amount of any premiums and other fees (including underwriting fees) and expenses to be incurred in connection therewith, (ii) no Default or Event of Default then exists or would occur as a result of the issuance thereof, (iii) the covenants and events of default contained in any such Replacement Senior Notes -69- 71 are not more restrictive on the Borrower and its Subsidiaries, and are no less favorable to the Lenders, than those set forth in the 15% Senior Discount Note Indenture (provided that, in no event, shall such issue of Replacement Senior Notes have any financial maintenance or capital expenditure restrictions (whether formulated as a covenant, event of default or otherwise)), (iv) the terms and conditions of any such Replacement Senior Notes do not have any mandatory repayment, prepayment, redemption, sinking fund, amortization or maturity prior to the date that is one year after the later of (x) the Multiple Draw I/Revolver Maturity Date and (y) the latest Multiple Draw II Maturity Date in effect at the time of the issuance of such Replacement Senior Notes (other than (x) an option of the holders to require the Borrower to repurchase such Replacement Senior Notes upon a change of control thereunder, provided that the terms of such change of control put are no more favorable to the holders than those set forth in the 15% Senior Discount Note Indenture and (y) requirements to apply proceeds of certain sales to make offers to purchase Replacement Senior Notes, provided that the terms thereof are no more favorable to the holders than those set forth in the 15% Senior Discount Note Indenture), (v) all Replacement Senior Notes shall be unsecured and shall be issued by the Borrower and shall not be entitled to the benefits of guarantees except to the extent required on substantially the same terms as those contained in the 15% Senior Discount Note Indenture and (vi) all terms and conditions of, and the documentation for, each issuance of Replacement Senior Notes shall be satisfactory to the Agents; (x) Replacement Senior Subordinated Notes of the Borrower issued after the Initial Borrowing Date, 100% of the Net Debt Proceeds of which are used to permanently redeem all or a portion of the 11-1/4% Senior Subordinated Discount Notes then outstanding; provided that Replacement Senior Subordinated Notes may only be issued if (i) the principal amount thereof (or, if issued at a discount, the face amount thereof less the amount of such discount) does not exceed the amount of the proceeds therefrom to be used to redeem principal of then outstanding 11-1/4% Senior Subordinated Discount Notes plus the amount of any premiums and other fees (including underwriting fees) and expenses to be incurred in connection therewith, (ii) no Default or Event of Default then exists or would occur as a result of the issuance thereof, (iii) the covenants and events of default contained in any such Replacement Senior Subordinated Notes are not more restrictive on the Borrower and its Subsidiaries, and are no less favorable to the Lenders, than those set forth in the 11-1/4% Senior Subordinated Discount Note Indenture (provided that, in no event, shall such issue of Replacement Senior Subordinated Discount Notes have any financial maintenance or capital expenditure restrictions (whether formulated as a covenant, event of default or otherwise)), (iv) the terms and conditions of any such Replacement Senior Subordinated Notes do not have any mandatory repayment, prepayment, redemption, sinking fund, amortization or maturity prior to the date that is one year after the later of (x) the Multiple Draw I/Revolver Maturity Date and (y) the latest Multiple Draw II Maturity Date in effect at the time of the issuance of such Replacement Senior Subordinated Notes (other than (x) an option of the holders to require the Borrower to repurchase such Replacement Senior Subordinated Notes upon a change of control thereunder, provided that the terms of such change of control put are no more favorable to the holders than those set forth in the 11-1/4% Senior Subordinated -70- 72 Discount Note Indenture and (y) requirements to apply proceeds of certain sales to make offers to purchase Replacement Senior Subordinated Notes, provided that the terms thereof are no more favorable to the holders than those set forth in the 11-1/4% Senior Subordinated Discount Note Indenture), (v) all Replacement Senior Subordinated Notes shall be subordinated to the Obligations pursuant to terms at least as favorable to the Lenders as the subordination terms contained in the 11-1/4% Senior Subordinated Note Indenture, (vi) all Replacement Senior Subordinated Notes shall be unsecured and shall be issued by the Borrower and shall not be entitled to the benefits of guarantees except to the extent required on substantially the same terms as those contained in the 11-1/4% Senior Subordinated Note Indenture and (vii) all terms and conditions of (including the subordination provisions), and the documentation for, each issuance of Replacement Senior Subordinated Notes shall be satisfactory to the Agents; (xi) Indebtedness of the Borrower incurred pursuant to the GTE Transaction in an aggregate amount not to exceed $5,000,000; (xii) Indebtedness of a Subsidiary Guarantor pursuant to a guarantee by such Subsidiary Guarantor of Indebtedness permitted under Section 9.04(vi), (vii), (ix) or (x), in each case so long as, and for so long as, such Person continues to constitute a Subsidiary Guarantor as defined herein, provided that any guarantee by such Subsidiary Guarantor of Indebtedness permitted under Section 9.04(vi) or (x) shall be subordinated to the obligations of such Subsidiary Guarantor under the Subsidiary Guaranty in a manner at least as favorable to the Lenders as the subordination terms applicable to the Borrower contained in the 11-1/4% Senior Subordinated Note Indenture or the Replacement Senior Subordinated Note Documents, as the case may be; and (xiii) additional unsecured Indebtedness incurred by the Borrower and the Subsidiary Guarantors in an aggregate principal amount not to exceed $2,500,000 at any one time outstanding. 9.05 Advances, Investments and Loans. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any other Person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract, or hold any cash or Cash Equivalents (each of the foregoing an "Investment" and, collectively, "Investments"), except that the following shall be permitted: (i) the Borrower and its Subsidiaries may acquire and hold accounts receivables owing to any of them, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms of the Borrower or such Subsidiary; (ii) the Borrower and its Subsidiaries may acquire and hold cash and Cash Equivalents, provided that during any time when Revolving Loans or Swingline Loans are outstanding, the aggregate amount of cash and Cash Equivalents permitted to be held by -71- 73 the Borrower and its Subsidiaries shall not exceed $5,000,000 for any period of five consecutive Business Days; (iii) the Borrower and its Subsidiaries may hold the Investments held by them on the Initial Borrowing Date and described on Schedule XII, provided that any additional Investments made with respect thereto shall be permitted only if independently justified under the other provisions of this Section 9.05; (iv) the Borrower and its Subsidiaries may acquire and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in good faith settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (v) the Borrower and its Subsidiaries may make loans and advances in the ordinary course of business to their respective employees so long as the aggregate principal amount thereof at any time outstanding (determined without regard to any write-downs or write-offs of such loans and advances) shall not exceed $500,000; (vi) the Borrower may acquire and hold obligations of one or more officers or other employees of the Borrower or any of its Subsidiaries in connection with such officers' or employees' acquisition of shares of common stock of the Borrower so long as no cash is paid by the Borrower or any of its Subsidiaries to such officers or employees in connection with the acquisition of any such obligations; (vii) the Borrower may enter into Interest Rate Protection Agreements to the extent permitted by Section 9.04(iii); (viii) the Borrower and the Subsidiary Guarantors may make cash common equity contributions to the capital of their respective Subsidiaries which are Subsidiary Guarantors; (ix) the Borrower and the Subsidiary Guarantors may make intercompany loans and advances between or among one another (together with any intercompany loans referred to in clauses (x) and (xi) below, collectively, "Intercompany Loans"), so long as each Intercompany Loan made pursuant to this clause (ix) shall be evidenced by an Intercompany Note that is pledged to the Collateral Agent pursuant to the Pledge Agreement; (x) the Borrower and the Subsidiary Guarantors may make cash common equity contributions to the capital of, and Intercompany Loans to, Non-Guarantor Subsidiaries so long as (i) the aggregate amount of all such Investments made pursuant to this clause (x) does not exceed $500,000 (determined without regard to any write-downs or write-offs thereof) and (ii) each Intercompany Loan made pursuant to this clause (x) shall be evidenced by an Intercompany Note that is pledged to the Collateral Agent pursuant to the Pledge Agreement, provided that in the event that any Non-Guarantor Subsidiary that has received a cash common equity contribution and/or an Intercompany -72- 74 Loan pursuant to this clause (x) ceases to constitute a Subsidiary, such Investment shall only be permitted if independently justified under clause (xiii) below; (xi) the Non-Guarantor Subsidiaries may make cash common equity contributions to the capital of, and Intercompany Loans to, other Non-Guarantor Subsidiaries, provided that in the event that (A) any Non-Guarantor Subsidiary that has made a cash common equity contribution and/or Intercompany Loan pursuant to this clause (xi) ceases to constitute same, such Investment shall only be permitted if independently justified under clause (x) above or clause (xiii) below and (B) in the event that any Non-Guarantor Subsidiary which has received a common equity contribution or Intercompany Loan pursuant to this clause (xi) ceases to constitute a Subsidiary of the Borrower, any remaining Investment therein by the Borrower or any of its Subsidiaries will be required to be independently justified under another clause of this Section 9.05; (xii) non-cash consideration received by the Borrower or any of its Subsidiaries in connection with any sale of assets to the extent permitted under Section 9.02(ii); and (xiii) the Borrower and its Subsidiaries may make additional Investments (determined without duplication in the case of Investments made through one or more Subsidiaries of the Borrower) not otherwise permitted under this Section 9.05 in an aggregate amount not to exceed (x) $5,000,000 in any fiscal year of the Borrower and (y) $12,500,000 in the aggregate (in each case determined without regard to any write-downs or write-offs thereof), provided, however, that of the $12,500,000 aggregate Investments permitted to be made pursuant to this clause (xiii), not more than $7,500,000 of such Investments may be made in Persons other than PageMart Canada. 9.06 Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate of the Borrower or any of its Subsidiaries, other than in the ordinary course of business and on terms and conditions substantially as favorable to the Borrower or such Subsidiary as would reasonably be obtained by the Borrower or such Subsidiary at that time in a comparable arm's-length transaction with a Person other than an Affiliate, except that the following in any event shall be permitted: (i) Dividends may be paid to the extent provided in Section 9.03; (ii) loans may be made and other transactions may be entered into by the Borrower and its Subsidiaries to the extent permitted by Sections 9.02, 9.04 and 9.05; (iii) the payment of fees to any Person for investment banking services (including, without limitation, any underwriting discounts and commissions and placement agent fees) performed in the ordinary course of such Person's business; (iv) roaming, switching and similar types of agreements customary in the paging industry; -73- 75 (v) the provision by the Borrower or any of its Subsidiaries of technical expertise to any of its Affiliates; (vi) customary directors' fees, indemnification and similar arrangements, employee salaries, bonuses or employment agreements, compensation or employment benefit arrangements and incentive arrangements with any officer, director or employee of the Borrower entered into in the ordinary course of business (including customary benefits thereunder) and permitted by applicable law; and (vii) the transactions contemplated in this Agreement may be entered into by the Borrower and its Subsidiaries. 9.07 Capital Expenditures. (a) The Borrower will not, and will not permit any of its Subsidiaries to, make any Capital Expenditures, except that during any fiscal year of the Borrower set forth below (taken as one accounting period), the Borrower and its Subsidiaries may make Capital Expenditures so long as the aggregate amount of all such Capital Expenditures does not exceed in any fiscal year of the Borrower set forth below the amount set forth opposite such fiscal year below:
Fiscal Year Ending Amount ------------------ ------ December 31, 1999 $125,000,000 December 31, 2000 $125,000,000 December 31, 2001 $125,000,000 December 31, 2002 $100,000,000 December 31, 2003 $100,000,000
(b) In addition to the foregoing, the Borrower and its Subsidiaries may make Capital Expenditures with the amount of Net Sale Proceeds received by the Borrower or any of its Subsidiaries from any Asset Sale so long as an amount equal to such Net Sale Proceeds is reinvested in assets used or to be used in the businesses referred to in Section 9.14(a) within 180 days following the date of such Asset Sale to the extent such Net Sale Proceeds are not otherwise required to be applied to repay outstanding Term Loans and/or to reduce the Total Multiple Draw I Term Loan Commitment, or the Total Multiple Draw II Term Loan Commitment, as the case may be, pursuant to Section 4.02(e) or reduce the Total Revolving Loan Commitment pursuant to Section 3.03(e), as the case may be. (c) In addition to the foregoing, the Borrower and its Subsidiaries may make Capital Expenditures with the amount of Net Insurance Proceeds received by the Borrower or any of its Subsidiaries from any Recovery Event so long as such Net Insurance Proceeds are used to replace or restore any properties or assets in respect of which such Net Insurance Proceeds were paid within 270 days following the date of receipt of such Net Insurance Proceeds from such Recovery Event to the extent such Net Insurance Proceeds are not otherwise required to be applied to repay outstanding Term Loans and/or reduce the Total Multiple Draw I Term Loan Commitment or the Total Multiple Draw II Term Loan Commitment, as the case may be, -74- 76 pursuant to Section 4.02(g) or reduce the Total Revolving Loan Commitment pursuant to Section 3.03(e), as the case may be. (d) In addition to the foregoing, the Borrower may make Capital Expenditures to the extent permitted under Section 9.02(ix). 9.08 Consolidated Cash Interest Coverage Ratio. The Borrower will not permit the Consolidated Cash Interest Coverage Ratio for any Test Period ending (x) on or prior to December 31, 2000 to be less than 1.75:1.00 and (y) after December 31, 2000 to be less than 2.00:1.00. 9.09 Minimum TMS EBITDA. (a) The Borrower will not permit Consolidated TMS EBITDA for any Test Period ending on the last day of a fiscal quarter of the Borrower set forth below to be less than the amount set forth opposite such fiscal quarter below:
Fiscal Quarter Ending Amount --------------------- ------ June 30, 1999 $55,000,000 September 30, 1999 $60,000,000 December 31, 1999 $60,000,000 March 31, 2000 $65,000,000 June 30, 2000 $70,000,000 September 30, 2000 $70,000,000 Thereafter $75,000,000
(b) In addition, the Borrower will not permit Consolidated TMS EBITDA for any fiscal quarter of the Borrower to be less than $13,500,000. 9.10 Minimum Consolidated EBITDA. The Borrower will not permit Consolidated EBITDA for any Test Period ending on the last day of a fiscal quarter of the Borrower set forth below to be less than the amount set forth opposite such fiscal quarter below:
Fiscal Quarter Ending Amount --------------------- ------ June 30, 1999 $ 30,000,000 September 30, 1999 $ 30,000,000 December 31, 1999 $ 30,000,000 March 31, 2000 $ 35,000,000 June 30, 2000 $ 40,000,000 September 30, 2000 $ 45,000,000 December 31, 2000 $ 55,000,000 March 31, 2001 $ 65,000,000 June 30, 2001 $ 75,000,000 September 30, 2001 $ 85,000,000 December 31, 2001 $ 95,000,000 March 31, 2002 $100,000,000
-75- 77
Fiscal Quarter Ending Amount --------------------- ------ June 30, 2002 $105,000,000 September 30, 2002 $110,000,000 December 31, 2002 $120,000,000 March 31, 2003 $130,000,000 June 30, 2003 $140,000,000 September 30, 2003 $150,000,000 Thereafter $170,000,000
9.11 Limitations on Payments of Certain Indebtedness; Modifications of Certain Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc. (a) The Borrower will not, and will not permit any of its Subsidiaries to, (i) make (or give any notice in respect of) any voluntary or optional payment or prepayment on or redemption or acquisition for value of, or any prepayment or redemption as a result of any asset sale, change of control or similar event of (including in each case, without limitation, by way of depositing with the trustee with respect thereto or any other Person money or securities before due for the purpose of paying when due), any 11-1/4% Senior Subordinated Discount Notes, 15% Senior Discount Notes, any Replacement Senior Notes or any Replacement Senior Subordinated Notes, provided that, so long as no Default or Event of Default then exists or would result therefrom, the Borrower may redeem, repurchase or otherwise retire (A) 15% Senior Discount Notes with proceeds received from (1) incurrences of Multiple Draw II Term Loans or (2) Replacement Senior Notes issued pursuant to Section 9.04(x) and (B) 11-1/4% Senior Subordinated Discount Notes with proceeds from Replacement Senior Subordinated Notes issued pursuant to Section 9.04(xi), (ii) amend or modify, or permit the amendment or modification of, any provision of (A) the 11-1/4% Senior Subordinated Discount Notes or any other 11-1/4% Senior Subordinated Discount Note Document, (B) the 15% Senior Discount Notes or any other 15% Senior Discount Note Document, (C) after the issuance thereof, the Replacement Senior Notes or any other Replacement Senior Note Document, (D) after the issuance thereof, the Replacement Senior Subordinated Notes or any other Replacement Senior Subordinated Note Document or (E) the Vendor Financing Agreement, (iii) amend, modify or change its certificate or articles of incorporation (including, without limitation, by the filing or modification of any certificate or articles of designation) or by-laws (or the equivalent organizational documents) or any agreement entered into by it with respect to its capital stock (including any Shareholders' Agreement), or enter into any new agreement with respect to its capital stock, unless such amendment, modification, change or other action contemplated by this clause (iii) could not reasonably be expected to be adverse to the interests of the Lenders in any material respect, or (iv) enter into any tax sharing agreement, tax allocation agreement or similar agreement without the prior written consent of each Agent. (b) The Borrower will not, and will not permit any of its Subsidiaries to, designate any Indebtedness other than the Obligations, as "Designated Senior Indebtedness" for the purposes of (x) the 11-1/4% Senior Subordinated Discount Notes and the other 11-1/4% Senior Subordinated Discount Note Documents or (y) after the issuance thereof, the Replacement Senior Subordinated Notes or any other Replacement Senior Subordinated Note Document. -76- 78 (c) The Borrower will not, and will not permit any of its Subsidiaries to, make any cash interest payments on (i) the 11-1/4% Senior Subordinated Discount Notes prior to August 1, 2003, provided that, in connection with any redemption, repurchase or retirement of 11-1/4% Senior Subordinated Discount Notes in accordance with (and to the extent permitted by) the provisions of Section 9.11(a) occurring after February 1, 2003, the Borrower may make payments of accrued and unpaid interest owing thereon, or (ii) the 15% Senior Discount Notes prior to August 1, 2000, provided that, in connection with any redemption, repurchase or retirement of 15% Senior Discount Notes in accordance with (and to the extent permitted by) the provisions of Section 9.11(a) occurring after February 1, 2000, the Borrower may make payments of accrued and unpaid interest owing thereon. 9.12 Limitation on Certain Restrictions on Subsidiaries. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by the Borrower or any Subsidiary of the Borrower, or pay any Indebtedness owed to the Borrower or any Subsidiary of the Borrower, (b) make loans or advances to the Borrower or any Subsidiary of the Borrower or (c) transfer any of its properties or assets to the Borrower or any Subsidiary of the Borrower, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) this Agreement and the other Credit Documents, (iii) the Vendor Financing Agreement, the 11-1/4% Senior Subordinated Discount Note Documents and the 15% Senior Discount Note Documents, each as in effect on the Initial Borrowing Date, and any such encumbrances or restrictions contained in any Replacement Senior Note Documents or Replacement Senior Subordinated Note Documents, so long as such encumbrances and restrictions are no less favorable to the Lenders than those contained in the 15% Senior Discount Note Documents or the 11-1/4% Senior Subordinated Note Documents, as the case may be, (iv) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or any Subsidiary of the Borrower, (v) customary provisions restricting assignment of any licensing agreement or other contract entered into by the Borrower or any Subsidiary of the Borrower in the ordinary course of business, (vi) customary restrictions on dispositions of Real Property of the Borrower contained in reciprocal easement agreements entered into by the Borrower or any Subsidiary in the ordinary course of business and (vii) restrictions on the transfer of any asset subject to a Lien permitted by Section 9.01(vi), (vii) or (viii). 9.13 Limitation on Issuance of Capital Stock. (a) The Borrower will not, and will not permit any of its Subsidiaries to, issue (i) any preferred stock, except that the Borrower may at any time and from time to time issue Qualified Preferred Stock of the Borrower, or (ii) any redeemable common stock other than common stock that is redeemable at the sole option of the Borrower or such Subsidiary, as the case may be. (b) The Borrower will not permit any of its Subsidiaries to issue any capital stock (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, capital stock, except (i) for transfers and replacements of then outstanding shares of capital stock, (ii) for stock splits, stock dividends and issuances which do not decrease the percentage ownership of the Borrower or any of its Subsidiaries in any class of -77- 79 the capital stock of such Subsidiary, (iii) to qualify directors to the extent required by applicable law, (iv) for issuances by newly created or acquired Subsidiaries in accordance with the terms of this Agreement or (v) for issuances of non-redeemable common stock (or the equivalent) by any Foreign Subsidiary. 9.14 Business. (a) The Borrower and its Subsidiaries will not engage in any business other than the business engaged in by the Borrower and its Subsidiaries as of the Initial Borrowing Date and reasonable extensions thereof. (b) Notwithstanding the foregoing, (i) all the FCC Licenses shall be held by License Subsidiaries and (ii) the License Subsidiaries shall not own any significant assets or have any material liabilities other than their respective FCC Licenses and those liabilities under this Agreement and the other Credit Documents to which they are a party. 9.15 Limitation on Creation of Subsidiaries. (a) Except as otherwise specifically provided in immediately succeeding clause (b), the Borrower will not, and will not permit any of its Subsidiaries to, establish, create or acquire after the Initial Borrowing Date any Subsidiary, provided that the Borrower and its Wholly-Owned Subsidiaries shall be permitted to establish or create Wholly-Owned Subsidiaries so long as (A) the equity interests of each such new Wholly-Owned Subsidiary is pledged pursuant to, and to the extent required by, the Pledge Agreement and the certificates representing such equity interests, together with stock or other powers duly executed in blank, are delivered to the Collateral Agent for the benefit of the Secured Creditors and (B) to the extent such new Wholly-Owned Subsidiary Guarantor does not meet the criteria required to constitute a Non-Guarantor Subsidiary in accordance with the definition thereof, (i) such new Wholly-Owned Subsidiary executes a counterpart of a guarantee in form and substance satisfactory to the Agents (the "Subsidiaries Guaranty"), the Pledge Agreement and the Security Agreement and (ii) such new Wholly-Owned Subsidiary, to the extent requested by any Agent or the Required Lenders, takes all actions required pursuant to Section 8.11. In addition, each new Wholly-Owned Subsidiary which becomes, or is required to become, a Subsidiary Guarantor shall execute and deliver, or cause to be executed and delivered, all other relevant documentation of the type described in Section 5 as such new Wholly-Owned Subsidiary would have had to deliver if such new Wholly-Owned Subsidiary were a Credit Party on the Initial Borrowing Date. (b) In addition to Subsidiaries of the Borrower created pursuant to preceding clause (a), the Borrower may establish Non-Guarantor Subsidiaries after the Initial Borrowing Date as a result of Investments expressly permitted to be made pursuant to Section 9.05; provided that all capital stock of each such Non-Guarantor Subsidiary shall be pledged by any Credit Party which owns same to the extent required by the Pledge Agreement; provided, however, that such Non-Guarantor Subsidiary shall not be required to execute and deliver a counterpart of the Subsidiaries Guaranty or any Security Documents, in each case except to the extent thereafter required in accordance with the provisions of Section 8.13. SECTION 10. Events of Default. Upon the occurrence of any of the following specified events (each an "Event of Default"): -78- 80 10.01 Payments. The Borrower shall (i) default in the payment when due of any principal of any Loan or any Note or (ii) default, and such default shall continue unremedied for three or more Business Days, in the payment when due of any interest on any Loan or Note, any Unpaid Drawing or any Fees or any other amounts owing hereunder or thereunder; or 10.02 Representations, etc. Any representation, warranty or statement made or deemed made by any Credit Party herein or in any other Credit Document or in any certificate delivered to any Agent or any Lender pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or 10.03 Covenants. Any Credit Party shall (i) default in the due performance or observance by it of any term, covenant or agreement contained in Section 8.01(g)(i), 8.08 or Section 9 or (ii) default in the due performance or observance by it of any other term, covenant or agreement contained in this Agreement or any other Credit Document (other than those set forth in Sections 10.01 and 10.02) and such default shall continue unremedied for a period of 30 days after written notice thereof to the defaulting party by any Agent or the Required Lenders; or 10.04 Default Under Other Agreements. (i) The Borrower or any of its Subsidiaries shall (x) default in any payment of any Indebtedness (other than the Obligations) beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created or (y) default in the observance or performance of any agreement or condition relating to any Indebtedness (other than the Obligations) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause (determined without regard to whether any notice is required), any such Indebtedness to become due prior to its stated maturity, or (ii) any Indebtedness (other than the Obligations) of the Borrower or any of its Subsidiaries shall be declared to be (or shall become) due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof, provided that it shall not be a Default or an Event of Default under this Section 10.04 unless the aggregate principal amount of all Indebtedness as described in preceding clauses (i) and (ii) is at least $2,000,000; or 10.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the Borrower or any of its Subsidiaries, and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Borrower or any of its Subsidiaries, or the Borrower or any of its Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Borrower or any of its Subsidiaries, or there is commenced against the Borrower or any of its Subsidiaries any such proceeding which remains undismissed for a period of 60 days, or the Borrower or any of its Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or -79- 81 proceeding is entered; or the Borrower or any of its Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or the Borrower or any of its Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by the Borrower or any of its Subsidiaries for the purpose of effecting any of the foregoing; or 10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding standard required for any plan year or part thereof under Section 412 of the Code or Section 302 of ERISA or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code or Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA shall be subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur with respect to such Plan within the following 30 days, any Plan which is subject to Title IV of ERISA shall have had or is likely to have a trustee appointed to administer such Plan, any Plan which is subject to Title IV of ERISA is, shall have been or is likely to be terminated or to be the subject of termination proceedings under ERISA, any Plan shall have an Unfunded Current Liability, a contribution required to be made with respect to a Plan or a Foreign Pension Plan has not been timely made, the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate has incurred or is likely to incur any liability to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on account of a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or the Borrower or any Subsidiary of the Borrower has incurred or is likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) that provide benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or Plans or Foreign Pension Plans, a "default" within the meaning of Section 4219(c)(5) of ERISA shall occur with respect to any Plan, any applicable law, rule or regulation is adopted, changed or interpreted, or the interpretation or administration thereof is changed, in each case after the date hereof, by any governmental authority or agency or by any court (a "Change of Law"), or, as a result of a Change in Law, an event occurs following a Change in Law, with respect to or otherwise affecting any Plan; (b) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; and (c) such lien, security interest or liability, individually and/or in the aggregate, in the opinion of the Required Lenders, has had, or could reasonably be expected to have, a material adverse effect on the business, operations, properties, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole; or 10.07 Security Documents. At any time after the execution and delivery thereof, any of the Security Documents shall cease to be in full force and effect, or shall cease to give the Collateral Agent for the benefit of the Secured Creditors the Liens, rights, powers and privileges purported to be created thereby (including, without limitation, a perfected security interest in, and Lien on, all of the Collateral, in favor of the Collateral Agent, superior to and prior to the rights of -80- 82 all third Persons (except as permitted by Section 9.01), and subject to no other Liens (except as permitted by Section 9.01); or 10.08 Subsidiaries Guaranty. At any time after the execution and delivery thereof, the Subsidiaries Guaranty or any provision thereof shall cease to be in full force or effect as to any Subsidiary Guarantor, or any Subsidiary Guarantor or any Person acting by or on behalf of such Subsidiary Guarantor shall deny or disaffirm such Subsidiary Guarantor's obligations under Subsidiary Guaranty or any Subsidiary Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to Subsidiary Guaranty; or 10.09 Judgments. One or more judgments or decrees shall be entered against the Borrower or any Subsidiary of the Borrower involving in the aggregate for the Borrower and its Subsidiaries a liability (not paid or fully covered by a reputable and solvent insurance company) and such judgments and decrees either shall be final and non-appealable or shall not be vacated, discharged or stayed or bonded pending appeal for any period of 30 consecutive days, and the aggregate amount of all such judgments equals or exceeds $2,000,000; or 10.10 Change of Control. A Change of Control shall occur; or 10.11 Failure to Comply with the Communications Act. The Borrower or any of its Subsidiaries shall fail to comply in any respect with the Communications Act, or any FCC Rule (including, without limitation, a failure to meet FCC build out requirements for the nationwide and regional personal communication systems licenses held by the License Subsidiaries), and such failure has, or could reasonably be expected to have, a material adverse effect on the business, operations, properties, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole; or 10.12 Licenses. Any of the FCC Licenses is (a) revoked, rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a full term or (b) subject to any decision by the FCC which designates a hearing with respect to any application for renewal or which could result in the FCC taking any action referred to in immediately preceding paragraph (a), and such revocation, rescission, suspension, modification or decision (i) has, or could reasonably be expected to have, a material adverse effect on the business, operations, properties, assets, liabilities, conditions (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole or (ii) adversely affects the legal or character qualification of the Borrower or any of its Subsidiaries to hold any FCC License; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent, upon the written request of the Required Lenders, shall by written notice to the Borrower, take any or all of the following actions, without prejudice to the rights of any Agent, any Lender or the holder of any Note to enforce its claims against any Credit Party (provided that, if an Event of Default specified in Section 10.05 shall occur with respect to the Borrower, the result which would occur upon the giving of written notice by the Administrative Agent as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Total Commitment terminated, whereupon all -81- 83 Commitments of each Lender shall forthwith terminate immediately and any Commitment Commission shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans and the Notes and all Obligations owing hereunder and thereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Credit Party; (iii) terminate any Letter of Credit which may be terminated in accordance with its terms; (iv) direct the Borrower to pay (and the Borrower agrees that upon receipt of such notice, or upon the occurrence of an Event of Default specified in Section 10.05 with respect to the Borrower, it will pay) to the Collateral Agent at the Payment Office such additional amount of cash or Cash Equivalents, to be held as security by the Collateral Agent, as is equal to the aggregate Stated Amount of all Letters of Credit issued for the account of the Borrower and then outstanding; (v) enforce, as Collateral Agent, all of the Liens and security interests created pursuant to the Security Documents; and (vi) apply any cash collateral held by the Administrative Agent pursuant to Section 4.02 to the repayment of the Obligations. SECTION 11. Definitions and Accounting Terms. 11.01 Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Additional Security Documents" shall have the meaning provided in Section 8.11. "Adjusted Consolidated Net Income" shall mean, for any period, Consolidated Net Income of the Borrower for such period plus, without duplication, the sum of the amount of all net non-cash charges (including, without limitation, depreciation, amortization, deferred tax expense and non-cash interest expense) and net non-cash losses which were included in arriving at Consolidated Net Income of the Borrower for such period, less the amount of all net non-cash gains and non-cash credits which were included in arriving at Consolidated Net Income of the Borrower for such period. "Adjusted Consolidated Working Capital" shall mean, at any time, Consolidated Current Assets (but excluding therefrom all cash and Cash Equivalents) less Consolidated Current Liabilities at such time. "Administrative Agent" shall mean BTCo, in its capacity as Administrative Agent for the Lenders hereunder, and shall include any successor to the Administrative Agent appointed pursuant to Section 12.09. "Advanced Messaging Services" shall mean the Borrower's and its Subsidiaries' wireless messaging services relating to devices using ReFLEX(TM) protocol (or a successor protocol) and which are held by their respective subscribers for such services. "Advanced Messaging Units" shall mean the aggregate number of wireless messaging devices using ReFLEX(TM) protocol (or a successor protocol) and which are held by subscribers of the Borrower's or any of its Subsidiaries' wireless messaging services, which have -82- 84 been activated by the Borrower or such Subsidiary, less any reserves against any pagers established by the Borrower and its Subsidiaries, in each case consistent with past practices. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power (i) to vote 5% or more of the securities having ordinary voting power for the election of directors of such corporation or (ii) to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" shall mean and include the Administrative Agent and the Syndication Agent. "Agreement" shall mean this Credit Agreement, as modified, supplemented, amended, restated (including any amendment and restatement hereof), extended, renewed, refinanced or replaced from time to time. "Applicable Margin" shall mean: (a) with respect to any Multiple Draw I Term Loans or Revolving Loans, from and after any Start Date to and including the corresponding End Date, the respective percentage per annum set forth below under the respective Type of Multiple Draw I Term Loans or Revolving Loans and opposite the respective Level (i.e., Level 1, Level 2, Level 3, Level 4, Level 5 or Level 6, as the case may be) indicated to have been achieved on the applicable Test Date for such Start Date (as shown on the respective officer's certificate delivered pursuant to Section 8.01(f) or the second proviso below):
Level Leverage Ratio Multiple Draw I Term Multiple Draw I Term Loans ----- -------------- Loans and Revolving and Revolving Loans Loans maintained as maintained as Base Rate Loans Eurodollar Loans --------------- ---------------- 1 Less than or equal to 1.50% 2.50% 4.00:1.00 2 Greater than 4.00:1.00 1.75% 2.75% but less than or equal to 4.50:1.00 3 Greater than 4.50:1.00 2.00% 3.00% but less than or equal to 5.00:1.00 4 Greater than 5.00:1.00 2.25% 3.25% but less than or equal to 5.50:1.00
-83- 85 5 Greater than 5.50:1.00 2.50% 3.50% but less than or equal to 6.00:1.00 6 Greater than 6.00:1.00 2.75% 3.75%
; provided, however, that if the Borrower fails to deliver the financial statements required to be delivered pursuant to Section 8.01(b) or (c) (accompanied by the officer's certificate required to be delivered pursuant to Section 8.01(f) showing the applicable Leverage Ratio on the relevant Test Date) on or prior to the respective date required by such Sections, then Level 6 pricing shall apply until such time, if any, as the financial statements required as set forth above and the accompanying officer's certificate have been delivered showing the pricing for the respective Margin Reduction Period is at a level which is less than Level 6 (it being understood that, in the case of any late delivery of the financial statements and officer's certificate as so required, the Applicable Margin, if any, shall apply only from and after the date of the delivery of the complying financial statements and officers' certificates); provided further, that Level 6 pricing shall apply at any time when any Default or any Event of Default is in existence. Notwithstanding anything to the contrary contained in the immediately preceding sentence, Level 6 pricing shall apply for the period from the Effective Date to but not including the date which is the first Start Date after the Borrower's fiscal quarter ending on September 30, 1999; and (b) with respect to any Multiple Draw II Term Loans incurred under a Multiple Draw II Term Loan Sub-Facility, the respective percentages per annum relating to the respective Type of Multiple Draw II Term Loans as set forth in the applicable Multiple Draw II Term Loan Commitment Agreement, provided that in no event shall the Applicable Margin exceed in the case of (i) Multiple Draw II Term Loans maintained as Base Rate Loans, 5.00% and (ii) Multiple Draw II Term Loans maintained as Eurodollar Loans, 6.00%. "Applicable RL Commitment Commission Percentage" shall mean (i) on or prior to the Multiple Draw I Term Loan Full Utilization Date, 1.50% and (ii) thereafter, 0.75%. "Asset Sale" shall mean any sale, transfer or other disposition by the Borrower or any of its Subsidiaries to any Person (including by way of redemption by such Person) other than to the Borrower or a Wholly-Owned Subsidiary of the Borrower of any asset (including, without limitation, any capital stock or other securities of, or equity interests in, another Person) other than sales of assets pursuant to Sections 9.02 (v), (vi), (vii), (viii) and (ix). "Assignment and Assumption Agreement" shall mean an Assignment and Assumption Agreement substantially in the form of Exhibit L (appropriately completed). -84- 86 "Available Revolving Loan Commitment" shall mean, at any time for any RL Lender, such RL Lender's RL Percentage of the Total Available Revolving Loan Commitment. "Bankruptcy Code" shall have the meaning provided in Section 10.05. "Base Rate" shall mean, at any time, the higher of (i) the Prime Lending Rate and (ii) 1/2 of 1% in excess of the Federal Funds Rate. "Base Rate Loan" shall mean (i) each Swingline Loan and (ii) each other Loan designated or deemed designated as such by the Borrower at the time of the incurrence thereof or conversion thereto. "Borrower" shall have the meaning provided in the first paragraph of this Agreement. "Borrowing" shall mean the borrowing of one Type of Loan of a single Tranche from all the Lenders having Commitments of the respective Tranche (or from the Swingline Lender in the case of Swingline Loans) on a given date (or resulting from a conversion or conversions on such date) having in the case of Eurodollar Loans the same Interest Period, provided that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of the related Borrowing of Eurodollar Loans. "BTCo" shall mean Bankers Trust Company, in its individual capacity, and any successor corporation thereto by merger, consolidation or otherwise. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day except Saturday, Sunday and any day which shall be in New York, New York a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) above and which is also a day for trading by and between banks in the New York interbank Eurodollar market. "Capital Expenditures" shall mean, with respect to any Person, all expenditures by such Person which should be capitalized in accordance with generally accepted accounting principles and, without duplication, the amount of Capitalized Lease Obligations incurred by such Person. "Capitalized Lease Obligations" shall mean, with respect to any Person, all rental obligations of such Person which, under generally accepted accounting principles, are or will be required to be capitalized on the books of such Person, in each case taken at the amount thereof accounted for as indebtedness in accordance with such principles. "Cash Equivalents" shall mean, as to any Person, (i) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (ii) marketable direct -85- 87 obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within six months from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Ratings Services or Moody's Investors Service, Inc., (iii) Dollar denominated time deposits and certificates of deposit of any commercial bank having, or which is the principal banking subsidiary of a bank holding company having, a long-term unsecured debt rating of at least "A" or the equivalent thereof from Standard & Poor's Ratings Services or "A2" or the equivalent thereof from Moody's Investors Service, Inc. with maturities of not more than six months from the date of acquisition by such Person, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (iii) above, (v) commercial paper issued by any Person incorporated in the United States rated at least A-1 or the equivalent thereof by Standard & Poor's Ratings Services or at least P-1 or the equivalent thereof by Moody's Investors Service, Inc. and in each case maturing not more than six months after the date of acquisition by such Person and (vi) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (i) through (v) above. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as the same may be amended from time to time, 42 U.S.C. Section 9601 et seq. "Certificated Securities" shall have the meaning provided in the Pledge Agreement. "Change of Control" shall mean (i) any Person or "group" (within the meaning of Rules 13d-3 or 13d-5 under the Securities Exchange Act (as in effect on the Effective Date)) or group of related persons, together with any Affiliates thereof (other than the MS Funds) shall (A) have acquired beneficial ownership of 30% or more on a fully diluted basis of the voting and/or economic interest in the Borrower's capital stock or (B) have obtained power (whether or not exercised) to elect a majority of the Borrower's directors, (ii) the Board of Directors of the Borrower shall cease to consist of a majority of Continuing Directors or (iii) a "change of control" or similar event shall occur under, and as defined in, the 11-1/4% Senior Subordinated Note Indenture, the 15% Senior Discount Note Indenture, the Vendor Financing Agreement, any Replacement Senior Note Document or any Replacement Senior Subordinated Note Document. "Change of Law" shall have the meaning provided in Section 10.06. "Co-Arrangers" shall have the meaning provided in the first paragraph of this Agreement. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor. "Collateral" shall mean all property (whether real or personal) with respect to which any security interests have been granted (or purported to be granted) pursuant to any -86- 88 Security Document, including, without limitation, all Pledge Agreement Collateral, all Security Agreement Collateral and all cash and Cash Equivalents delivered as collateral pursuant to Section 4.02 or 10. "Collateral Agent" shall mean the Administrative Agent acting as collateral agent for the Secured Creditors pursuant to the Security Documents. "Commitment" shall mean any of the commitments of any Lender, i.e., whether the Multiple Draw I Sub-Tranche A Term Loan Commitment, the Multiple Draw I Sub-Tranche B Term Loan Commitment, the Multiple Draw I Sub-Tranche C Term Loan Commitment, the Multiple Draw II Sub-Tranche A Term Loan Commitment, the Multiple Draw II Sub-Tranche B Term Loan Commitment or the Revolving Loan Commitment. "Commitment Commission" shall mean and include the Multiple Draw I Sub-Tranche B Commitment Commission, the Multiple Draw I Sub-Tranche C Commitment Commission, the RL Commitment Commission and any commitment commission payable pursuant to Section 3.01(d). "Communications Act" shall mean the Communications Act of 1934, as amended. "Consolidated Cash Interest Coverage Ratio" shall mean, for any period, the ratio of Consolidated EBITDA of the Borrower to Consolidated Cash Interest Expense for such period. "Consolidated Cash Interest Expense" shall mean, for any period, Consolidated Interest Expense (other than Consolidated Interest Expense attributable to (x) the accretion of original issue discount on Indebtedness for borrowed money issued at less than face value thereof or (y) any interest added to the principal amount of such Indebtedness) for such period. "Consolidated Current Assets" shall mean, at any time, the consolidated current assets of the Borrower and its Subsidiaries at such time. "Consolidated Current Liabilities" shall mean, at any time, the consolidated current liabilities of the Borrower and its Subsidiaries at such time, but excluding the current portion of any Indebtedness under this Agreement and the current portion of any other long-term Indebtedness which would otherwise be included therein. "Consolidated EBIT" shall mean, for any period with respect to any Person, Consolidated Net Income of such Person for such period before consolidated interest expense of such Person and provision for taxes for such period and without giving effect to (x) any extraordinary gains or losses and (y) any gains or losses from sales of assets other than from sales of inventory sold in the ordinary course of business (it being understood and agreed that any gains from sales by the Borrower in any period of wireless messaging devices previously leased by the Borrower and capitalized on its books shall be included in the calculation of Consolidated EBIT for such period). -87- 89 "Consolidated EBITDA" shall mean, for any period with respect to any Person, Consolidated EBIT of such Person for such period, adjusted by adding thereto the amount of all amortization of intangibles and depreciation that were deducted in arriving at Consolidated EBIT for such period. "Consolidated Indebtedness" shall mean, at any time, the sum of (without duplication) (i) all Indebtedness of the Borrower and its Subsidiaries as would be required to be reflected on the liability side of a balance sheet of such Person in accordance with GAAP as determined on a consolidated basis, (ii) all Indebtedness of the Borrower and its Subsidiaries of the type described in clauses (iii) and (vii) of the definition of Indebtedness contained herein and (iii) all Contingent Obligations of the Borrower and its Subsidiaries in respect of Indebtedness of any third Person of the type referred to in preceding clauses (i) and (ii) of this definition; provided that for purposes of this definition, the amount of Indebtedness in respect of Interest Rate Protection Agreements and Other Hedging Agreements shall be at any time the unrealized net loss position, if any, of the Borrower and/or its Subsidiaries thereunder on a marked-to-market basis determined no more than one month prior to such time. "Consolidated Interest Expense" shall mean, for any period, the total consolidated interest expense of the Borrower and its Subsidiaries for such period (calculated without regard to any limitations on the payment thereof) plus, without duplication, that portion of Capitalized Lease Obligations of the Borrower and its Subsidiaries representing the interest factor for such period; provided that the amortization of deferred financing, legal and accounting costs with respect to this Agreement shall be excluded from Consolidated Interest Expense to the extent same would otherwise have been included therein. "Consolidated Net Income" shall mean, for any period with respect to any Person, the net income (or loss) of such Person for such period, determined on a consolidated basis (after any deduction for minority interests), provided that (i) in determining Consolidated Net Income, the net income (or loss) of any other Person which is not a Subsidiary of such Person or is accounted for by such Person by the equity method of accounting shall be included only to the extent of the payment of cash dividends or distributions by such other Person to such Person or a Subsidiary thereof during such period, (ii) the net income of any Subsidiary of such Person shall be excluded to the extent that the declaration or payment of cash dividends or similar distributions by that Subsidiary of that net income is not at the date of determination permitted by operation of its charter or any agreement, instrument or law applicable to such Subsidiary and (iii) the net income (or loss) of any other Person acquired by such specified Person or a Subsidiary of such Person in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded. "Consolidated TMS EBITDA" shall mean, for any period, that portion of the Consolidated EBITDA of the Borrower for such period to the extent same is attributable to the Borrower's and its Subsidiaries' Traditional Messaging Services (and excluding Consolidated EBITDA attributable to Advanced Messaging Services). "Contingent Obligation" shall mean, as to any Person, any obligation of such Person as a result of such Person being a general partner of the other Person, unless the -88- 90 underlying obligation is expressly made non-recourse as to such general partner, and any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Continuing Directors" shall mean the directors of the Borrower on the Effective Date and each other director if such director's nomination for election to the Board of Directors of the Borrower is recommended by a majority of the then Continuing Directors. "Credit Documents" shall mean this Agreement and, after the execution and delivery thereof pursuant to the terms of this Agreement, each Note, the Subsidiaries Guaranty, each Security Document and each Multiple Draw II Term Loan Commitment Agreement. "Credit Event" shall mean the making of any Loan or the issuance of any Letter of Credit. "Credit Party" shall mean the Borrower and each Subsidiary Guarantor. "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Lender" shall mean any Lender with respect to which a Lender Default is in effect. "Dividend" shall mean, with respect to any Person, that such Person has declared or paid a dividend or returned any equity capital to its stockholders or partners or authorized or made any other distribution, payment or delivery of property (other than common stock of such Person) or cash to its stockholders or partners as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for a consideration any shares of any class of its capital stock or any partnership interests outstanding on or after the Effective Date (or any options or warrants issued by such Person with respect to its capital stock), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or otherwise -89- 91 acquire for a consideration any shares of any class of the capital stock or any partnership interests of such Person outstanding on or after the Effective Date (or any options or warrants issued by such Person with respect to its capital stock). Without limiting the foregoing, "Dividends" with respect to any Person shall also include all payments made or required to be made by such Person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans or setting aside of any funds for the foregoing purposes other than any such payment made to employees of such Person to the extent such payment has reduced Consolidated Net Income of such Person. "Dollars" and the sign "$" shall each mean freely transferable lawful money of the United States. "Domestic Subsidiary" shall mean each Subsidiary of the Borrower incorporated or organized in the United States of America or any State or territory thereof. "Drawing" shall have the meaning provided in Section 2.05(b). "Effective Date" shall have the meaning provided in Section 13.10. "11-1/4% Senior Subordinated Discount Note Documents" shall mean the 11-1/4% Senior Subordinated Discount Note Indenture, the 11-1/4% Senior Subordinated Discount Notes and each other document or agreement relating to the issuance of the 11-1/4% Senior Subordinated Discount Notes. "11-1/4% Senior Subordinated Discount Note Indenture" shall mean the Indenture, dated as of January 28, 1998, between the Borrower and United States Trust Company of New York, as Trustee thereunder. "11-1/4% Senior Subordinated Discount Notes" shall mean the Borrower's 11-1/4% Senior Subordinated Discount Notes due 2008 issued pursuant to 11-1/4% Senior Subordinated Discount Note Indenture. "Eligible Transferee" shall mean and include a commercial bank, financial institution, any fund that invests in loans or any other "accredited investor" (as defined in Regulation D of the Securities Act), but in any event excluding the Borrower and its Subsidiaries. "Employment Agreements" shall have the meaning provided in Section 5.05. "End Date" shall mean, for any Margin Reduction Period, the last day of such Margin Reduction Period. "Environmental Claims" shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, directives, claims, liens, notices of noncompliance or violation, investigations or proceedings relating in any way to any Environmental Law or any permit issued, or any approval given, under any such Environmental Law (hereafter, "Claims"), including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any -90- 92 applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief in connection with alleged injury or threat of injury to health, safety or the environment due to the presence of Hazardous Materials. "Environmental Law" shall mean any Federal, state, foreign or local statute, law, rule, regulation, ordinance, code, guideline, written policy and rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, health and safety or Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. Section 1801 et seq.; the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.; and any state and local or foreign counterparts or equivalents, in each case as amended from time to time. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and applicable rulings issued thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) which together with the Borrower or a Subsidiary of the Borrower would be deemed to be a "single employer" (i) within the meaning of Section 414(b), (c), (m) or (o) of the Code or (ii) as a result of the Borrower or a Subsidiary of the Borrower being or having been a general partner of such person. "Eurodollar Loan" shall mean each Loan (other than any Swingline Loan) designated as such by the Borrower at the time of the incurrence thereof or conversion thereto. "Eurodollar Rate" shall mean (a) the offered quotation to first-class banks in the New York interbank Eurodollar market by BTCo for Dollar deposits of amounts in immediately available funds comparable to the outstanding principal amount of the Eurodollar Loan of BTCo with maturities comparable to the Interest Period applicable to such Eurodollar Loan commencing two Business Days thereafter as of 11:00 A.M. (New York time) on the date which is two Business Days prior to the commencement of such Interest Period, divided (and rounded upward to the nearest 1/16 of 1%) by (b) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves required by applicable law) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency funding or liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D). "Event of Default" shall have the meaning provided in Section 10. -91- 93 "Excess Cash Flow" shall mean, for any period, the remainder of (a) the sum of (i) Adjusted Consolidated Net Income for such period, (ii) the decrease, if any, in Adjusted Consolidated Working Capital from the first day to the last day of such period and (iii) the amount of any cash proceeds and dividends received during such period (and not otherwise included in the calculation of Adjusted Consolidated Net Income for such period) in respect of Investments theretofore made by the Borrower and its Subsidiaries (in Persons who are not Subsidiaries of the Borrower) as permitted by Sections 9.05(v) and (xiii), minus (b) the sum of (i) the amount of all Capital Expenditures made by the Borrower and its Subsidiaries during such period (other than Capital Expenditures to the extent financed with equity proceeds, Asset Sale proceeds, insurance proceeds or Indebtedness (other than Loans and Indebtedness under the Vendor Financing Agreement)), (ii) the aggregate amount of permanent principal payments of Indebtedness for borrowed money of the Borrower and its Subsidiaries during such period (other than (A) repayments to the extent made with Asset Sale proceeds, equity proceeds, insurance proceeds or Indebtedness and (B) repayments of Loans, provided that repayments of Loans shall be deducted in determining Excess Cash Flow if such repayments were (x) required as a result of a Scheduled Repayment under Section 4.02(b)(i) or (ii) or (y) made as a voluntary prepayment with internally generated funds (but in the case of a voluntary prepayment of Revolving Loans or Swingline Loans, only to the extent accompanied by a voluntary reduction to the Total Revolving Loan Commitment)), (iii) the amount of Investments made by the Borrower and its Subsidiaries during such period (in Persons who are not Subsidiaries of the Borrower) pursuant to Sections 9.05(v) and (xiii) and (iv) the increase, if any, in Adjusted Consolidated Working Capital from the first day to the last day of such period. "Excess Cash Payment Date" shall mean the date occurring 90 days after the last day of each fiscal year of the Borrower (beginning with its fiscal year ending on December 31, 2000). "Excess Cash Payment Period" shall mean the immediately preceding fiscal year of the Borrower. "Existing Credit Agreement" shall mean the Credit Agreement, dated as of May 11, 1995, among the Borrower, the lenders party thereto, BT Commercial Corporation, as agent and BTCo, as issuing bank, as same is in effect on the Initial Borrowing Date. "Existing Indebtedness" shall have the meaning provided in Section 7.21. "Existing Indebtedness Agreements" shall have the meaning provided in Section 5.05. "Facing Fee" shall have the meaning provided in Section 3.01(f). "FCC" shall mean the U.S. Federal Communications Commission, or any successor thereto. "FCC Licenses" shall have the meaning provided in Section 7.22. "FCC Rules" shall mean the published rules, policies and regulations of the FCC. -92- 94 "Federal Funds Rate" shall mean, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal Funds brokers of recognized standing selected by the Administrative Agent. "Fees" shall mean all amounts payable pursuant to or referred to in Section 3.01. "15% Senior Discount Note Documents" shall mean the 15% Senior Discount Note Indenture, the 15% Senior Discount Notes and each other document or agreement relating to the issuance of the 15% Senior Discount Notes. "15% Senior Discount Note Indenture" shall mean the Indenture, dated as of January 17, 1995, between the Borrower and United States Trust Company of New York, as Trustee thereunder. "15% Senior Discount Notes" shall mean the Borrower's 15% Senior Discount Notes due 2005 issued pursuant to the 15% Senior Discount Note Indenture. "Foreign Pension Plan" shall mean any plan, fund (including, without limitation, any superannuation fund) or other similar program established or maintained outside the United States by the Borrower or any one or more of its Subsidiaries primarily for the benefit of employees of the Borrower or such Subsidiaries residing outside the United States, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code. "Foreign Person" shall have the meaning provided in the definition of Subsidiary contained herein. "Foreign Subsidiary" shall mean each Subsidiary of the Borrower other than a Domestic Subsidiary. "Glenayre" shall mean Glenayre Electronics, Inc., a Colorado corporation. "Governmental Authorizations" shall have the meaning provided in Section 7.23. "GTE" shall have the meaning in the definition of GTE Transaction. "GTE Transaction" shall mean one or more transactions between GTE Corp. or an affiliate thereof (collectively, "GTE") and the Borrower pursuant to which the Borrower shall purchase equipment, subscribers and other assets from GTE for consideration consisting of cash and other property having an aggregate value of not more than $10,000,000 (with the value of such other property valued at the fair market value thereof (as determined in good faith by the -93- 95 Board of Directors or senior management of the Borrower)) and, in turn, the Borrower may dispose of certain of such purchased equipment, subscribers and other assets. "Hazardous Materials" shall mean (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is friable, urea formaldehyde foam insulation, dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous waste," "hazardous materials," "extremely hazardous substances," "restricted hazardous waste," "toxic substances," "toxic pollutants," "contaminants," or "pollutants," or words of similar import, under any applicable Environmental Law; and (c) any other chemical, material or substance, the exposure to which is prohibited, limited or regulated by any governmental authority. "Indebtedness" shall mean, as to any Person, without duplication, (i) all indebtedness (including principal, interest, fees and charges) of such Person for borrowed money or for the deferred purchase price of property or services, (ii) the maximum amount available to be drawn under all letters of credit issued for the account of such Person and all unpaid drawings in respect of such letters of credit, (iii) all Indebtedness of the types described in clause (i), (ii), (iv), (v), (vi) or (vii) of this definition secured by any Lien on any property owned by such Person, whether or not such Indebtedness has been assumed by such Person (provided that, if the Person has not assumed or otherwise become liable in respect of such Indebtedness, such Indebtedness shall be deemed to be in an amount equal to the fair market value of the property to which such Lien relates as determined in good faith by such Person), (iv) the aggregate amount required to be capitalized under leases under which such Person is the lessee, (v) all obligations of such person to pay a specified purchase price for goods or services, whether or not delivered or accepted, i.e., take-or-pay and similar obligations, (vi) all Contingent Obligations of such Person and (vii) all obligations under any Interest Rate Protection Agreement, any Other Hedging Agreement or under any similar type of agreement. Notwithstanding the foregoing, Indebtedness shall not include trade payables and accrued expenses incurred by any Person in accordance with customary practices and in the ordinary course of business of such Person. "Information Systems and Equipment" of any Person shall mean all computer hardware, firmware and software, as well as other information processing systems, or any equipment containing embedded microchips, whether directly owned, licensed, leased, operated or otherwise controlled by such Person, including through third-party service providers, and which, in whole or in part, are used, operated, relied upon, or integral to, such Person's conduct of its business. "Initial Borrowing Date" shall mean the date occurring on or after the Effective Date on which the initial Borrowing of Loans occurs. "Initial Multiple Draw II Term Loan Borrowing Date" shall mean the date occurring on or after the Multiple Draw I Term Loan Full Utilization Date on which the initial Borrowing of Multiple Draw II Terms Loans occurs. "Intercompany Loan" shall have the meaning provided in Section 9.05(ix). -94- 96 "Intercompany Note" shall mean a promissory note, in the form of Exhibit M, evidencing Intercompany Loans. "Interest Determination Date" shall mean, with respect to any Eurodollar Loan, the second Business Day prior to the commencement of any Interest Period relating to such Eurodollar Loan. "Interest Period" shall have the meaning provided in Section 1.09. "Interest Rate Protection Agreement" shall mean any interest rate swap agreement, interest rate cap agreement, interest collar agreement, interest rate hedging agreement or other similar agreement or arrangement. "Investments" shall have the meaning provided in Section 9.05. "Issuing Lender" shall mean BTCo. "L/C Supportable Obligations" shall mean (i) obligations of the Borrower or any of its Subsidiaries with respect to workers compensation, surety bonds and other similar statutory obligations and (ii) such other obligations of the Borrower or any of its Subsidiaries as are reasonably acceptable to the Issuing Lender and the Agents and otherwise permitted to exist pursuant to the terms of this Agreement (other than obligations in respect of the 11-1/4% Senior Subordinated Discount Notes, the 15% Senior Discount Notes and the Vendor Financing Agreement). "Leaseholds" of any Person shall mean all the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures. "Lender" shall mean each financial institution listed on Schedule I, as well as any Person that becomes a "Lender" hereunder pursuant to Section 1.13 or 13.04(b). "Lender Default" shall mean (i) the refusal (which has not been retracted) or the failure of a Lender to make available its portion of any Borrowing (including any Mandatory Borrowing) or to fund its portion of any unreimbursed payment under Section 2.04(c) or (ii) a Lender having notified in writing the Borrower and/or the Administrative Agent that such Lender does not intend to comply with its obligations under Section 1.01 or 2. "Letter of Credit" shall have the meaning provided in Section 2.01(a). "Letter of Credit Fee" shall have the meaning provided in Section 3.01(e). "Letter of Credit Outstandings" shall mean, at any time, the sum of (i) the Stated Amount of all outstanding Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all Letters of Credit. "Letter of Credit Request" shall have the meaning provided in Section 2.03(a). -95- 97 "Leverage Ratio" shall mean, at any time, the ratio of (x) Consolidated Indebtedness at such time to (y) the product of (i) Consolidated EBITDA of the Borrower for the fiscal quarter of the Borrower most recently ended and (ii) 4. "License Subsidiaries" shall mean PageMart II, Inc., PageMart PCS, Inc. and PageMart Operations, Inc. "Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any other similar recording or notice statute, and any lease having substantially the same effect as any of the foregoing). "Loan" shall mean each Multiple Draw I Sub-Tranche A Term Loan, each Multiple Draw I Sub-Tranche B Term Loan, each Multiple Draw I Sub-Tranche C Term Loan, each Multiple Draw II Sub-Tranche A Term Loan, each Multiple Draw II Sub-Tranche B Term Loan, each Revolving Loan and each Swingline Loan. "Majority Lenders" of any Tranche shall mean those Non-Defaulting Lenders which would constitute the Required Lenders under, and as defined in, this Agreement if all outstanding Obligations of the other Tranches under this Agreement were repaid in full and all Commitments with respect thereto were terminated. "Management Agreements" shall have the meaning provided in Section 5.05. "Mandatory Borrowing" shall have the meaning provided in Section 1.01(h). "Margin Reduction Period" shall mean each period which shall commence on the date occurring after the Effective Date upon which the respective officer's certificate is delivered pursuant to Section 8.01(f) and which shall end on the date of actual delivery of the next officer's certificates pursuant to Section 8.01(f) or the latest date on which such next officer's certificate is required to be so delivered. "Margin Stock" shall have the meaning provided in Regulation U. "Maturity Date" shall mean with respect to any Tranche of Loans (other than Swingline Loans), the Multiple Draw I/Revolver Maturity Date or the respective Multiple Draw II Maturity Date, as the case may be. "Maximum Swingline Amount" shall mean $2,500,000. "Migrated Unit" shall mean any Advanced Messaging Unit placed into service with any strategic partner of the Borrower or any of its Subsidiaries to the extent, and only to the extent, such Advanced Messaging Unit is in service at the time the respective deduction of such Advanced Messaging Unit is to be made in accordance with the definition of Minimum Advanced Messaging Units Amount contained herein or in Section 6.03(b). -96- 98 "Minimum Advanced Messaging Units Amount" shall mean, with respect to any Borrowing of Loans to occur during a respective period set forth in clauses (A), (B), (C), (D) or (E) below, the number of Advanced Messaging Units in service set forth below under such clause (A), (B), (C), (D) or (E) less any Migrated Units, in each case at the end of the then most recently ended fiscal quarter of the Borrower: (A) at any time on or prior to December 31, 1999, 75,000; (B) at any time after December 31, 1999 and on or prior to March 31, 2000, 90,000; (C) at any time after March 31, 2000 and on or prior to June 30, 2000, 135,000; (D) at any time after June 30, 2000 and on or prior to September 30, 2000, 175,000; and (E) at any time after September 30, 2000, 217,500. "Minimum Borrowing Amount" shall mean (i) for Term Loans, $5,000,000, (ii) for Revolving Loans, $1,000,000 and (iii) for Swingline Loans, $100,000. "MS Funds" shall mean, collectively, 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. and MSCP III 892 Investors, L.P. "MSSF" shall mean Morgan Stanley Senior Funding, Inc., in its individual capacity, and any successor thereto by merger, consolidation or otherwise. "Multiple Draw I/Revolver Maturity Date" shall mean June 30, 2003. "Multiple Draw I Sub-Tranche A Term Loan" shall have the meaning provided in Section 1.01(a). "Multiple Draw I Sub-Tranche A Term Loan Commitment" shall mean, for each Lender, the amount set forth opposite such Lender's name in Schedule I directly below the column entitled "Multiple Draw I Sub-Tranche A Term Loan Commitment," as same may be (x) terminated or reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Sections 1.13 and/or 13.04(b). "Multiple Draw I Sub-Tranche A Term Loan Commitment Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is equal to the aggregate amount of Multiple Draw I Sub-Tranche A Term Loan Commitments in existence at -97- 99 such time and the denominator of which is equal to the aggregate amount of all Multiple Draw I Term Loan Commitments in existence at such time. "Multiple Draw I Sub-Tranche B Commitment Commission" shall have the meaning provided in Section 3.01(a). "Multiple Draw I Sub-Tranche B Term Loan" shall have the meaning provided in Section 1.01(b). "Multiple Draw I Sub-Tranche B Term Loan Borrowing Date" shall mean each date on which a Borrowing of Multiple Draw I Sub-Tranche B Term Loans is incurred pursuant to Section 1.01; provided that in no event shall any Borrowing of Multiple Draw I Sub-Tranche B Term Loans be incurred after the Multiple Draw I Term Loan Commitment Termination Date. "Multiple Draw I Sub-Tranche B Term Loan Commitment" shall mean, for each Lender, the amount set forth opposite such Lender's name in Schedule I directly below the column entitled "Multiple Draw I Sub-Tranche B Term Loan Commitment," as same may be (x) terminated or reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Sections 1.13 and/or 13.04(b). "Multiple Draw I Sub-Tranche B Term Loan Commitment Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is equal to the aggregate amount of Multiple Draw I Sub-Tranche B Term Loan Commitments in existence at such time and the denominator of which is equal to the aggregate amount of all Multiple Draw I Term Loan Commitments in existence at such time. "Multiple Draw I Sub-Tranche C Commitment Commission" shall have the meaning provided in Section 3.01(b). "Multiple Draw I Sub-Tranche C Term Loan" shall have the meaning provided in Section 1.01(c). "Multiple Draw I Sub-Tranche C Term Loan Borrowing Date" shall mean each date on which a Borrowing of Multiple Draw I Sub-Tranche C Term Loans is incurred pursuant to Section 1.01; provided that in no event shall any Borrowing of Multiple Draw I Sub-Tranche C Term Loans be incurred after the Multiple Draw I Term Loan Commitment Termination Date. "Multiple Draw I Sub-Tranche C Term Loan Commitment" shall mean, for each Lender, the amount set forth opposite such Lender's name in Schedule I directly below the column entitled "Multiple Draw I Sub-Tranche C Term Loan Commitment," as same may be (x) terminated or reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Sections 1.13 and/or 13.04(b). "Multiple Draw I Sub-Tranche C Term Loan Commitment Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is equal to the -98- 100 aggregate amount of Multiple Draw I Sub-Tranche C Term Loan Commitments in existence at such time and the denominator of which is equal to the aggregate amount of all Multiple Draw I Term Loan Commitments in existence at such time. "Multiple Draw I Term Loan" shall have the meaning provided in Section 1.01(c). "Multiple Draw I Term Loan Borrowing Date" shall mean each date on which a Borrowing of Multiple Draw I Term Loans is incurred pursuant to Section 1.01; provided that in no event shall any Borrowing of Multiple Draw I Term Loans be incurred after the Multiple Draw I Term Loan Commitment Termination Date. "Multiple Draw I Term Loan Commitment Termination Date" shall mean December 31, 2000. "Multiple Draw I Term Loan Full Utilization Date" shall mean that date upon which Multiple Draw I Term Loans have theretofore been incurred and the Total Multiple Draw I Term Loan Commitment has been terminated. "Multiple Draw I Term Loan Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is equal to the aggregate principal amount of all Multiple Draw I Term Loans outstanding at such time and the denominator of which is equal to the aggregate principal amount of all Term Loans outstanding at such time. "Multiple Draw I Term Loan Scheduled Repayment" shall have the meaning provided in Section 4.02(b)(i). "Multiple Draw I Term Note" shall have the meaning provided in Section 1.05(a). "Multiple Draw II Maturity Date" shall mean, with respect to any Multiple Draw II Term Loans under a Multiple Draw II Term Loan Sub-Facility, the maturity date for such Multiple Draw II Term Loans as provided in the Multiple Draw II Term Loan Commitment Agreement relating thereto, subject to the restrictions on maturity set forth in Section 1.14. "Multiple Draw II Sub-Tranche A Term Loan" shall have the meaning provided in Section 1.01(d). "Multiple Draw II Sub-Tranche A Term Loan Borrowing Date" shall mean each date on which a Borrowing of Multiple Draw II Sub-Tranche A Term Loans is incurred pursuant to Section 1.01; provided that in no event shall any Borrowing of Multiple Draw II Sub-Tranche A Term Loans be incurred after the Multiple Draw II Term Loan Commitment Termination Date. "Multiple Draw II Sub-Tranche A Term Loan Commitment" shall mean, for each Lender, any commitment to make Multiple Draw II Term Loans provided by such Lender pursuant to Section 1.14, in such amount as agreed to by such Lender in the respective Multiple Draw II Term Loan Commitment Agreement and as set forth opposite such Lender's name on Schedule I hereto (as modified in accordance with Section 1.14) directly below the column entitled "Multiple Draw II Term Loan Commitment" as the same may be (x) terminated or -99- 101 reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Sections 1.13 and/or 13.04(b). "Multiple Draw II Sub-Tranche A Term Loan Commitment Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is equal to the aggregate amount of Multiple Draw II Sub-Tranche A Term Loan Commitments in existence at such time and the denominator of which is equal to the aggregate amount of all Multiple Draw II Term Loan Commitments in existence at such time. "Multiple Draw II Sub-Tranche B Term Loan" shall have the meaning provided in Section 1.01(e). "Multiple Draw II Sub-Tranche B Term Loan Borrowing Date" shall mean each date on which a Borrowing of Multiple Draw II Sub-Tranche B Term Loans is incurred pursuant to Section 1.01; provided that in no event shall any Borrowing of Multiple Draw II Sub-Tranche B Term Loans be incurred after the Multiple Draw II Term Loan Commitment Termination Date. "Multiple Draw II Sub-Tranche B Term Loan Commitment" shall mean, for each Lender, any commitment to make Multiple Draw II Term Loans provided by such Lender pursuant to Section 1.14, in such amount as agreed to by such Lender in the respective Multiple Draw II Term Loan Commitment Agreement and as set forth opposite such Lender's name on Schedule I hereto (as modified in accordance with Section 1.14) directly below the column entitled "Multiple Draw II Term Loan Commitment" as the same may be (x) terminated or reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Sections 1.13 and/or 13.04(b). "Multiple Draw II Sub-Tranche B Term Loan Commitment Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is equal to the aggregate amount of Multiple Draw II Sub-Tranche B Term Loan Commitments in existence at such time and the denominator of which is equal to the aggregate amount of all Multiple Draw II Term Loan Commitments in existence. "Multiple Draw II Term Loans" shall have the meaning provided in Section 1.01(e). "Multiple Draw II Term Loan Borrowing Date" shall mean any date on which a Borrowing of Multiple Draw II Term Loans are incurred pursuant to Section 1.01, provided that in no event shall any Borrowings of Multiple Draw II Term Loans be incurred prior to the Multiple Draw I Term Loan Full Utilization Date. "Multiple Draw II Term Loan Commitment" shall mean, for each Lender, the sum of the Multiple Draw II Sub-Tranche A Term Loan Commitment and the Multiple Draw II Sub-Tranche B Term Loan Commitment of such Lender. -100- 102 "Multiple Draw II Term Loan Commitment Agreement" shall mean a Multiple Draw Term Loan Commitment Agreement substantially in the form of Exhibit C (appropriately completed). "Multiple Draw II Term Loan Commitment Date" shall mean each date (which in no event shall occur after the Multiple Draw II Commitment Termination Date) on which Multiple Draw II Term Loan Commitment Agreements are delivered pursuant to Section 1.14. "Multiple Draw II Term Loan Commitment Termination Date" shall mean, with respect to each Multiple Draw II Term Loan Sub-Facility, the respective date specified as the Multiple Draw II Term Loan Commitment Termination Date in the relevant Multiple Draw II Term Loan Commitment Agreement or Agreements. "Multiple Draw II Term Loan Lender" shall have the meaning provided in Section 1.14. "Multiple Draw II Term Loan Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is equal to the aggregate principal amount of all Multiple Draw II Term Loans outstanding at such time and the denominator of which is equal to the aggregate principal amount of all Term Loans outstanding at such time. "Multiple Draw II Term Loan Scheduled Repayment" shall have the meaning provided in Section 4.02(b)(ii). "Multiple Draw II Term Loan Sub-Facility" shall mean a sub-facility under the facility evidenced by the Total Multiple Draw II Term Loan Commitment relating to the commitments of one or more Lenders to make a Multiple Draw II Term Loan or Multiple Draw II Term Loans under such sub-facility having identical interest rates, maturities and scheduled amortizations. "Multiple Draw II Term Note" shall have the meaning provided in Section 1.05(a). "NAIC" shall mean the National Association of Insurance Commissioners. "Net Debt Proceeds" shall mean, with respect to any incurrence of Indebtedness for borrowed money, the cash proceeds (net of underwriting discounts and commissions and other reasonable costs associated therewith) received by the respective Person from the respective incurrence of such Indebtedness for borrowed money. "Net Equity Proceeds" shall mean, with respect to each issuance or sale of any equity by any Person or any capital contribution to such Person, the cash proceeds (net of underwriting discounts and commissions and other reasonable costs associated therewith) received by such Person from the respective sale or issuance of its equity or from the respective capital contribution; provided that, in the event the Borrower receives Net Equity Proceeds (as calculated above without regard to this proviso) in excess of $100,000,000 pursuant to any sale or issuance of its equity, to the extent (and only to the extent) that the terms of the Vendor Financing Agreement require any Net Equity Proceeds from such sale or issuance in excess of -101- 103 $100,000,000 to be applied to repay outstanding Indebtedness thereunder pursuant to Section 1.3(c) thereof, the Borrower may make such required repayments and the aggregate amount so applied as required by Section 1.3(c) of the Vendor Financing Agreement shall be excluded from Net Equity Proceeds (and to the extent otherwise reflected therein, shall be deducted in determining the amount of Net Equity Proceeds received by the Borrower). "Net Insurance Proceeds" shall mean, with respect to any Recovery Event, the cash proceeds (net of reasonable costs and taxes incurred in connection with such Recovery Event (including required payments of Indebtedness under the Vendor Financing Agreement) and excluding any cash proceeds received in connection with such Recovery Event from any business interruption insurance) received by the respective Person in connection with such Recovery Event. "Net Sale Proceeds" shall mean, for any Asset Sale, the gross cash proceeds (including any cash received by way of deferred payment pursuant to a promissory note, receivable or otherwise, but only as and when received) received from such sale of assets, net of the reasonable costs of such sale (including fees and commissions, payments of unassumed liabilities relating to the assets sold and required payments of any Indebtedness (including Indebtedness under the Vendor Financing Agreement but other than Indebtedness secured pursuant to the Security Documents) which is secured by the respective assets which were sold), and the incremental taxes paid or payable as a result of such Asset Sale. "Non-Compete Agreement" shall have the meaning provided in Section 5.05. "Non-Defaulting Lender" and "Non-Defaulting RL Lender" shall mean and include each Lender or RL Lender, as the case may be, other than a Defaulting Lender. "Non-Guarantor Subsidiaries" shall mean (i) on and after the Initial Borrowing Date, each of: PageMart PCS, Inc. PageMart International, Inc. PageMart II, Inc. PageMart Operations, Inc. PageMart California, Inc. PageMart Operations, Inc. of Virginia Telephone North, Inc.; and (ii) after the Initial Borrowing Date, any additional Domestic Subsidiary of the Borrower established or created which at the time of such establishment or creation has assets (excluding any assets constituting Investments of such Domestic Subsidiary in a Foreign Person to the extent such Investments are permitted under Section 9.05(xi) or (xiii)) with an aggregate book value or fair market value (as determined in good faith by Borrower), whichever is greater, equal to or less than of $500,000, provided that no such Domestic Subsidiary shall constitute a Non-Guarantor Subsidiary if at the time of the establishment or creation thereof (x) the aggregate book value or fair market value (as determined in good faith by the Borrower), whichever is greater, of the -102- 104 consolidated assets of all Non-Guarantor Subsidiaries (excluding for this purpose (i) any assets constituting Investments of any such Non-Guarantor Subsidiary in a Foreign Person to the extent in existence on the Effective Date or permitted under Section 9.05(xi) or (xiii), (ii) Foreign Subsidiaries, and (iii) the License Subsidiaries) is equal to or in excess of $1,000,000 or (y) that portion of Consolidated EBITDA attributable to all such Non-Guarantor Subsidiaries (including for this purpose the License Subsidiaries but excluding (i) Foreign Subsidiaries and (ii) the Consolidated EBITDA attributable to any Foreign Person unless such Consolidated EBITDA is distributed or paid to the Borrower or one of its Domestic Subsidiaries) for the Test Period of the Borrower then most recently ended is equal to or exceeds $500,000. Notwithstanding anything to the contrary contained above, (A) at any time when the assets (excluding any assets constituting Investments of a Domestic Subsidiary in a Foreign Person, to the extent in existence on the Effective Date or permitted under Section 9.05(xi) or (xiii)) of any Domestic Subsidiary (other than a License Subsidiary) theretofore constituting a Non-Guarantor Subsidiary exceed $500,000 or the Consolidated EBITDA attributable to such Non-Guarantor Subsidiary (excluding the Consolidated EBITDA attributable to any Foreign Person unless such Consolidated EBITDA is distributed or paid to the Borrower or one of its Domestic Subsidiaries) for the Test Period of the Borrower most recently ended exceeds $250,000, in either such case, such Subsidiary shall automatically cease to constitute a Non-Guarantor Subsidiary, (B) at any time when the consolidated assets of all Non-Guarantor Subsidiaries (excluding for this purpose (i) any assets constituting Investments of any such Non-Guarantor Subsidiary in a Foreign Person, to the extent in existence on the Effective Date or permitted under Section 9.05(xi) or (xiii), (ii) Foreign Subsidiaries and (iii) the License Subsidiaries) exceed $1,000,000 or that portion of Consolidated EBITDA for all such Non-Guarantor Subsidiaries (including for this purpose the License Subsidiaries but excluding (i) Foreign Subsidiaries and (ii) the Consolidated EBITDA attributable to any Foreign Person unless such Consolidated EBITDA is distributed or paid to the Borrower or one of its Domestic Subsidiaries) for the Test Period of the Borrower then most recently ended exceeds $500,000, one or more Domestic Subsidiaries (other than the License Subsidiaries) which theretofore constituted Non-Guarantor Subsidiaries (as designated by Borrower or, in the absence of any such designation, as designated by the Administrative Agent) shall cease to constitute Non-Guarantor Subsidiaries, so that either (x) the thresholds described above in this clause (B) are not exceeded or (y) if the thresholds described above in this clause (B) are exceeded, all Domestic Subsidiaries (other than the License Subsidiaries) shall have become Guarantor Subsidiaries, and (C) the Borrower may, in its discretion, at any time, by giving written notice to the Administrative Agent, designate a Domestic Subsidiary as no longer constituting a Non-Guarantor Subsidiary (in which case such Domestic Subsidiary shall no longer constitute a Non-Guarantor Subsidiary). "Non-U.S. Person" shall mean any Person that is incorporated or organized under the laws of, or that is a citizen of, any jurisdiction other than the United States of America or any State thereof, but excluding any territory thereof. "Note" shall mean each Multiple Draw I Term Note, each Multiple Draw II Term Note, each Revolving Note and the Swingline Note. "Notice of Borrowing" shall have the meaning provided in Section 1.03(a). "Notice of Conversion" shall have the meaning provided in Section 1.06. -103- 105 "Notice Office" shall mean the office of the Administrative Agent located at One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006, Attention: Larry Benison or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto. "Obligations" shall mean all amounts owing to any Agent, the Collateral Agent, the Issuing Lender or any Lender pursuant to the terms of this Agreement or any other Credit Document. "Other Hedging Agreement" shall mean any foreign exchange contracts, currency swap agreements, commodity agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values. "PageMart Canada" shall mean PageMart Canada Holdings, Ltd. "Participant" shall have the meaning provided in Section 2.04(a). "Payment Office" shall mean the office of the Administrative Agent located at One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "Permitted Liens" shall have the meaning provided in Section 9.01. "Person" shall mean any individual, partnership, joint venture, firm, corporation, association, limited liability company, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" shall mean any pension plan as defined in Section 3(2) of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of) the Borrower or a Subsidiary of the Borrower or an ERISA Affiliate, and each such plan for the five year period immediately following the latest date on which the Borrower, or a Subsidiary of the Borrower or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan. "Pledge Agreement" shall have the meaning provided in Section 5.09. "Pledge Agreement Collateral" shall mean all "Collateral" as defined in the Pledge Agreement. "Pledgee" shall have the meaning provided in the Pledge Agreement. "Prime Lending Rate" shall mean the rate which BTCo announces from time to time as its prime lending rate, the Prime Lending Rate to change when and as such prime lending rate changes. The Prime Lending Rate is a reference rate and does not necessarily represent the -104- 106 lowest or best rate actually charged to any customer. BTCo may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. "Projections" shall mean the projections, dated as of February, 1999, which were prepared by or on behalf of the Borrower in connection with this Agreement and delivered to each Agent and the Lenders prior to the Initial Borrowing Date. "Qualified Preferred Stock" shall mean any preferred stock of the Borrower so long as the terms (including any covenants) of any such preferred stock (w) do not contain any mandatory put, redemption, repayment, sinking fund or other similar provision occurring prior to one year after the later of (i) the Multiple Draw I/Revolver Maturity Date and (ii) the latest Multiple Draw II Maturity Date in effect at the time of the establishment of the terms of such preferred stock, (x) do not require the cash payment of dividends, (y) do not grant the holders thereof any voting rights except for (i) voting rights required to be granted to such holders under applicable law and (ii) limited customary voting rights on fundamental matters such as mergers, consolidations, sales of all or substantially all of the assets of the Borrower, or liquidations involving the Borrower and (z) are otherwise reasonably satisfactory to the Agents. "Qualified Proceeds" shall mean any of the following or any combination of the following: (i) Cash Equivalents, (ii) assets used or useful in the businesses referred to in Section 9.14(a) and (iii) the capital stock of, or other debt or equity interest in, any Person to the extent, and only to the extent, such Investment is permitted under Section 9.05. "Quarterly Payment Date" shall mean the last Business Day of each March, June, September and December occurring after the Initial Borrowing Date, commencing on March 31, 1999. "RCRA" shall mean the Resource Conservation and Recovery Act, as the same may be amended from time to time, 42 U.S.C.ss. 6901 et seq. -- ---- "Real Property" of any Person shall mean all the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds. "Recovery Event" shall mean the receipt by the Borrower or any of its Subsidiaries of any cash insurance proceeds other than cash proceeds received from business interruption insurance or condemnation awards payable (i) by reason of theft, loss, physical destruction, damage, taking or any other similar event with respect to any property or assets of the Borrower or any of its Subsidiaries and (ii) under any policy of insurance required to be maintained under Section 8.03, provided that no event set forth in preceding clauses (i) or (ii) shall be a Recovery Event unless the aggregate proceeds received from, or with respect to, such amount exceeds $2,500,000. "Register" shall have the meaning provided in Section 13.15. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. -105- 107 "Regulation T" shall mean Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Regulation X" shall mean Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Release" shall mean the disposing, discharging, injecting, spilling, pumping, leaking, leaching, dumping, emitting, escaping, emptying, pouring or migrating, into or upon any land or water or air, or otherwise entering into the environment. "Replaced Lender" shall have the meaning provided in Section 1.13. "Replacement Lender" shall have the meaning provided in Section 1.13. "Replacement Senior Note Documents" shall mean the Replacement Senior Notes and each other document or agreement relating to the issuance of the Replacement Senior Notes. "Replacement Senior Notes" shall mean an issue of notes (senior or subordinated) issued by the Borrower pursuant to Section 9.04(ix) to refinance in full the 15% Senior Discount Notes. "Replacement Senior Subordinated Note Documents" shall mean the Replacement Senior Subordinated Notes and each other document or agreement relating to the issuance of the Replacement Senior Subordinated Notes. "Replacement Senior Subordinated Notes" shall mean an issue of subordinated notes issued by the Borrower pursuant to Section 9.04(x) to refinance in full the 11 1/4% Senior Subordinated Discount Notes. "Reportable Event" shall mean an event described in Section 4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA other than those events as to which the 30-day notice period is waived under subsection .22, .23, .25, .27, .28 or .29(c), .29(1) or .29(2) of PBGC Regulation Section 4043. "Required Lenders" shall mean Lenders constituting both (A) Non-Defaulting Lenders the sum of whose outstanding Term Loans (and, if outstanding, Multiple Draw I Term Loan Commitments or Multiple Draw II Term Loan Commitments, as the case may be) and Revolving Loan Commitments (or after the termination thereof, outstanding Revolving Loans and RL Percentages of (x) outstanding Swingline Loans and (y) Letter of Credit Outstandings) represent at least 50.1% of the sum of (i) all outstanding Term Loans (and, if outstanding, Multiple Draw I Term Loan Commitments or Multiple Draw II Term Loan Commitments, as the case may be) of Non-Defaulting Lenders and (ii) the Total Revolving Loan Commitment less the Revolving Loan Commitments of all Defaulting Lenders (or after the termination thereof, the sum of the then total outstanding Revolving Loans of Non-Defaulting Lenders and the aggregate RL -106- 108 Percentages of all Non-Defaulting Lenders of the total (x) outstanding Swingline Loans and (y) Letter of Credit Outstandings at such time) and (B) those Non-Defaulting Lenders which would be required for such Lenders to constitute the Required Lenders under clause (A) above if all Multiple Draw II Term Loan Commitments were deemed to be zero (but including in any such calculation any then outstanding Multiple Draw II Term Loans); provided that for purposes of exercising any rights of the Required Lenders pursuant to Section 10 of this Agreement at any time when an Event of Default is in existence, those Non-Defaulting Lenders described in either clause (A) or (B) above shall constitute Required Lenders pursuant to this definition. "Revolving Loan" shall have the meaning provided in Section 1.01(f). "Revolving Loan Commitment" shall mean, for each Lender, the amount set forth opposite such Lender's name in Schedule I directly below the column entitled "Revolving Loan Commitment," as same may be (x) reduced from time to time pursuant to Sections 3.02, 3.03 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 1.13 or 13.04(b). "Revolving Note" shall have the meaning provided in Section 1.05(a). "RL Commitment Commission" shall have the meaning provided in Section 3.01(c). "RL Lender" shall mean each Lender with a Revolving Loan Commitment or with outstanding Revolving Loans. "RL Percentage" of any RL Lender at any time shall mean a fraction (expressed as a percentage) the numerator of which is the Revolving Loan Commitment of such RL Lender at such time and the denominator of which is the Total Revolving Loan Commitment at such time, provided that if the RL Percentage of any Lender is to be determined after the Total Revolving Loan Commitment has been terminated, then the RL Percentages of such RL Lender shall be determined immediately prior (and without giving effect) to such termination. "Scheduled Repayments" shall have the meaning provided in Section 4.02(b)(ii). "SEC" shall have the meaning provided in Section 8.01(h). "Section 4.04(b)(ii) Certificate" shall have the meaning provided in Section 4.04(b)(ii). "Secured Creditors" shall have the meaning assigned that term in the respective Security Documents. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Security Agreement" shall have the meaning provided in Section 5.10. -107- 109 "Security Agreement Collateral" shall mean all "Collateral" as defined in the Security Agreement. "Security Document" shall mean and include each of the Security Agreement, the Pledge Agreement and, after the execution and delivery thereof, each Additional Security Document. "Senior Officer" shall mean the Chief Executive Officer, President, Chief Financial Officer, Treasurer, Assistant Treasurer or Controller or any other senior officer of the Borrower or any of its Subsidiaries with knowledge of, or responsibility for, the financial affairs of such Person. "Shareholders' Agreements" shall have the meaning provided in Section 5.05. "Start Date" shall mean, with respect to any Margin Reduction Period, the first day of such Margin Reduction Period. "Stated Amount" of each Letter of Credit shall mean, at any time, the maximum amount available to be drawn thereunder (in each case determined without regard to whether any conditions to drawing could then be met). "Subsidiaries Guaranty" shall have the meaning provided in Section 9.16(a). "Subsidiary" shall mean, as to any Person, (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person and/or one or more Subsidiaries of such Person and (ii) any partnership, limited liability company, association, joint venture or other entity in which such Person and/or one or more Subsidiaries of such Person has more than a 50% equity interest at the time , except that any Person described in this clause (ii) which is organized under the laws of a jurisdiction other than the United States or any state or territory thereof (each a "Foreign Person") shall not constitute a Subsidiary if the Borrower and its other Subsidiaries do not have the right to elect a majority of the directors (or similar Persons under applicable law) of such Foreign Person and do not otherwise own or have the right to exercise majority voting control over the actions of such Foreign Person. "Subsidiary Guarantor" shall mean each Subsidiary of the Borrower which executes and delivers a counterpart of the Subsidiary Guaranty. "Supermajority Lenders" shall mean (x) in the case of references to holders of Multiple Draw I Term Loans, those Non-Defaulting Lenders which would constitute the Required Lenders under, and as defined in, this Agreement if (x) all outstanding Obligations (other than those with respect to Multiple Draw I Term Loans) under this Agreement were repaid in full and all Commitments with respect to such other Obligations were terminated and (y) the percentage "50.1%" contained therein were changed to "66-2/3%" and (y) in cases where references are to holders of Multiple Draw II Term Loans, those Non-Defaulting Lenders which would constitute -108- 110 the Required Lenders under, and as defined in, this Agreement if (x) all outstanding Obligations (other than those relating to Multiple Draw II Term Loans) under this Agreement were repaid in full and all Commitments with respect to such other Obligations were terminated and (y) the percentage "50.1%" contained therein were changed to "66-2/3%". "Swingline Expiry Date" shall mean that date which is five Business Days prior to the Maturity Date. "Swingline Lender" shall mean BTCo. "Swingline Loan" shall have the meaning provided in Section 1.01(g). "Swingline Note" shall have the meaning provided in Section 1.05(a). "Syndication Agent" shall mean MSSF in its capacity as Syndication Agent for the Lenders hereunder. "Syndication Date" shall mean that date upon which the Administrative Agent determines (and notifies the Borrower) that the primary syndication (and resultant addition of Persons as Lenders pursuant to Section 13.04(b)) has been completed. "Tax Benefit" shall have the meaning provided in Section 4.04(c). "Taxes" shall have the meaning provided in Section 4.04(a). "Term Loans" shall mean each Multiple Draw I Term Loan and each Multiple Draw II Term Loan. "Test Date" shall mean, with respect to any Margin Reduction Period, the fiscal quarter of the Borrower most recently ended for which financial statements pursuant to Section 8.01(b) or (c) are available (or are required to be available in accordance with said Sections). "Test Period" shall mean each period of four consecutive fiscal quarters of the Borrower then last ended (in each case taken as one accounting period). "Total Available Revolving Loan Commitment" shall mean (x) at all times prior to the first date on which the number of Advanced Messaging Units in service by the Borrower exceeds 15,000, the lesser of (i) $10,000,000 and (ii) the Total Revolving Loan Commitment and (y) thereafter, the Total Revolving Loan Commitment. "Total Commitment" shall mean, at any time, the sum of the Commitments of each of the Lenders. "Total Multiple Draw I Sub-Tranche A Term Loan Commitment" shall mean, at any time, the sum of the Multiple Draw I Sub-Tranche A Term Loan Commitments of each of the Lenders. -109- 111 "Total Multiple Draw I Sub-Tranche B Term Loan Commitment" shall mean, at any time, the sum of the Multiple Draw I Sub-Tranche B Term Loan Commitments of each of the Lenders. "Total Multiple Draw I Sub-Tranche C Term Loan Commitment" shall mean, at any time, the sum of the Multiple Draw I Sub-Tranche C Term Loan Commitments of each of the Lenders. "Total Multiple Draw I Term Loan Commitment" shall mean, at any time, the sum of the Multiple Draw I Term Loan Commitments of each of the Lenders. "Total Multiple Draw II Sub-Tranche A Term Loan Commitment" shall mean, at any time, the sum of the Multiple Draw II Sub-Tranche A Term Loan Commitments of each of the Lenders. "Total Multiple Draw II Sub-Tranche B Term Loan Commitment" shall mean, at any time, the sum of the Multiple Draw II Sub-Tranche B Term Loan Commitments of each of the Lenders. "Total Multiple Draw II Term Loan Commitment" shall mean, at any time, the sum of the Multiple Draw II Term Loan Commitments of each of the Lenders. "Total Revolving Loan Commitment" shall mean, at any time, the sum of the Revolving Loan Commitments of each of the Lenders. "Total Unutilized Revolving Loan Commitment" shall mean, at any time, an amount equal to the remainder of (x) the Total Revolving Loan Commitment then in effect less (y) the sum of the aggregate principal amount of all Revolving Loans and Swingline Loans then outstanding plus the then aggregate amount of all Letter of Credit Outstandings. "Traditional Messaging Services" shall mean the Borrower's and its Subsidiaries' wireless messaging services relating to one-way pagers held by their respective subscribers for such services. "Tranche" shall mean the respective facility and commitments utilized in making Loans hereunder, with there being seven separate Tranches, i.e., Multiple Draw I Sub-Tranche A Term Loans, Multiple Draw I Sub-Tranche B Term Loans, Multiple Draw I Sub-Tranche C Term Loans, Multiple Draw II Sub-Tranche A Term Loans, Multiple Draw II Sub-Tranche B Term Loans, Revolving Loans and Swingline Loans. "Type" shall mean the type of Loan determined with regard to the interest option applicable thereto, i.e., whether a Base Rate Loan or a Eurodollar Loan. "UCC" shall mean the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction. -110- 112 "Unfunded Current Liability" of any Plan shall mean the amount, if any, by which the actuarial present value of the accumulated plan benefits under the Plan as of the close of its most recent plan year determined in accordance with actuarial assumptions at such time consistent with Statement of Financial Accounting Standards No. 87, exceeds the fair market value of all plan assets allocable thereto. "United States" and "U.S." shall each mean the United States of America. "Unpaid Drawing" shall have the meaning provided for in Section 2.05(a). "Unutilized Revolving Loan Commitment" shall mean, with respect to any Lender at any time, such Lender's Revolving Loan Commitment at such time less the sum of (i) the aggregate outstanding principal amount of all Revolving Loans made by such Lender at such time and (ii) such Lender's RL Percentage of the Letter of Credit Outstandings at such time. "Vendor Financing Agreement" shall mean that certain $30,000,000 Promissory Note and Security Agreement, dated March 21, 1997, between the Borrower and Glenayre. "VFA Amendment" shall mean an Amendment to the Vendor Financing Agreement in form and substance satisfactory to the Agents (which form has been agreed upon by the Agents and the Borrower prior to the Initial Borrowing Date), which Amendment shall, inter alia, (i) provide that the Collateral Agent may retain a second priority perfected security interest in the "Collateral" under, and as defined in, the Vendor Financing Agreement, (ii) amend the asset sales covenant contained therein and (iii) amend the prohibition on guarantees contained therein to permit any Subsidiary of the Borrower to enter into the Subsidiaries Guaranty in accordance with this Agreement. "Weighted Average Life to Maturity" shall mean, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the then outstanding principal amount of such Indebtedness into (ii) the total of the product obtained by multiplying (x) the amount of each then remaining installment or other required scheduled payments of principal, including payment at final maturity, in respect thereof, by (y) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment. "Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any corporation 100% of whose capital stock (other than director's qualifying shares) is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, limited liability company, association, joint venture or other entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time. "Wholly-Owned Subsidiary Guarantors" shall mean, at any time, each Subsidiary Guarantor which is a Wholly-Owned Subsidiary of the Borrower at such time. "Year 2000 Compliant" shall mean that all of the Borrower's and its Subsidiaries' Information Systems and Equipment accurately process date data (including, but not limited to, calculating, comparing and sequencing) before, during and after the year 2000, as well as same and multi-century dates, or between the years 1999 and 2000, taking into account all leap years, -111- 113 including the fact that the year 2000 is a leap year, and further, that when generally used in combination with, or interfacing with, Information Systems and Equipment of other Persons having compatible Information System and Equipment, shall accurately accept, release and exchange date data, and shall in all material respects continue to function in the same manner as it performs today and shall not otherwise impair the accuracy or functionality of the Borrower's or any of its Subsidiaries' Information Systems and Equipment. SECTION 12. The Agents. 12.01 Appointment. The Lenders hereby irrevocably designate BTCo as Administrative Agent (for purposes of this Section 12, the term "Administrative Agent" also shall include BTCo in its capacity as (x) Collateral Agent pursuant to the Security Documents and (y) a Co-Arranger hereunder) to act as specified herein and in the other Credit Documents. The Lenders hereby irrevocably designate MSSF as Syndication Agent (for purposes of this Section 12, the term "Syndication Agent" also shall include MSSF as a Co-Arranger hereunder) to act as specified herein and in the other Credit Documents. Each Lender hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, the Administrative Agent and the Syndication Agent to take such action on their behalf under the provisions of this Agreement, the other Credit Documents and any other instruments and agreements referred to herein or therein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Administrative Agent and the Syndication Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Administrative Agent and the Syndication Agent may perform any of their respective duties hereunder by or through its officers, directors, agents, employees or affiliates. 12.02 Nature of Duties. Neither the Administrative Agent nor the Syndication Agent shall have any duties or responsibilities except those expressly set forth in this Agreement and in the other Credit Documents. Neither the Administrative Agent, the Syndication Agent nor any of their respective officers, directors, agents, employees or affiliates shall be liable for any action taken or omitted by them hereunder or under any other Credit Document or in connection herewith or therewith, unless caused by its or their gross negligence or willful misconduct. The duties of the Administrative Agent and the Syndication Agent shall be mechanical and administrative in nature; neither the Administrative Agent nor the Syndication Agent shall have by reason of this Agreement or any other Credit Document a fiduciary relationship in respect of any Lender or the holder of any Note; and nothing in this Agreement or any other Credit Document, expressed or implied, is intended to or shall be so construed as to impose upon the Administrative Agent or the Syndication Agent any obligations in respect of this Agreement or any other Credit Document except as expressly set forth herein or therein. 12.03 Lack of Reliance on the Agents. Independently and without reliance upon the Administrative Agent or the Syndication Agent, each Lender and the holder of each Note, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Borrower and its Subsidiaries in connection with the making and the continuance of the Loans and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the creditworthiness of the Borrower -112- 114 and its Subsidiaries and, except as expressly provided in this Agreement, neither the Administrative Agent nor the Syndication Agent shall have any duty or responsibility, either initially or on a continuing basis, to provide any Lender or the holder of any Note with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter. Neither the Administrative Agent nor the Syndication Agent shall be responsible to any Lender or the holder of any Note for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or any other Credit Document or the financial condition of the Borrower or any of its Subsidiaries or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Credit Document, or the financial condition of the Borrower or any of its Subsidiaries or the existence or possible existence of any Default or Event of Default. 12.04 Certain Rights of the Agents. If either Agent shall request instructions from the Required Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Credit Document, such Agent shall be entitled to refrain from such act or taking such action unless and until such Agent shall have received instructions from the Required Lenders; and such Agent shall not incur liability to any Lender by reason of so refraining. Without limiting the foregoing, no Lender or the holder of any Note shall have any right of action whatsoever against any Agent as a result of such Agent acting or refraining from acting hereunder or under any other Credit Document in accordance with the instructions of the Required Lenders. 12.05 Reliance. Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by any Person that such Agent believed to be the proper Person, and, with respect to all legal matters pertaining to this Agreement and any other Credit Document and its duties hereunder and thereunder, upon advice of counsel selected by such Agent. 12.06 Indemnification. To the extent any Agent is not reimbursed and indemnified by the Borrower or any of its Subsidiaries, the Lenders will reimburse and indemnify such Agent in proportion to their respective "percentage" as used in determining the Required Lenders (determined as if there were no Defaulting Lenders) for and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by such Agent in performing its duties hereunder or under any other Credit Document or in any way relating to or arising out of this Agreement or any other Credit Document; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct (as finally determined by a court of competent jurisdiction). -113- 115 12.07 Each Agent in its Individual Capacity. With respect to its obligation to make Loans, or issue or participate in Letters of Credit, under this Agreement, each Agent shall have the rights and powers specified herein for a "Lender" and may exercise the same rights and powers as though it were not performing the duties specified herein; and the term "Lender," "Required Lenders," "Majority Lenders," "Supermajority Lenders," "holders of Notes" or any similar terms shall, unless the context clearly otherwise indicates, include such Agent in its respective individual capacities. Each Agent and its affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, investment banking, trust or other business with, or provide debt financing, equity capital or other services (including financial advisory services) to, any Credit Party or any Affiliate of any Credit Party (or any Person engaged in a similar business with any Credit Party or any Affiliate thereof) as if they were not performing the duties specified herein, and may accept fees and other consideration from any Credit Party or any Affiliate of any Credit Party for services in connection with this Agreement and otherwise without having to account for the same to the Lender. 12.08 Holders. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or indorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. 12.09 Resignation by the Administrative Agent or the Syndication Agent. (a) The Administrative Agent may resign from the performance of all its respective functions and duties hereunder and/or under the other Credit Documents at any time by giving 15 Business Days' prior written notice to the Lenders. Such resignation shall take effect upon the appointment of a successor Administrative Agent pursuant to clauses (b) and (c) below or as otherwise provided below. The Syndication Agent may resign from the performance of its functions and duties hereunder at any time by giving the Administrative Agent notice thereof. Such resignation shall take effect upon the giving of such notice. (b) Upon any such notice of resignation by the Administrative Agent, the Required Lenders shall appoint a successor Administrative Agent hereunder or thereunder who shall be a commercial bank or trust company reasonably acceptable to the Borrower. (c) If a successor Administrative Agent shall not have been so appointed within such 15 Business Day period, the Administrative Agent with the consent of the Borrower (which consent shall not be unreasonably withheld or delayed), shall then appoint a successor Administrative Agent who shall serve as Administrative Agent hereunder or thereunder until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided above. (d) If no successor Administrative Agent has been appointed pursuant to clause (b) or (c) above by the 20th Business Day after the date such notice of resignation was given by the Administrative Agent, the Administrative Agent's resignation shall become effective -114- 116 and the Required Lenders shall thereafter perform all the duties of the Administrative Agent hereunder and/or under any other Credit Document until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided above. SECTION 13. Miscellaneous. 13.01 Payment of Expenses, etc. The Borrower shall: (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of each Agent (including, without limitation, the reasonable fees and disbursements of White & Case LLP and of the Agents' consultants and other counsel to the Agents in connection with the preparation, execution and delivery of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein and any amendment, waiver or consent relating hereto or thereto, of the Agents in connection with their syndication efforts with respect to this Agreement and of the Agents and, after the occurrence of an Event of Default, each of the Lenders in connection with the enforcement of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or pursuant to any insolvency or bankruptcy proceedings (including, in each case without limitation, the reasonable fees and disbursements of counsel for the Agents and, after the occurrence of an Event of Default, for each of the Lenders); (ii) pay and hold each of the Lenders harmless from and against any and all present and future stamp, excise and other similar documentary taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (iii) indemnify each Agent and each Lender, and each of their respective officers, directors, employees, representatives, agents, trustees and investment advisors from and hold each of them harmless against any and all liabilities, obligations (including removal or remedial actions), losses, damages, penalties, claims, actions, judgments, suits, costs, expenses and disbursements (including reasonable attorneys' and consultants' fees and disbursements) incurred by, imposed on or assessed against any of them as a result of, or arising out of, or in any way related to, or by reason of, (a) any investigation, litigation or other proceeding (whether or not any Agent or any Lender is a party thereto and whether or not such investigation, litigation or other proceeding is brought by or on behalf of any Credit Party) related to the entering into and/or performance of this Agreement or any other Credit Document or the use of any Letter of Credit or the proceeds of any Loans hereunder or the consummation of the transactions contemplated herein or in any other Credit Document or the exercise of any of their rights or remedies provided herein or in the other Credit Documents, or (b) the actual or alleged presence of Hazardous Materials in the air, surface water or groundwater or on the surface or subsurface of any Real Property currently or previously owned, leased or operated by the Borrower or any of its Subsidiaries, the generation, storage, transportation, handling or disposal of Hazardous Materials by the Borrower or any of its Subsidiaries at any location, whether or not currently or previously owned, leased or operated by the Borrower or any of its Subsidiaries, the non-compliance of any Real Property with foreign, federal, state and local laws, regulations, and ordinances (including applicable permits thereunder) applicable to any Real Property, or any Environmental Claim asserted against the Borrower, any of its Subsidiaries or any Real Property currently or previously owned, leased or operated by the Borrower or any of its Subsidiaries, including, in each case, without limitation, the reasonable fees -115- 117 and disbursements of counsel and other consultants incurred in connection with any such investigation, litigation or other proceeding (but in each of the foregoing instances excluding any losses, liabilities, claims, damages or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified (as finally determined by a court competent jurisdiction)). To the extent that the undertaking to indemnify, pay or hold harmless each Agent or any Lender set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Borrower shall make the maximum contribution to the payment and satisfaction of each of the indemnified liabilities which is permissible under applicable law. 13.02 Right of Setoff. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent and each Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to any Credit Party or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by the Administrative Agent or such Lender (including, without limitation, by branches and agencies of such Lender wherever located) to or for the credit or the account of any Credit Party against and on account of the Obligations and liabilities of the Credit Parties to the Administrative Agent or such Lender under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations purchased by such Lender pursuant to Section 13.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Lender shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. 13.03 Notices. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, telecopier or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered: if to any Credit Party, at the address specified opposite its signature below or in the other relevant Credit Documents; if to any Lender, at its address specified on Schedule II; and if to the Administrative Agent, at the Notice Office; or, as to any Credit Party or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties hereto and, as to each Lender, at such other address as shall be designated by such Lender in a written notice to the Borrower and the Administrative Agent. All such notices and communications shall, when mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be effective when deposited in the mails, delivered to the telegraph company, cable company or overnight courier, as the case may be, or sent by telex or telecopier, except that notices and communications to the Administrative Agent and the Borrower shall not be effective until received by the Administrative Agent or the Borrower, as the case may be. 13.04 Benefit of Agreement; Assignments; Participations. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, the Borrower may not assign or transfer any of its rights, obligations or interest hereunder without the prior written consent of the Lenders and, provided further, that, although any Lender may transfer, assign or grant participations in its -116- 118 rights hereunder, such Lender shall remain a "Lender" for all purposes hereunder (and may not transfer or assign all or any portion of its Commitments hereunder except as provided in Sections 1.13 and 13.04(b)) and the transferee, assignee or participant, as the case may be, shall not constitute a "Lender" hereunder and, provided further, that no Lender shall transfer or grant any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the final scheduled maturity of any Loan, Note or Letter of Credit (unless such Letter of Credit is not extended beyond the Multiple Draw I/Revolver Maturity Date) in which such participant is participating, or reduce the rate or extend the time of payment of interest or Fees thereon (except in connection with a waiver of applicability of any post-default increase in interest rates) or reduce the principal amount thereof (it being understood that any amendment or modification to the financial definitions in this Agreement or to Section 13.07(a) shall not constitute a reduction in the rate of interest or Fees for purposes of this clause (i)), or increase the amount of the participant's participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitment shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant's participation is not increased as a result thereof), (ii) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or (iii) release all or substantially all of the Collateral under all of the Security Documents (except as expressly provided in the Credit Documents) supporting the Loans or Letters of Credit hereunder in which such participant is participating. In the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant's rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation. (b) Notwithstanding the foregoing, any Lender (or any Lender together with one or more other Lenders) may (x) assign all or a portion of its Commitments and related outstanding Obligations (or, if the Commitments with respect to the relevant Tranche have terminated, outstanding Obligations) hereunder to (i) its parent company and/or any affiliate of such Lender which is at least 50% owned by such Lender or its parent company or to one or more Lenders or (ii) in the case of any Lender that is a fund that invests in loans, any other fund that invests in loans and is managed or advised by the same investment advisor of such Lender or by an Affiliate of such investment advisor or (y) assign all, or if less than all, a portion equal to at least $5,000,000 in the aggregate for the assigning Lender or assigning Lenders, of such Commitments and related outstanding Obligations (or, if the Commitments with respect to the relevant Tranche have terminated, outstanding Obligations) hereunder to one or more Eligible Transferees (treating any fund that invests in loans and any other fund that invests in loans and is managed or advised by the same investment advisor of such fund or by an Affiliate of such investment advisor as a single Eligible Transferee), each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment and Assumption Agreement, provided that, (i) at such time Schedule I shall be deemed modified to reflect the Commitments and/or outstanding Loans, as the case may be, of such new Lender and of the existing Lenders, (ii) upon the surrender of the relevant Notes by the assigning Lender (or, upon such assigning -117- 119 Lender's indemnifying the Borrower for any lost Note pursuant to a customary indemnification agreement) new Notes will be issued, at the Borrower's expense, to such new Lender and to the assigning Lender upon the request of such new Lender or assigning Lender, such new Notes to be in conformity with the requirements of Section 1.05 (with appropriate modifications) to the extent needed to reflect the revised Commitments and/or outstanding Loans, as the case may be, (iii) the consent of the Administrative Agent and, so long as no Default or Event of Default then exists, the consent of the Borrower (each of which consents shall not be unreasonably withheld or delayed) shall be required in connection with any assignment to an Eligible Transferee pursuant to clause (y) above, provided that the consent of the Borrower shall not be required until the earlier of (A) the Syndication Date and (B) the 90th day after the Initial Borrowing Date, (iv) the Administrative Agent shall receive at the time of each such assignment, from the assigning or assignee Lender, the payment of a non-refundable assignment fee of $3,500 and (v) no such transfer or assignment will be effective until recorded by the Administrative Agent on the Register pursuant to Section 13.15. To the extent of any assignment pursuant to this Section 13.04(b), the assigning Lender shall be relieved of its obligations hereunder with respect to its assigned Commitments and outstanding Loans. At the time of each assignment pursuant to this Section 13.04(b) to a Person which is not already a Lender hereunder and which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Lender shall, to the extent legally entitled to do so, provide to the Borrower the appropriate Internal Revenue Service Forms (and, if applicable, a Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent that an assignment of all or any portion of a Lender's Commitments and related outstanding Obligations pursuant to Section 1.13 or this Section 13.04(b) would, at the time of such assignment, result in increased costs under Section 1.10, 2.06 or 4.04 from those being charged by the respective assigning Lender prior to such assignment, then the Borrower shall not be obligated to pay such increased costs (although the Borrower, in accordance with and pursuant to the other provisions of this Agreement, shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective assignment). (c) Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank and, with the consent of the Administrative Agent, any Lender which is a fund may pledge all or any portion of its Loans and Notes to its trustee in support of its obligations to its trustee. No pledge pursuant to this clause (c) shall release the transferor Lender from any of its obligations hereunder. 13.05 No Waiver; Remedies Cumulative. No failure or delay on the part of the Administrative Agent, the Syndication Agent, the Collateral Agent, the Issuing Lender or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower or any other Credit Party and the Administrative Agent, the Syndication Agent, the Collateral Agent, the Issuing Lender or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights, powers and remedies herein or in any other Credit Document expressly provided are cumulative and not exclusive of any rights, powers or remedies which the Administrative Agent, the Syndication -118- 120 Agent, the Collateral Agent, the Issuing Lender or any Lender would otherwise have. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent, the Syndication Agent, the Collateral Agent, the Issuing Lender or any Lender to any other or further action in any circumstances without notice or demand. 13.06 Payments Pro Rata. (a) Except as otherwise provided in this Agreement, the Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of the Borrower in respect of any Obligations hereunder, it shall distribute such payment to the Lenders (other than any Lender that has consented in writing to waive its pro rata share of any such payment) pro rata based upon their respective shares, if any, of the Obligations with respect to which such payment was received. (b) Each of the Lenders agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise), which is applicable to the payment of the principal of, or interest on, the Loans, Unpaid Drawings, Commitment Commission or Letter of Credit Fees, of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of such Obligation then owed and due to such Lender bears to the total of such Obligation then owed and due to all of the Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations of the respective Credit Party to such Lenders in such amount as shall result in a proportional participation by all the Lenders in such amount; provided that if all or any portion of such excess amount is thereafter recovered from such Lenders, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. (c) Notwithstanding anything to the contrary contained herein, the provisions of the preceding Sections 13.06(a) and (b) shall be subject to the express provisions of this Agreement which require, or permit, differing payments to be made to Non-Defaulting Lenders as opposed to Defaulting Lenders. 13.07 Calculations; Computations; Accounting Terms. (a) The financial statements to be furnished to the Lenders pursuant hereto shall be made and prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Lenders); provided that except as otherwise specifically provided herein, all computations of Excess Cash Flow, and all computations and all definitions used in determining compliance with Sections 9.07 through 9.10, inclusive, shall utilize accounting principles and policies in conformity with those used to prepare the historical financial statements of the Borrower and its Subsidiaries referred to in Section 7.05(a). (b) All computations of interest, Commitment Commission and other Fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day; except that in the case of Letter of Credit Fees, -119- 121 the last day shall be included) occurring in the period for which such interest, Commitment Commission or Fees are payable. 13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH CREDIT PARTY, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENTS BROUGHT IN ANY OF THE AFOREMENTIONED COURTS, THAT SUCH COURTS LACK PERSONAL JURISDICTION OVER IT. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT, ANY LENDER OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION. (b) THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW, WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. -120- 122 (c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 13.09 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower, the Administrative Agent and the Syndication Agent. 13.10 Effectiveness. This Agreement shall become effective on the date (the "Effective Date") on which the Borrower, each Agent and each of the Lenders shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered the same to the Administrative Agent at the Notice Office or, in the case of the Lenders, shall have given to the Administrative Agent telephonic (confirmed in writing), written or telex notice (actually received) at such office that the same has been signed and mailed to it. The Administrative Agent will give the Borrower and each Lender prompt written notice of the occurrence of the Effective Date. 13.11 Headings Descriptive. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 13.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the respective Credit Parties party thereto and the Required Lenders, provided that no such change, waiver, discharge or termination shall, without the consent of each Lender (other than a Defaulting Lender) (with Obligations being directly affected in the case of following clause (i)), (i) extend the final scheduled maturity of any Loan or Note or extend the stated expiration date of any Letter of Credit beyond the Multiple Draw I/Revolver Maturity Date, or reduce the rate or extend the time of payment of interest or Fees thereon (except in connection with the waiver of applicability of any post-default increase in interest rates), or reduce the principal amount thereof (it being understood that any amendment or modification to the financial definitions in this Agreement or to Section 13.07(a) shall not constitute a reduction in the rate of interest or Fees for purposes of this clause (i)), (ii) release all or substantially all of the Collateral (except as expressly provided in the Credit Documents) under all the Security Documents, (iii) amend, modify or waive any provision of this Section 13.12 (except for technical amendments with respect to additional extensions of credit pursuant to this Agreement which afford the protections to such additional extensions of credit of the type provided to the Term Loans and the Revolving Loan Commitments on the Effective Date), (iv) reduce the percentage specified in the definition of Required Lenders (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the extensions of Term Loans and -121- 123 Revolving Loan Commitments are included on the Effective Date) or (v) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement; provided further, that no such change, waiver, discharge or termination shall (1) increase the Commitments of any Lender over the amount thereof then in effect without the consent of such Lender (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the Total Commitment shall not constitute an increase of the Commitment of any Lender, and that an increase in the available portion of any Commitment of any Lender shall not constitute an increase of the Commitment of such Lender), (2) without the consent of the Issuing Lender, amend, modify or waive any provision of Section 2 or alter its rights or obligations with respect to Letters of Credit, (3) without the consent of the Swingline Lender, alter the Swingline Lender's rights or obligations with respect to Swingline Loans, (4) without the consent of each Agent, amend, modify or waive any provision of Section 12 or any other provision as same relates to the rights or obligations of such Agent or (5) without the consent of Collateral Agent, amend, modify or waive any provision relating to the rights or obligations of the Collateral Agent, (6) except in cases where additional extensions of term loans are being afforded substantially the same treatment afforded to the Term Loans pursuant to this Agreement as originally in effect, without the consent of the Majority Lenders of each Tranche which is being allocated a lesser prepayment, repayment or commitment reduction as a result of the actions described below (or without the consent of the Majority Lenders of each Tranche in the case of an amendment to the definition of Majority Lenders), amend the definition of Majority Lenders or alter the required application of any prepayments or repayments (or commitment reduction), as between the various Tranches, pursuant to Section 4.01 or 4.02 (excluding Section 4.02(b)) (although the Required Lenders may waive, in whole or in part, any such prepayment, repayment or commitment reduction, so long as the application, as amongst the various Tranches, of any such prepayment, repayment or commitment reduction which is still required to be made is not altered), or (7) reduce the amount of, or extend the date of, any Multiple Draw I Term Loan Scheduled Repayment without the consent of the Supermajority Lenders holding Multiple Draw I Term Loans, or reduce the amount, or extend the date of, any Multiple Draw II Term Loan Scheduled Repayment without the consent of the Supermajority Lenders holding Multiple Draw II Term Loans, or amend the definition of Supermajority Lenders (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Supermajority Lenders on substantially the same basis as the extensions of Term Loans and Revolving Loan Commitments are included on the Effective Date) without the consent of the Supermajority Lenders holding both Multiple Draw I Term Loans and Multiple Draw II Term Loans. (b) If, in connection with any proposed change, waiver, discharge or termination to any of the provisions of this Agreement as contemplated by clauses (i) through (v), inclusive, of the first proviso to Section 13.12(a), the consent of the Required Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, then the Borrower shall have the right, so long as all non-consenting Lenders whose individual consent is required are treated as described in either clauses (A) or (B) below, to either (A) replace each such non-consenting Lender or Lenders with one or more Replacement Lenders pursuant to Section 1.13 so long as at the time of such replacement, each such Replacement Lenders consents -122- 124 to the proposed change, waiver, discharge or termination or (B) terminate such non-consenting Lender's Commitments and/or repay each Tranche of outstanding Loans of such Lender in accordance with Sections 3.02(d) and/or 4.01(b), provided that, unless the Commitments that are terminated, and Loans repaid, pursuant to preceding clause (B) are immediately replaced in full at such time through the addition of new Lenders or the increase of the Commitments and/or outstanding Loans of existing Lenders (who in each case must specifically consent thereto), then in the case of any action pursuant to preceding clause (B) the Required Lenders (determined after giving effect to the proposed action) shall specifically consent thereto, provided further, that in any event the Borrower shall not have the right to replace a Lender, terminate its Commitments or repay its Loans solely as a result of the exercise of such Lender's rights (and the withholding of any required consent by such Lender) pursuant to the second proviso to Section 13.12(a). (c) Notwithstanding anything to the contrary contained in clause (a) above of this Section 13.12, the Borrower, the Administrative Agent and each Multiple Draw II Term Loan Lender in respect of any Multiple Draw II Term Loan Sub-Facility may, in accordance with the provisions of Section 1.14, enter into a Multiple Draw II Term Loan Commitment Agreement in respect of such Multiple Draw II Term Loan Sub-Facility, provided that after the execution and delivery by the Borrower, the Administrative Agent and each such Multiple Draw II Term Loan Lender of such Multiple Draw II Term Loan Commitment Agreement, such Multiple Draw II Term Loan Commitment Agreement may thereafter only be modified in accordance with the requirements of clause (a) above of this Section 13.12. 13.13 Survival. All indemnities set forth herein including, without limitation, in Sections 1.10, 1.11, 2.06, 4.04, 12.06 and 13.01 shall survive the execution, delivery and termination of this Agreement and the Notes and the making and repayment of the Obligations. 13.14 Domicile of Loans. Each Lender may transfer and carry its Loans at, to or for the account of any office, Subsidiary or Affiliate of such Lender. Notwithstanding anything to the contrary contained herein, to the extent that a transfer of Loans pursuant to this Section 13.14 would, at the time of such transfer, result in increased costs under Section 1.10, 1.11, 2.06 or 4.04 from those being charged by the respective Lender prior to such transfer, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective transfer). 13.15 Register. The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for purposes of this Section 13.15, to maintain a register (the "Register") on which it will record the Commitments from time to time of each of the Lenders, the Loans made by each of the Lenders and each repayment in respect of the principal amount of the Loans of each Lender. Failure to make any such recordation, or any error in such recordation, shall not affect the Borrower's obligations in respect of such Loans. With respect to any Lender, the transfer or provision of the Commitments of such Lender and the rights to the principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective until such transfer is recorded on the Register maintained by the Administrative Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the -123- 125 transferor. The registration of assignment or transfer of all or part of any Commitments and Loans shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 13.04(b). Coincident with the delivery of such an Assignment and Assumption Agreement to the Administrative Agent for acceptance and registration of assignment or transfer of all or part of a Loan, or as soon thereafter as practicable, the assigning or transferor Lender shall surrender the Note (if any) evidencing such Loan, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the assigning or transferor Lender and/or the new Lender at the request of any such Lender. The registration of any provision of Multiple Draw II Term Loan Commitments pursuant to Section 1.14 shall be recorded by the Administrative Agent on the Register only upon the acceptance of the Administrative Agent of a properly executed and delivered Multiple Draw II Term Loan Commitment Agreement. Coincident with the delivery of such Multiple Draw II Term Loan Commitment Agreement for acceptance and registration of the provision of a Multiple Draw II Term Loan Commitment, or as soon thereafter as practicable, new Notes shall be issued to the respective Multiple Draw II Term Loan Lender at the request of such Multiple Draw II Term Loan Lender. The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 13.15 (other than any losses, claims, damages and liabilities to the extent incurred by reason of the gross negligence or willful misconduct of the Administrative Agent (as finally determined by a court of competent jurisdiction)). 13.16 Confidentiality. (a) Subject to the provisions of clause (b) of this Section 13.16, each Agent and each Lender agrees that it will use its reasonable efforts not to disclose without the prior consent of the Borrower (other than to its employees, auditors, advisors or counsel or to another Agent or Lender, as the case may be, if such Agent or Lender, as the case may be, or such Agent's or Lender's holding or parent company, as the case may be, in its sole discretion determines that any such party should have access to such information, provided such Persons shall be subject to the provisions of this Section 13.16 to the same extent as such Agent or Lender) any information with respect to the Borrower or any of its Subsidiaries which is now or in the future furnished pursuant to this Agreement or any other Credit Document and which is designated by the Borrower to the Lenders in writing, or could reasonably be expected to be considered, as confidential, provided that any Agent or Lender may disclose any such information (i) as has become generally available to the public other than by virtue of a breach of this Section 13.16(a) by the respective Agent or Lender, (ii) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Agent or Lender or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (iii) as may be required or appropriate in respect to any summons or subpoena or in connection with any litigation, (iv) in order to comply with any law, order, regulation or ruling applicable to such Lender, (v) to the Administrative Agent, the Syndication Agent or the Collateral Agent and (vi) to any prospective or actual transferee or participant in connection with any contemplated transfer or participation of any of the Notes or Commitments or any interest therein by any such Lender, provided that such prospective transferee agrees to be -124- 126 bound by the confidentiality provisions contained in this Section 13.16, provided further that in the case of a disclosure contemplated by clause (iii) or (iv) above, such Lender shall use reasonable efforts to provide the Borrower prior notice of its intention or obligation to disclose such confidential information. (b) The Borrower hereby acknowledges and agrees that each Agent and each Lender may share with any of their respective affiliates, and such affiliates may share with such Agent or Lender any information related to the Borrower or any of its Subsidiaries (including, without limitation, any non-public customer information regarding the creditworthiness of the Borrower and its Subsidiaries), provided such Persons shall be subject to the provisions of this Section 13.16 to the same extent as such Agent and Lender. 13.17 Certain Agreements with Respect to the 11-1/4% Senior Subordinated Discount Notes and the 15% Senior Discount Notes. The Borrower hereby (A) represents and warrants that (i) $50,000,000 of Multiple Draw I of Term Loans may be incurred under this Agreement on the Initial Borrowing Date in reliance on Section 4.03(a)(i) of the 11-1/4% Senior Subordinated Discount Note Indenture and Section 4.03(a)(i) of the 15% Senior Discount Note Indenture and (ii) $25,000,000 of Revolving Loans, Swingline Loans and Letters of Credit in the aggregate incurred pursuant to the Total Revolving Loan Commitment as in effect on the Initial Borrowing Date may be incurred in reliance on Section 4.03(a)(i) of the 11-1/4% Senior Subordinated Discount Note Indenture and Section 4.03(a)(i) of the 15% Senior Discount Note Indenture and (B) agrees it will not take any position contrary to the representations and warranties set forth in preceding clause (A). In addition, the Borrower (A) acknowledges and agrees that it will not be permitted to (i) incur any Multiple Draw I Term Loans on any Multiple Draw I Term Loan Borrowing Date unless such Multiple Draw I Term Loans may be incurred in reliance on Section 4.03(a)(i) of the 11-1/4% Senior Subordinated Discount Note Indenture and Section 4.03(a)(i) of the 15% Senior Discount Note Indenture or (ii) incur any Multiple Draw II Term Loans pursuant to any provision of Multiple Draw II Term Loan Commitments pursuant to Section 1.14 unless such additional extensions of credit are permitted to be incurred in reliance on Section 4.03(a)(i) of the 11-1/4% Senior Subordinated Discount Note Indenture and Section 4.03(a)(i) of the 15% Senior Discount Note Indenture and (B) covenants and agrees that it will take, and will cause each of its Subsidiaries to take, all such actions as may be necessary so as to ensure that all Indebtedness of the Borrower (including, without limitation, any Multiple Draw I Term Loans incurred on any Multiple Draw I Term Loan Date and any Multiple Draw II Term Loans incurred as a result of any provision of Multiple Draw II Term Loan Commitments pursuant to Section 1.14) incurred under this Agreement and the other Credit Documents shall always be permitted to be incurred under Section 4.03(a)(i) of the 11-1/4% Senior Subordinated Discount Note Indenture and Section 4.03(a)(i) of the 15% Senior Discount Note Indenture without relying on any other provision of the 11-1/4% Senior Subordinated Discount Note Indenture or the 15% Senior Discount Note Indenture. * * * -125- 127 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written. Address: 3333 Lee Parkway, Suite 100 PAGEMART WIRELESS, INC. Dallas, Texas 75219 Attn: G. Clay Myers Tel. No.: (214) 765-3510 By Fax No.: (214) 765-4961 --------------------------------- Title: BANKERS TRUST COMPANY, Individually, as Administrative Agent and as a Co-Arranger By --------------------------------- Title: MORGAN STANLEY SENIOR FUNDING, INC., Individually, as Syndication Agent and as a Co-Arranger By --------------------------------- Title: 128 FINOVA CAPITAL CORPORATION By --------------------------------- Title: 129 SCHEDULE I COMMITMENTS
Multiple Multiple Multiple Multiple Multiple Draw I Draw I Draw I Draw II Draw II Sub-Tranche Sub-Tranche Sub-Tranche Sub-Tranche Sub-Tranche A Term Loan B Term Loan C Term Loan A Term Loan B Term Loan Revolving Loan Bank Commitment Commitment Commitment Commitment Commitment Commitment - ---- ----------- ----------- ----------- ----------- ----------- -------------- Bankers Trust $12,500,000 $12,500,000 $ 8,750,000 -- -- $ 8,750,000 Company Morgan Stanley $12,500,000 $12,500,000 $ 8,750,000 -- -- $ 8,750,000 Senior Funding, Inc. Finova Capital $ 0 $ 0 $ 7,500,000 -- -- $ 7,500,000 Corporation ----------- ----------- ----------- ------------ ---------- -------------- TOTAL: $25,000,000 $25,000,000 $25,000,000 -- -- $25,000,000.00 =========== =========== =========== ============ ========== ==============
130 SCHEDULE II LENDER ADDRESSES
Bank Address - ---- ------- Bankers Trust Company 130 Liberty Street New York, New York Attn: Greg Shefrin Tel. No.: (212) 250-1724 Fax No.: (212) 669-1516 Morgan Stanley Senior Funding, Inc. 1221 Avenue of the Americas New York, New York 10036 Attn: Morgan Edwards Tel. No.: (212) 762-5814 Fax No.: (212) 762-9198 with a copy to: 1585 Broadway, 10th Floor New York, New York 10036 Attn: Jim Morgan Tel. No.: (212) 761-4866 Fax No.: (212) 761-0592 Finova Capital Corporation 311 South Wacker Drive Suite 4400 Chicago, IL 60606-6618 Attn: Andrew J. Pluta Tel. No.: (312) 322-3534 Fax. No.: (312) 322-3530
131 SCHEDULE III REAL PROPERTY 132 SCHEDULE IV PLANS 133 SCHEDULE V CAPITALIZATION 134 SCHEDULE V SUBSIDIARIES 135 SCHEDULE VI EXISTING INDEBTEDNESS 136 SCHEDULE VIII FCC LICENSES 137 SCHEDULE IX GOVERNMENTAL AUTHORIZATIONS 138 SCHEDULE X INSURANCE 139 SCHEDULE XI EXISTING LIENS
File Original Description Permitted Debtor Secured Party Number File Date of Collateral Refinancing - ------ ------------- ------ --------- ------------- -----------
140 SCHEDULE XII EXISTING INVESTMENTS 141 TABLE OF CONTENTS
Page ---- SECTION 1. Amount and Terms of Credit.........................................................................1 1.01 The Commitments....................................................................................1 1.02 Minimum Amount of Each Borrowing...................................................................5 1.03 Notice of Borrowing................................................................................5 1.04 Disbursement of Funds..............................................................................6 1.05 Notes..............................................................................................7 1.06 Conversions........................................................................................9 1.07 Borrowings.........................................................................................9 1.08 Interest..........................................................................................10 1.09 Interest Periods..................................................................................11 1.10 Increased Costs, Illegality, etc..................................................................12 1.11 Compensation......................................................................................14 1.12 Change of Lending Office..........................................................................14 1.13 Replacement of Lenders............................................................................14 1.14 Multiple Draw II Term Loan Commitments............................................................15 SECTION 2. Letters of Credit.................................................................................17 2.01 Letters of Credit.................................................................................17 2.02 Maximum Letter of Credit Outstandings; Final Maturities...........................................18 2.03 Letter of Credit Requests; Minimum Stated Amount..................................................18 2.04 Letter of Credit Participations...................................................................19 2.05 Agreement to Repay Letter of Credit Drawings......................................................20 2.06 Increased Costs...................................................................................21 SECTION 3. Commitment Commission; Fees; Reductions of Commitment.............................................22 3.01 Fees..............................................................................................22 3.02 Voluntary Termination of Multiple Draw I Term Loan Commitments, Multiple Draw II Term Loan Commitments, Unutilized Revolving Loan Commitments..........................24 3.03 Mandatory Reduction of Commitments................................................................25 SECTION 4. Prepayments;Payments; Taxes.......................................................................27 4.01 Voluntary Prepayments.............................................................................27 4.02 Mandatory Repayments and Commitment Reductions....................................................28 4.03 Method and Place of Payment.......................................................................33 4.04 Net Payments......................................................................................33
(i) 142
Page ---- SECTION 5. Conditions Precedent to Credit Events on the Initial Borrowing Date...............................35 5.01 Execution of Agreement; Notes.....................................................................36 5.02 Officer's Certificate.............................................................................36 5.03 Opinions of Counsel...............................................................................36 5.04 Corporate Documents; Proceedings; etc.............................................................36 5.05 Plans; Shareholders' Agreements; Management Agreements; Employment Agreements; Non-Compete Agreements; Existing Indebtedness Agreements..........................37 5.06 Existing Credit Agreement.........................................................................38 5.07 Adverse Change, etc...............................................................................38 5.08 Litigation........................................................................................39 5.09 Pledge Agreement..................................................................................39 5.10 Security Agreement................................................................................39 5.11 Officer's Certificate as to "Senior Indebtedness"under the 11-1/4% Senior Subordinated Discount Notes.............................................................40 5.12 Board Approval....................................................................................40 5.13 Financial Statements; Pro Forma Balance Sheet; Projections........................................40 5.14 Solvency Certificate; Insurance Certificates......................................................40 5.15 Fees, etc.........................................................................................41 SECTION 6. Conditions Precedent to All Credit Events.........................................................41 6.01 No Default; Representations and Warranties........................................................41 6.02 Notice of Borrowing; Letter of Credit Request.....................................................41 6.03 Advanced Messaging Units Thresholds...............................................................41 6.04 Officer's Certificate as to Compliance under the 11-1/4% Senior Subordinated Discount Notes and the 15% Senior Discount Notes..................................42 6.05 Special Conditions To Multiple Draw II Term Loans.................................................42 SECTION 7. Representations,Warranties and Agreements.........................................................42 7.01 Corporate Status..................................................................................43 7.02 Corporate and Other Power and Authority...........................................................43 7.03 No Violation......................................................................................43 7.04 Approvals.........................................................................................43 7.05 Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc...............................................................................44 7.06 Litigation........................................................................................45 7.07 True and Complete Disclosure......................................................................45 7.08 Use of Proceeds; Margin Regulations...............................................................45 7.09 Tax Returns and Payments..........................................................................46 7.10 Compliance with ERISA.............................................................................46 7.11 The Security Documents............................................................................47 7.12 Properties........................................................................................48 7.13 Capitalization....................................................................................48 7.14 Subsidiaries......................................................................................49 7.15 Compliance with Statutes, etc.....................................................................49
(ii) 143
Page ---- 7.16 Investment Company Act............................................................................49 7.17 Public Utility Holding Company Act................................................................49 7.18 Environmental Matters.............................................................................49 7.19 Labor Relations...................................................................................50 7.20 Patents, Licenses, Franchises and Formulas........................................................50 7.21 Indebtedness......................................................................................50 7.22 FCC Licenses......................................................................................51 7.23 Other Governmental Authorizations.................................................................51 7.24 Qualification.....................................................................................52 7.25 Insurance.........................................................................................52 7.26 Year 2000.........................................................................................52 7.27 11-1/4% Senior Subordinated Discount Notes........................................................53 7.28 License Subsidiaries..............................................................................53 SECTION 8. Affirmative Covenants.............................................................................53 8.01 Information Covenants.............................................................................53 (a) Monthly Reports.......................................................................53 (b) Quarterly Financial Statements........................................................53 (c) Annual Financial Statements...........................................................54 (d) Management Letters....................................................................54 (e) Budgets and Projections...............................................................54 (f) Officer's Certificates................................................................54 (g) Notice of Default or Litigation; etc..................................................55 (h) Other Reports and Filings.............................................................55 (i) Environmental Matters.................................................................55 (j) Other Information.....................................................................56 8.02 Books, Records and Inspections; Annual Meetings...................................................56 8.03 Maintenance of Property; Insurance................................................................57 8.04 Corporate Franchises..............................................................................58 8.05 Compliance with Statutes, etc.....................................................................58 8.06 Compliance with Environmental Laws................................................................58 8.07 ERISA.............................................................................................58 8.08 End of Fiscal Years; Fiscal Quarters..............................................................60 8.09 Performance of Obligations........................................................................60 8.10 Payment of Taxes..................................................................................60 8.11 Additional Security; Further Assurances...........................................................60 8.12 Information Systems and Equipment.................................................................62 8.13 Actions with Respect to Non-Guarantor Subsidiaries................................................62 8.14 Section 310(b)(4) of the Communications Act, 47 U.S.C. Section 310(b)(4); Certain Actions Related thereto, etc...........................................................62 SECTION 9. Negative Covenants................................................................................63 9.01 Liens.............................................................................................63 9.02 Consolidation, Merger, Purchase or Sale of Assets, etc............................................65 9.03 Dividends.........................................................................................67
(iii) 144
Page ---- 9.04 Indebtedness......................................................................................68 9.05 Advances, Investments and Loans...................................................................71 9.06 Transactions with Affiliates......................................................................73 9.07 Capital Expenditures..............................................................................74 9.08 Consolidated Cash Interest Coverage Ratio.........................................................75 9.09 Minimum TMS EBITDA................................................................................75 9.10 Minimum Consolidated EBITDA.......................................................................75 9.11 Limitations on Payments of Certain Indebtedness; Modifications of Certain Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc......................................................76 9.12 Limitation on Certain Restrictions on Subsidiaries................................................77 9.13 Limitation on Issuance of Capital Stock...........................................................77 9.14 Business..........................................................................................78 9.15 Limitation on Creation of Subsidiaries............................................................78 SECTION 10. Events of Default................................................................................78 10.01 Payments.........................................................................................79 10.02 Representations, etc.............................................................................79 10.03 Covenants........................................................................................79 10.04 Default Under Other Agreements...................................................................79 10.05 Bankruptcy, etc..................................................................................79 10.06 ERISA............................................................................................80 10.07 Security Documents...............................................................................80 10.08 Subsidiaries Guaranty............................................................................81 10.09 Judgments........................................................................................81 10.10 Change of Control................................................................................81 10.11 Failure to Comply with the Communications Act....................................................81 10.12 Licenses.........................................................................................81 SECTION 11. Definitions and Accounting Terms.................................................................82 11.01 Defined Terms....................................................................................82 SECTION 12. The Agents......................................................................................112 12.01 Appointment.....................................................................................112 12.02 Nature of Duties................................................................................112 12.03 Lack of Reliance on the Agents..................................................................112 12.04 Certain Rights of the Agents....................................................................113 12.05 Reliance........................................................................................113 12.06 Indemnification.................................................................................113 12.07 Each Agent in its Individual Capacity...........................................................114 12.08 Holders.........................................................................................114 12.09 Resignation by the Administrative Agent or the Syndication Agent................................114
(iv) 145
Page ---- SECTION 13. Miscellaneous...................................................................................115 13.01 Payment of Expenses, etc........................................................................115 13.02 Right of Setoff.................................................................................116 13.03 Notices.........................................................................................116 13.04 Benefit of Agreement; Assignments; Participations...............................................116 13.05 No Waiver; Remedies Cumulative..................................................................118 13.06 Payments Pro Rata...............................................................................119 13.07 Calculations; Computations; Accounting Terms....................................................119 13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL..........................120 13.09 Counterparts....................................................................................121 13.10 Effectiveness...................................................................................121 13.11 Headings Descriptive............................................................................121 13.12 Amendment or Waiver; etc........................................................................121 13.13 Survival........................................................................................123 13.14 Domicile of Loans...............................................................................123 13.15 Register........................................................................................123 13.16 Confidentiality.................................................................................124 13.17 Certain Agreements with Respect to the 11-1/4% Senior Subordinated Discount Notes and the 15% Senior Discount Notes.....................................................................125
SCHEDULE I Commitments SCHEDULE II Lender Addresses SCHEDULE III Real Property SCHEDULE IV Plans SCHEDULE V Capitalization SCHEDULE VI Subsidiaries SCHEDULE VII Existing Indebtedness SCHEDULE VIII FCC Licenses SCHEDULE IX Governmental Authorizations SCHEDULE X Insurance SCHEDULE XI Existing Liens SCHEDULE XII Existing Investments EXHIBIT A Notice of Borrowing EXHIBIT B-1 Multiple Draw I Term Note EXHIBIT B-2 Multiple Draw II Term Note EXHIBIT B-3 Revolving Note EXHIBIT B-4 Swingline Note EXHIBIT C Multiple Draw II Term Loan Commitment Agreement EXHIBIT D Letter of Credit Request EXHIBIT E Section 4.04(b)(ii) Certificate EXHIBIT F-1 Opinion of Davis Polk & Wardwell, Counsel to the Credit Parties EXHIBIT F-2 Opinion of Frederick G. Anderson, Esq., General Counsel to the Borrower (v) 146 EXHIBIT F-3 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison, Special FCC Counsel to the Credit Parties EXHIBIT G Officers' Certificate EXHIBIT H Pledge Agreement EXHIBIT I Security Agreement EXHIBIT J Solvency Certificate EXHIBIT K Subsidiaries Guaranty EXHIBIT L Assignment and Assumption Agreement EXHIBIT M Intercompany Note (vi) EX-10.6 5 SECURITY AGREEMENT DATED AS OF MARCH 23, 1999 1 EXHIBIT 10.6 SECURITY AGREEMENT among PAGEMART WIRELESS, INC., CERTAIN SUBSIDIARIES OF PAGEMART WIRELESS, INC. and BANKERS TRUST COMPANY, as Collateral Agent Dated as of March 23, 1999 2 SECURITY AGREEMENT SECURITY AGREEMENT, dated as of March 23, 1999, made by each of the undersigned assignors (each an "Assignor" and, together with any other entity that becomes an assignor hereunder pursuant to Section 10.12 hereof, the "Assignors") in favor of Bankers Trust Company, as Collateral Agent (the "Collateral Agent"), for the benefit of the Secured Creditors (as defined below). Except as otherwise defined herein, capitalized terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as so defined. W I T N E S S E T H : WHEREAS, PageMart Wireless, Inc. (the "Borrower"), the lenders party from time to time party thereto (the "Lenders"), Bankers Trust Company, as Administrative Agent (together with any successor administrative agent, the "Administrative Agent"), Morgan Stanley Senior Funding, Inc., as Syndication Agent (the "Syndication Agent") and Bankers Trust Company and Morgan Stanley Senior Funding, Inc., as Co-Arrangers have entered into a Credit Agreement, dated as of March 23, 1999, providing for the making of Loans to, and the issuance of Letters of Credit for the account of, the Borrower as contemplated therein (as amended, modified or supplemented from time to time, the "Credit Agreement") (the Lenders, the Administrative Agent, the Syndication Agent, the Issuing Lender and the Collateral Agent are herein called the "Lender Creditors"); WHEREAS, the Borrower may at any time and from time to time enter into one or more Interest Rate Protection Agreements or Other Hedging Agreements with one or more Lenders or any affiliate thereof (each such Lender or affiliate, even if the respective Lender subsequently ceases to be a Lender under the Credit Agreement for any reason, together with such Lender's or affiliate's successors and assigns, if any, collectively, the "Other Creditors," and together with the Lender Creditors, are herein called the "Secured Creditors"); WHEREAS, it is a condition precedent to the making of Loans to, and the issuance of Letters of Credit for the account of, the Borrower under the Credit Agreement that each Assignor shall have executed and delivered to the Collateral Agent this Agreement; and WHEREAS, each Assignor will obtain benefits from the incurrence of Loans by, and the issuance of Letters of Credit for the account of, the Borrower under the Credit Agreement and the entering into by the Borrower of Interest Rate Protection Agreements or Other Hedging Agreements and, accordingly, each Assignor desires to enter into this Agreement in order to satisfy the condition described in the preceding paragraph; NOW, THEREFORE, in consideration of the benefits accruing to each Assignor, the receipt and sufficiency of which are hereby acknowledged, each Assignor hereby makes the following representations and warranties to the Collateral Agent for the benefit of the Secured 3 Creditors and hereby covenants and agrees with the Collateral Agent for the benefit of the Secured Creditors as follows: ARTICLE I SECURITY INTERESTS 1.1. Grant of Security Interests. (a) As security for the prompt and complete payment and performance when due of all of its Obligations, each Assignor does hereby assign and transfer unto the Collateral Agent, and does hereby pledge and grant to the Collateral Agent for the benefit of the Secured Creditors, a continuing security interest in, all of the right, title and interest of such Assignor in, to and under all of the following, whether now existing or hereafter from time to time acquired: (i) each and every Receivable, (ii) all Contracts, together with all Contract Rights arising thereunder, (iii) all Inventory, (iv) all Equipment, (v) all Marks, together with the registrations and right to all renewals thereof, and the goodwill of the business of such Assignor symbolized by the Marks, (vi) all Patents and Copyrights, (vii) all computer programs of such Assignor and all intellectual property rights therein and all other proprietary information of such Assignor, including, but not limited to, Trade Secrets Rights, (viii) all other Goods, General Intangibles, Investment Property, Permits, Chattel Paper, Documents, Instruments and other assets (including cash) (subject, in the case of General Intangibles and Permits constituting FCC Licenses only, to clause (xi) below), (ix) the Cash Collateral Account and all monies, securities, instruments and other investments deposited or required to be deposited in such Cash Collateral Account, (x) all other bank, demand, time savings, cash management, passbook, certificates of deposit and similar accounts maintained by such Assignor and all monies, securities, instruments and other investments deposited or required to be deposited in any of the foregoing accounts, (xi) all goodwill, going concern value, and all of such Assignor's rights in, to or under, or relating to, any license, permit or other authorization (each, an "FCC License") issued by the FCC (provided, however, that such security interest does not include, and the term "Collateral" does not include, at any time any FCC License to the extent, but only to the extent, that such Assignor is prohibited at that time from granting a security interest therein pursuant to the Communications Act, and the FCC Rules, but includes, to the maximum extent permitted by law, all rights incident or appurtenant to any such FCC License and the rights to receive all proceeds, monies or other consideration derived or derivable from or in connection with the sale, assignment or transfer of any FCC License); and (xii) all Proceeds and products of any and all of the foregoing (all of the above, collectively, the "Collateral"). (b) The security interest of the Collateral Agent under this Agreement extends to all Collateral of the kind which is the subject of this Agreement which any Assignor may acquire at any time during the term of this Agreement. (c) Notwithstanding anything to the contrary contained in clauses (a) and (b) above, it is acknowledged and agreed that the security interests created hereby in any Equipment subject to the Vendor Financing Agreement shall be second in priority to the security interest in such Equipment created pursuant to the Vendor Financing Agreement for so long, and for only so long, as the Vendor Financing Agreement remains in effect, and upon the termination of the -2- 4 Vendor Financing Agreement, such Equipment shall be subject to a first priority security interest pursuant to this Agreement without any further action on the part of any Assignor, the Collateral Agent or any Secured Creditor. (d) Notwithstanding anything to the contrary contained in clauses (a) and (b) above or elsewhere in this Agreement, it is acknowledged and agreed that (i) the security interest created hereby shall not extend to any computer program or patents owned by a third Person in which any Assignor has rights of usage thereof to the extent (and only to the extent) the granting of a security interest therein is expressly prohibited by an agreement relating thereto to which such Assignor is a party and (ii) the security interest created hereunder in, and the Collateral Agent's and the Secured Creditors' rights and remedies hereunder with respect to, any Patents that any Assignor has granted rights therein to a third Person shall be subject to the respective agreement relating to such grant for so long as, and for only so long as, such agreement remains in effect; provided, however, that (A) such computer programs or patents, as the case may be, described in preceding clause (i) above shall be excluded from the Collateral only to the extent and only for so long as the relevant agreement continues validly to prohibit the creation of such security interest, and upon the expiration of such prohibition, all computer programs or patents, as the case may be, as to which such prohibition previously applied shall automatically be included in the Collateral, without any further action on the part of any Assignor, the Collateral Agent, or any other Secured Creditor and (B) any residual rights of the respective Assignor or Assignors with respect to Patents described in preceding clause (ii) above shall be included in the Collateral (and not be subject to the interest of any third Persons to the fullest extent permitted under the relevant agreement described in clause (ii) above). (e) It is acknowledged and agreed that the security interest created hereby does not extend to any assets owned by any third Person (and not owned by any Assignor) that are located at any Real Property sites of any Assignor. 1.2. Power of Attorney. Each Assignor hereby constitutes and appoints the Collateral Agent its true and lawful attorney, irrevocably, with full power after the occurrence of and during the continuance of an Event of Default (in the name of such Assignor or otherwise) to act, require, demand, receive, compound and give acquittance for any and all moneys and claims for moneys due or to become due to such Assignor under or arising out of the Collateral, to endorse any checks or other instruments or orders in connection therewith and, subject, in the case of any exercise by the Pledgee of any rights or remedies that effects an assignment or transfer of control of any FCC License, to receipt of any approvals that may be required under the Communications Act or the FCC Rules, to file any claims or take any action or institute any proceedings which the Collateral Agent may deem to be necessary or advisable to protect the interests of the Secured Creditors, which appointment as attorney is coupled with an interest. -3- 5 ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS Each Assignor represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement, as follows: 2.1. Necessary Filings. All filings, registrations and recordings necessary or appropriate to create, preserve and perfect the security interest granted by such Assignor to the Collateral Agent hereby in respect of the Collateral have been accomplished (or, in the case of (i) any Collateral which has been moved as described in the last sentence in Section 2.5 of this Agreement, will have been accomplished within the time period provided in such sentence or (ii) all other Collateral, will have been accomplished on the Business Day immediately following the Effective Date) and the security interest granted to the Collateral Agent pursuant to this Agreement in and to the Collateral creates a perfected security interest therein prior to the rights of all other Persons therein and subject to no other Liens (other than Permitted Liens) and is entitled to all the rights, priorities and benefits afforded by the Uniform Commercial Code or other relevant law as enacted in any relevant jurisdiction to perfected security interests, in each case to the extent that the Collateral consists of the type of property in which a security interest may be perfected by filing a financing statement under the Uniform Commercial Code as enacted in any relevant jurisdiction or in the United States Patent and Trademark Office or in the United States Copyright Office. 2.2. No Liens. Such Assignor is, and as to Collateral acquired by it from time to time after the date hereof such Assignor will be, the owner of all Collateral free from any Lien, security interest, encumbrance or other right, title or interest of any Person (other than Permitted Liens), and such Assignor shall defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent. 2.3. Other Financing Statements. As of the date hereof, there is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Collateral (other than financing statements filed in respect of Permitted Liens), and so long as the Termination Date has not occurred, such Assignor will not execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted hereby by such Assignor or in connection with Permitted Liens. 2.4. Chief Executive Office, Record Locations. The chief executive office of such Assignor is located at the address indicated on Annex A hereto for such Assignor. Such Assignor will not move its chief executive office except to such new location as such Assignor may establish in accordance with the last sentence of this Section 2.4. The originals of all documents evidencing all Receivables and Contract Rights of such Assignor and the only original books of account and records of such Assignor relating thereto are, and will continue to be, kept at such chief executive office, at one or more of the other locations set forth on Annex A hereto or at -4- 6 such new locations as such Assignor may establish in accordance with the last sentence of this Section 2.4. All Receivables and Contract Rights of such Assignor are, and will continue to be, maintained at, and controlled and directed (including, without limitation, for general accounting purposes) from, the office locations described above or such new location established in accordance with the last sentence of this Section 2.4. No Assignor shall establish new locations for such offices until (i) it shall have given to the Collateral Agent not less than 15 days' prior written notice of its intention to do so, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new location, it shall have taken all action reasonably satisfactory to the Collateral Agent to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions have been taken, in order to perfect (and maintain the perfection of) the security interest granted hereby in respect of the types of Collateral referred to in Section 1.1 hereof. 2.5. Location of Inventory and Equipment. All Inventory and Equipment (other than Equipment consisting of transmitter sites owned by each Assignor) held on the date hereof by each Assignor is located at one of the locations shown on Part A of Annex B hereto for such Assignor. All Equipment constituting transmitter sites held on the date hereof by each Assignor is located in one of the States of the United States of America shown on Part B of Annex B hereto for such Assignor. Each Assignor agrees that all Inventory and Equipment now held or subsequently acquired by it shall be kept at (or shall be in transport to) any one of the locations shown on the respective part of Annex B hereto (or, in the case of Equipment constituting transmitter sites only, any other location in which the Collateral Agent has filed UCC-1 financing statements in order to ensure that the Collateral Agent's lien on such Equipment remains perfected), or such new location as such Assignor may establish in accordance with the last sentence of this Section 2.5. Except with respect to Equipment consisting of transmitter sites as otherwise provided above, any Assignor may establish a new location for Inventory and Equipment only if (i) it shall have given to the Collateral Agent not less than 15 days' prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may request, (ii) with respect to such new location, it shall have taken all action reasonably satisfactory to the Collateral Agent to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions have been taken, in order to perfect (and maintain the perfection of) the security interest granted hereby in respect of the types of Collateral referred to in Section 1.1 hereof. Notwithstanding anything to the contrary contained in this Section 2.5, in the event any Assignor has moved any Equipment constituting transmitter sites to a new location such that the security interest created hereunder in such transmitter sites is no longer perfected, within 60 days following such move, such Assignor shall provide the Collateral Agent with the new location or locations of such -5- 7 transmitter sites and, upon the request of the Collateral Agent, shall enter into UCC-1 financing statements, and shall take any other actions as may be reasonably requested by the Collateral Agent, to ensure that the Collateral Agent's lien on such transmitter sites remains perfected. 2.6. Recourse. This Agreement is made with full recourse to each Assignor (including, without limitation, with full recourse to all assets of such Assignor) and pursuant to and upon all the warranties, representations, covenants and agreements on the part of such Assignor contained herein, in the other Secured Debt Agreements and otherwise in writing in connection herewith or therewith. 2.7. Trade Names; Change of Name. No Assignor has or operates in any jurisdiction under, or in the preceding five years has had or has operated in any jurisdiction under, any trade names, fictitious names or other names except its legal name and such other trade or fictitious names as are listed on Annex C hereto for such Assignor. No Assignor shall change its legal name or assume or operate in any jurisdiction under any trade, fictitious or other name except those names listed on Annex C hereto for such Assignor and new names established in accordance with the last sentence of this Section 2.7. No Assignor shall assume or operate in any jurisdiction under any new trade, fictitious or other name until (i) it shall have given to the Collateral Agent not less than 15 days' prior written notice of its intention so to do, clearly describing such new name and the jurisdictions in which such new name shall be used and providing such other information in connection therewith as the Collateral Agent may reasonably request, (ii) with respect to such new name, it shall have taken all action reasonably requested by the Collateral Agent to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect and (iii) at the request of the Collateral Agent, it shall have furnished an opinion of counsel reasonably acceptable to the Collateral Agent to the effect that all financing or continuation statements and amendments or supplements thereto have been filed in the appropriate filing office or offices, and all other actions have been taken, in order to perfect (and maintain the perfection of) the security interest granted hereby in respect of the types of Collateral referred to in Section 1.1 hereof. ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS; CHATTEL PAPER 3.1. Additional Representations and Warranties. As of the time when each of its Receivables arises, each Assignor shall be deemed to have represented and warranted that such Receivable, and all records, papers and documents relating thereto (if any) are what they purport to be, and such Receivable will evidence true and valid obligations of the account debtor named therein. 3.2. Maintenance of Records. Each Assignor will keep and maintain at its own cost and expense accurate records of its Receivables and Contracts, including, but not limited to, originals of all documentation (including each Contract) with respect thereto, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith, and such Assignor will make the same available on such Assignor's premises to the -6- 8 Collateral Agent for inspection, at such Assignor's own cost and expense, at any and all reasonable times upon prior notice to such Assignor. Upon the occurrence and during the continuance of an Event of Default and at the request of the Collateral Agent, such Assignor shall, at its own cost and expense, deliver all tangible evidence of its Receivables and Contract Rights (including, without limitation, all documents evidencing the Receivables and all Contracts) and such books and records to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by such Assignor). Upon the occurrence and during the continuance of an Event of Default and if the Collateral Agent so directs, such Assignor shall legend, in form and manner satisfactory to the Collateral Agent, the Receivables and the Contracts, as well as books, records and documents (if any) of such Assignor evidencing or pertaining to such Receivables and Contracts with an appropriate reference to the fact that such Receivables and Contracts have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. 3.3. Direction to Account Debtors; Contracting Parties; etc. Upon the occurrence and during the continuance of an Event of Default, and if the Collateral Agent so directs any Assignor, such Assignor agrees (x) to cause all payments on account of the Receivables and Contracts to be made directly to the Cash Collateral Account, (y) that the Collateral Agent may, at its option, directly notify the obligors with respect to any Receivables and/or under any Contracts to make payments with respect thereto as provided in the preceding clause (x), and (z) that the Collateral Agent may enforce collection of any such Receivables and Contracts and may adjust, settle or compromise the amount of payment thereof, in the same manner and to the same extent as such Assignor. Without notice to or assent by any Assignor, the Collateral Agent may apply any or all amounts then in, or thereafter deposited in, the Cash Collateral Account which application shall be effected in the manner provided in Section 7.4 of this Agreement; provided however, that at such time as no Default or Event of Default shall be continuing, all funds in the Cash Collateral Account shall be disbursed to the respective Assignor. The costs and expenses (including reasonable attorneys' fees) of collection, whether incurred by an Assignor or the Collateral Agent, shall be borne by the relevant Assignor. The Collateral Agent shall deliver a copy of each notice referred to in the preceding clause (y) to the relevant Assignor, provided that the failure by the Collateral Agent to so notify such Assignor shall not affect the effectiveness of such notice or the other rights of the Collateral Agent created by this Section 3.3. 3.4. Modification of Terms; etc. Except in accordance with such Assignor's ordinary course of business and consistent with reasonable business judgment, no Assignor shall rescind or cancel any indebtedness evidenced by any Receivable or under any Contract, or modify any term thereof or make any adjustment with respect thereto, or extend or renew the same, or compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, or sell any Receivable or Contract, or interest therein, without the prior written consent of the Collateral Agent. Each Assignor will duly fulfill all obligations on its part to be fulfilled under or in connection with the Receivables and Contracts and will do nothing to impair the rights of the Collateral Agent in the Receivables or Contracts. 3.5. Collection. Each Assignor shall endeavor in accordance with reasonable business practices to cause to be collected from the account debtor named in each of its Receivables or obligor under any Contract, as and when due (including, without limitation, -7- 9 amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Receivable or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivable or under such Contract, except that, prior to the occurrence of an Event of Default, any Assignor may allow in the ordinary course of business as adjustments to amounts owing under its Receivables and Contracts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which such Assignor finds appropriate in accordance with reasonable business judgment and (ii) a refund or credit due as a result of returned or damaged merchandise or improperly performed services or for other reasons which such Assignor finds appropriate in accordance with reasonable business judgment. The reasonable costs and expenses (including, without limitation, reasonable attorneys' fees) of collection, whether incurred by an Assignor or the Collateral Agent, shall be borne by the relevant Assignor. 3.6. Instruments. If any Assignor owns or acquires any Instrument constituting Collateral, such Assignor will within 10 Business Days notify the Collateral Agent thereof, and upon request by the Collateral Agent will promptly deliver such Instrument to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder. 3.7. Assignors Remain Liable Under Receivables. Anything herein to the contrary notwithstanding, the Assignors shall remain liable under each of the Receivables to observe and perform all of the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise to such Receivables and applicable law. Neither the Collateral Agent nor any other Secured Creditor shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any other Secured Creditor of any payment relating to such Receivable pursuant hereto, nor shall the Collateral Agent or any other Secured Creditor be obligated in any manner to perform any of the obligations of any Assignor under or pursuant to any Receivable (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by them or as to the sufficiency of any performance by any party under any Receivable (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to them or to which they may be entitled at any time or times. 3.8. Assignors Remain Liable Under Contracts. Anything herein to the contrary notwithstanding, the Assignors shall remain liable under each of the Contracts to observe and perform all of the conditions and obligations to be observed and performed by them thereunder, all in accordance with and pursuant to the terms and provisions of each Contract and applicable law. Neither the Collateral Agent nor any other Secured Creditor shall have any obligation or liability under any Contract by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any other Secured Creditor of any payment relating to such contract pursuant hereto, nor shall the Collateral Agent or any other Secured Creditor be obligated in any manner to perform any of the obligations of any Assignor under or pursuant to any Contract, to make any payment, to make any inquiry as to the nature or the sufficiency of any performance by any party under any Contract, to present or file any claim, to take any action to enforce any performance or -8- 10 to collect the payment of any amounts which may have been assigned to them or to which they may be entitled at any time or times. 3.9. Further Actions. (a) Each Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, certificates, reports and other assurances or instruments and take such further steps relating to its Receivables, Contracts, Instruments and other property or rights covered by the security interest hereby granted, as the Collateral Agent may reasonably require. (b) Each Assignor agrees that in the event of any change in any requirement of law occurring after the date hereof that affects in any manner the Collateral Agent's rights of access to, or use or sale of the FCC Licenses or the procedures necessary to enable the Collateral Agent to obtain such rights of access, use or sale (including, without limitation, changes allowing greater such access), each Assignor upon request of the Collateral Agent or the Required Lenders, shall enter into an amendment to this Agreement in form and substance satisfactory to the Collateral Agent to provide the Collateral Agent with such rights to the greatest extent possible consistent with then applicable requirements of law, including without limitation the Communications Act and the FCC Rules. ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS 4.1. Additional Representations and Warranties. Each Assignor represents and warrants that it is the true and lawful owner of or otherwise has the right to use the registered Marks listed in Annex D hereto for such Assignor and that said listed Marks include all United States marks and applications for United States marks registered in the United States Patent and Trademark Office that such Assignor owns or uses in connection with its business as of the date hereof. Each Assignor represents and warrants that it owns, is licensed to use or otherwise has the right to use, all Marks that it uses, except to the extent that any such lack of ownership, license or right could not reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. Each Assignor further warrants that it has no knowledge of any third party claim that any aspect of such Assignor's present or contemplated business operations materially infringes or will materially infringe any trademark, service mark or trade name. Each Assignor represents and warrants that it is the true and lawful owner of or otherwise has the right to use all U.S. trademark registrations and applications listed in Annex D hereto and that said registrations are valid, subsisting, have not been cancelled and that such Assignor is not aware of any third-party claim that any of said registrations is invalid or unenforceable, or is not aware that there is any reason that any of said registrations is invalid or unenforceable, or is not aware that there is any reason that any of said applications will not pass to registration. Upon the occurrence and continuance of an Event of Default, each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign any document which may be required by the United States Patent and Trademark Office in -9- 11 order to effect an absolute assignment of all right, title and interest in each Mark, and record the same. 4.2. Licenses and Assignments. Except as otherwise permitted by the Secured Debt Agreements, each Assignor hereby agrees not to divest itself of any right under any Mark absent prior written approval of the Collateral Agent. 4.3. Infringements. Each Assignor agrees, promptly upon learning thereof, to notify the Collateral Agent in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who such Assignor believes is materially infringing or diluting or otherwise violating in any material respect any of such Assignor's rights in and to any Mark, or with respect to any party claiming that such Assignor's use of any Mark violates in any material respect any property right of that party. Each Assignor further agrees, unless otherwise agreed by the Collateral Agent, to prosecute any Person materially infringing any Mark in accordance with reasonable business practices. 4.4. Preservation of Marks. Each Assignor agrees to use its Significant Marks in interstate commerce during the time in which this Agreement is in effect and to take all such other actions as are necessary to preserve such Significant Marks as trademarks or service marks under the laws of the United States. 4.5. Maintenance of Registration. Each Assignor shall, at its own expense, diligently process all documents required to maintain trademark registrations material to its business, financial condition or property, including, but not limited to, affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office for all of its registered Significant Marks, and shall pay all fees and disbursements in connection therewith and shall not abandon any such filing of affidavit of use or any such application of renewal prior to the exhaustion of all administrative and judicial remedies without prior written consent of the Collateral Agent. 4.6. Future Registered Marks. If any Mark registration is issued hereafter to any Assignor as a result of any application now or hereafter pending before the United States Patent and Trademark Office, within 30 days of receipt of such certificate, such Assignor shall deliver to the Collateral Agent a copy of such certificate, and an assignment for security in such Mark, to the Collateral Agent and at the expense of such Assignor, confirming the assignment for security in such Mark to the Collateral Agent hereunder, the form of such security to be substantially the same as the form hereof or in such other form as may be reasonably satisfactory to the Collateral Agent. 4.7. Remedies. If an Event of Default shall occur and be continuing, the Collateral Agent may, by written notice to the relevant Assignor, take any or all of the following actions: (i) declare the entire right, title and interest of such Assignor in and to each of the Marks, together with all trademark rights and rights of protection to the same, vested in the Collateral Agent for the benefit of the Secured Creditors, in which event such rights, title and interest shall immediately vest, in the Collateral Agent for the benefit of the Secured Creditors, and the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 4.1 -10- 12 hereof to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and use or sell the Marks and the goodwill of such Assignor's business symbolized by the Marks and the right to carry on the business and use the assets of such Assignor in connection with which the Marks have been used; and (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and such Assignor shall execute such further documents that the Collateral Agent may reasonably request to further confirm this and to transfer ownership of the Marks and registrations and any pending trademark application in the United States Patent and Trademark Office to the Collateral Agent. ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS 5.1. Additional Representations and Warranties. Each Assignor represents and warrants that it is the true and lawful owner of all rights in (i) all United States trade secrets and proprietary information necessary to operate the business of the Assignor (the "Trade Secret Rights"), (ii) the Patents listed in Annex E hereto for such Assignor and that said Patents include all the United States patents and applications for United States patents that such Assignor owns as of the date hereof and (iii) the Copyrights listed in Annex F hereto for such Assignor and that said Copyrights constitute all the United States copyrights registered with the United States Copyright Office and applications to United States copyrights that such Assignor owns as of the date hereof. Each Assignor further warrants that it has no knowledge of any third party claim that any aspect of such Assignor's present or contemplated business operations materially infringes or will materially infringe any patent or such Assignor has misappropriated any trade secret or proprietary information. Upon the occurrence and continuance of an Event of Default, each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign any document which may be required by the United States Patent and Trademark Office in order to effect an absolute assignment of all right, title and interest in each Patent, and to record the same. 5.2. Licenses and Assignments. Except as otherwise permitted by the Secured Debt Agreements, each Assignor hereby agrees not to divest itself of any right under any Significant Patent or Significant Copyright absent prior written approval of the Collateral Agent. 5.3. Infringements. Each Assignor agrees, promptly upon learning thereof, to furnish the Collateral Agent in writing with all pertinent information available to such Assignor with respect to any material infringement, contributing material infringement or active inducement to materially infringe in any Patent or Copyright or to any claim that the practice of any Patent or use of any Copyright violates any property right of a third party, or with respect to any misappropriation of any Trade Secret Right or any claim that practice of any Trade Secret Right violates any property right of a third party. Each Assignor further agrees, absent direction of the Collateral Agent to the contrary, diligently to prosecute any Person materially infringing any Patent or Copyright or any Person materially misappropriating any Trade Secret Right in accordance with such Assignor's reasonable business judgment. -11- 13 5.4. Maintenance of Patents or Copyright. At its own expense, each Assignor shall make timely payment of all post-issuance fees required pursuant to 35 U.S.C. ss. 41 to maintain in force its rights under each Significant Patent or Significant Copyright, absent prior written consent of the Collateral Agent. 5.5. Prosecution of Patent and Copyright Applications. At its own expense, each Assignor shall diligently prosecute all applications for (i) United States Patents listed in Annex E hereto and (ii) Copyrights listed on Annex F hereto, in each case for such Assignor and shall, consistent with reasonable business judgment, not abandon any such application prior to exhaustion of all administrative and judicial remedies, absent written consent of the Collateral Agent, unless such Assignor shall determine that the prosecution thereof is no longer desirable in the conduct of the business of such Assignor in that the cessation of such prosecution is not disadvantageous in any material respect to such Assignor. 5.6. Other Patents and Copyrights. Within 30 days of the acquisition or issuance of a United States Patent, registration of a Copyright, or acquisition of a registered Copyright, or of filing of an application for a United States Patent or Copyright, the relevant Assignor shall deliver to the Collateral Agent a copy of said Copyright or certificate or registration of, or application therefor, said Patents, as the case may be, with an assignment for security as to such Patent or Copyright, as the case may be, to the Collateral Agent and at the expense of such Assignor, confirming the assignment for security, the form of such assignment for security to be substantially the same as the form hereof or in such other form as may be reasonably satisfactory to the Collateral Agent. 5.7. Remedies. If an Event of Default shall occur and be continuing, the Collateral Agent may by written notice to the relevant Assignor, take any or all of the following actions: (i) declare the entire right, title, and interest of such Assignor in each of the Patents and Copyrights vested in the Collateral Agent for the benefit of the Secured Creditors, in which event such right, title, and interest shall immediately vest in the Collateral Agent for the benefit of the Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 5.1 hereof to execute, cause to be acknowledged and notarized and to record said absolute assignment with the applicable agency; (ii) take and practice or sell the Patents and Copyrights; and (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from practicing the Patents and using the Copyrights directly or indirectly, and such Assignor shall execute such further documents as the Collateral Agent may reasonably request further to confirm this and to transfer ownership of the Patents and Copyrights to the Collateral Agent for the benefit of the Secured Creditors. ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL 6.1. Protection of Collateral Agent's Security. Each Assignor will do nothing to impair the rights of the Collateral Agent in the Collateral. Each Assignor will at all times keep its Inventory and Equipment insured in favor of the Collateral Agent, at such Assignor's own -12- 14 expense to the extent and in the manner provided in the Credit Agreement. Except to the extent otherwise permitted to be retained by such Assignor or applied by such Assignor pursuant to the terms of the Credit Agreement, the Collateral Agent shall, at the time any proceeds of such insurance are distributed to the Secured Creditors, apply such proceeds in accordance with Section 7.4 hereof. Each Assignor assumes all liability and responsibility in connection with the Collateral acquired by it and the liability of such Assignor to pay the Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to such Assignor. 6.2. Warehouse Receipts Non-negotiable. Each Assignor agrees that if any warehouse receipt or receipt in the nature of a warehouse receipt is issued with respect to any of its Inventory, such Assignor shall request that such warehouse receipt or receipt in the nature thereof shall not be "negotiable" (as such term is used in Section 7-104 of the UCC as in effect in any relevant jurisdiction or under other relevant law). 6.3. Further Actions. Each Assignor will, at its own expense and upon the request of the Collateral Agent, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in the Collateral. 6.4. Financing Statements. Each Assignor agrees to execute and deliver to the Collateral Agent such financing statements, in form reasonably acceptable to the Collateral Agent, as the Collateral Agent may from time to time reasonably request or as are necessary or desirable in the opinion of the Collateral Agent to establish and maintain a valid, enforceable, first priority perfected security interest in the Collateral as provided herein and the other rights and security contemplated hereby all in accordance with the UCC as enacted in any and all relevant jurisdictions or any other relevant law. Each Assignor will pay any applicable filing fees, recordation taxes and related expenses relating to its Collateral. Each Assignor hereby authorizes the Collateral Agent to file any such financing statements without the signature of such Assignor where permitted by law. 6.5. FCC Licenses. Each Assignor agrees to take any and all necessary and appropriate commercially reasonable actions to preserve the FCC Licenses and to otherwise prevent any adverse modification, revocation, suspension, cancellation, or refusal by the FCC to renew any of the FCC Licenses except to the extent such modification, revocation, suspension, cancellation or refusal could not reasonably be expected to have a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken a whole. To that end, each Assignor shall execute any and all documents required by the FCC or any other governmental authority or requested by the Borrower or the Collateral Agent, and to provide any information with its possession reasonably requested by any of the foregoing, to ensure that any and all applications, -13- 15 reports, and other filings are made with the FCC or any other governmental authority in a timely fashion and that no action is taken by the FCC, any court, or any governmental authority which could have a material adverse effect on any of the FCC Licenses. ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT 7.1. Remedies; Obtaining the Collateral Upon Default. Each Assignor agrees that, if any Event of Default shall have occurred and be continuing, then and in every such case, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law, shall have all rights as a secured creditor under any UCC, and such additional rights and remedies to which a secured creditor is entitled under the laws in effect, in all relevant jurisdictions and may: (i) personally, or by agents or attorneys, immediately take possession of the Collateral or any part thereof, from such Assignor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon such Assignor's premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of such Assignor; (ii) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Receivables and the Contracts) constituting the Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Collateral Agent and may exercise any and all remedies of such Assignor in respect of such Collateral; (iii) withdraw all monies, securities and instruments in the Cash Collateral Account for application to the Obligations in accordance with Section 7.4 hereof; (iv) sell, assign or otherwise liquidate any or all of the Collateral or any part thereof in accordance with Section 7.2 hereof, or direct the relevant Assignor to sell, assign or otherwise liquidate any or all of the Collateral or any part thereof, and, in each case, take possession of the proceeds of any such sale or liquidation; (v) take possession of the Collateral or any part thereof, by directing the relevant Assignor in writing to deliver the same to the Collateral Agent at any place or places designated by the Collateral Agent, in which event such Assignor shall at its own expense: (x) forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent; (y) store and keep any Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 7.2 hereof; and -14- 16 (z) while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain the same in good condition; and (vi) license or sublicense, whether on an exclusive or nonexclusive basis, any Marks, Patents or Copyrights included in the Collateral for such term and on such conditions and in such manner as the Collateral Agent shall in its sole judgment determine; it being understood that each Assignor's obligation to so deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by such Assignor of said obligation. By accepting the benefits of this Agreement, the Secured Creditors agree that this Agreement may be enforced only by the action of the Collateral Agent acting upon the instructions of the Required Secured Creditors and that no other Secured Creditor shall have any right individually to seek to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Collateral Agent for the benefit of the Secured Creditors upon the terms of this Agreement and the Credit Agreement. 7.2. Remedies; Disposition of the Collateral. If any Event of Default shall have occurred and be continuing, then any Collateral repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and any other Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law (including, in the case of any disposition of the FCC Licenses or transfer of control thereof, the Communication Act and the FCC Rules), determine to be commercially reasonable. Subject to, in the case of any disposition of the FCC Licenses or transfer of control thereof, receipt of any approvals required under the Communications Act or the FCC Rules, any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair at the expense of the relevant Assignor which the Collateral Agent shall determine to be commercially reasonable. Any such disposition which shall be a private sale or other private proceedings permitted by such requirements shall be made upon not less than 10 days' prior written notice to the relevant Assignor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right of the relevant Assignor or any nominee of such Assignor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than 10 days' prior written notice to the relevant Assignor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Collateral Agent's option, be subject to reserve), after publication of notice of such auction (where required by applicable law) not less than 10 days prior thereto. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the -15- 17 time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned. To the extent permitted by any such requirement of law, the Collateral Agent may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section 7.2 without accountability to the relevant Assignor. If, under mandatory requirements of applicable law, the Collateral Agent shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to the relevant Assignor as hereinabove specified, the Collateral Agent need give such Assignor only such notice of disposition as shall be reasonably practicable in view of such mandatory requirements of applicable law. Each Assignor agrees to do or cause to be done all such other acts and things as may be reasonably necessary to make such sale or sales of all or any portion of the Collateral valid and binding and in compliance with any and all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at such Assignor's expense. 7.3. Waiver of Claims. Except as otherwise provided in this Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES, and each Assignor hereby further waives, to the extent permitted by law: (i) all damages occasioned by such taking of possession except any damages which are the direct result of the Collateral Agent's gross negligence or willful misconduct; (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights hereunder; and (iii) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and each Assignor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws. Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the relevant Assignor therein and thereto, and shall be a perpetual bar both at law and in equity against such Assignor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under such Assignor. 7.4. Application of Proceeds. (a) All moneys collected by the Collateral Agent (or, to the extent the Pledge Agreement or any Additional Security Document requires proceeds of collateral under such Security Document to be applied in accordance with the provisions of this Agreement, the Pledgee under such other Security Document) upon any sale or other disposition -16- 18 of the Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied as follows. (i) first, to the payment of all amounts owing the Collateral Agent of the type described in clauses (iii) and (iv) of the definition of "Obligations"; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Primary Obligations shall be paid to the Secured Creditors as provided in Section 7.4(e) hereof, with each Secured Creditor receiving an amount equal to such outstanding Primary Obligations or, if the proceeds are insufficient to pay in full all such Primary Obligations, its Pro Rata Share of the amount remaining to be distributed; (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii), an amount equal to the outstanding Secondary Obligations shall be paid to the Secured Creditors as provided in Section 7.4(e) hereof, with each Secured Creditor receiving an amount equal to its outstanding Secondary Obligations or, if the proceeds are insufficient to pay in full all such Secondary Obligations, its Pro Rata Share of the amount remaining to be distributed; and (iv) fourth, to the extent proceeds remain after the application pursuant to the preceding clauses (i) through (iii), inclusive, and following the termination of this Agreement pursuant to Section 10.8(a) hereof, to the relevant Assignor or to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement (x) "Pro Rata Share" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor's Primary Obligations or Secondary Obligations, as the case may be, and the denominator of which is the then outstanding amount of all Primary Obligations or Secondary Obligations, as the case may be, (y) "Primary Obligations" shall mean (i) in the case of the Credit Document Obligations, all principal of, and interest on, all Loans, all Unpaid Drawings and all Fees and (ii) in the case of the Other Obligations, all amounts due under such Interest Rate Protection Agreements or Other Hedging Agreements (other than indemnities, fees (including, without limitation, attorneys' fees) and similar obligations and liabilities) and (z) "Secondary Obligations" shall mean all Obligations other than Primary Obligations. (c) When payments to Secured Creditors are based upon their respective Pro Rata Shares, the amounts received by such Secured Creditors hereunder shall be applied (for purposes of making determinations under this Section 7.4 only) (i) first, to their Primary Obligations and (ii) second, to their Secondary Obligations. If any payment to any Secured Creditor of its Pro Rata Share of any distribution would result in overpayment to such Secured Creditor, such excess amount shall instead be distributed in respect of the unpaid Primary Obligations or Secondary Obligations, as the case may be, of the other Secured Creditors, with each Secured Creditor whose Primary Obligations or Secondary Obligations, as the case may be, have not been paid in full to receive an amount equal to such excess amount multiplied by a fraction the numerator of which is the unpaid Primary Obligations or Secondary Obligations, as -17- 19 the case may be, of such Secured Creditor and the denominator of which is the unpaid Primary Obligations or Secondary Obligations, as the case may be, of all Secured Creditors entitled to such distribution. (d) Each of the Secured Creditors, by their acceptance of the benefits hereof, agrees and acknowledges that if the Lender Creditors are to receive a distribution on account of undrawn amounts with respect to Letters of Credit issued under the Credit Agreement (which shall only occur after all outstanding Loans and Unpaid Drawings with respect to such Letters of Credit have been paid in full), such amounts shall be paid to the Administrative Agent under the Credit Agreement and held by it, for the equal and ratable benefit of the Lender Creditors, as cash security for the repayment of Obligations owing to the Lender Creditors as such. If any amounts are held as cash security pursuant to the immediately preceding sentence, then upon the termination of all outstanding Letters of Credit, and after the application of all such cash security to the repayment of all Obligations owing to the Lender Creditors after giving effect to the termination of all such Letters of Credit, if there remains any excess cash, such excess cash shall be returned by the Administrative Agent to the Collateral Agent for distribution in accordance with Section 7.4(a) hereof. (e) All payments required to be made hereunder shall be made (x) if to the Lender Creditors, to the Administrative Agent under the Credit Agreement for the account of the Lender Creditors, and (y) if to the Other Creditors, to the trustee, paying agent or other similar representative (each a "Representative") for the Other Creditors or, in the absence of such a Representative, directly to the Other Creditors. (f) For purposes of applying payments received in accordance with this Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the Administrative Agent under the Credit Agreement and (ii) the Representative for the Other Creditors or, in the absence of such a Representative, upon the Other Creditors for a determination (which the Administrative Agent and each Representative for any Other Creditors agree (or shall agree) to provide upon request of the Collateral Agent) of the outstanding Primary Obligations and Secondary Obligations owed to the Lender Creditors or the Other Creditors, as the case may be. Unless it has actual knowledge (including by way of written notice from a Lender Creditor or an Other Creditor) to the contrary, the Administrative Agent and each Representative, in furnishing information pursuant to the preceding sentence, and the Collateral Agent, in acting hereunder, shall be entitled to assume that no Secondary Obligations are outstanding. Unless it has actual knowledge (including by way of written notice from an Other Creditor) to the contrary, the Collateral Agent, in acting hereunder, shall be entitled to assume that no Interest Rate Protection Agreements or Other Hedging Agreements are in existence. (g) It is understood that the Assignors shall remain jointly and severally liable to the extent of any deficiency between the amount of the proceeds of the Collateral and the aggregate amount of the Obligations. 7.5. Remedies Cumulative. Each and every right, power and remedy hereby specifically given to the Collateral Agent shall be in addition to every other right, power and remedy specifically given under this Agreement, the other Secured Debt Agreements or now or -18- 20 hereafter existing at law, in equity or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of the exercise of one shall not be deemed a waiver of the right to exercise any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and no renewal or extension of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence thereof. No notice to or demand on any Assignor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent to any other or further action in any circumstances without notice or demand. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover reasonable expenses, including reasonable attorneys' fees, and the amounts thereof shall be included in such judgment. 7.6. Discontinuance of Proceedings. In case the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case the relevant Assignor, the Collateral Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted. ARTICLE VIII INDEMNITY 8.1. Indemnity. (a) Each Assignor jointly and severally agrees to indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor and their respective successors, permitted assigns, employees, agents and servants (hereinafter in this Section 8.1 referred to individually as "Indemnitee," and collectively as "Indemnitees") harmless from any and all liabilities, obligations, damages, injuries, penalties, claims, demands, actions, suits, judgments and any and all costs, expenses or disbursements (including reasonable attorneys' fees and expenses) (for the purposes of this Section 8.1 the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement, any other Secured Debt Agreement or any other document executed in connection herewith or therewith or in any other way connected with the administration of the transactions contemplated hereby or thereby or the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Collateral (including, without limitation, latent or other defects, whether or not discoverable), the violation of the laws of any country, state or other governmental body or unit, any tort (including, -19- 21 without limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any Person (including any Indemnitee), or property damage), or contract claim; provided that no Indemnitee shall be indemnified pursuant to this Section 8.1(a) for losses, damages or liabilities to the extent caused by the gross negligence or willful misconduct of such Indemnitee. Each Assignor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, the relevant Assignor shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify the relevant Assignor of any such assertion of which such Indemnitee has knowledge. (b) Without limiting the application of Section 8.1(a) hereof, each Assignor agrees, jointly and severally, to pay, or reimburse the Collateral Agent for any and all reasonable fees, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Collateral Agent's Liens on, and security interest in, the Collateral, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Collateral, premiums for insurance with respect to the Collateral and all other fees, costs and expenses in connection with protecting, maintaining or preserving the Collateral and the Collateral Agent's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral. (c) Without limiting the application of Section 8.1(a) or (b) hereof, each Assignor agrees, jointly and severally, to pay, indemnify and hold each Indemnitee harmless from and against any loss, costs, damages and expenses which such Indemnitee may suffer, expend or incur in consequence of or growing out of any misrepresentation by any Assignor in this Agreement, any other Secured Debt Agreement or in any writing contemplated by or made or delivered pursuant to or in connection with this Agreement or any other Secured Debt Agreement. (d) If and to the extent that the obligations of any Assignor under this Section 8.1 are unenforceable for any reason, such Assignor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 8.2. Indemnity Obligations Secured by Collateral; Survival. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Obligations secured by the Collateral. The indemnity obligations of each Assignor contained in this Article VIII shall continue in full force and effect notwithstanding the full payment of all of the other Obligations and notwithstanding the full payment of all the Notes issued under the Credit Agreement, the termination of all Interest Rate Protection Agreements or Other Hedging Agreements and all Letters of Credit and the payment of all other Obligations and notwithstanding the discharge thereof. -20- 22 ARTICLE IX DEFINITIONS The following terms shall have the meanings herein specified. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. "Administrative Agent" shall have the meaning provided in the recitals of this Agreement. "Agreement" shall mean this Security Agreement as the same may be modified, supplemented or amended from time to time in accordance with its terms. "Assignor" shall have the meaning provided in the first paragraph of this Agreement. "Borrower" shall have the meaning provided in the recitals of this Agreement. "Cash Collateral Account" shall mean a cash collateral account maintained with, and in the sole dominion and control of, the Collateral Agent for the benefit of the Secured Creditors. "Chattel Paper" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Class" shall have the meaning provided in Section 10.2 of this Agreement. "Collateral" shall have the meaning provided in Section 1.1(a) of this Agreement. "Collateral Agent" shall have the meaning provided in the first paragraph of this Agreement. "Contract Rights" shall mean all rights of any Assignor under each Contract, including, without limitation, (i) any and all rights to receive and demand payments under any or all Contracts, (ii) any and all rights to receive and compel performance under any or all Contracts and (iii) any and all other rights, interests and claims now existing or in the future arising in connection with any or all Contracts. "Contracts" shall mean all contracts between any Assignor and one or more additional parties (including, without limitation, any Interest Rate Protection Agreements or Other Hedging Agreements and any partnership agreements, joint venture agreements, limited liability company agreements and licensing agreements), but excluding any contract to the extent that the terms thereof prohibit (after giving effect to any approvals or waivers) the assignment of, or granting a security interest in, such contract (it being understood and agreed, however, that notwithstanding the foregoing, all rights to payment for money due or to become due pursuant to any such excluded contract shall be subject to the security interests created by this Agreement). -21- 23 "Copyrights" shall mean any United States copyright owned by any Assignor, including any registrations of any Copyrights, in the United States Copyright Office or any foreign equivalent office, as well as any application for a copyright registration now or hereafter made by any Assignor with the United States Copyright Office or any foreign equivalent office. "Credit Agreement" shall have the meaning provided in the recitals of this Agreement. "Credit Document Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Default" shall mean any event which, with notice or lapse of time, or both, would constitute an Event of Default. "Documents" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Equipment" shall mean any "equipment," as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor and, in any event, shall include, but shall not be limited to, all machinery, equipment, furnishings, fixtures and vehicles now or hereafter owned by any Assignor and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. "Event of Default" shall mean any Event of Default under, and as defined in, the Credit Agreement and shall in any event include, without limitation, any payment default on any of the Other Obligations after the expiration of any applicable grace period. "FCC License" shall have the meaning provided in Section 1.1 of this Agreement. "General Intangibles" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York (and shall include all partnership interests and all limited liability company and membership interests). "Goods" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Indemnitee" shall have the meaning provided in Section 8.1 of this Agreement. "Instrument" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Inventory" shall mean merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods, supplies, incidentals, packaging materials, labels, materials and any other items used or usable in manufacturing, processing, packaging or shipping same, in all stages of production -- from raw -22- 24 materials through work-in-process to finished goods -- and all products and proceeds of whatever sort and wherever located and any portion thereof which may be returned, rejected, reclaimed or repossessed by the Collateral Agent from any Assignor's customers, and shall specifically include all "inventory" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor. "Investment Property" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Lender Creditors" shall have the meaning provided in the recitals of this Agreement. "Lenders" shall have the meaning provided in the recitals of this Agreement. "Liens" shall mean any security interest, mortgage, pledge, lien, claim, charge, encumbrance, title retention agreement, lessor's interest in a financing lease or analogous instrument in, of, or on any Assignor's property. "Marks" shall mean all right, title and interest in and to any trademarks, service marks and trade names now held or hereafter acquired by any Assignor, including any registration of any trademarks and service marks in the United States Patent and Trademark Office or in any equivalent foreign office and any trade dress including logos and/or designs used by any Assignor. "Obligations" shall mean (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and indebtedness (including, without limitation, indemnities, Fees and interest thereon) of each Assignor to the Lender Creditors, whether now existing or hereafter incurred under, arising out of, or in connection with the Credit Agreement and the other Credit Documents to which such Assignor is a party (including all such obligations and indebtedness of such Assignor under the Subsidiaries Guaranty) and the due performance and compliance by such Assignor with all of the terms, conditions and agreements contained in the Credit Agreement and such other Credit Documents (all such obligations and liabilities under this clause (i), except to the extent consisting of obligations or indebtedness with respect to Interest Rate Protection Agreements or Other Hedging Agreements, being herein collectively called the "Credit Document Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities owing by such Assignor to the Other Creditors under, or with respect to (including by reason of the Subsidiaries Guaranty), any Interest Rate Protection Agreement or Other Hedging Agreement, whether such Interest Rate Protection Agreement or Other Hedging Agreement is now in existence or hereafter arising, and the due performance and compliance by such Assignor with all of the terms, conditions and agreements contained therein (all such obligations and liabilities described in this clause (ii) being herein collectively called the "Other Obligations"); (iii) any and all sums advanced by the Collateral Agent in order to preserve the Collateral or preserve its security interest in the Collateral; (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of such Assignor referred to in clauses (i) and (ii) above, after an Event of Default shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or -23- 25 otherwise disposing of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights hereunder, together with reasonable attorneys' fees and court costs; and (v) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement under Section 8.1 of this Agreement; it being acknowledged and agreed that the "Obligations" shall include extensions of credit of the types described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. "Other Creditors" shall have the meaning provided in the recitals of this Agreement. "Other Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Patents" shall mean any patent to which any Assignor now or hereafter has title and any divisions or continuations thereof, as well as any application for a patent now or hereafter made by any Assignor. "Permits" shall mean, to the extent permitted to be assigned by the terms thereof or by applicable law, all licenses, permits, rights, orders, variances, franchises or authorizations of or from any governmental authority or agency. "Primary Obligations" shall have the meaning provided in Section 7.4(b) of this Agreement. "Pro Rata Share" shall have the meaning provided in Section 7.4(b) of this Agreement. "Proceeds" shall have the meaning provided in the Uniform Commercial Code as in effect in the State of New York on the date hereof or under other relevant law and, in any event, shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or any Assignor from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to any Assignor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any person acting under color of governmental authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Receivables" shall mean any "account" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor and, in any event, shall include, but shall not be limited to, all of such Assignor's rights to payment for goods sold or leased or services performed by such Assignor, whether now in existence or arising from time to time hereafter, including, without limitation, rights evidenced by an account, note, contract, security agreement, chattel paper, or other evidence of indebtedness or security, together with (a) all security pledged, assigned, hypothecated or granted to or held by such Assignor to secure the foregoing, (b) all of any Assignor's right, title and interest in and to any goods, the sale of which gave rise thereto, (c) all -24- 26 guarantees, endorsements and indemnifications on, or of, any of the foregoing, (d) all powers of attorney for the execution of any evidence of indebtedness or security or other writing in connection therewith, (e) all books, records, ledger cards, and invoices relating thereto, (f) all evidences of the filing of financing statements and other statements and the registration of other instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers, (g) all credit information, reports and memoranda relating thereto and (h) all other writings related in any way to the foregoing. "Representative" shall have the meaning provided in Section 7.4(e) of this Agreement. "Required Secured Creditors" shall mean (i) the Required Lenders (or, to the extent required by Section 13.12 of the Credit Agreement, each of the Lenders) under the Credit Agreement so long as any Credit Document Obligations remain outstanding and (ii) in any situation not covered by the preceding clause (i), the holders of a majority of the outstanding principal amount of the Other Obligations. "Requisite Creditors" shall have the meaning provided in Section 10.2 of this Agreement. "Secondary Obligations" shall have the meaning provided in Section 7.4(b) of this Agreement. "Secured Creditors" shall have the meaning provided in the recitals of this Agreement. "Secured Debt Agreements" shall mean and include this Agreement, the other Credit Documents and the Interest Rate Protection Agreements and Other Hedging Agreements. "Significant Copyright" shall mean each Copyright listed in Annex F hereto of any Assignor that is material to its business, financial condition or property. "Significant Mark" shall mean each Mark listed on Annex D hereto of any Assignor that is material to its business, financial condition or property. "Significant Patent" shall mean each Patent listed in Annex E hereto for any Assignor that is material to its business, financial condition or property. "Syndication Agent" shall have the meaning provided in the recitals of this Agreement. "Termination Date" shall have the meaning provided in Section 10.8 of this Agreement. "Trade Secret Rights" shall have the meaning provided in Section 5.1 of this Agreement. -25- 27 "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction. ARTICLE X MISCELLANEOUS 10.1. Notices. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement, addressed as follows: (a) if to any Assignor, at the address set forth opposite such Assignor's signature below; (b) if to the Collateral Agent, at: Bankers Trust Company One Bankers Trust Plaza New York, New York 10006 Attention: Greg Shefrin Tel. No.: (212) 250-1724 Fax. No.: (212) 250-7218 (c) if to any Lender Creditor, at such address as such Lender Creditor shall have specified in the Credit Agreement; (d) if to any Other Creditor, at such address as such Other Creditor shall have specified in writing to each Assignor and the Collateral Agent; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 10.2. Waiver; Amendment. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Assignor directly effected thereby and the Collateral Agent (with the written consent of the Required Secured Creditors); provided, however, that any change, waiver, modification or variance affecting the rights and benefits of a single Class of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors of such affected Class. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, i.e., whether (x) the Lender Creditors as holders of the Credit Document Obligations or (y) the Other Creditors as the holders of the Other Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (x) with respect to the Credit Document Obligations, the Required Lenders and (y) with respect to the Other Obligations, the holders of at least a majority of all obligations -26- 28 outstanding from time to time under the Interest Rate Protection Agreements or Other Hedging Agreements. 10.3. Obligations Absolute. The obligations of each Assignor hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of such Assignor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Agreement or any other Secured Debt Agreement; or (c) any amendment to or modification of any Secured Debt Agreement or any security for any of the Obligations; whether or not such Assignor shall have notice or knowledge of any of the foregoing. 10.4. Successors and Assigns. This Agreement shall be binding upon each Assignor and its successors and assigns (although no Assignor may assign its rights and obligations hereunder except in accordance with the provisions of the Secured Debt Agreements) and shall inure to the benefit of and be enforceable by the Collateral Agent and the Secured Creditors and their respective successors and assigns. All agreements, statements, representations and warranties made by each Assignor herein or in any certificate or other instrument delivered by such Assignor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors and shall survive the execution and delivery of this Agreement and the other Secured Debt Agreements regardless of any investigation made by the Secured Creditors or on their behalf. 10.5. Headings Descriptive. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 10.6. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 10.7. Assignor's Duties. It is expressly agreed, anything herein contained to the contrary notwithstanding, that each Assignor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Collateral and the Collateral Agent shall not have any obligations or liabilities with respect to any Collateral by reason of or arising out of this Agreement, nor shall the Collateral Agent be required or obligated in any manner to perform or fulfill any of the obligations of any Assignor under or with respect to any Collateral. 10.8. Termination; Release. (a) After the Termination Date, this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 8.1 hereof shall survive such termination) and the Collateral Agent, at the request and expense of the respective Assignor, will promptly execute and deliver to such Assignor a proper instrument or instruments (including Uniform Commercial Code termination statements on form UCC-3) acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to such Assignor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Collateral Agent and as has not -27- 29 theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which the Total Commitment and all Interest Rate Protection Agreements and Other Hedging Agreements have been terminated, no Note is outstanding (and all Loans have been repaid in full), all Letters of Credit have been terminated and all Obligations then owing have been paid in full. (b) In the event that any part of the Collateral is sold in connection with a sale permitted by Section 9.02 of the Credit Agreement (other than a sale to any Assignor or a Subsidiary thereof) or otherwise released at the direction of the Required Secured Creditors and the proceeds of such sale or sales or from such release are applied in accordance with the provisions of the Credit Agreement, to the extent required to be so applied, such Collateral will be sold free and clear of the Liens created by this Agreement and the Collateral Agent, at the request and expense of the relevant Assignor, will duly assign, transfer and deliver to such Assignor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold or released and as may be in the possession of the Collateral Agent and has not theretofore been released pursuant to this Agreement. (c) At any time that an Assignor desires that the Collateral Agent take any action to acknowledge or give effect to any release of Collateral pursuant to the foregoing Section 10.8(a) or (b), such Assignor shall deliver to the Collateral Agent a certificate signed by a principal executive officer of such Assignor stating that the release of the respective Collateral is permitted pursuant to Section 10.8(a) or (b), as the case may be. 10.9. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with each Assignor and the Collateral Agent. 10.10. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.11. The Collateral Agent. The Collateral Agent will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Collateral Agent as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement and in Section 12 of the Credit Agreement. The Collateral Agent shall act hereunder and thereunder on the terms and conditions set forth herein and in Section 12 of the Credit Agreement. 10.12. Additional Assignors. It is understood and agreed that any Subsidiary of the Borrower that is required to execute a counterpart of this Agreement after the date hereof -28- 30 pursuant to the Credit Agreement shall become an Assignor hereunder by executing a counterpart hereof and delivering the same to the Collateral Agent. 10.13. Actions Requiring FCC Approval. (a) Notwithstanding anything to the contrary contained in this Agreement, or any of the documents executed pursuant hereto, the Collateral Agent will not take any action pursuant to this Agreement, or any such documents, which would constitute or result in any assignment of any FCC License or any transfer of control of the holder of any FCC License if such assignment of such FCC License or such transfer of control would require under then existing law (including the Communications Act or the FCC Rules) the prior approval of the FCC, without first obtaining such approval. In connection with this Section 10.13, the Collateral Agent shall be entitled to rely upon the advise of FCC counsel of the Collateral Agent's choice with respect to such assignment or transfer (including to determine whether any such assignment or transfer has occurred or will occur and whether or not prior approval of the FCC is required) whether or not the advice rendered is ultimately determined to have been accurate. (b) If an Event of Default shall have occurred and be continuing, each Assignor shall take any action which the Collateral Agent may request in the exercise of its rights and remedies under this Agreement in order to transfer or assign the Collateral to the Collateral Agent or to such one or more third parties as the Collateral Agent may designate, or to a combination of the foregoing. To enforce the provisions of this Section 10.13, after an Event of Default shall have occurred and be continuing, the Collateral Agent is empowered to request, and each Assignor hereby agrees to authorize, the appointment of a receiver or trustee from any court of competent jurisdiction. Such receiver or trustee shall be instructed to seek from the FCC (and any other governmental authority) consent or approval as may be required by the Communications Act and the FCC Rules for any assignment of the assets of or transfer of control of any or all of the FCC Licenses or any Person whose stock, partnership interest or other equity interest is subject to this Agreement to the extent required for such trustee or receiver to assume such control for the purpose of seeking a bona fide purchaser to whom such FCC Licenses or other Collateral will be assigned or control of such entity ultimately will be transferred. Each Assignor agrees, at such Assignor's cost and expense, to cooperate with any such trustee or receiver, or at such trustee's or receiver's direction, such purchaser and with the Collateral Agent in the preparation, execution and filing of any applications or other documents and providing any information that may be necessary or helpful in obtaining the FCC's consent to the assignment or transfer to such trustee or receiver, or at such trustee's or receiver's direction, such purchaser of the Collateral or any of the FCC Licenses. To the fullest extent permitted under applicable law, each Assignor hereby agrees to consent to and authorize any such transfer of control upon the request of the Collateral Agent after the occurrence of and during the continuation of an Event of Default and, without limiting any rights of the Collateral Agent under this Agreement, to authorize the Collateral Agent to nominate a trustee or receiver to assume control of the Collateral, subject only to any required consent, approval or order of a court of competent jurisdiction, the FCC or other governmental authorities, for the purposes of effectuating the transactions contemplated in this Section 10.13(b). Such trustee or receiver shall have all the rights and powers as provided to it by law, court order or to the Collateral Agent under this Agreement. Each Assignor shall cooperate fully and use its best efforts in obtaining the consent -29- 31 of the FCC and the approval or consent of each other governmental authority required to effectuate the foregoing. (c) Each Assignor shall use its best efforts to assist in obtaining the consent or approval of the FCC, any court, and any other governmental authority, if required, for any action or transaction contemplated by this Agreement, including, without limitation, the preparation, execution and filing with the FCC of the transferor's or assignor's portion of any application or applications for consent to the transfer of control or assignment necessary or appropriate under the FCC's policies, rules and regulations for approval of the transfer or assignments of all or any portion of the Collateral. (d) Each Assignor hereby acknowledges and agrees that the FCC Licenses are unique assets and that a violation of such Assignor's covenant to cooperate with respect to the obtainment of any regulatory consents would result in irreparable harm to the Collateral Agent for which monetary damages are not readily ascertainable. Each Assignor further agrees that, because of the unique nature of its undertakings in this Section 10.13, the same may be specifically enforced, and such Assignor hereby waives, and agrees to waive, any claim or defense that the Collateral Agent would have an adequate remedy at law for the breach of such undertakings and any requirement for posting of a bond or other certificate. (e) Without limiting the obligations of any Assignor hereunder in any respect, each Assignor further agrees that if such Assignor, upon or after the occurrence and during the continuance of an Event of Default, should fail or refuse to execute any application or other document necessary or appropriate to obtain any governmental consent necessary or appropriate for the exercise of any right of the Collateral Agent hereunder, such Assignor agrees that, to the fullest extent permitted by the Communications Act and the FCC Rules, such application or other document may be executed on such Assignor's behalf by the clerk of any court or other forum in any competent jurisdiction without notice to such Assignor. (f) This Section 10.13 shall not limit any other rights of the Collateral Agent or the Secured Creditors available under applicable law and consistent with the Communications Act and the FCC Rules. 10.14. Consent and Waiver. EACH ASSIGNOR HEREBY IRREVOCABLY CONSENTS TO AND WAIVES ANY RIGHT TO OBJECT TO OR OTHERWISE CONTEST THE APPOINTMENT OF A RECEIVER AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT. EACH ASSIGNOR HEREBY GRANTS SUCH CONSENT AND WAIVER KNOWINGLY AFTER HAVING DISCUSSED THE IMPLICATIONS THEREOF WITH COUNSEL, ACKNOWLEDGES THAT THE UNCONTESTED RIGHT TO HAVE A RECEIVER APPOINTED FOR THE FOREGOING PURPOSES IS CONSIDERED ESSENTIAL BY THE COLLATERAL AGENT AND THE SECURED CREDITORS IN CONNECTION WITH THE ENFORCEMENT OF THEIR RIGHTS AND REMEDIES HEREUNDER AND UNDER THE OTHER CREDIT DOCUMENTS, AND THE AVAILABILITY OF SUCH APPOINTMENT AS A REMEDY UNDER THE FOREGOING CIRCUMSTANCES WAS A MATERIAL FACTOR IN INDUCING THE LENDERS TO MAKE (AND COMMIT TO MAKE) LOANS TO THE -30- 32 BORROWER AND IN INDUCING THE OTHER CREDITORS TO ENTER INTO INTEREST RATE PROTECTION AGREEMENTS AND OTHER HEDGING AGREEMENTS WITH THE BORROWER, AND AGREES TO ENTER INTO ANY AND ALL STIPULATIONS IN ANY LEGAL ACTIONS, OR AGREEMENTS OR OTHER INSTRUMENTS IN CONNECTION WITH THE FOREGOING AND TO COOPERATE FULLY WITH THE COLLATERAL AGENT AND THE REQUIRED LENDERS, OR, THE HOLDERS OF A MAJORITY OF THE OTHER OBLIGATIONS, AS THE CASE MAY BE, IN CONNECTION WITH THE ASSUMPTION AND EXERCISE OF CONTROL BY THE RECEIVER OVER ALL OR ANY PORTION OF THE COLLATERAL. * * * -31- 33 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. Address: 3333 Lee Parkway, Suite 100 PAGEMART WIRELESS, INC., Dallas, TX 75219 as an Assignor Attention: G. Clay Myers Telephone: (214) 765-3510 Telecopier: (214) 765-4961 By ------------------------------- Name: Title: Accepted and Agreed to: BANKERS TRUST COMPANY, as Collateral Agent By -------------------------------- Name: Title: 34 ANNEX A TO SECURITY AGREEMENT SCHEDULE OF CHIEF EXECUTIVE OFFICES AND OTHER RECORD LOCATIONS 35 ANNEX B TO SECURITY AGREEMENT SCHEDULE OF INVENTORY AND EQUIPMENT LOCATIONS 36 ANNEX C TO SECURITY AGREEMENT SCHEDULE OF TRADE AND FICTITIOUS NAMES 37 ANNEX D TO SECURITY AGREEMENT SCHEDULE OF MARKS 38 ANNEX E TO SECURITY AGREEMENT SCHEDULE OF PATENTS 39 ANNEX F TO SECURITY AGREEMENT SCHEDULE OF COPYRIGHTS 40 ANNEX G TO SECURITY AGREEMENT ASSIGNMENT OF SECURITY INTEREST IN UNITED STATES TRADEMARKS AND PATENTS FOR GOOD AND VALUABLE CONSIDERATION, receipt and sufficiency of which are hereby acknowledged, [Name of Assignor], a __________ corporation (the "Assignor") with principal offices at ____________________________, hereby assigns and grants to Bankers Trust Company, as Collateral Agent, with principal offices at One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006 (the "Assignee"), a security interest in (i) all of the Assignor's right, title and interest in and to the United States trademarks, trademark registrations and trademark applications (the "Marks") set forth on Schedule A attached hereto, (ii) all of the Assignor's rights, title and interest in and to the United States patents (the "Patents") set forth on Schedule B attached hereto, in each case together with (iii) all Proceeds (as such term is defined in the Security Agreement referred to below) and products of the Marks and Patents, (iv) the goodwill of the businesses with which the Marks are associated and (v) all causes of action arising prior to or after the date hereof for infringement of any of the Marks and Patents or unfair competition regarding the same. THIS ASSIGNMENT is made to secure the satisfactory performance and payment of all the Obligations of the Assignor, as such term is defined in the Security Agreement among the Assignor, the other assignors from time to time party thereto and the Assignee, dated as of March 23, 1999 (as amended from time to time, the "Security Agreement"). Upon the occurrence of the Termination Date (as defined in the Security Agreement), the Assignee shall, upon such satisfaction, execute, acknowledge, and deliver to the Assignor an instrument in writing releasing the security interest in the Marks and Patents acquired under this Assignment. 41 ANNEX G Page 2 This Assignment has been granted in conjunction with the security interest granted to the Assignee under the Security Agreement. The rights and remedies of the Assignee with respect to the security interest granted herein are without prejudice to, and are in addition to those set forth in the Security Agreement, all terms and provisions of which are incorporated herein by reference. In the event that any provisions of this Assignment are deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall govern. 42 ANNEX G Page 3 IN WITNESS WHEREOF, the undersigned have executed this Assignment as of the ____ day of _________, ____. [NAME OF ASSIGNOR], Assignor By --------------------------------------- Name: Title: BANKERS TRUST COMPANY, as Collateral Agent, Assignee By --------------------------------------- Name: Title: 43 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of _________, ____, before me personally came ________ _________________ who, being by me duly sworn, did state as follows: that [s]he is _______________ of [Name of Assignor], that [s]he is authorized to execute the foregoing Assignment on behalf of said corporation and that [s]he did so by authority of the Board of Directors of said corporation. ------------------------------- Notary Public 44 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of _________, ____, before me personally came ________ _____________________ who, being by me duly sworn, did state as follows: that [s]he is __________________ of Bankers Trust Company that [s]he is authorized to execute the foregoing Assignment on behalf of said corporation and that [s]he did so by authority of the Board of Directors of said corporation. ------------------------------- Notary Public 45 Schedule A
U.S. TRADEMARKS --------------- MARK REG. NO. REG. DATE - ---- -------- ---------
46 SCHEDULE B
U.S. TRADEMARKS --------------- PATENT PATENT NO. ISSUE DATE - ------ ---------- ----------
47 ANNEX H TO SECURITY AGREEMENT ASSIGNMENT OF SECURITY INTEREST IN UNITED STATES COPYRIGHTS WHEREAS, [Name of Assignor], a _______________ corporation (the "Assignor"), having its chief executive office at ___________________________, ___________________________, is the owner of all right, title and interest in and to the United States copyrights and associated United States copyright registrations and applications for registration set forth in Schedule A attached hereto; WHEREAS, BANKERS TRUST COMPANY, as Collateral Agent, having its principal offices at One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006 (the "Assignee"), desires to acquire a security interest in said copyrights and copyright registrations and applications therefor; and WHEREAS, the Assignor is willing to assign to the Assignee, and to grant to the Assignee, a security interest in and lien upon the copyrights and copyright registrations and applications therefor described above. NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, and subject to the terms and conditions of the Security Agreement, dated as of March 23, 1999, made by the Assignor, the other assignors from time to time party thereto and the Assignee (as amended from time to time, the "Security Agreement"), the Assignor hereby assigns to the Assignee, and grants to the Assignee, a security interest in the copyrights and copyright registrations and applications therefor set forth in Schedule A attached hereto. This Assignment has been granted in conjunction with the security interest granted to the Assignee under the Security Agreement. The rights and remedies of the Assignee with respect to the security interest granted herein are without prejudice to, and are in addition to those set forth in the Security Agreement, all terms and provisions of which are incorporated herein by reference. In the event that any provisions of this Assignment are deemed to conflict with the Security Agreement, the provisions of the Security Agreement shall govern. 48 Executed at New York, New York, the __ day of _________, ____. [NAME OF ASSIGNOR], as Assignor By ---------------------------------------- Name: Title: BANKERS TRUST COMPANY, as Collateral Agent, Assignee By ---------------------------------------- Name: Title: 49 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this __ day of _________, ____, before me personally came ___________ _______________, who being duly sworn, did depose and say that [s]he is ___________________ of [Name of Assignor], that [s]he is authorized to execute the foregoing Assignment on behalf of said corporation and that [s]he did so by authority of the Board of Directors of said corporation. ------------------------- Notary Public 50 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On this ____ day of _________, ____, before me personally came ________ _____________________ who, being by me duly sworn, did state as follows: that [s]he is __________________ of Bankers Trust Company that [s]he is authorized to execute the foregoing Assignment on behalf of said corporation and that [s]he did so by authority of the Board of Directors of said corporation. ---------------------------- Notary Public 51 SCHEDULE A
U.S. COPYRIGHTS --------------- REGISTRATION PUBLICATION NUMBERS DATE COPYRIGHT TITLE ------------ --------------- ---------------
52 TABLE OF CONTENTS
Page ---- ARTICLE I SECURITY INTERESTS.......................................................................................2 1.1. Grant of Security Interests........................................................................2 1.2. Power of Attorney..................................................................................3 ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS........................................................3 2.1. Necessary Filings..................................................................................4 2.2. No Liens...........................................................................................4 2.3. Other Financing Statements.........................................................................4 2.4. Chief Executive Office, Record Locations...........................................................4 2.5. Location of Inventory and Equipment................................................................5 2.6. Recourse...........................................................................................5 2.7. Trade Names; Change of Name........................................................................6 ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS; CHATTEL PAPER..............................................................6 3.1. Additional Representations and Warranties..........................................................6 3.2. Maintenance of Records.............................................................................6 3.3. Direction to Account Debtors; Contracting Parties; etc.............................................7 3.4. Modification of Terms; etc.........................................................................7 3.5. Collection.........................................................................................7 3.6. Instruments........................................................................................8 3.7. Assignors Remain Liable Under Receivables..........................................................8 3.9. Further Actions....................................................................................8 ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS.................................................................9 4.1. Additional Representations and Warranties..........................................................9 4.2. Licenses and Assignments...........................................................................9 4.3. Infringements.....................................................................................10 4.4. Preservation of Marks.............................................................................10 4.5. Maintenance of Registration.......................................................................10
(i) 53 4.6. Future Registered Marks...........................................................................10 4.7. Remedies..........................................................................................10 ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS...................................................................11 5.1. Additional Representations and Warranties.........................................................11 5.2. Licenses and Assignments..........................................................................11 5.3. Infringements.....................................................................................11 5.4. Maintenance of Patents or Copyright...............................................................11 5.5. Prosecution of Patent and Copyright Applications..................................................12 5.6. Other Patents and Copyrights......................................................................12 5.7. Remedies..........................................................................................12 ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL....................................................................12 6.1. Protection of Collateral Agent's Security.........................................................12 6.2. Warehouse Receipts Non-negotiable.................................................................13 6.3. Further Actions...................................................................................13 6.4. Financing Statements..............................................................................13 6.5. FCC Licenses......................................................................................13 ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT............................................................14 7.1. Remedies; Obtaining the Collateral Upon Default...................................................14 7.2. Remedies; Disposition of the Collateral...........................................................15 7.3. Waiver of Claims..................................................................................16 7.4. Application of Proceeds...........................................................................16 7.5. Remedies Cumulative...............................................................................18 7.6. Discontinuance of Proceedings.....................................................................19 ARTICLE VIII INDEMNITY...............................................................................................19 8.1. Indemnity.........................................................................................19 8.2. Indemnity Obligations Secured by Collateral; Survival.............................................20
(ii) 54 ARTICLE IX DEFINITIONS.............................................................................................20 ARTICLE X MISCELLANEOUS...........................................................................................26 10.1. Notices..........................................................................................26 10.2. Waiver; Amendment................................................................................26 10.3. Obligations Absolute.............................................................................27 10.4. Successors and Assigns...........................................................................27 10.5. Headings Descriptive.............................................................................27 10.6. Governing Law....................................................................................27 10.7. Assignor's Duties................................................................................27 10.8. Termination; Release.............................................................................27 10.9. Counterparts.....................................................................................28 10.10. Severability....................................................................................28 10.11. The Collateral Agent............................................................................28 10.12. Additional Assignors............................................................................28 10.13. Actions Requiring FCC Approval..................................................................29 10.14. Consent and Waiver.............................................................................30
ANNEX A Schedule of Chief Executive Offices/Record Locations ANNEX B Schedule of Inventory and Equipment Locations ANNEX C Schedule of Trade and Fictitious Names ANNEX D Schedule of Marks ANNEX E Schedule of Patents ANNEX F Schedule of Copyrights ANNEX G Form of Assignment of Security Interest in Certain United States Trademarks and Patents ANNEX H Form of Assignment of Security Interest in United States Copyrights (iii) EX-10.7 6 PLEDGE AGREEMENT DATED MARCH 23, 1999 1 EXHIBIT 10.7 PLEDGE AGREEMENT PLEDGE AGREEMENT (as amended, modified or supplemented from time to time, this "Agreement"), dated as of March 23, 1999, made by each of the undersigned pledgors (each a "Pledgor" and, together with any other entity that becomes a party hereto pursuant to Section 26 hereof, the "Pledgors") to Bankers Trust Company, as Collateral Agent (the "Pledgee"), for the benefit of the Secured Creditors (as defined below). Except as otherwise defined herein, capitalized terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. W I T N E S S E T H: WHEREAS, PageMart Wireless, Inc. (the "Borrower"), the lenders from time to time party thereto (the "Lenders"), Bankers Trust Company, as Administrative Agent (together with any successor Administrative Agent, the "Administrative Agent"), Morgan Stanley Senior Funding, Inc., as Syndication Agent, and Bankers Trust Company and Morgan Stanley Senior Funding, Inc., as Co-Arrangers have entered into a Credit Agreement, dated as of March 23, 1999 (as amended, modified or supplemented from time to time, the "Credit Agreement"), providing for the making of Loans to, and the issuance of Letters of Credit for the account of, the Borrower as contemplated therein (the Lenders, the Administrative Agent, the Syndication Agent, the Issuing Lender and the Pledgee are herein called the "Lender Creditors"); WHEREAS, the Borrower may at any time and from time to time enter into one or more Interest Rate Protection Agreements or Other Hedging Agreements with one or more Lenders or any affiliate thereof (each such Lender or affiliate, even if the respective Lender subsequently ceases to be a Lender under the Credit Agreement for any reason, together with such Lender's or affiliate's successors and assigns, if any, collectively, the "Other Creditors," and together with the Lender Creditors, the "Secured Creditors"); WHEREAS, it is a condition to the making of Loans to, and the issuance of Letters of Credit for the account of, the Borrower under the Credit Agreement that each Pledgor shall have executed and delivered to the Pledgee this Agreement; and WHEREAS, each Pledgor desires to enter into this Agreement in order to satisfy the condition described in the preceding paragraph; NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to each Pledgor, the receipt and sufficiency of which are hereby acknowledged, each Pledgor hereby makes the following representations and warranties to the Pledgee for the benefit of the Secured Creditors and hereby covenants and agrees with the Pledgee for the benefit of the Secured Creditors as follows: 1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor for the benefit of the Secured Creditors to secure: 2 (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and indebtedness (including, without limitation, indemnities, Fees and interest thereon) of such Pledgor to the Lender Creditors, whether now existing or hereafter incurred under, arising out of, or in connection with the Credit Agreement and the other Credit Documents to which such Pledgor is a party and the due performance and compliance by such Pledgor with all of the terms, conditions and agreements contained in the Credit Agreement and in such other Credit Documents (all such obligations and liabilities under this clause (i), except to the extent consisting of obligations or indebtedness with respect to Interest Rate Protection Agreements or Other Hedging Agreements, being herein collectively called the "Credit Document Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities owing by such Pledgor to the Other Creditors under, or with respect to, any Interest Rate Protection Agreement or Other Hedging Agreement, whether such Interest Rate Protection Agreement or Other Hedging Agreement is now in existence or hereafter arising, and the due performance and compliance by such Pledgor with all of the terms, conditions and agreements contained therein (all such obligations and liabilities described in this clause (ii) being herein collectively called the "Other Obligations"); (iii) any and all sums advanced by the Pledgee in order to preserve the Collateral (as hereinafter defined) or preserve its security interest in the Collateral; (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations or liabilities of such Pledgor referred to in clauses (i), (ii) and (iii) above, after an Event of Default (which term to mean and include any Event of Default under, and as defined in, the Credit Agreement or any payment default by the Borrower under any Interest Rate Protection Agreement or Other Hedging Agreement and shall, in any event, include, without limitation, any payment default (after the expiration of any applicable grace period) on any of the Obligations (as hereinafter defined)) shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Pledgee of its rights hereunder, together with reasonable attorneys' fees and court costs; and (v) all amounts paid by any Secured Creditor as to which such Secured Creditor has the right to reimbursement under Section 11 of this Agreement; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (v) of this Section 1 being herein collectively called the "Obligations," it being acknowledged and agreed that the "Obligations" shall include extensions of credit of the types described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. -2- 3 2. DEFINITIONS. (a) Unless otherwise defined herein, all capitalized terms used herein and defined in the Credit Agreement shall be used herein as therein defined. Reference to singular terms shall include the plural and vice versa. (b) The following capitalized terms used herein shall have the definitions specified below: "Administrative Agent" has the meaning set forth in the Recitals hereto. "Adverse Claim" has the meaning given such term in Section 8-102(a)(1) of the UCC. "Agreement" has the meaning set forth in the first paragraph hereof. "Certificated Security" has the meaning given such term in Section 8-102(a)(4) of the UCC. "Clearing Corporation" has the meaning given such term in Section 8-102(a)(5) of the UCC. "Collateral" has the meaning set forth in Section 3.1 hereof. "Collateral Accounts" means any and all accounts established and maintained by the Pledgee in the name of any Pledgor to which Collateral may be credited. "Credit Agreement" has the meaning set forth in the Recitals hereto. "Credit Document Obligations" has the meaning set forth in Section 1 hereof. "Domestic Corporation" has the meaning set forth in the definition of "Stock." "Event of Default" has the meaning set forth in Section 1 hereof. "Financial Asset" has the meaning given such term in Section 8-102(a)(9) of the UCC. "Foreign Corporation" has the meaning set forth in the definition of "Stock." "Indemnitees" has the meaning set forth in Section 11 hereof. "Instrument" has the meaning given such term in Section 9-105(1)(i) of the UCC. "Investment Property" has the meaning given such term in Section 9-115(f) of the UCC. "Lender Creditors" has the meaning set forth in the Recitals hereto. "Lenders" has the meaning set forth in the Recitals hereto. -3- 4 "Limited Liability Company Assets" means all assets, whether tangible or intangible and whether real, personal or mixed (including, without limitation, all limited liability company capital and interest in other limited liability companies), at any time owned or represented by any Limited Liability Company Interest. "Limited Liability Company Interests" means the entire limited liability company membership interest at any time owned by any Pledgor in any limited liability company. "Non-Voting Stock" means all capital stock which is not Voting Stock. "Notes" means all intercompany notes among the Borrower and its Subsidiaries and all other promissory notes from time to time issued to, or held by, any Pledgor, provided that any such promissory note issued by an executive officer of any Pledgor may be excluded from this definition so long as the aggregate principal amount of such note does not exceed $500,000. "Obligations" has the meaning set forth in Section 1 hereof. "Other Creditors" has the meaning set forth in the Recitals hereto. "Other Obligations" has the meaning set forth in Section 1 hereof. "Partnership Assets" means all assets, whether tangible or intangible and whether real, personal or mixed (including, without limitation, all partnership capital and interest in other partnerships), at any time owned or represented by any Partnership Interest. "Partnership Interest" means the entire general partnership interest or limited partnership interest at any time owned by any Pledgor in any general partnership or limited partnership. "Pledged Notes" has the meaning set forth in Section 3.5 hereof. "Pledgee" has the meaning set forth in the first paragraph hereof. "Pledgor" has the meaning set forth in the first paragraph hereof. "Proceeds" has the meaning given such term in Section 9-306(l) of the UCC. "Required Lenders" has the meaning given such term in the Credit Agreement. "Secured Creditors" has the meaning set forth in the Recitals hereto. "Secured Debt Agreements" has the meaning set forth in Section 5 hereof. "Securities Account" has the meaning given such term in Section 8-501(a) of the UCC. "Securities Act" means the Securities Act of 1933, as amended, as in effect from time to time. -4- 5 "Security" and "Securities" has the meaning given such term in Section 8-102(a)(15) of the UCC and shall in any event include all Stock and Notes (to the extent same constitute "Securities" under Section 8-102(a)(15)). "Security Entitlement" has the meaning given such term in Section 8-102(a)(17) of the UCC. "Stock" means (x) with respect to corporations incorporated under the laws of the United States or any State or territory thereof (each a "Domestic Corporation"), all of the issued and outstanding shares of capital stock of any corporation at any time owned by any Pledgor of any Domestic Corporation and (y) with respect to corporations not Domestic Corporations (each a "Foreign Corporation"), all of the issued and outstanding shares of capital stock at any time owned by any Pledgor of any Foreign Corporation. "Termination Date" has the meaning set forth in Section 21 hereof. "UCC" means the Uniform Commercial Code as in effect in the State of New York from time to time; provided that all references herein to specific sections or subsections of the UCC are references to such sections or subsections, as the case may be, of the Uniform Commercial Code as in effect in the State of New York on the date hereof. "Uncertificated Security" has the meaning given such term in Section 8-102(a)(18) of the UCC. "Voting Stock" means all classes of capital stock of any Foreign Corporation entitled to vote. 3. PLEDGE OF SECURITIES, ETC. 3.1 Pledge. To secure the Obligations now or hereafter owed or to be performed by such Pledgor, each Pledgor does hereby grant, pledge and assign to the Pledgee for the benefit of the Secured Creditors, and does hereby create a continuing security interest in favor of the Pledgee for the benefit of the Secured Creditors in, all of the right, title and interest in and to the following, whether now existing or hereafter from time to time acquired (collectively, the "Collateral"): (a) each of the Collateral Accounts, including any and all assets of whatever type or kind deposited by such Pledgor in such Collateral Account, whether now owned or hereafter acquired, existing or arising, including, without limitation, all Financial Assets, Investment Property, moneys, checks, drafts, Instruments, Securities or interests therein of any type or nature deposited or required by the Credit Agreement or any other Secured Debt Agreement to be deposited in such Collateral Account, and all investments and all certificates and other Instruments (including depository receipts, if any) from time to time representing or evidencing the same, and all dividends, interest, distributions, cash and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing; -5- 6 (b) all Securities of such Pledgor from time to time; (c) all Limited Liability Company Interests of such Pledgor from time to time and all of its right, title and interest in each limited liability company to which each such interest relates, whether now existing or hereafter acquired, including, without limitation: (A) all the capital thereof and its interest in all profits, losses, Limited Liability Company Assets and other distributions to which such Pledgor shall at any time be entitled in respect of such Limited Liability Company Interests; (B) all other payments due or to become due to such Pledgor in respect of Limited Liability Company Interests, whether under any limited liability company agreement, operating agreement or otherwise, whether as contractual obligations, damages, insurance proceeds or otherwise; (C) all of its claims, rights, powers, privileges, authority, options, security interests, liens and remedies, if any, under any limited liability company agreement or operating agreement, or at law or otherwise in respect of such Limited Liability Company Interests; (D) all present and future claims, if any, of such Pledgor against any such limited liability company for moneys loaned or advanced, for services rendered or otherwise; (E) all of such Pledgor's rights under any limited liability company agreement or operating agreement or at law to exercise and enforce every right, power, remedy, authority, option and privilege of such Pledgor relating to such Limited Liability Company Interests, including any power to terminate, cancel or modify any limited liability company agreement or operating agreement, to execute any instruments and to take any and all other action on behalf of and in the name of any of such Pledgor in respect of such Limited Liability Company Interests and any such limited liability company, to make determinations, to exercise any election (including, but not limited to, election of remedies) or option or to give or receive any notice, consent, amendment, waiver or approval, together with full power and authority to demand, receive, enforce, collect or receipt for any of the foregoing or for any Limited Liability Company Asset, to enforce or execute any checks, or other instruments or orders, to file any claims and to take any action in connection with any of the foregoing (with all of the foregoing rights only to be exercisable upon the occurrence and during the continuation of an Event of Default); and (F) all other property hereafter delivered in substitution for or in addition to any of the foregoing, all certificates and instruments representing or evidencing such other property and all cash, securities, interest, dividends, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof; -6- 7 (d) all Partnership Interests of such Pledgor from time to time and all of its right, title and interest in each partnership to which each such interest relates, whether now existing or hereafter acquired, including, without limitation: (A) all the capital thereof and its interest in all profits, losses, Partnership Assets and other distributions to which such Pledgor shall at any time be entitled in respect of such Partnership Interests; (B) all other payments due or to become due to such Pledgor in respect of Partnership Interests, whether under any partnership agreement, operating agreement or otherwise, whether as contractual obligations, damages, insurance proceeds or otherwise; (C) all of its claims, rights, powers, privileges, authority, options, security interests, liens and remedies, if any, under any partnership agreement or operating agreement, or at law or otherwise in respect of such Partnership Interests; (D) all present and future claims, if any, of such Pledgor against any such partnership for moneys loaned or advanced, for services rendered or otherwise; (E) all of such Pledgor's rights under any partnership agreement or operating agreement or at law to exercise and enforce every right, power, remedy, authority, option and privilege of such Pledgor relating to such Partnership Interests, including any power to terminate, cancel or modify any partnership agreement or operating agreement, to execute any instruments and to take any and all other action on behalf of and in the name of any of such Pledgor in respect of such Partnership Interests and any such partnership, to make determinations, to exercise any election (including, but not limited to, election of remedies) or option or to give or receive any notice, consent, amendment, waiver or approval, together with full power and authority to demand, receive, enforce, collect or receipt for any of the foregoing or for any Partnership Asset, to enforce or execute any checks, or other instruments or orders, to file any claims and to take any action in connection with any of the foregoing (with all of the foregoing rights only to be exercisable upon the occurrence and during the continuation of an Event of Default); and (F) all other property hereafter delivered in substitution for or in addition to any of the foregoing, all certificates and instruments representing or evidencing such other property and all cash, securities, interest, dividends, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof; (e) all Security Entitlements of such Pledgor from time to time in any and all of the foregoing; -7- 8 (f) all Financial Assets and Investment Property of such Pledgor from time to time; and (g) all Proceeds of any and all of the foregoing. Notwithstanding anything to the contrary contained in this Section 3.1, (x) no Pledgor (to the extent that it is the Borrower or a Domestic Subsidiary of the Borrower) shall be required at any time to pledge hereunder more than 65% of the Voting Stock of any Foreign Corporation and (y) each Pledgor shall be required to pledge hereunder 100% of any Non-Voting Stock at any time and from time to time acquired by such Pledgor of any Foreign Corporation. 3.2. Procedures. (a) To the extent that any Pledgor at any time or from time to time owns, acquires or obtains any right, title or interest in any Collateral, such Collateral shall automatically (and without the taking of any action by the respective Pledgor) be pledged pursuant to Section 3.1 of this Agreement and, in addition thereto, such Pledgor shall (to the extent provided below) take the following actions as set forth below (as promptly as practicable and, in any event, within 10 Business Days after it obtains such Collateral) for the benefit of the Pledgee and the Secured Creditors: (i) with respect to a Certificated Security (other than a Certificated Security credited on the books of a Clearing Corporation), the respective Pledgor shall physically deliver such Certificated Security to the Pledgee, endorsed to the Pledgee or endorsed in blank; (ii) with respect to an Uncertificated Security (other than an Uncertificated Security credited on the books of a Clearing Corporation), the respective Pledgor shall cause the issuer of such Uncertificated Security to duly authorize and execute, and deliver to the Pledgee, an agreement for the benefit of the Pledgee and the Secured Creditors substantially in the form of Annex G hereto (appropriately completed to the reasonable satisfaction of the Pledgee and with such modifications, if any, as shall be reasonably satisfactory to the Pledgee) pursuant to which such issuer agrees to comply with any and all instructions originated by the Pledgee without further consent by the registered owner and not to comply with instructions regarding such Uncertificated Security (and any Partnership Interests and Limited Liability Company Interests issued by such issuer) originated by any other Person other than a court of competent jurisdiction; (iii) with respect to a Certificated Security, Uncertificated Security, Partnership Interest or Limited Liability Company Interest credited on the books of a Clearing Corporation (including a Federal Reserve Bank, Participants Trust Company or The Depository Trust Company), the respective Pledgor shall promptly notify the Pledgee thereof and shall promptly take all actions required (i) to comply with the applicable rules of such Clearing Corporation and (ii) to perfect the security interest of the Pledgee under applicable law (including, in any event, under Sections 9-115 (4)(a) and (b), 9-115 (1)(e) and 8-106 (d) of the UCC). The Pledgor further agrees to take such actions as the Pledgee deems necessary or desirable to effect the foregoing; -8- 9 (iv) with respect to a Partnership Interest or a Limited Liability Company Interest (other than a Partnership Interest or Limited Liability Interest credited on the books of a Clearing Corporation), (1) if such Partnership Interest or Limited Liability Company Interest is represented by a certificate, the procedure set forth in Section 3.2(a)(i) hereof, and (2) if such Partnership Interest or Limited Liability Company Interest is not represented by a certificate, the procedure set forth in Section 3.2(a)(ii) hereof; (v) with respect to any Note, physical delivery of such Note to the Pledgee, endorsed to the Pledgee or endorsed in blank; and (vi) with respect to cash, (i) upon the request of the Pledgee, establishment by the Pledgee of a cash account in the name of such Pledgor over which the Pledgee shall have exclusive and absolute control and dominion (and no withdrawals or transfers may be made therefrom by any Person except with the prior written consent of the Pledgee) and (ii) deposit of such cash in such cash account. (b) In addition to the actions required to be taken pursuant to proceeding Section 3.2(a) hereof, each Pledgor shall take the following additional actions with respect to the Securities and Collateral (as defined below): (i) with respect to all Collateral of such Pledgor whereby or with respect to which the Pledgee may obtain "control" thereof within the meaning of Section 8-106 of the UCC (or under any provision of the UCC as same may be amended or supplemented from time to time, or under the laws of any relevant State other than the State of New York), the respective Pledgor shall take all actions as may be requested from time to time by the Pledgee so that "control" of such Collateral is obtained and at all times held by the Pledgee; and (ii) each Pledgor shall from time to time cause appropriate financing statements (on Form UCC-1 or other appropriate form) under the Uniform Commercial Code as in effect in the various relevant States, covering all Collateral hereunder (with the form of such financing statements to be satisfactory to the Pledgee), to be filed in the relevant filing offices so that at all times the Pledgee has a security interest in all Investment Property and other Collateral which is perfected by the filing of such financing statements (in each case to the maximum extent perfection by filing may be obtained under the laws of the relevant States, including, without limitation, Section 9-115(4)(b) of the UCC). 3.3 Subsequently Acquired Collateral. If any Pledgor shall acquire (by purchase, stock dividend or otherwise) any additional Collateral at any time or from time to time after the date hereof, such Collateral shall automatically (and without any further action being required to be taken) be subject to the pledge and security interests created pursuant to Section 3.1 hereof and, furthermore, the Pledgor will promptly thereafter take (or cause to be taken) all action with respect to such Collateral in accordance with the procedures set forth in Section 3.2 hereof, and will promptly thereafter deliver to the Pledgee (i) a certificate executed by a principal executive officer of such Pledgor describing such Collateral and certifying that the same has been duly pledged in favor of the Pledgee (for the benefit of the Secured Creditors) hereunder and (ii) -9- 10 supplements to Annexes A through F hereto as are necessary to cause such annexes to be complete and accurate at such time. Without limiting the foregoing, each Pledgor shall be required to pledge hereunder any shares of stock at any time and from time to time after the date hereof acquired by such Pledgor of any Foreign Corporation, provided that (x) no Pledgor (to the extent that it is the Borrower or a Domestic Subsidiary of the Borrower) shall be required at any time to pledge hereunder more than 65% of the Voting Stock of any Foreign Corporation and (y) each Pledgor shall be required to pledge hereunder 100% of any Non-Voting Stock at any time and from time to time acquired by such Pledgor of any Foreign Corporation. 3.4 Transfer Taxes. Each pledge of Collateral under Section 3.1 or Section 3.3 hereof shall be accompanied by any transfer tax stamps required in connection with the pledge of such Collateral. 3.5 Definition of Pledged Notes. All Notes at any time pledged or required to be pledged hereunder are hereinafter called the "Pledged Notes". 3.6 Certain Representations and Warranties Regarding the Collateral. Each Pledgor represents and warrants that on the date hereof (i) each Subsidiary of such Pledgor, and the direct ownership thereof, is listed in Annex A hereto; (ii) the Stock held by such Pledgor consists of the number and type of shares of the stock of the corporations as described in Annex B hereto; (iii) such Stock constitutes that percentage of the issued and outstanding capital stock of the issuing corporation as is set forth in Annex B hereto; (iv) the Notes held by such Pledgor consist of the promissory notes described in Annex C hereto where such Pledgor is listed as the lender; (v) the Limited Liability Company Interests held by such Pledgor consist of the number and type of interests of the Persons described in Annex D hereto; (vi) each such Limited Liability Company Interest constitutes that percentage of the issued and outstanding equity interest of the issuing Person as set forth in Annex D hereto; (vii) the Partnership Interests held by such Pledgor consist of the number and type of interests of the Persons described in Annex E hereto; (viii) each such Partnership Interest constitutes that percentage or portion of the entire partnership interest of the Partnership as set forth in Annex E hereto; (ix) the Pledgor has complied with the respective procedure set forth in Section 3.2(a) hereof with respect to each item of Collateral described in Annexes A through E hereto; and (x) on the date hereof, such Pledgor owns no other Securities, Limited Liability Company Interests or Partnership Interests. 4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. If and to the extent necessary to enable the Pledgee to perfect its security interest in any of the Collateral or to exercise any of its remedies hereunder, the Pledgee shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of the Collateral, which may be held (in the discretion of the Pledgee) in the name of the relevant Pledgor, endorsed or assigned in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or a sub-agent appointed by the Pledgee. 5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until there shall have occurred and be continuing an Event of Default, each Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Collateral owned by it, and to give consents, waivers or ratifications in respect thereof; provided, that, in each case, no vote shall -10- 11 be cast or any consent, waiver or ratification given or any action taken or omitted to be taken which would violate or be inconsistent with any of the terms of this Agreement, the Credit Agreement, any other Credit Document or any Interest Rate Protection Agreement or Other Hedging Agreement (collectively, the "Secured Debt Agreements"), or which would have the effect of impairing the value of the Collateral or any part thereof or the position or interests of the Pledgee or any other Secured Creditor in the Collateral. All such rights of each Pledgor to vote and to give consents, waivers and ratifications shall cease in case an Event of Default has occurred and is continuing, and Section 7 hereof shall become applicable. 6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless and until there shall have occurred and be continuing an Event of Default, all cash dividends, cash distributions, cash Proceeds and other cash amounts payable in respect of the Collateral shall be paid to the respective Pledgor (and may be used by such Pledgor for its general corporate purposes). The Pledgee shall be entitled to receive directly, and to retain as part of the Collateral: (i) all other or additional stock, notes, limited liability company interests, partnership interests, instruments or other securities or property (including cash dividends except as otherwise provided above) paid or distributed by way of dividend or otherwise in respect of the Collateral; (ii) all other or additional stock, notes, limited liability company interests, partnership interests, instruments or other securities or property (including, but not limited to, cash except as otherwise provided above) paid or distributed in respect of the Collateral by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and (iii) all other or additional stock, notes, limited liability company interests, partnership interests, instruments or other securities or property (including, but not limited to, cash except as otherwise provided above) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate reorganization. Nothing contained in this Section 6 shall limit or restrict in any way the Pledgee's right to receive proceeds of the Collateral in any form in accordance with Section 3 of this Agreement. All dividends, distributions or other payments which are received by any Pledgor contrary to the provisions of this Section 6 and Section 7 hereof shall be received in trust for the benefit of the Pledgee, shall be segregated from other property or funds of such Pledgor and shall be forthwith paid over to the Pledgee as Collateral in the same form as so received (with any necessary endorsement). 7. REMEDIES IN CASE OF EVENT OF DEFAULT. If there shall have occurred and be continuing an Event of Default, then and in every such case, the Pledgee shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement, any other Secured Debt Agreement or by law) for the protection and enforcement of its rights in respect of the Collateral, and the Pledgee shall be entitled to exercise all the rights and remedies of a secured party under the Uniform Commercial Code as in effect in any relevant jurisdiction and -11- 12 also shall be entitled, without limitation, to exercise the following rights, which each Pledgor hereby agrees to be commercially reasonable: (i) to receive all amounts payable in respect of the Collateral otherwise payable under Section 6 hereof to the respective Pledgor; (ii) subject to receipt of any approvals required under the Communications Act or the FCC Rules as provided in Section 19 hereof, to transfer all or any part of the Collateral into the Pledgee's name or the name of its nominee or nominees; (iii) to accelerate, subject to the terms thereof, any Pledged Note which may be accelerated in accordance with its terms, and take any other lawful action to collect upon any Pledged Note (including, without limitation, to make any demand for payment thereon of any amounts then due and payable); (iv) subject to receipt of any approvals required under the Communications Act or the FCC Rules as provided in Section 19 hereof, to vote all or any part of the Collateral (whether or not transferred into the name of the Pledgee) and give all consents, waivers and ratifications in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof (each Pledgor hereby irrevocably constituting and appointing the Pledgee the proxy and attorney-in-fact of such Pledgor, with full power of substitution to do so); (v) at any time and from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by each Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its absolute discretion may determine, provided that at least 10 days' written notice of the time and place of any such sale shall be given to the respective Pledgor. The Pledgee shall not be obligated to make any such sale of Collateral regardless of whether any such notice of sale has theretofore been given. Each Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshaling the Collateral and any other security for the Obligations or otherwise. At any such sale, unless prohibited by applicable law, the Pledgee on behalf of the Secured Creditors may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption. Neither the Pledgee nor any other Secured Creditor shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto; and (vi) to set-off any and all Collateral against any and all Obligations, and to withdraw any and all cash or other Collateral from any and all Collateral Accounts and to apply such cash and other Collateral to the payment of any and all Obligations. -12- 13 8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and remedy of the Pledgee provided for in this Agreement or in any other Secured Debt Agreement, or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Pledgee or any other Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement or any other Secured Debt Agreement or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee or any other Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee or any other Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof. No notice to or demand on any Pledgor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Pledgee or any other Secured Creditor to any other or further action in any circumstances without notice or demand. The Secured Creditors agree that this Agreement may be enforced only by the action of the Administrative Agent or the Pledgee, in each case acting upon the instructions of the Required Lenders (or, after the date on which all Credit Document Obligations have been paid in full, the holders of at least the majority of the outstanding Other Obligations) and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent or the Pledgee or the holders of at least a majority of the outstanding Other Obligations, as the case may be, for the benefit of the Secured Creditors upon the terms of this Agreement. 9. APPLICATION OF PROCEEDS. (a) All monies collected by the Pledgee upon any sale or other disposition of the Collateral pursuant to the terms of this Agreement, together with all other monies received by the Pledgee hereunder, shall be applied in the manner provided in the Security Agreement. (b) It is understood and agreed that the Pledgors shall remain jointly and severally liable to the extent of any deficiency between the amount of the proceeds of the Collateral hereunder and the aggregate amount of the Obligations. 10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or pur-chasers shall not be obligated to see to the application of any part of the purchase money paid over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. 11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to indemnify and hold harmless the Pledgee in such capacity and each other Secured Creditor and their respective successors, assigns, employees, agents, affiliates and servants (individually an "Indemnitee," and collectively the "Indemnitees") from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind or nature, and (ii) to reimburse each Indemnitee for all costs and expenses, including reasonable attorneys' fees, in each case -13- 14 growing out of or resulting from this Agreement or the exercise by any Indemnitee of any right or remedy granted to it hereunder or under any other Secured Debt Agreement (but excluding any claims, demands, losses, judgments and liabilities or expenses to the extent incurred by reason of gross negligence or willful misconduct of such Indemnitee as finally determined by a court of competent jurisdiction). In no event shall the Pledgee be liable, in the absence of gross negligence or willful misconduct on its part, for any matter or thing in connection with this Agreement other than to account for monies actually received by it in accordance with the terms hereof. If and to the extent that the obligations of any Pledgor under this Section 11 are unenforceable for any reason, such Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 12. PLEDGEE NOT A PARTNER OR LIMITED LIABILITY COMPANY MEMBER. (a) Nothing herein shall be construed to make the Pledgee or any other Secured Creditor liable as a member of any limited liability company or as a partner of any partnership and neither the Pledgee nor any other Secured Creditor by virtue of this Agreement or otherwise (except as referred to in the following sentence) shall have any of the duties, obligations or liabilities of a member of any limited liability company or of a partner of any partnership. The parties hereto expressly agree that, unless the Pledgee shall become the absolute owner of Collateral consisting of a Limited Liability Company Interest or Partnership Interest pursuant hereto, this Agreement shall not be construed as creating a partnership or joint venture among the Pledgee, any other Secured Creditor and/or any Pledgor. (b) Except as provided in the last sentence of paragraph (a) of this Section 12, the Pledgee, by accepting this Agreement, did not intend to become a member of any limited liability company or a partner of any partnership or otherwise be deemed to be a co-venturer with respect to any Pledgor or any limited liability company or partnership either before or after an Event of Default shall have occurred. The Pledgee shall have only those powers set forth herein and the Secured Creditors shall assume none of the duties, obligations or liabilities of a member of any limited liability company or of a partner of any partnership or any Pledgor except as provided in the last sentence of paragraph (a) of this Section 12. (c) The Pledgee and the other Secured Creditors shall not be obligated to perform or discharge any obligation of any Pledgor as a result of the pledge hereby effected. (d) The acceptance by the Pledgee of this Agreement, with all the rights, powers, privileges and authority so created, shall not at any time or in any event obligate the Pledgee or any other Secured Creditor to appear in or defend any action or proceeding relating to the Collateral to which it is not a party, or to take any action hereunder or thereunder, or to expend any money or incur any expenses or perform or discharge any obligation, duty or liability under the Collateral. 13. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) Each Pledgor agrees that it will join with the Pledgee in executing and, at such Pledgor's own expense, file and refile under the Uniform Commercial Code or other applicable law such financing statements, continuation statements and other documents in such offices as the Pledgee may deem necessary and wherever required by law in order to perfect and preserve the Pledgee's security interest in -14- 15 the Collateral and hereby authorizes the Pledgee to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of such Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments as the Pledgee may reasonably require or deem necessary to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee its rights, powers and remedies hereunder. (b) Subject to the Communications Act and the FCC Rules to the extent applicable, each Pledgor hereby appoints the Pledgee such Pledgor's attorney-in-fact, with full authority in the place and stead of such Pledgor and in the name of such Pledgor or otherwise, to act from time to time solely after the occurrence and during the continuance of an Event of Default in the Pledgee's reasonable discretion to take any action and to execute any instrument which the Pledgee may deem necessary or advisable to accomplish the purposes of this Agreement. (c) Each Pledgor agrees that, in the event of any change in any requirement of law occurring after the date hereof that affects in any manner the Pledgee's rights of access to, or use or sale of the FCC Licenses or the procedures necessary to enable the Pledgee to obtain such rights of access, use or sale (including, without limitation, changes allowing greater such access), each Pledgor upon request of the Pledgee or the Required Lenders, shall enter into an amendment to this Agreement in form and substance satisfactory to the Pledgee to provide the Pledgee and the Secured Creditors with such rights to the greatest extent possible consistent with then applicable requirements of law, including without limitation the Communications Act and the FCC Rules. 14. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed by each Secured Creditor that by accepting the benefits of this Agreement each such Secured Creditor acknowledges and agrees that the obligations of the Pledgee as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Pledgee shall act hereunder on the terms and conditions set forth herein and in Section 12 of the Credit Agreement. 15. TRANSFER BY THE PLEDGORS. No Pledgor will sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein (except as may be permitted in accordance with the terms of the Credit Agreement). 16. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGORS. (a) Each Pledgor represents, warrants and covenants that: (i) it is the legal, beneficial and record owner of, and has good and marketable title to, all Collateral consisting of one or more Securities and that it has sufficient interest in all Collateral in which a security interest is purported to be created hereunder for such security interest to attach (subject, in each case, to no pledge, lien, mortgage, -15- 16 hypothecation, security interest, charge, option, Adverse Claim or other encumbrance whatsoever, except the liens and security interests created by this Agreement); (ii) it has full power, authority and legal right to pledge all the Collateral pledged by it pursuant to this Agreement; (iii) this Agreement has been duly authorized, executed and delivered by such Pledgor and constitutes a legal, valid and binding obligation of such Pledgor enforceable against such Pledgor in accordance with its terms, except to the extent that the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law); (iv) except to the extent already obtained or made, no consent of any other party (including, without limitation, any stockholder, partner, member or creditor of such Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by such Pledgor in connection with (a) the execution, delivery or performance of this Agreement, (b) the validity or enforceability of this Agreement (except as set forth in clause (iii) above), (c) the perfection or enforceability of the Pledgee's security interest in the Collateral or (d) except for compliance with or as may be required by applicable securities laws, the exercise by the Pledgee of any of its rights or remedies provided herein; (v) the execution, delivery and performance of this Agreement will not violate any provision of any applicable law or regulation or of any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign, applicable to such Pledgor, or of the certificate of incorporation, operating agreement, limited liability company agreement, partnership agreement or by-laws of such Pledgor or of any securities issued by such Pledgor or any of its Subsidiaries, or of any mortgage, deed of trust, indenture, lease, loan agreement, credit agreement or other material contract, agreement or instrument or undertaking to which such Pledgor or any of its Subsidiaries is a party or which purports to be binding upon such Pledgor or any of its Subsidiaries or upon any of their respective assets and will not result in the creation or imposition of (or the obligation to create or impose) any lien or encumbrance on any of the assets of such Pledgor or any of its Subsidiaries except as contemplated by this Agreement; (vi) all of the Collateral (consisting of Securities, Limited Liability Company Interests or Partnership Interests) has been duly and validly issued and acquired, is fully paid and non-assessable and is subject to no options to purchase or similar rights; (vii) the pledge, collateral assignment and delivery to the Pledgee of the Collateral consisting of Certificated Securities (together with instruments of transfer therefor) pursuant to this Agreement creates a valid and perfected first priority security interest in such Certificated Securities, and the proceeds thereof, subject to no prior Lien or encumbrance or to any agreement purporting to grant to any third party a Lien or -16- 17 encumbrance on the property or assets of such Pledgor which would include the Securities, and the Pledgee is entitled to all the rights, priorities and benefits afforded by the UCC or other relevant law as enacted in any relevant jurisdiction to perfect security interests in respect of such Collateral; and (viii) "control" (as defined in Section 8-106 of the UCC) has been obtained by the Pledgee over all Collateral consisting of Securities (including Notes which are Securities) with respect to which such "control" may be obtained pursuant to Section 8-106 of the UCC. (b) Each Pledgor covenants and agrees that it will defend the Pledgee's right, title and security interest in and to the Securities and the proceeds thereof against the claims and demands of all persons whomsoever; and each Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Collateral hereunder and will likewise defend the right thereto and security interest therein of the Pledgee and the other Secured Creditors. (c) Each Pledgor covenants and agrees that it will take no action which would violate any of the terms of any Secured Debt Agreement. 17. CHIEF EXECUTIVE OFFICE; RECORDS. The chief executive office of each Pledgor is located at the address specified in Annex F hereto for such Pledgor. Each Pledgor will not move its chief executive office except to such new location as such Pledgor may establish in accordance with the last sentence of this Section 17. The originals of all documents in the possession of such Pledgor evidencing all Collateral, including but not limited to all Limited Liability Company Interests and Partnership Interests, and the only original books of account and records of such Pledgor relating thereto are, and will continue to be, kept at such chief executive office as specified in Annex F hereto, or at such new locations as such Pledgor may establish in accordance with the last sentence of this Section 17. All Limited Liability Company Interests and Partnership Interests are, and will continue to be, maintained at, and controlled and directed (including, without limitation, for general accounting purposes) from, such chief executive office as specified in Annex F hereto, or such new locations as such Pledgor may establish in accordance with the last sentence of this Section 17. No Pledgor shall establish a new location for such offices until (i) it shall have given to the Pledgee not less than 15 days' prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Pledgee may reasonably request and (ii) with respect to such new location, it shall have taken all action, satisfactory to the Pledgee, to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. Promptly after establishing a new location for such offices in accordance with the immediately preceding sentence, the respective Pledgor shall deliver to the Pledgee a supplement to Annex F hereto so as to cause such Annex F hereto to be complete and accurate. 18. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or -17- 18 otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (i) any renewal, extension, amendment or modification of or addition or supplement to or deletion from any Secured Debt Agreement or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (ii) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument including, without limitation, this Agreement; (iii) any furnishing of any additional security to the Pledgee or its assignee or any acceptance thereof or any release of any security by the Pledgee or its assignee; (iv) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; or (v) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to any Pledgor or any Subsidiary of any Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not such Pledgor shall have notice or knowledge of any of the foregoing. 19. ACTIONS REQUIRING FCC APPROVAL. (a) Notwithstanding anything to the contrary contained in this Agreement, or any of the documents executed pursuant hereto, the Pledgee will not take any action pursuant to this Agreement, or any such documents, which would constitute or result in any assignment of any FCC License or any transfer of control of the holder of any FCC License if such assignment of such License or such transfer of control would require under then existing law (including the Communications Act or the FCC Rules) the prior approval of the FCC, without first obtaining such approval. In connection with this Section 19 the Pledgee shall be entitled to rely upon the advice of FCC counsel of the Pledgee's choice with respect to such assignment or transfer (including to determine whether any such assignment or transfer has occurred or will occur and whether or not prior approval of the FCC is required) whether or not the advice rendered is ultimately determined to have been accurate. (b) If an Event of Default shall have occurred and be continuing, the relevant Pledgor shall take any action which the Pledgee may request in the exercise of its rights and remedies under this Agreement in order to transfer or assign the Collateral to the Pledgee or to such one or more third parties as the Pledgee may designate, or to a combination of the foregoing. To enforce the provisions of this Section 19, after an Event of Default shall have occurred and be continuing, the Pledgee is empowered to request, and each Pledgor agrees to authorize, the appointment of a receiver or trustee from any court of competent jurisdiction. Such receiver or trustee shall be instructed to seek from the FCC (and any other governmental authority) such consent or approval as may be required by the Communications Act and the FCC Rules for any assignment of the assets of or transfer of control of any or all of the FCC Licenses or of any Person whose stock, partnership interests or other equity interest is subject to this Agreement to the extent required for such trustee or receiver to assume such control for the purpose of seeking a bona fide purchaser to whom such FCC Licenses will be assigned or control of such entity ultimately will be transferred. Each Pledgor agrees, at such Pledgor's own cost and expense, to cooperate with any such trustee or receiver, or at such trustee's or receiver's direction, a bona-fide purchaser and with the Pledgee in the preparation, execution and filing of any applications and other documents and providing any information that may be necessary or helpful in obtaining the FCC's consent to the assignment or transfer to such trustee or receiver, or at such trustee's or receiver's direction, such purchaser of the Collateral or any of the FCC Licenses. To the fullest -18- 19 extent permitted by applicable law, each Pledgor hereby agrees to consent to and authorize any such transfer of control upon the request of the Pledgee after the occurrence and during the continuation of an Event of Default and, without limiting any rights of the Pledgee under this Agreement, to authorize the Pledgee to nominate a trustee or receiver to assume control of the Collateral, subject only to any required consents, approvals or orders of courts of competent jurisdiction, the FCC or other governmental authorities, for the purpose of effectuating the transactions contemplated in this Section 19(b). Such trustee or receiver shall have all the rights and powers as provided to it by law, court order or the Pledgee under this Agreement. Each Pledgor shall cooperate fully and use its best efforts in obtaining the consent of the FCC and the approval or consent of each other governmental authority required to effectuate the foregoing. (c) Each Pledgor shall use its best efforts to assist in obtaining consent or approval of the FCC, any court and any other governmental authority, if required, for any action or transactions contemplated by this Agreement, including, without limitation, the preparation, execution and filing with the FCC of the transferor's or assignor's portion of any application or applications for consent to the transfer of control or assignment necessary or appropriate under the FCC's policies, rules and regulations for approval of the transfer or assignment of all or any portion of the Collateral. (d) Each Pledgor hereby acknowledges and agrees that the FCC Licenses are unique assets and that a violation of such Pledgor's covenant to cooperate with respect to the obtainment of any regulatory consents would result in irreparable harm to the Pledgee for which monetary damages are not readily ascertainable. Each Pledgor further agrees that, because of the unique nature of its undertakings in this Section 19, the same may be specifically enforced, and such Pledgor hereby waives, and agrees to waive, any claim or defense that the Pledgee would have an adequate remedy at law for the breach of such undertakings and any requirement for the posting of bond or other certificate. (e) Without limiting the obligations of any Pledgor hereunder in any respect, each Pledgor further agrees that if such Pledgor, upon or after the occurrence and during the continuance of an Event of Default, should fail or refuse to execute any application or other document necessary or appropriate to obtain any governmental consent necessary or appropriate for the exercise of any right of the Pledgee hereunder, such Pledgor agrees that, to the full extent permitted by the Communications Act and the FCC Rules, such application or other document may be executed on such Pledgor's behalf by the clerk of any court or other forum in any competent jurisdiction without notice to such Pledgor. (f) This Section 19 shall not limit any other rights or remedies of the Pledgee or the Secured Creditors available under applicable law including, without limitation, the Communications Act and the FCC Rules. 20. REGISTRATION, ETC. (a) If there shall have occurred and be continuing an Event of Default then, and in every such case, upon receipt by any Pledgor from the Pledgee of a written request or requests that such Pledgor cause any registration, qualification or compliance under any Federal or state securities law or laws to be effected with respect to all or any part of the Collateral consisting of Securities, Limited Liability Company Interests or -19- 20 Partnership Interests, such Pledgor as soon as practicable and at its expense will use its reasonable best efforts to cause such registration to be effected (and be kept effective) and will use its reasonable best efforts to cause such qualification and compliance to be declared effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Collateral, including, without limitation, registration under the Securities Act, as then in effect (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other government requirements, provided that the Pledgee shall furnish to such Pledgor such information regarding the Pledgee as such Pledgor may reasonably request in writing and as shall be required in connection with any such registration, qualification or compliance. Such Pledgor will cause the Pledgee to be kept advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to the Pledgee such number of prospectuses, offering circulars or other documents incident thereto as the Pledgee from time to time may reasonably request, and will indemnify the Pledgee, each other Secured Creditor and all others participating in the distribution of such Collateral against all claims, losses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement or other offering document) or by any omission (or alleged omission) to state therein (or in any related registration statement or other offering document) a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same may have been caused by an untrue statement or omission based upon information furnished in writing to such Pledgor by the Pledgee or such other Secured Creditor expressly for use therein. (b) If at any time when the Pledgee shall determine to exercise its right to sell all or any part of the Collateral consisting of Securities, Limited Liability Company Interests or Partnership Interests pursuant to Section 7 hereof, and the Collateral or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act, as then in effect, the Pledgee may, in its sole and absolute discretion, sell such Collateral, as the case may be, or part thereof by private sale in such manner and under such circumstances as the Pledgee may deem necessary or advisable in order that such sale may legally be effected without such registration. Without limiting the generality of the foregoing, in any such event the Pledgee, in its sole and absolute discretion (i) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Collateral or part thereof shall have been filed under such Securities Act, (ii) may approach and negotiate with a single possible purchaser to effect such sale, and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Collateral or part thereof. In the event of any such sale, the Pledgee shall incur no responsibility or liability for selling all or any part of the Collateral at a price which the Pledgee, in its sole and absolute discretion, in good faith deems reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until after registration as aforesaid. 21. TERMINATION; RELEASE. (a) After the Termination Date, this Agreement and the security interest created hereby shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 11 hereof shall survive any such termination), and the Pledgee, at the request and expense of any Pledgor, will execute and deliver to such -20- 21 Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any monies at the time held by the Pledgee or any of its sub-agents hereunder. As used in this Agreement, "Termination Date" shall mean the date upon which the Total Commitment and all Interest Rate Protection Agreements and Other Hedging Agreements have been terminated, no Note under the Credit Agreement is outstanding (and all Loans have been repaid in full), all Letters of Credit have been terminated and all Obligations then due and payable have been paid in full. (b) In the event that any part of the Collateral is sold in connection with a sale permitted by Section 9.02 of the Credit Agreement (other than a sale to any Pledgor or any Subsidiary of any Pledgor) or is otherwise released at the direction of the Required Lenders (or all the Lenders if required by Section 13.12 of the Credit Agreement) and the proceeds of such sale or sales or from such release are applied in accordance with the provisions of the Credit Agreement, to the extent required to be so applied, the Pledgee, at the request and expense of any Pledgor, will duly assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral (and releases therefor) as is then being (or has been) so sold or released and has not theretofore been released pursuant to this Agreement. (c) At any time that a Pledgor desires that the Pledgee assign, transfer and deliver Collateral (and releases therefor) as provided in Section 21(a) or (b) hereof, it shall deliver to the Pledgee a certificate signed by an officer of such Pledgor stating that the release of the respective Collateral is permitted pursuant to such Section 21(a) or (b). (d) The Pledgee shall have no liability whatsoever to any other Secured Creditor as the result of any release of Collateral by it in accordance with this Section 21. 22. NOTICES, ETC. All such notices and communications provided for hereunder shall be in writing (including telegraphic, telex, telecopier or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered to the appropriate address set forth below. All such notices and communications shall, when mailed, telegraphed, telexed, telecopied, or cabled or sent by overnight courier, be effective when deposited in the mails, delivered to the telegraph company, cable company or overnight courier, as the case may be, or sent by telex or telecopier, except that notices and communications to (x) the Pledgee shall not be effective until received by the Pledgee and (y) any Pledgor shall not be effective until received by any such Pledgor, as the case may be. All notices and other communications shall be in writing and addressed as follows: (a) if to any Pledgor, at the address set forth opposite such Pledgor's signature below; -21- 22 (b) if to the Pledgee, at: Bankers Trust Company One Bankers Trust Plaza 130 Liberty Street New York, NY 10006 Attention: Greg Shefrin Telephone No.: (212) 250-1724 Telecopier No.: (212) 250-7218 (c) if to any Lender Creditor, either (x) to the Administrative Agent, at the address of the Administrative Agent specified in the Credit Agreement or (y) at such address as such Lender Creditor shall have specified in the Credit Agreement; (d) if to any Other Creditor at such address as such Other Creditor shall have specified in writing to the Pledgors and the Pledgee; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 23. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Pledgor directly affected thereby and the Pledgee (with the written consent of either (x) the Required Lenders (or all of the Lenders to the extent required by Section 13.12 of the Credit Agreement) at all times prior to the time when all Credit Document Obligations have been paid in full or (y) the holders of at least a majority of the outstanding Other Obligations at all times after the time when all Credit Document Obligations have been paid in full); provided that any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall also require the written consent of the Requisite Creditors (as defined below) of such affected Class. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, i.e., whether (i) the Lender Creditors as holders of the Credit Document Obligations or (ii) the Other Creditors as the holders of the Other Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (i) with respect to the Credit Document Obligations, the Required Lenders and (ii) with respect to the Other Obligations, the holders of at least a majority of all obligations outstanding from time to time under the Interest Rate Protection Agreements and Other Hedging Agreements. 24. MISCELLANEOUS. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of and be enforceable by each of the parties hereto and its successors and assigns, provided that no Pledgor may assign any of its rights or obligations under this Agreement without the prior consent of the Collateral Agent. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. EACH PLEDGOR IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION PROCEEDING OR COUNTERCLAIM ARISING -22- 23 OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. The headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto. EACH PLEDGOR HEREBY IRREVOCABLY CONSENTS TO AND WAIVES ANY RIGHT TO OBJECT TO OR OTHERWISE CONTEST THE APPOINTMENT OF A RECEIVER AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT. EACH PLEDGOR HEREBY GRANTS SUCH CONSENT AND WAIVER KNOWINGLY AFTER HAVING DISCUSSED THE IMPLICATIONS THEREOF WITH COUNSEL, ACKNOWLEDGES THAT THE UNCONTESTED RIGHT TO HAVE A RECEIVER APPOINTED FOR THE FOREGOING PURPOSES IS CONSIDERED ESSENTIAL BY THE PLEDGEE AND THE SECURED CREDITORS IN CONNECTION WITH THE ENFORCEMENT OF THEIR RIGHTS AND REMEDIES HEREUNDER AND UNDER THE OTHER CREDIT DOCUMENTS, AND THE AVAILABILITY OF SUCH APPOINTMENT AS A REMEDY UNDER THE FOREGOING CIRCUMSTANCES WAS A MATERIAL FACTOR IN INDUCING THE LENDERS TO MAKE (AND COMMIT TO MAKE) LOANS TO THE BORROWER AND IN INDUCING THE OTHER CREDITORS TO ENTER INTO INTEREST RATE PROTECTION AGREEMENTS AND OTHER HEDGING AGREEMENTS WITH THE BORROWER, AND AGREES TO ENTER INTO ANY AND ALL STIPULATIONS IN ANY LEGAL ACTIONS, OR AGREEMENTS OR OTHER INSTRUMENTS IN CONNECTION WITH THE FOREGOING AND TO COOPERATE FULLY WITH THE PLEDGEE AND THE REQUIRED LENDERS, OR, THE HOLDERS OF A MAJORITY OF THE OTHER OBLIGATIONS, AS THE CASE MAY BE, IN CONNECTION WITH THE ASSUMPTION AND EXERCISE OF CONTROL BY THE RECEIVER OVER ALL OR ANY PORTION OF THE COLLATERAL. 25. RECOURSE. This Agreement is made with full recourse to the Pledgors and pursuant to and upon all the representations, warranties, covenants and agreements on the part of the Pledgors contained herein and in the other Secured Debt Agreements and otherwise in writing in connection herewith or therewith. 26. ADDITIONAL PLEDGORS. It is understood and agreed that any Subsidiary of the Borrower that is required to execute a counterpart of this Agreement after the date hereof pursuant to Section 8.13 or 9.15 of the Credit Agreement shall automatically become a Pledgor hereunder by executing a counterpart hereof and delivering the same to the Pledgee. * * * * -23- 24 IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written. Address: PAGEMART WIRELESS, INC., 3333 Lee Parkway, Suite 100 as a Pledgor Dallas, TX 75219 Attention: G. Clay Myers Telephone: (214) 765-3510 Telecopier: (214) 765-4961 By --------------------------------------- Name: Title: Accepted and Agreed to: BANKERS TRUST COMPANY, as Collateral Agent and Pledgee By ------------------------------------ Name: Title: 25 ANNEX A to PLEDGE AGREEMENT LIST OF SUBSIDIARIES 26 ANNEX B to PLEDGE AGREEMENT LIST OF STOCK I. PageMart Wireless, Inc.
Percentage of Relevant Sub- Number Outstanding Shares Clause of Name of Issuing Certificate Type of of of Section 3.2(a) Corporation Number Shares Shares Capital Stock of Pledge Agreement ----------- ------ ------ ------ ------------- ------------------- =========== ====== ====== ====== ============= ===================
27 ANNEX C to PLEDGE AGREEMENT LIST OF NOTES I. PageMart Wireless, Inc.
Amount Maturity Date Obligor Relevant Sub-clause of - ------ ------------- ------- Section 3.2(a) of Pledge Agreement -------------------
28 ANNEX D to PLEDGE AGREEMENT LIST OF LIMITED LIABILITY COMPANY INTERESTS 29 ANNEX E to PLEDGE AGREEMENT LIST OF PARTNERSHIP INTERESTS 30 ANNEX F to PLEDGE AGREEMENT LIST OF CHIEF EXECUTIVE OFFICES I. PageMart Wireless, Inc. 31 ANNEX G to PLEDGE AGREEMENT Form of Agreement Regarding Uncertificated Securities, Limited Liability Company Interests and Partnership Interests AGREEMENT (as amended, modified or supplemented from time to time, this "Agreement"), dated as of _______ __, ____, among each of the undersigned pledgors (each a "Pledgor" and, collectively, the "Pledgors"), Bankers Trust Company, not in its individual capacity but solely as Collateral Agent, under, and as defined in, the Pledge Agreement referred to below, (the "Pledgee"), and __________, as the issuer of the Uncertificated Securities, Limited Liability Company Interests and/or Partnership Interests (each as defined below) (the "Issuer"). W I T N E S S E T H : WHEREAS, each Pledgor and the Pledgee have entered into a Pledge Agreement, dated as of March 23, 1999 (as amended, amended and restated, modified or supplemented from time to time, the "Pledge Agreement"), under which, among other things, in order to secure the payment of the Obligations (as defined in the Pledge Agreement), each Pledgor will pledge to the Pledgee for the benefit of the Secured Creditors (as defined in the Pledge Agreement), and grant a security interest in favor of the Pledgee for the benefit of the Secured Creditors in, all of the right, title and interest of such Pledgor in and to any and all (1) "uncertificated securities" (as defined in Section 8-102(a)(18) of the Uniform Commercial Code, as adopted in the State of New York) ("Uncertificated Securities"), (2) Partnership Interests (as defined in the Pledge Agreement) and (3) Limited Liability Company Interests (as defined in the Pledge Agreement), in each case issued from time to time by the Issuer, whether now existing or hereafter from time to time acquired by such Pledgor (with all of such Uncertificated Securities, Partnership Interests and Limited Liability Company Interests being herein collectively called the "Issuer Pledged Interests"); and WHEREAS, each Pledgor desires the Issuer to enter into this Agreement in order to perfect the security interest of the Pledgee under the Pledge Agreement in the Issuer Pledged Interests, to vest in the Pledgee control of the Issuer Pledge Interests and to provide for the rights of the parties under this Agreement; NOW THEREFORE, in consideration of the premises and the mutual promises and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Each Pledgor hereby irrevocably authorizes and directs the Issuer, and the Issuer hereby agrees, to comply with any and all instructions and orders originated by the Pledgee (and its successors and assigns) regarding any and all of the Issuer Pledged Interests without the further consent by the registered owner (including the respective Pledgor), and not to comply 32 with any instructions or orders regarding any or all of the Issuer Pledged Interests originated by any person or entity other than the Pledgee (and its successors and assigns) or a court of competent jurisdiction. 2. The Issuer hereby certifies that (i) no notice of any security interest, lien or other encumbrance or claim affecting the Issuer Pledged Interests (other than the security interest of the Pledgee) has been received by it, and (ii) the security interest of the Pledgee in the Issuer Pledged Interests has been registered in the books and records of the Issuer. 3. The Issuer hereby represents and warrants that (i) the pledge by the Pledgors of, and the granting by the Pledgors of a security interest in, the Issuer Pledged Interests to the Pledgee, for the benefit of the Secured Creditors, does not violate the charter, by-laws, partnership agreement, membership agreement or any other agreement governing the Issuer or the Issuer Pledged Interests, and (ii) the Issuer Pledged Interests are fully paid and nonassessable. 4. All notices, statements of accounts, reports, prospectuses, financial statements and other communications to be sent to any Pledgor by the Issuer in respect of the Issuer will also be sent to the Pledgee at the following address: Bankers Trust Company One Bankers Trust Plaza 130 Liberty Street New York, NY 10006 Attention: Greg Shefrin Tel: (212) 250-1724 Fax: (212) 250-7218 5. Until the Pledgee shall have delivered written notice to the Issuer that all of the Obligations have been paid in full and this Agreement is terminated, the Issuer will send any and all redemptions, distributions, interest or other payments in respect of the Issuer Pledged Interests from the Issuer for the account of the Pledgor only by wire transfers to the following address: ___________________ ___________________ ___________________ ___________________ ABA No.: ___________________________ Account in the Name of: ___________ Account No.: ______________________ 6. Except as expressly provided otherwise in Sections 4 and 5 above, all notices, instructions, orders and communications hereunder shall be sent or delivered by mail, telex, telecopy or overnight courier service and all such notices and communications shall, when mailed, telexed, telecopied or sent by overnight courier, be effective when deposited in the mails or delivered to the overnight courier, prepaid and properly addressed for delivery on such or the next Business Day, or sent by telex or telecopier, except that notices and communications to the Pledgee shall not be effective until received by the Pledgee. All notices and other communications shall be in writing and addressed as follows: 2 -25- 33 (a) if to any Pledgor, at: PageMart Wireless, Inc. 3333 Lee Parkway, Suite 100 Dallas, TX 75219 Attention: G. Clay Myers Tel.: (214) 765-3510 Fax: (214) 765-4961 (b) if to the Pledgee, at: Bankers Trust Company One Bankers Trust Plaza 130 Liberty Street New York, NY 10006 Attention: Greg Shefrin Tel: (212) 250-1724 Fax: (212) 250-7218 (c) if to the Issuer, at: ___________________ ___________________ ___________________ Attention: ___________________ Telephone No.:_________________ Telecopier No.:________________ or at such other address as shall have been furnished in writing by any person described above to the party required to give notice hereunder. As used in this Section 6, "Business Day" means any day other than a Saturday, Sunday, or other day in which banks in New York are authorized to remain closed. 7. This Agreement shall be binding upon the successors and assigns of each Pledgor and the Issuer and shall inure to the benefit of and be enforceable by the Pledgee and its successors and assigns. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever except in writing signed by the Pledgee, the Issuer and any Pledgor which at such time owns any Issuer Pledged Interests. 3 34 8. This Agreement shall be governed by and construed in accordance with the law of the State of New York, without regard to its principles of conflict of laws. IN WITNESS WHEREOF, each Pledgor, the Pledgee and the Issuer have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written. [____________________________],(1) as a Pledgor By --------------------------------------- Name: Title: BANKERS TRUST COMPANY, not in its individual capacity but solely as Collateral Agent and Pledgee By --------------------------------------- Name: Title: [____________________________], the Issuer By --------------------------------------- Name: Title: - --------------- (1) Insert signature block for each Pledgor party to this Agreement. 4 EX-10.21 7 RESALE AGMT DATED 9/1/98 BETWEEN PAGEMART & GTE 1 EXHIBIT 10.21 Agreement Number: C989107SC001 RESALE AGREEMENT BETWEEN GTE COMMUNICATION SYSTEMS CORPORATION AND PAGEMART WIRELESS, INC. CONTRACT MANAGER: GALE L. MARVIN PageMart 09/28/98 -CONFIDENTIAL- 2 TABLE OF CONTENTS 1. TERM.....................................................................................................1 2. DEFINITIONS..............................................................................................1 3. LICENSE..................................................................................................3 4. INDEPENDENT PARTIES......................................................................................3 5. SCOPE....................................................................................................4 6. LICENSOR RESPONSIBILITIES................................................................................4 7. RESELLER RESPONSIBILITIES................................................................................4 8. LIQUIDATED DAMAGES.......................................................................................6 9. PUBLIC REGULATION........................................................................................6 10. PRICING..................................................................................................7 11. AUTHORIZED EQUIPMENT.....................................................................................8 12. BILLING/TERMS OF PAYMENT.................................................................................9 13. PRECEDENCE OF DOCUMENTS..................................................................................9 14. USE OF CONFIDENTIAL INFORMATION..........................................................................9 15. PUBLICITY...............................................................................................11 16. TRADEMARKS AND TRADE NAMES..............................................................................12 17. COMPLIANCE WITH LAWS....................................................................................12 18. FORCE MAJEURE...........................................................................................12 19. CENTURY COMPLIANCE......................................................................................12 20. INDEMNIFICATION.........................................................................................13 21. WARRANTY................................................................................................15 22. INFRINGEMENT............................................................................................16 23. PERMITS.................................................................................................17 24. ASSIGNMENT..............................................................................................17 25. TAXES...................................................................................................18 26. RECORDS.................................................................................................18 27. RIGHT OF ACCESS.........................................................................................18 28. TERMINATION.............................................................................................18 29. DISPUTE RESOLUTION......................................................................................20 30. NOTICES.................................................................................................21 31. NONWAIVER...............................................................................................22 32. SEVERABILITY............................................................................................22 33. SECTION HEADINGS........................................................................................22 34. SURVIVAL OF OBLIGATIONS.................................................................................22 35. CHOICE OF LAW...........................................................................................22 36. ENTIRE AGREEMENT........................................................................................23 37. SIGNATURES..............................................................................................23
EXHIBIT A-Affiliates Exhibit E-Reseller National Account Service Commitment EXHIBIT B-Service Level Agreement Exhibit F-Technical Standards EXHIBIT C-Pricing EXHIBIT D-Authorized Equipment
PageMart 09/28/98 -CONFIDENTIAL- 3 RESALE AGREEMENT This Resale Agreement (this "Agreement") is made and entered into effective as of September 1, 1998, 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 75219-5111 (hereinafter referred to as "LICENSOR") and GTE Communication Systems Corporation, acting through its GTE Supply division, for the benefit of itself and the affiliated companies listed in Exhibit A ("Affiliates"), which may be modified from time to time by RESELLER, with offices at 700 Hidden Ridge, Irving, Texas 75038 (hereinafter referred to as "RESELLER"). WHEREAS, LICENSOR provides paging and wireless messaging services, voice messaging services, and customer support services (the "Services"); and WHEREAS, RESELLER desires to contract with LICENSOR to resell the Services in accordance with Exhibit B, Service Level Agreement and, in connection therewith, to receive blocks of PINS, Capcodes and DIDs (each as defined below). WHEREAS, RESELLER desires to contract with LICENSOR to resell such Services and, in connection therewith, to receive access ports and codes to LICENSOR's paging, administrative and data systems. THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties agree as follows: 1. TERM This Agreement shall be effective on September 1, 1998 and shall continue in effect thereafter until August 31, 2001, unless terminated or modified 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 expiration date. RESELLER may unilaterally renew this Agreement for additional periods of three years by providing LICENSOR with written notice not less than thirty (30) days prior to the expiration date of this or a succeeding contract term. This Agreement supersedes Agreement 999999-93-12 dated November 1, 1993 and as amended but will not supersede any current Agreement with any other Affiliate. 2. DEFINITIONS a. Staffed Coverage - Coverage of any help desk or other service which is staffed by a LICENSOR employed live-person for real-time interaction with RESELLER. b. DID - A local telephone number assigned by RESELLER or LICENSOR to identify a specific pager on the LICENSOR's network. By dialing the DID, the telephone network will switch the call to a LICENSOR owned terminal, and the terminal will associate the specific number with a specific pager/paging device on the LICENSOR's network. c. Equipment - Pagers and related message receiving devices. PageMart 09/28/98 -CONFIDENTIAL- 4 d. Interconnections - Any and all devices, services, circuits, systems, or related items which connect any of the LICENSOR's various systems (including, but not limited to; Paging Systems, Administrative Systems, And Activation Systems). e. Modification - Any addition, deletion, or reconfiguration to any and/or all hardware and/or software associated with any networks, network nodes, system, or system nodes. f. Network Node And/or System Node - Any portion or individual piece of any network or system which is intended to perform a function which allows the network or system to fulfill its intended function. g. Non-functional - Not performing the function intended by manufacturer, LICENSOR design, or portrayed to RESELLER via coverage maps and/or other LICENSOR provided information. h. Subscriber - A person or entity whose account is owned by the RESELLER and whose services are provided by use of all or part of the LICENSOR's Paging System. i. Upgrade - Any addition of hardware or software which is intended to improve or modify the performance of any network, network node, system, or system node. j. System Upgrade - Any addition of hardware or software which is intended to improve or modify the performance of any system or system node. k. TNPP - Telocator Network Paging Protocol. l. Calls - When discussing Pricing, Calls refers to the number of telephone calls or pages a single account is allotted in any given month. For the purpose of pricing LICENSOR's Services, Calls will be aggregated as defined elsewhere in this contract. When discussing DID or TAP interconnections to LICENSOR's network, Calls refers to a telephone call into LICENSOR's network. m. Capcode - An alphanumeric/numeric number which is assigned to one and only one paging device on any given frequency. This number is, in effect, the paging devices address, and therefore must be unique to each paging device. CAPCODES are defined, developed, and controlled by the LICENSOR. n. Latency - Any delay. o. Coverage zone - Any area which has radio frequency coverage on any LICENSOR owned frequency, with a minimum signal level of -88db. as of the date of execution of this Agreement. p. Root Cause Analysis - A report detailing the cause and effect of a specific network deficiency. This report should identify, at a minimum and in a reasonable amount of detail, the who, what, when, where, why, and effect of any network deficiency. PageMart 09/28/98 -CONFIDENTIAL- 2 5 q. 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 or other devices, the respective pager is activated. r. On-call - When a LICENSOR employee can be contacted via pager, cellular phone, or regular phone service and is available for real-time interaction within a specified time frame. s. Pending - Time of delay during which incoming calls are rejected or blocked, or account activations, Modifications, or deletions are not processed by any network, system, network node, or system node. t. Consumer Price Index - where identified within this Agreement shall mean the CPI- U, U.S.City Average for all items, with the index base period set as (1982-84=100). 3. LICENSE a. LICENSOR grants RESELLER a non-exclusive license to resell LICENSOR's Services subject to the terms and conditions of this Agreement, applicable law, and the rules, regulations and decisions of the Federal Communications Commission or any other applicable regulatory body. b. RESELLER may license its own sub-agents, affiliates, or any parent, subsidiary or affiliate of any third party with the public intention of merging, acquiring or otherwise affiliating itself with RESELLER announced before or at the time of execution of this Agreement for the marketing, promotion and resale of LICENSOR's Services, provided that RESELLER shall provide sixty (60) days notice to LICENSOR of all sub-agents and affiliates authorized by RESELLER for promotion and resale on its behalf. RESELLER shall ensure that its sub-agents, affiliates, or sub-licensees abide by the terms and conditions of this Agreement. 4. INDEPENDENT PARTIES In providing any Services or reselling any Services pursuant to this Agreement, each party is acting solely as an independent contractor and not as an agent of the other party. Each party shall be responsible for compliance with all laws, rules and regulations involving its 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, worker's compensation, disability insurance and federal and state income tax withholding. Neither party undertakes by this Agreement or otherwise to perform or discharge any liability or obligation of the other party, whether regulatory or contractual, or to assume any responsibility whatsoever for the conduct of the business or operations of the other party. Nothing contained in this Agreement is intended to give rise to a partnership or joint venture between the parties or to impose upon the parties any of the duties or responsibilities of partners or joint venturers. Except as provided in this Agreement, neither party shall have the right, power, or authority to act or to create any PageMart 09/28/98 -CONFIDENTIAL- 3 6 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, and all relevant sections of this contract. 6. LICENSOR RESPONSIBILITIES a. LICENSOR shall provide RESELLER's Subscribers with access to its Paging System and shall provide continuous (when commercially feasible) network service in the geographical locations where LICENSOR is legally authorized to provide Services in accordance with all relevant sections of this Agreement, including all Exhibits attached hereto. b. The Services provided by LICENSOR shall include but not be limited to: i. Numeric display - Numeric display paging. LICENSOR guarantees RESELLER the use of a minimum enough bandwidth/frequency space to support a net growth rate of [*] percent per year above the previous year's base as of the previous December 31; and ii. Alphanumeric - Alphanumeric paging. LICENSOR guarantees RESELLER the use of a minimum FLEX bandwidth/frequency space to support a net growth rate of [*] percent per year for Local Alphanumeric Paging above the previous year's base. LICENSOR guarantees RESELLER the use of a minimum FLEX or REFLEX bandwidth/frequency space to support a net growth rate of [*] percent per year for State, and Regional, and Nationwide Alphanumeric Paging above the previous year's base as of the previous December 31. c. LICENSOR shall assign and coordinate all telephone and Capcode numbers in order to ensure the initiation of service and to ensure ongoing service to Subscribers placed on LICENSOR's Paging System in accordance with Exhibit B. 7. RESELLER RESPONSIBILITIES a. RESELLER shall use commercially reasonable efforts to promote, solicit, market the Services. b. RESELLER shall be solely responsible for providing all sales, equipment and customer support services to its Subscribers. c. Upon LICENSOR's reasonable request, RESELLER shall provide non-binding sales forecasts by quarter for the following year. PageMart 09/28/98 -CONFIDENTIAL- 4 * CONFIDENTIAL INFORMATION HAS BEEN DELETED. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT. 7 d. 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 service or equipment rentals. e. RESELLER shall provide and mail all announcements or notices required to be mailed to its Subscribers as required by any regulatory agency. f. RESELLER shall assign Capcode, DID's, and PIN's to its Subscribers only from the group of Capcodes, DID's and PIN's assigned to RESELLER by LICENSOR. RESELLER shall ensure that a given Capcode, DID or PIN is not assigned to more than one pager, provided that LICENSOR has not given RESELLER duplicate Capcodes, DID's or PIN's, which were then assigned in violation of this provision without the fault or knowledge of RESELLER. Under Transmission Only Paging Services and/or Quasi-RESELLER Paging Services as described below, RESELLER will provide the DID numbers, and LICENSOR will provide the Capcodes and PIN NUMBERS to RESELLER. LICENSOR will provide quantities of Capcodes and PINS to RESELLER as necessary to support RESELLER's on-going sales efforts and existing subscriber base. i. Under Full RESELLER Paging Services the RESELLER will procure customers which will be activated on one of LICENSOR's paging terminals and in LICENSOR's billing system via PRIME, Vantive, WinFast, ActFast, Dial-Now, or other LICENSOR provided activation systems. LICENSOR will provide the pager number and all in-bound calling. When a valid customer receives a page the in-bound call is accepted by LICENSOR (at the terminal), the customer is validated in the terminal, and the page is transmitted to the transmitters in the correct coverage zone via satellite simulcast. The transmitters then send the page out via one of LICENSOR's frequencies (that frequency which matches the receiver in that specific customer's pager). Multiple sub-services are to be provided by LICENSOR to RESELLER under this service as defined below. ii. Under Quasi-RESELLER Paging Services the RESELLER will procure customers which will be activated on a RESELLER paging terminal, one of LICENSOR's paging terminals, and LICENSOR's billing system via PRIME, Vantive, WinFast, ActFast, Dial-Now, or other LICENSOR provided activation systems. When a valid customer receives a page the in-bound call is accepted by RESELLER (at the terminal), the customer is validated in the terminal, and the page is transmitted to a LICENSOR terminal via TNPP. The data is directed by LICENSOR's terminal to the transmitters in the correct coverage zone via satellite simulcast. The transmitters then send the page out via one of LICENSOR's frequencies (that frequency which matches the receiver in that specific customer's pager). Multiple sub-services are to be provided by LICENSOR to RESELLER under this service as defined below. PageMart 09/28/98 -CONFIDENTIAL- 5 8 iii. Under Transmission Only Paging Services the RESELLER will procure customers which will be activated on a RESELLER paging terminal via a RESELLER provided activation system. Billing will be based on the amount of data that passes through the LICENSOR's system as defined in the pricing section of this contract. When a valid customer receives a page the in-bound call is accepted by RESELLER (at the RESELLER owned terminal), the customer is validated in the terminal, and the page is transmitted to a LICENSOR terminal via TNPP. The data is directed by LICENSOR's terminal to the transmitters in the correct coverage zone via satellite simulcast. The transmitters then send the page out via one of LICENSOR's frequencies (that frequency which matches the receiver in that specific customer's pager). Multiple sub-services are to be provided by LICENSOR to RESELLER under this service as defined below. g. RESELLER, in accordance with all manufacturer's specifications, shall maintain and keep in good working order all equipment leased by RESELLER to its Subscribers pursuant to the terms of this Agreement. 8. LIQUIDATED DAMAGES The parties recognize the RESELLER will suffer substantial economic loss should LICENSOR fail to meet various performance criteria set forth in this Agreement and all exhibits attached hereto. Because such loss is often difficult to quantify in particular instances, the parties have agreed that LICENSOR will pay to RESELLER certain sums (pursuant to various described formulae) characterized herein as liquidated damages in the event of LICENSOR's failure to meet agreed performance criteria. These liquidated damages are not penalties, but rather are the parties good faith estimation of RESELLER's damages caused by LICENSOR's failure to meet such performance criteria. 9. PUBLIC REGULATION a. It is understood that the ultimate control and responsibility for the standard and quality of Services required under the provisions of any 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 licenses, radio communication facilities, or 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 any regulatory agency, if such approval shall be required. d. This Agreement shall be terminated, amended, revised, or supplemented PageMart 09/28/98 -CONFIDENTIAL- 6 9 immediately if required by the FCC or any state regulatory agency. e. The imposition by the FCC or any 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. 10. PRICING a. RESELLER hereby agrees to pay LICENSOR the charges and fees for Services as specified in Exhibit C, Pricing and in accordance with the terms and conditions contained herein. b. The charges and fees specified in Exhibit C 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. The specified prices in Exhibit C shall remain firm for the first twenty-four (24) months of this Agreement. After the twenty-fourth (24th) month from the execution of this agreement, LICENSOR is not obligated to, but may, increase prices once in each twelve (12) month period by giving written notice to RESELLER at least ninety (90) days prior to the proposed effective date of the new pricing. LICENSOR shall not increase the prices in Exhibit C by more than the lesser of the Consumer Price Index, as defined within this Agreement, or * in any twelve (12) month period. d. Effect of Change in Law or Regulation. Notwithstanding anything to the contrary contained in the Agreement or any schedule or exhibit attached hereto, LICENSOR shall have the right to change the fees changed for Services or change the Services at any time upon thirty (30) days prior notice to RESELLER to the extent that such change is necessary to comply with applicable law or regulation, whether state or federal, or to the extent that a change in applicable law or regulation substantially affects LICENSOR's operating costs. LICENSOR shall provide detailed documentation substantiating the change in operating costs RESELLER must approve any changes in the Service fees or the Services in writing prior to any changes in the Service fees or the Services, which approval will not be unreasonably withheld. If RESELLER and LICENSOR cannot mutually agree on the extent/effect of these changes on LICENSOR's operating costs, then the parties agree to utilize Section 29, DISPUTE RESOLUTION to resolve the issue. e. LICENSOR warrants and represents that the prices for Services hereunder are no less favorable than those currently extended to any other similarly situated RESELLER of LICENSOR of the same or like classification as RESELLER for the same volume achieved by RESELLER for the same or like Services. PageMart 09/28/98 -CONFIDENTIAL- 7 * CONFIDENTIAL INFORMATION HAS BEEN DELETED. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT. 10 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. 11. AUTHORIZED EQUIPMENT a. RESELLER and its Subscribers shall only activate and utilize the equipment which is either listed in Exhibit D, AUTHORIZED EQUIPMENT or complies with all technical standards as defined in Exhibit F in connection with LICENSOR's Services, however, unless equipment is listed on Exhibit D, LICENSOR will not provide troubleshooting support for equipment problems and LICENSOR will not be responsible for meeting the SLA requirements in Exhibit B, Section 2.4. LICENSOR may revise Exhibit D from time to time upon delivery of written notice to RESELLER at least one hundred twenty (120) days prior to the effective date of such revision. If LICENSOR amends Exhibit D in such a manner whereby previously authorized equipment is no longer authorized for use on LICENSOR's Paging System, LICENSOR agrees to continue to provide service to such previously authorized equipment receiving Services as of the date of the notice for one (1) year after the date of such notice. b. If LICENSOR modifies LICENSOR's network in any manner after the date of execution of this Agreement whereas any previously authorized equipment sold by RESELLER to RESELLER's customers no longer functions either; (i) as a unit, or (ii) in conjunction with the Network (i.e. garbled messages or consistent garbled messages), then LICENSOR will bear the expense to provide substitute authorized equipment in exchange for the previously authorized equipment then utilized by RESELLER's Subscribers. All pagers previously sold by LICENSOR to RESELLER are included in this Agreement, as they are still functionally operational on this network. Nothing in this section shall be construed such that LICENSOR is responsible for end user devices which are malfunctioning as an individual device (i.e. the problem is specific to a specific individual pager, and not inherent in substantially all devices of both the same manufacturer and model). c. LICENSOR's liability will not exceed the net book value of the equipment based on a five (5) year straight line depreciation schedule from the date of purchase from manufacturer or other supplier. d. LICENSOR is not liable for equipment which has been recalled by manufacturer and for which manufacturer either repairs or replaces. However, nothing in this section should be construed to limit LICENSOR's responsibility to thoroughly test all equipment for compatibility with LICENSOR's network prior to approving the equipment for inclusion in Exhibit D. e. LICENSOR will provide commercially reasonable technical standards for new equipment within thirty (30) days after the signing of this Agreement, or RESELLER will have the right to develop commercially reasonable standards at RESELLER's sole discretion. These standards will be included as an automatic amendment to this contract as Exhibit F. Any equipment which is developed by or on behalf of RESELLER must meet these commercially reasonable technical standards in order PageMart 09/28/98 -CONFIDENTIAL- 8 11 for RESELLER to utilize the equipment on LICENSOR's network. However, LICENSOR reserves the right to thoroughly test all new equipment for technical compatibility with the network. If LICENSOR determines that the new equipment is not technically compatible with the network, regardless of whether or not the equipment meets the technical standards, LICENSOR agrees that RESELLER may utilize the equipment on LICENSOR's network, and RESELLER agrees that the equipment will not be added to Exhibit D, Authorized Equipment, provided however, that LICENSOR provides detailed analysis of the technical incompatibility, thus providing RESELLER with the opportunity to correct any such technical incompatibility. Once any such technical incompatibilities are corrected, RESELLER may resubmit the new equipment for testing for technical compatibility with the network and, subsequently, inclusion in Exhibit D upon acceptance, which acceptance shall not be unreasonably withheld. 12. BILLING/TERMS OF PAYMENT a. LICENSOR shall provide RESELLER monthly billing in accordance with Exhibit B, Service Level Agreement, Section 4, Billing/Invoicing Services. b. Payment for Services shall be due thirty (30) days from the date of receipt of an undisputed invoice, unless payment terms more favorable to RESELLER are stated on LICENSOR's invoice and RESELLER elects to pay on such terms. RESELLER will remit payment to LICENSOR only for the amounts not disputed in good faith by RESELLER. If a disputed amount is going to be with held from a current invoice, RESELLER will notify LICENSOR, giving reasons for the dispute prior to payment due date. RESELLER shall retain the right to dispute any invoice amount (paid or unpaid) within ninety (90) days after the date of receipt. If RESELLER fails to make timely payment on any monthly undisputed invoice amount, RESELLER will pay LICENSOR interest from the date due at the rate of one and one half (1 1/2%) percent per month or the maximum rate allowed by law, whichever is lower. 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 written Agreement shall control over any conflicting or inconsistent terms and conditions contained in any order placed with LICENSOR by RESELLER. 14. USE OF CONFIDENTIAL INFORMATION a. In order for the parties to perform their respective obligations under this Agreement, it may be necessary for either party to disclose to the other technical, personnel and/or business information in written, graphic, electronic, oral or other tangible or intangible forms including, but not limited to, specifications, records, data, computer programs, drawings, schematics, know-how, notes, models, reports and samples. Such information may contain proprietary or confidential material, or material subject to applicable laws regarding secrecy of communications or trade secrets (Confidential Information). PageMart 09/28/98 -CONFIDENTIAL- 9 12 b. Each party acknowledges and agrees: i. That all Confidential Information acquired by either party from the other shall be and shall remain the exclusive property of the disclosing party; ii. To identify in writing as confidential or proprietary, or mark as confidential or proprietary, any information that either party deems to be Confidential Information; iii. That information that is disclosed orally shall not be considered Confidential Information unless it is reduced to writing or to a written summary that identifies the orally-disclosed topics to be considered as Confidential Information and such writing is provided to the recipient at the time of disclosure or within thirty (30) days thereafter; iv. To receive in confidence any Confidential Information; to limit access to such Confidential Information to authorized employees, agents and contractors (covered by obligations at least as restrictive as those set forth in this Section) who have a need to know the Confidential Information in order for the party to perform its obligations under this Agreement and who have been informed of the confidential and proprietary nature; not to disclose, reveal or divulge any Confidential Information or authorize any other person to do so except: (1) as specifically approved in writing by the disclosing party, or; (2) as required in connection with the due and proper performance by the receiving party of its obligations under this Agreement. (which shall not be deemed to include disclosure to consultants, advisors or other third parties which are not full-time, regular employees of the receiving party. However, disclosure may be made to consultants, advisors, or other contractors which have a need to know and which are bound by confidentiality agreements no less stringent than this Agreement); v. To use such Confidential Information only for the purposes of performing their obligations under this Agreement and for such other purposes as may be agreed upon between the parties in writing; vi. If a receiving party receives a request to disclose any Confidential Information (whether pursuant to a valid and effective subpoena, an order issued by a court or other governmental authority of competent jurisdiction or otherwise) on advice of legal counsel that disclosure is required under applicable law, such party agrees that, prior to disclosing any Confidential Information, it shall: (1) notify the disclosing party of the existence and terms of such request or advice, (2) cooperate with the disclosing party in taking legally available steps to resist or narrow any such request or to otherwise eliminate the need for such disclosure, if requested to do so by the disclosing party, and (3) if disclosure is required, cooperate with the disclosing party in taking legally available steps to obtain a protective order or other reliable assurance that confidential treatment will be afforded to such portion of the Confidential Information as is required to be disclosed; PageMart 09/28/98 -CONFIDENTIAL- 10 13 vii. Upon request of the disclosing party, to return all Confidential Information to such party, or to destroy any documents, computer media or records, in written, graphic, or other tangible form, that contain any Confidential Information; viii. That the obligations with respect to Confidential Information shall extend for a period of five (5) years beyond completion of the term of this Agreement. ix. That nothing contained in this Section shall be construed as a license or permission to make, use, or sell the Confidential Information or Services derived therefrom. c. The obligations contained in this Section do not apply to Confidential Information that: i. As shown by reasonably documented proof, was in the receiving party's possession prior to receipt thereof from the disclosing party; ii. As shown by reasonably documented proof, was received by one party in good faith from a third party not subject to a confidential obligation to the other party; iii. Now is or later becomes publicly known through no breach of confidential obligation by the receiving party; iv. Is disclosed pursuant to a requirement imposed by a governmental agency or is otherwise required to be disclosed by operation of law, provided that the party receiving the request for the information has fully complied with its obligations under Section 14.(b)(iv); v. Was developed by the receiving party without the developing persons having access to any of the Confidential Information received from the other party; vi. Is authorized in writing by the disclosing party to be released or is designated in writing by the source as no longer being confidential or proprietary. d. It is agreed that a violation of any of the provisions of this Section will cause irreparable harm and injury to the disclosing party and that party shall be entitled, in addition to any other rights and remedies it may have at law or in equity, to seek an injunction enjoining and restraining the receiving party from doing or continuing to do any such act and any other violations or threatened violations of this Section. 15. PUBLICITY Each party agrees not to provide copies of this Agreement, or otherwise disclose the terms of this Agreement, to any third party without the prior written consent of the other party; provided, however, that either party may, without obtaining the other party's consent, provide copies or make disclosures to prospective purchasers of the business of such party, PageMart 09/28/98 -CONFIDENTIAL- 11 14 such party's affiliates, to comply with applicable laws or regulations or any regulatory or judicial body requesting such information. The parties further agree to submit to one another, for written approval, all advertising, sales promotion, press releases and other publicity matters relating to the Services performed pursuant to this Agreement, when its respective name or mark is mentioned or language from which the connection of said name or mark may be inferred or implied. The parties further agree not to publish or use such advertising, sales promotions, press releases, or publicity matters without such prior written approval. Any approval required under this Section shall not be unreasonably withheld or delayed by either party. 16. TRADEMARKS AND TRADE NAMES Except as specifically set out in the Agreement, nothing in this Agreement shall grant, suggest or imply any authority for one party to use the name, trademarks, service marks or trade names of the other for any purpose whatsoever, unless written permission is granted by the other party prior to usage. 17. COMPLIANCE WITH LAWS The parties hereto shall comply with the provisions of all applicable federal, state, and local laws, ordinances, regulations and codes (including procurement of required permits or certificates) in their respective performance under this Agreement including, but not limited to, the Fair Labor Standards Act of 1938, safety and environmental laws, rules and regulations, any laws, rules and regulations regarding wages, hours, fringe benefits and taxes, and federal and state Occupational Safety and Health Act Laws. 18. FORCE MAJEURE If performance of this Agreement is prevented, restricted or interfered with by reason of acts of God, wars, revolution, civil commotion, acts of public enemy, embargo, acts of government in its sovereign capacity, labor difficulties, including without limitation, strikes, slowdowns, picketing or boycotts, or other circumstances beyond the reasonable control and not involving any fault or negligence of the party affected, the party affected, upon giving prompt notice to the other party, shall be excused from such performance on a day-to-day basis during the continuance of such prevention, restriction, or interference (and the other party shall likewise be excused from performance of its obligations on a day-to-day basis during the same period), provided, however, that the party so affected shall use its best reasonable efforts to avoid or remove such causes of nonperformance and both parties shall proceed immediately with the performance of their obligations under this Agreement whenever such causes are removed or cease. 19. CENTURY COMPLIANCE LICENSOR represents and warrants that by June 30, 1999, 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 its 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 to 2000. PageMart 09/28/98 -CONFIDENTIAL- 12 15 20. INDEMNIFICATION a. LICENSOR shall indemnify, defend, and hold harmless RESELLER and its affiliates, shareholders, directors, officers, employees, contractors, agents and other representatives from and against all demands, claims, damages, liabilities, expenses (including reasonable fees and disbursements of counsel), judgments, settlements and penalties of every kind (collectively "Claims") based on (i) personal injury, death, or property damage arising from or related to LICENSOR's (either directly or through its officers, agents, subcontractors or representatives) negligence or misconduct in or related to performance of the Services under this Agreement, or (ii) violation of any term of this Agreement or matters referred to in Subsection 20 (b) below, provided, however the obligation set out in this Section (ii) shall not apply to Claims arising from or related to; (1) violations of any term of this Agreement of the type that provides a specific remedy (to include Liquidated Damages set forth in Exhibit B), or; (2) guarantees or express warranties given by RESELLER to its subscribers. The preceding proviso shall not apply to Claims of third parties to the extent that they are based on actual gross negligence or willful misconduct of LICENSOR. The foregoing indemnity shall not apply in the case of Claims which solely arise from the negligence, misconduct or other fault of RESELLER. It shall apply, however, if a Claim is the result of the joint negligence, joint misconduct, or joint fault of LICENSOR and RESELLER, but in such a case the amount of the Claim for which RESELLER is entitled to indemnification shall be limited to that portion of such Claim attributable to the negligence, misconduct or other fault of LICENSOR. The obligations of this provision are in addition to LICENSOR's obligation to provide insurance and shall not be limited by any limitation on the amount or type of damages, compensation or benefits payable by LICENSOR under the Worker's Compensation Acts, Longshoremen and Harborworker's Act, Disability Benefits Act or any other employee benefit act. b. Without limitation of 20 (a) above, LICENSOR shall, to the fullest extent permitted by law, defend, indemnify and hold harmless RESELLER, its officers, agents and employees, from all Claims of every kind arising from or related to the following matters: i. LICENSOR's failure to comply with all federal, state or local laws, rules or regulations applicable to LICENSOR's employees, including, without limitation, the laws, rules or regulations referred to in Section 17, COMPLIANCE WITH LAWS and Section 25, TAXES; ii. LICENSOR's failure to comply with terms of Section 14, CONFIDENTIAL INFORMATION, regarding proprietary information of RESELLER; iii. LICENSOR's failure to pay all fees and royalties for the use of patented articles or methods in connection with the Services; iv. LICENSOR's failure to obtain or maintain the Permits referred to in Section 23, PERMITS, except for those Permits that RESELLER has expressly PageMart 09/28/98 -CONFIDENTIAL- 13 16 agreed to obtain and maintain at RESELLER's expense; v. Contributions to multiemployer pension plans affecting LICENSOR's employees; vi. Any mechanics' or materialmen's liens or any other liens or encumbrances filed in respect of or placed upon any real property or improvements owned or leased by RESELLER as a result of any Services performed by or any other act or omission on the part of LICENSOR or any subcontractor or other person claiming by, through or under LICENSOR; or vii. Any injury, sickness, disease or death of any person, damage to any properties or assets or remediation of any soil, surface water or groundwater resulting from the processing, use, distribution, treatment, storage, placement, removal, transportation or disposal of any Hazardous Materials by LICENSOR or its officers, agents subcontractors or representatives. c. RESELLER agrees to indemnify, defend and hold harmless LICENSOR and its affiliates, shareholders, directors, officers, employees, contractors, agents and other representatives from and against any and all Claims arising from or related to: i. Any negligent misrepresentations of the Services to RESELLER's subscribers; and ii. Contributions to multiemployer pension plans affecting RESELLER's employees. d. RESELLER shall promptly notify LICENSOR in writing of any suits, Claims or demands covered by this indemnity. Promptly after receipt of such notice, LICENSOR shall assume the defense of such claim with counsel reasonably satisfactory to RESELLER. If LICENSOR fails, within a reasonable time after receipt of such notice, to assume the defense with counsel reasonably satisfactory to RESELLER, or if, in the reasonable judgment of RESELLER, a direct or indirect conflict of interest exists between the parties with respect to the Claim, or if in the sole judgment of RESELLER the assumption and conduct of the defense by LICENSOR would materially and adversely affect RESELLER in any manner or prejudice its ability to conduct a successful defense, then RESELLER shall have the right to undertake the defense, compromise and settlement of such Claim for the account and at the expense of LICENSOR. Notwithstanding the above, if RESELLER in its sole discretion so elects, RESELLER may also participate in the defense of such actions by employing counsel at its expense, without waiving LICENSOR's obligations to indemnify or defend. An indemnified party shall not settle or compromise any Claims against it or consent to the entry of any judgments without the prior written consent of the indemnifying party and without an unconditional release of all liability by each claimant or plaintiff to the indemnified party. e. 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 PageMart 09/28/98 -CONFIDENTIAL- 14 17 to (i) Workers' Compensation and related insurance as prescribed by applicable law; (ii) employer's liability insurance with limits of at least $1,000,000 for each occurrence, and (iii) 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 $2,000,000 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. 21. WARRANTY a. Except as expressly set forth in this Agreement, 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. If, notwithstanding the other terms of this Agreement, LICENSOR is liable for any mistakes, omissions, interruptions, delays, errors, or defects in transmission of pages on LICENSOR's Paging System, then the parties agree that, except as set forth in Exhibit B, LICENSOR shall not be liable beyond the actual and direct loss arising therefrom. However, LICENSOR's liability to RESELLER for each period of service disruption or defect in transmission will in no event exceed the amount of Fifty thousand dollars ($50,000) provided that nothing herein shall limit any amounts due to RESELLER pursuant to Exhibit B. 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. The preceding two sentences shall not limit a party's obligations under Section 22, INFRINGEMENT, or indemnification for third party claims arising from death, or personal injury, or willful misconduct of a party, or damage to tangible property, or gross negligence of a party. b. Section 20 (a) shall not apply to any Losses arising out of any claim by a Subscriber of RESELLER, added by RESELLER after the execution of this Agreement, unless the agreement between RESELLER and such Subscriber contains provisions substantially as follows: i. Disclaimer of Warranties. [GTE OR ANY THIRD PARTY SERVICE PROVIDER] DISCLAIMS ALL EXPRESS OR IMPLIED WARRANTIES WITH RESPECT TO THE EQUIPMENT AND SERVICES, INCLUDING WITHOUT PageMart 09/28/98 -CONFIDENTIAL- 15 18 LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. ii. Limitation of Liability. Customer acknowledges that pages and messages may be lost or garbled for many reasons other than the negligence of [GTE OR ANY THIRD PARTY SERVICE PROVIDER], such as dialing errors, power failures, network equipment failures, electronic interference and the recipient's messaging device being turned off or outside the coverage area or having a weak battery. [GTE OR ANY THIRD PARTY SERVICE PROVIDER], SHALL NOT BE LIABLE FOR ANY DAMAGES ARISING OUT OF (i) LATENT OR PATENT EQUIPMENT OR SERVICES DEFECTS, OR (ii) LOSS OF USE OF ANY OF THE EQUIPMENT OR SERVICES, OR (iii) ANY ACCIDENT OR INJURY CAUSED BY THE EQUIPMENT OR THE SERVICES WHEN SUCH ACCIDENT OR INJURY IS NOT DUE TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF [GTE OR ANY THIRD PARTY SERVICE PROVIDER], OR (iv) ANY FAILURE TO ACCURATELY TRANSMIT A MESSAGE OR ANY RECIPIENT'S FAILURE TO RECEIVE A MESSAGE UNLESS SUCH FAILURE IS DUE TO [GTE'S OR ANY THIRD PARTY SERVICE PROVIDER'S] GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. [GTE OR ANY THIRD PARTY SERVICE PROVIDER] SHALL NOT BE LIABLE FOR LOST PROFITS OR EXEMPLARY, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT, THE EQUIPMENT OR THE SERVICES. IF ANY LIMITATION OF LIABILITY SET FORTH HEREIN IS UNENFORCEABLE OR INAPPLICABLE FOR ANY REASON, [GTE'S OR ANY THIRD PARTY SERVICE PROVIDER'S] MAXIMUM AGGREGATE LIABILITY TO CUSTOMER UNDER ANY LEGAL THEORY (INCLUDING ITS OWN NEGLIGENCE) FOR DAMAGES ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT, THE EQUIPMENT OR THE SERVICES WILL NOT EXCEED THE LESSER OF THE ACTUAL DIRECT DAMAGES SUFFERED BY CUSTOMER OR THE AMOUNT PAID BY CUSTOMER FOR THE SPECIFIC UNIT OF EQUIPMENT OR SERVICE AND SERVICE PERIOD OUT OF WHICH THE CLAIM AROSE. 22. INFRINGEMENT a. LICENSOR agrees to indemnify, defend and hold harmless RESELLER and its affiliates, shareholders, directors, officers, employees, contractors, agents and other representatives from and against any and all Claims (as defined in Section 20 (a)) arising from or relating to any actual or alleged infringement or misappropriation of any patent, trademark, copyright, trade secret or any actual or alleged violation of any other intellectual property rights arising from or in connection with the software provided or the Services performed under this Agreement regardless of whether such software or Services form the entire basis or only a portion of the basis for such claims of infringement, misappropriation or violation. Notwithstanding anything to the contrary contained in this Agreement (including, but not limited to, Section 20 (a), the provisions of this Section 22 (a) shall govern the rights of RESELLER and its affiliates, shareholders, directors, officers, employees, contractors, agents and PageMart 09/28/98 -CONFIDENTIAL- 16 19 other representatives to indemnification for claims of infringement, misappropriation or violation of intellectual property rights. b. The provisions and procedures set forth in Section 20. (d) shall apply in the case of any claims of infringement, misappropriation or violation of intellectual property rights for which indemnification will be sought hereunder. c. Without limitation of Section 22 (a), if the sale or use of the software or Services is enjoined, LICENSOR shall, at LICENSOR's option and LICENSOR's expense, either: i. Procure for RESELLER the right to use the software or Services; ii. Replace the software or Services with equivalent, noninfringing software or Services; iii. Modify the software or Services so they become noninfringing, or iv. If (i), (ii), and (iii) are not practicable, subject to RESELLER's consent, remove the software or Services and refund the purchase price, including transportation, installation, removal and other incidental charges. 23. PERMITS Unless otherwise specifically provided for in this Agreement, LICENSOR shall obtain and keep in full force and effect, at its expense, any permits, licenses, consents, approvals and authorizations (Permits) necessary for the performance and completion of the Services. 24. 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, which shall not be unreasonably withheld or delayed; provided, however, 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 that was such a parent, subsidiary or affiliate at the time of execution of this Agreement or is listed in any Exhibit A furnished to LICENSOR from time to time. 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 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. PageMart 09/28/98 -CONFIDENTIAL- 17 20 25. 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 imposed by law upon RESELLER, or any similar taxes or assessments as applicable, with respect to transactions under this Agreement. Taxes and assessments 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 or assessment for which a valid exemption certificate acceptable to the applicable state or local taxing authorities is furnished by RESELLER to LICENSOR. 26. 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 specifying in detail 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. Either Party shall be entitled, at their own expense and 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. 27. RIGHT OF ACCESS LICENSOR shall permit RESELLER's predesignated representative(s), limited to three predefined representatives per state, reasonable supervised access to its facilities in connection with performance of Services under this Agreement. Both parties agree that no charge shall be made for such visits and that RESELLER shall provide a minimum of one (1) hour notice prior to arriving at any LICENSOR owned facility which is regularly staffed or during any time that a facility is involved in a service affecting issue. RESELLER shall provide reasonable notice prior to arriving at any LICENSOR owned facility which is not staffed and is not experiencing service affecting issues. 28. TERMINATION a. After the initial three (3) year term of the Agreement, LICENSOR may: i. terminate RESELLER's right to add additional subscribers upon provision to RESELLER of eighteen (18) months prior written notice. This notice may not be given until completion of the initial three (3) year term. During this eighteen (18) month period RESELLER may add additional Subscribers per the terms of this Agreement. After the eighteenth (18th) month RESELLER may not add additional Subscribers. During this eighteen month period, LICENSOR shall be PageMart 09/28/98 -CONFIDENTIAL- 18 21 bound by all terms of this Agreement, including Exhibit B, and all applicable Liquidated Damages. ii. however, after the eighteen (18) month notice in Section 28(a)(i), LICENSOR must provide an additional prior written notice of twenty-four (24) months if LICENSOR intends to terminate Service to the existing RESELLER Subscriber base under the terms of this Agreement. During this twenty-four (24) month notice period, LICENSOR may increase prices at the end of each twelve (12) month period in Exhibit C by the greater of [*] or the difference between the Consumer Price Index at the end of the previous twelve (12) month period and the then current Consumer Price Index, as defined within this Agreement, with a minimum of thirty (30) days written notice to RESELLER. LICENSOR has the right but not the obligation to terminate Service to RESELLER's existing Subscriber base after completion of the additional twenty-four (24) month notice period. Both parties are bound by all the terms of this Agreement until such time as all notification requirements and waiting periods are satisfied per this section of the Agreement OR until such time as all RESELLER Subscribers have been migrated from LICENSOR's network, whichever happens sooner. However, if RESELLER's total subscriber base falls below [*} subscribers at any time during this twenty-four (24) month waiting period, then LICENSOR shall not be liable for the Liquidated Damages as assessed in Exhibit B, however, LICENSOR will still be responsible for meeting all other terms of the Agreement 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: i. The other files a voluntary petition in bankruptcy; ii. The other is adjudged bankrupt; iii. A court assumes jurisdiction of the assets of the other under a federal reorganization act; iv. A trustee or receiver is appointed by a court for all or a substantial portion of the assets of the other; v. Other becomes insolvent or suspends its business; or vi. The other makes an assignment of its assets for the benefit of its creditors, except as required in the ordinary course of business. 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. PageMart 09/28/98 -CONFIDENTIAL- 19 * CONFIDENTIAL INFORMATION HAS BEEN DELETED. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT. 22 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. i. LICENSOR agrees to give RESELLER, at no cost to RESELLER, all Direct Inward Dial numbers associated with all RESELLER's customer accounts/pagers provided that it is both, technically possible to do so, and allowable from a regulatory perspective, with a Glenayre paging terminal. Any numbers and associated ports must be moved to a RESELLER owned terminal. These numbers will not be allowed to reside on a LICENSOR owned paging terminal without the prior written consent of both parties. RESELLER and LICENSOR will each be responsible for any of their own incurred administrative costs associated with such transfers. ii. RESELLER agrees to proactively transfer no more than [*] of the total subscriber base per month, although the effective rate of transfer will be greater than [*] due to normal churn of RESELLER's subscriber base. iii. LICENSOR is responsible for costs associated with ensuring technical compliance of all LICENSOR owned systems. iv. Subsection (d) will not apply after a facilities based direct competitor of LICENSOR gains control of RESELLER's business related to the scope of this Agreement, whether by RESELLER's sale or other transfer of this business or by a third parties purchase or other acquisition of RESELLER. RESELLER's pending transaction with Bell Atlantic is excluded from this subsection (e). 29. 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 dispute, controversy or claim relating to a breach or alleged breach on the part of either party of the provisions of Section 14, CONFIDENTIAL INFORMATION, (ii) a suit, action or proceeding to compel LICENSOR to comply with its obligations to indemnify RESELLER pursuant to this Agreement or (iii) a suit, action or proceeding to compel either party to comply with the dispute resolution procedures set forth in this Section, 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. 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 PageMart 09/28/98 -CONFIDENTIAL- 20 * CONFIDENTIAL INFORMATION HAS BEEN DELETED. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT. 23 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 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. 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 arbitrator shall have no power or authority to make awards or issue orders of any kind except as permitted by this Agreement and substantive law, and in no event shall the arbitrator have the authority to make any award that provides for punitive or exemplary damages. The arbitrator's decision shall follow the plain meaning of this Agreement and the relevant documents. 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. 30. NOTICES Any written notice either party may give the other concerning the subject matter of this Agreement shall be in writing and given or made by means of 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: PageMart 09/28/98 -CONFIDENTIAL- 21 24 To LICENSOR: At LICENSOR's address shown on the first page of this Agreement. To RESELLER: GTE Supply 700 Hidden Ridge (HQW03N42) Irving, Texas 75038 Attention: Contract Management Written notices for change in ownership, change in name of firm, or change in mailing address must be given by LICENSOR by mailing to RESELLER within thirty (30) days of such change. A change in ownership shall be defined as any one person, entity, or legal entity acquiring more than ten percent (10%) ownership of LICENSOR's company and or publicly traded stock. Notices for change in ownership must include the names of all new owners or officers, registered agent for service of process and state of incorporation or organization. 31. 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. 32. 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 remaining portion of this Agreement without including therein any such part or portion which may, for any reason, be hereafter declared invalid. 33. 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. 34. 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. 35. CHOICE OF LAW The construction, interpretation and performance of this Agreement shall be PageMart 09/28/98 -CONFIDENTIAL- 22 25 governed by and construed in accordance with the domestic laws of the State of Texas. 36. 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. 37. SIGNATURES IN WITNESS WHEREOF, the parties hereto have executed this Agreement through their authorized corporate representatives. GTE Communication Systems PageMart Wireless, Inc. Corporation By: /s/ M. R. REDMOND By: /s/ N. ROSS BUCKENHAM --------------------- ----------------------------- Name: M. R. Redmond Name: N. Ross Buckenham ------------------- --------------------------- Title: AVP-Contract Mgt Title: President ------------------ -------------------------- Date: 9/29/98 Date: 9/28/98 ------------------- --------------------------- PageMart 09/28/98 -CONFIDENTIAL- 23 26 EXHIBIT A GTE AFFILIATED ENTITIES GENERAL ADMINISTRATION GTE Corporation GTE Finance Corporation GTE Investment Management Corporation GTE Realty Corporation GTE Realty Corporation of Connecticut GTER Incorporated GTE-TCCA, Inc. GTE Reinsurance Company Limited (Vermont) GTE Life Insurance Company Limited (Bermuda) GTE Reinsurance Management Limited (Bermuda) GTE Service Corporation GTE Shareholder Services Incorporated GTE VisNet Incorporated GOVERNMENT SYSTEMS Contel Federal Systems, Inc. GTE Government Systems Corporation GTE CyberTrust Solutions Incorporated GTE Federal Services Corporation GTE Government Systems Overseas Corporation GTE Overseas Systems and Services Corporation Telecom Systems Incorporated Contel Page International Holdings, Inc. Contel Page International, Inc. Page Europa, S.p.A. MTX Italia GTE Telecom Incorporated GTE Telecom International Incorporated GTE Telecom International Systems Corporation GTE Telecom Saudi Arabia LTD INFORMATION SERVICES GTE Information Services Incorporated General Telephone Directory Company C. por A. GTE Communications Corporation GTE Data Services GmbH GTE Directories (Belgium) Limited GTE Directories (B) SDN.BHD (Brunei) GTE Directories Corporation Associated Directory Services-WC, Company GTE Directories Distribution Corporation GTE Directories Sales Corporation GTEX Corporation GTE Directories (HK) Limited (Hong Kong) GTE Directorios - Republica Dominicana, C. por A. GTE Government Information Services Incorporated GTE Information Services (UK) Limited (England) U S West Polska Sp. Z o.o. GTE New Media Services Incorporated GTE Telecommunications Services Incorporated GTE Yellow Pages Publishing Hungary Kft INTERNETWORKING OPERATIONS GTE Internetworking Incorporated GTE Intelligent Network Services Incorporated BBN Corporation BBN International Corporation BBN International Sales Corporation BBN Securities Corporation BBN U.K. Limited Bolt Beranek and Newman Corporation Realtech Corporation TELEPHONE OPERATING COMPANIES GTE Alaska Incorporated GTE Arkansas Incorporated GTE California Incorporated Contel Advanced Systems, Inc. GTE Florida Incorporated GTE Florida Business Connections Corporation GTE Funding Incorporated GTE Hawaiian Telephone Company Incorporated GTE Hawaiian Tel Insurance Company Incorporated GTE Hawaiian Tel International Incorporated The Micronesian Telecommunications Corporation GTE Pacifica Incorporated GTE Midwest Incorporated GTE North Incorporated GTE Northwest Incorporated GTE West Coast Incorporated GTE South Incorporated GTE Southwest Incorporated Contel of Minnesota, Inc. d/b/a GTE Minnesota Contel of the South, Inc. d/b/a GTE Systems of the South Contel Service Corporation GTE Anglo Holding Company Incorporated La Compagnie de Telephone Anglo-Canadienne/Anglo- Canadian Telephone Company BC TELECOM Inc. Aerotech Specialities Ltd. BC TEL Canadian Telephones and Supplies Ltd. ISM Information Systems Management (B.C.) Corporation BC TEL Mobility Cellular Inc. BC TEL Mobile Ltd. BC TEL Properties Inc. PageMart (9/28/98) -CONFIDENTIAL- A-1 27 EXHIBIT A GTE AFFILIATED ENTITIES BC TEL Risk Management Inc. BC TEL Systems Support Inc. Microtel International Inc. SRI Strategic Resources Inc. Telecom Leasing Canada (TLC) Limited Quebec-Telephone QuebecTel Communications Inc. QuebecTel Mobilite Inc. Quebec Tel International Inc. GTE Customer Networks, Inc. GTE Data Services Incorporated GTE Data Services International Incorporated GTE Holdings (Canada) Limited Compania Dominicana de Telefonos, C. por A. (Codetel) Quality Telecommunications, C. por A. GTE International Telephone Incorporated Informatica y Telecommunicaciones, C. por A. (Dominican Republic) GTE International Telecommunications Incorporated GTE do Brasil Limitada GTE Mexico, L.L.C. GTE PCS International Incorporated GTE Venezuela Incorporated VenWorld Telecom, C.A. (Venezuela) Compania Anonima Nacional Telefonos de Venezuela (CANTV) Prontocel S.A. (Brazil) GTE Investments Incorporated GTE London Limited (England) GTE Main Street Incorporated GTE Media Ventures Incorporated ContelVision, Inc. GTE Enterprise Initiatives Incorporated GTE Vantage Incorporated WIRELESS PRODUCTS AND SERVICES GTE Airfone Incorporated GTE Airfone of Canada Incorporated GTE Railfone Incorporated Mexfone, S.A. de C.V. GTE Wireless Incorporated GTE Mobile Communications Service Corporation GTE Mobile Communications International Incorporated GTE Mobilnet of Asheville Incorporated GTE Mobilnet of Danville Incorporated GTE Mobilnet of Eastern North Carolina Incorporated GTE Mobilnet of Jacksonville Incorporated GTE Mobilnet of Jacksonville II Incorporated GTE Mobilnet of Wilmington Incorporated GTE Mobilnet of Wilmington II Incorporated GTE Mobilnet of Fayetteville Incorporated GTE Mobilnet of Florence, South Carolina Incorporated GTE Mobilnet of North Carolina Incorporated GTE Mobilnet of Raleigh Incorporated GTE Mobilnet of South Carolina Incorporated GTE Mobilnet of the Southeast Incorporated GTE Cellular Communications Corporation GTE Mobilnet of Cleveland Incorporated GTE Mobilnet Sales Corp. GTE Mobilnet Service Corp. GTE Mobilnet of Austin Incorporated GTE Wireless of Houston Incorporated GTE Wireless of the Midwest Incorporated GTE Wireless of the Pacific Incorporated GTE Mobilnet of Clatsop Incorporated Contel Cellular International, Inc. GTE Mobilnet Holding Incorporated GTE Mobilnet of Alabama Incorporated GTE Mobilnet of Florence, Alabama Incorporated GTE Mobilnet of Chattanooga Incorporated GTE Mobilnet of Chattanooga II Incorporated GTE Mobilnet of Clarksville Incorporated GTE Mobilnet of Gadsden Incorporated GTE Mobilnet of Knoxville Incorporated GTE Mobilnet of Memphis Incorporated GTE Mobilnet of Memphis II Incorporated GTE Mobilnet of Nashville Incorporated GTE Mobilnet of Tennessee Incorporated GTE Mobilnet of Central California Incorporated Pinnacles Cellular, Inc. GTE Mobilnet of Huntsville Incorporated GTE Mobilnet of Illinois Funding Incorporated PageMart (9/28/98) -CONFIDENTIAL- A-2 28 EXHIBIT A GTE AFFILIATED ENTITIES GTE Mobilnet of San Diego Incorporated GTE Mobilnet of the Southwest Incorporated GTE Wireless of the South Incorporated OTHER OPERATIONS GTE China Incorporated GTE International Telecommunications Services LLC GITS Branch LLC GTE Holdings Mexico, S. de R.L. de C.V. GTE Data Services-Mexico, S.A. de C.V. GTEDS Services-Mexico, S.A. de C.V. GTE Supply-Mexico, S.A. de C.V. GTE Communications Services Incorporated GTE Leasing Corporation GTE Leasing Acceptance Corporation Kalama Grain Terminal, Inc. GTE Products of Connecticut Corporation GTE Communication Systems Corporation (GTE Supply) GTE International Incorporated GTE Far East (Services) Limited GTE Overseas Corporation GTE Laboratories Incorporated GTE Operations Support Incorporated GTE Operations do Brasil Comercial Ltda. West Indies Telephone Company Televac, Inc. GTE Transfer Corporation PageMart 09/28/98 -CONFIDENTIAL- A-3 29 EXHIBIT B Service Level Agreement LICENSOR agrees to maintain the service levels described herein. LICENSOR's service level agreement applies only to the infrastructure managed and maintained by LICENSOR. LICENSOR is not responsible for service levels for the infrastructure maintained by RESELLER (i.e. the Hawaii network infrastructure and all RESELLER paging terminals). LICENSOR will provide service to RESELLER in three different manners: Full RESELLER Paging Services, Quasi-RESELLER Paging Services, and Transmission Only Paging Services. Under Full RESELLER Paging Services the RESELLER will procure customers which will be activated on one of LICENSOR's paging terminals and in LICENSOR's billing system via PRIME, Vantive, WinFast, ActFast, Dial-Now, or other LICENSOR provided activation systems. LICENSOR will provide the pager number and all in-bound calling circuits. When a valid customer receives a page the in-bound call is accepted by LICENSOR (at the terminal), the customer is validated in the terminal, and the page is transmitted to the transmitters in the correct Coverage zone via satellite simulcast. The transmitters then send the page out via one of LICENSOR's frequencies (that frequency which matches the receiver in that specific customer's pager). Multiple sub-services are to be provided by LICENSOR to RESELLER under this service as defined below. Under Quasi-RESELLER Paging Services the RESELLER will procure customers which will be activated on a RESELLER paging terminal, one of LICENSOR's paging terminals, and LICENSOR's billing system via PRIME, Vantive, WinFast, ActFast, Dial-Now, or other LICENSOR provided activation systems. When a valid customer receives a page the in-bound call is accepted by RESELLER (at the terminal), the customer is validated in the terminal, and the page is transmitted to a LICENSOR terminal via TNPP. The data is directed by LICENSOR's terminal to the transmitters in the correct Coverage zone via satellite simulcast. The transmitters then send the page out via one of LICENSOR's frequencies (that frequency which matches the receiver in that specific customer's pager). Multiple sub-services are to be provided by LICENSOR to RESELLER under this service as defined below. Under Transmission Only Paging Services the RESELLER will procure customers which will be activated on a RESELLER paging terminal via a RESELLER provided activation system. Billing will be based on the amount of data that passes through the LICENSOR's system as defined in the pricing section of this contract. When a valid customer receives a page the in-bound call is accepted by RESELLER (at the RESELLER owned terminal), the customer is validated in the terminal, and the page is transmitted to a LICENSOR terminal via TNPP. The data is directed by LICENSOR's terminal to the transmitters in the correct Coverage zone via satellite simulcast. The transmitters then send the page out via one of LICENSOR's frequencies (that frequency which matches the receiver in that specific customer's pager). Multiple sub-services are to be provided by LICENSOR to RESELLER under this service as defined below. PageMart 09/28/98 -CONFIDENTIAL- B-1 30 [*] GTE Communication Systems PageMart Wireless, Inc. By: /s/ M. R. REDMOND By: /s/ N. ROSS BUCKENHAM -------------------------- -------------------------- Name: M. R. Redmond Name: N. Ross Buckenham ------------------------ ------------------------ Title: AVP-Contract Mgt Title: President ----------------------- ----------------------- Date: 9/29/98 Date: 9/28/98 ------------------------ ------------------------ PageMart (09/28/98) -CONFIDENTIAL- * CONFIDENTIAL INFORMATION HAS BEEN DELETED. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT. 31 EXHIBIT C Pricing Listed below are the three pricing options available to RESELLER: 1. PRIME PROVISIONED SUBSCRIBER MESSAGING SERVICES Services delivered to RESELLER customers utilizing a RESELLER or LICENSOR owned paging terminal for which LICENSOR's administrative system (PRIME) is used to provision the subscribers and collect call counts. 2. TNPP NON-PROVISIONED SUBSCRIBER MESSAGING SERVICES Services delivered to RESELLER customers for which RESELLER provides all provisioning services and does not utilize LICENSOR's provisioning systems nor paging terminals managed or maintained by LICENSOR. Traffic rated according to this pricing model must be delivered at RESELLER's cost to a LICENSOR network gateway (RTS Router) for direct distribution to the satellite uplink without passing through one of LICENSOR's paging terminals. 3. TNPP NON-PROVISIONED MACHINE MESSAGING SERVICES Services delivered to RESELLER customers for which RESELLER provides all provisioning services and does not utilize LICENSOR's provisioning systems nor paging terminals managed or maintained by LICENSOR. Traffic rated according to this pricing model must be delivered at RESELLER's cost to a LICENSOR network gateway (RTS Router) for direct distribution to the satellite uplink without passing through one of LICENSOR's paging terminals. Each message shall consist of no more than three (3) characters. PageMart (9/28/98) -CONFIDENTIAL- C-1 32 EXHIBIT C PRIME PROVISIONED SUBSCRIBER MESSAGING SERVICES ALPHANUMERIC PRICING
PER MO, PER UNIT TEXT NETWORK NUMERIC NET. US 800 / US 800 / 888 COVERAGE FLEX NETWORK RATE OVERCALL LEVEL OVERCALL LEVEL 888 CHARGE OVERCALL LEVEL - -------- ----------------- -------------- -------------- ---------- -------------- Local - Tier I * * * * * Local - Tier II * * * * * Local Tier III * * * * * Text Roam US only (1) * counts towards local coverage listed above Text Roam International (2) * counts towards local coverage listed above Statewide * * * * * Region * * * * * Dual Region * * * * * Norpac * * * * * SF or LA plus Las Vegas * * * * * California State plus Las Vegas * * * * * Nationwide US 48 States * * * * * US Extended (1) * * * * * International (2) N/A See International Text Roam above.
**Alphanumeric message allotment to include 100 characters per message. - LOCAL AND STATEWIDE ONLY, AGGREGATED AT LISTED SERVICE LEVELS. NO OTHER SERVICES ARE AGGREGATED. - GTE will offer industry standard overcall thresholds and rates in order to create financial opportunities for GTE or penalties for abusers of the network. - GTE user's usage profile does not change significantly from the current or the aggregation rules will be reviewed. - If a GTE subscriber originates more than 500 text messages in one month, GTE and PageMart will discuss the validity of the application and remove that customer from aggregation on the basis that at such a high level, over 16 text messages per day, PageMart is not fairly compensated. - International Roaming requires equal level of service of U.S. service on 929.6625 Mhz frequency. - All rates are per month unless otherwise noted. - FLEX Service only; "( )" denotes pocsag rate -- not applicable for new subscribers, but will apply to RESELLER's current pocsag inventory - Tier I (LA / San Diego), Tier II (Hawaii), Tier III (All areas not Tier I or Tier II). (1) 48 States, Alaska/Hawaii, Puerto Rico/Virgin Islands, Bahamas (2) 48 States, Canada, Alaska/Hawaii, Puerto Rico/Virgin Islands, Bahamas, Mexico, Central America PageMart (9/28/98) -CONFIDENTIAL- C-2 * CONFIDENTIAL INFORMATION HAS BEEN DELETED. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT. 33 EXHIBIT C PRIME PROVISIONED SUBSCRIBER MESSAGING SERVICES NUMERIC PRICING
Per Mo, Per Unit Network US 800/888 800/888 Coverage Flex Network Rate Overcall Level Charge Overcall Level - -------- ----------------- -------------- ------ -------------- Local * * * * Local LA/SD * * * * Numeric Roam US only (1) * counts towards local coverage listed above Numeric Roam International (2) * counts towards local coverage listed above Statewide * * * * Region * * * * Dual Region * * * * Norpac * * * * Seaboard Region * * * * SF or LA plus Las Vegas * * * * California State Plus Las Vegas * * * * Nationwide US 48 States * * * * US Extended (1) * * * * International (2) N/A See International Numeric Roam above.
**Price includes Local DID. - NUMERIC NETWORK OVERCALLS ARE AGGREGATED WITHIN THREE CATEGORIES: (1) LOCAL, ROAM, AND STATEWIDE; (2) REGIONAL; AND (3) NATIONWIDE AND EXTENDED NATIONWIDE. AGGREGATE BILLING DOES NOT INCLUDE 800/888 SERVICE. OVERCALL CHARGES ARE ASSESSED WHEN AGGREGATED THRESHOLD IS CROSSED. - GTE will offer industry standard overcall thresholds and rates in order to create financial opportunities for GTE or penalties for abusers of the network. - GTE user's usage profile does not change significantly from the current or the aggregation rules will be reviewed. - International Roaming requires equal level of service of U.S. service on 929.6625 Mhz frequency. - All rates are per month unless otherwise noted. - FLEX Service only; "( )" denotes pocsag rate -- not applicable for new subscribers, but will apply to RESELLER's current pocsag inventory. (1) 48 States, Alaska/Hawaii, Puerto Rico/Virgin Islands, Bahamas (2) 48 States, Canada, Alaska/Hawaii, Puerto Rico/Virgin Islands, Bahamas, Mexico, Central America PageMart (9/28/98) -CONFIDENTIAL- C-3 * CONFIDENTIAL INFORMATION HAS BEEN DELETED. THE OMITTED MATERIALS HAVE BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT. 34 EXHIBIT C TNPP Non-Provisioned Subscriber Messaging Services Pricing Pricing the same as Exhibit B Prime Provisioned Messaging Services except: o TNPP price does not include Local DID. o Numeric TNPP rates are discounted [*] from published PRIME rates and are for FLEX units only. o Alphanumeric TNPP rates are discounted [*] from published PRIME rates and are for FLEX units only. o LICENSOR will provide a monthly list for all customers using Roaming service. o [*] o TNPP circuits and licensing fees, to allow for pager provisionment, will be the financial responsibility of RESELLER. o Numeric overcalls [*] at per character based on 20 characters per numeric message, i.e., [*] per numeric overcall. PageMart (9/28/98) -CONFIDENTIAL- C-4 * CONFIDENTIAL INFORMATION HAS BEEN DELETED. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT. 35 EXHIBIT C TNPP Non-Provisioned Machine Messaging Services Pricing o To be discussed: Most Favored Nation clause will apply PageMart (9/28/98) -CONFIDENTIAL- C-5 36 EXHIBIT D Authorized Equipment PRODUCT NAME Motorola Pronto - Flx Motorola Bravo - Flx Motorola Jazz - Flx Motorola Express Extra - Flx Motorola Express Ultra - Flx Motorola Renegade - Flx* Motorola Wordline Flx Motorola Advisor Gold Flx Motorola Advisor Elite Flx Phillips Cobalt Flx Phillips Myna Flx * Only units currently in RESELLER'S inventory (approximately 10,000) may be placed in service under LICENSOR'S Paging System PageMart 09/28/98 -CONFIDENTIAL- D-1 37 EXHIBIT E RESELLER National Accounts Service Commitment [*] PageMart 09/28/98 -CONFIDENTIAL- E-1 * CONFIDENTIAL INFORMATION HAS BEEN DELETED. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT. 38 EXHIBIT F Technical Standards (To be added within thirty (30) days after executing this Agreement) PageMart 09/28/98 -CONFIDENTIAL- F-1 39 [PAGEMART LOGO] PAGEMART STANDARDS AND TEST PROCEDURES FOR WIRELESS MESSAGING DEVICES The following section will outline the general lab procedures utilized by PageMart to evaluate and test the subscriber units submitted for acceptance. 1 Inspection of unit for manufacturing quality, finish and ruggedness. 2 Analysis of ease of unit operation (message recall, etc.) in conformance with supplied operating procedures. 3 Analysis of programming ease and feature availability. 4 Analysis of technical and programming manuals. The following section will outline the testing of pager sensitivity, and other specifications as deemed necessary, in a Model CC105EXX Crawford TEM Cell. 1 Locate "BEST POSITION" through trial and error placement in the Crawford cell or based on information supplied by the manufacturer. 2 By reiterative adjustment of signal level from the test signal generator (HP8648C with FLEX encoding option) the point at which 80% of the page sequences sent are decoded will be determined. 3 To arrive at a 90% signaling reliability, add 1.5 dB to the value measured above. THIS VALUE REPRESENTS OUR MEASURED SENSITIVITY FOR THE PAGER. Our current benchmark level is -102dBm. Our expectation is for the sensitivity of a pager in this environment and by this method be no worse than -95dBm. The following section will outline the testing of pagers for high signal level intermodulation rejection in the TEM cell: 1 Combine three HP8648 signal generators w/ encoders using a three-way splitter and feed the signal into the TEM cell. 2 Adjust sig. Gen. #1 and #2 (the unwanted signals) 929.6125MHz and 929.5625MHz respectively, which create a third order hit on 929.66250 (the wanted signal frequency). 3 Set-up sig. Gen. #3 (the wanted signal) with pager appropriate modulation at 6400/4 Phase D on frequency 929.66250. 4 Adjust amplitude of all signal generators to -30dBm inside the cell compensating for any losses in the set-up. (PageMart set-up has a 20dB measured loss, therefore signal generators are set to -10dBm.) 5 The wanted signal is then decremented to failure and recorded. 6 THE DELTA OF THE WANTED TO THE UNWANTED SIGNALS REPRESENTS THE LEVEL OF INTERMODULATION REJECTION FOR THE PAGER AT -30dBm. Our current benchmark level is 45dB of IMR @ -30dBm. Our expectation of any device in this environment should be greater than 40dB of IMR @-30dBm. Note*** If testing of pager high-level IM is accomplished by following TIA/EIA-603 section 2.1.9 intermodulation Rejection, the following exceptions apply: 1 In paragraph 2.1.9.2.c, increases the level of the "wanted" signal by 70 dB. E.g., if reference sensitivity as measured in the TEM cell is -100 dBm, the new applied level is -30 dBm. 2 Replace any reference to a SINAD measurement with the 80% paging reliability reference point. 1 40 At this point, RF Engineering will produce a brief report with subjective evaluation factors and the results of sensitivity and I/M tests. This will be submitted to management. If a decision is made to proceed, additional testing will be done as follows. Field testing will be done at worst-case signaling rates in the following environments: 1. The usual simulcast system locations in city, suburban and rural locations. 2. Weak signal, usually rural, locations. 3. In areas of known high-level IM. 4. In other locations or cities as deemed necessary. Field testing is accomplished in the following manner. 1. Request the PageMart Communications Center to initiate numeric and/or alphanumeric sequential test pages through the appropriate paging terminal. 2. Place all pagers under test (the five new units plus known units for reference) clipped to a copier paper box top or equivalent (each pager should be separated by as much distance as possible). Setup the PageMart RF Engineering Grayson PageTracker with associated Notebook computer (P5-75 or better) to measure received signal strength indication (RSSI) and bit error rate (BER) on at least two receivers. 1. One receiver will utilize an external magnetic mount quarter-wave whip antenna mounted on the test vehicle roof. 2. The second receiver will utilize a two-way "rubber-ducky" type mobile radio antenna. 3. Drive routes and locations that are previously defined and mapped in relation to the desired environments. 4. Perform continuous testing by receiving periodic pages on specified drive routes at normal speeds. 5. Perform testing at fixed locations by receiving groups of ten or more sequential pages. (Rotate pager position at least every 25 pages) 6. Produce Graphical Information System (GIS) plots of BER and RSSI. 7. Compare reliability data in relation to GIS BER and RSSI: Within published coverage areas paging reliability should exceed 95%. In weak signal locations performance of the units under test should be comparable to the reference pager (+/- 5%). Other test locations should show paging reliability statistics on the units under test comparable to the reference pager in terms of pager reliability (+/- 5%). PageMart RF Engineering will produce a summary report including data as required with recommendations for management to decide on the purchase of production quantities of the pager under test. 2 EX-11.1 8 COMPUTATION OF PER SHARE EARNINGS (LOSS)-12/98 QTR 1 EXHIBIT 11.1 PAGEMART WIRELESS, INC. COMPUTATION OF PER SHARE EARNINGS (LOSS)
THREE MONTHS ENDED DECEMBER 31, 1998 ------------------------------------------ NUMBER PERCENT EQUIVALENT OF SHARES OUTSTANDING SHARES ----------- ----------- ---------- COMMON STOCK From Founders' Stock 2,300,000 100.00% 2,300,000 Stock Options Exercised 1,060,225 99.77% 1,057,752 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 110,943 81.90% 90,862 Warrants Exercised 49,450 100.00% 49,450 ----------- ------------ 40,398,292 40,375,738 WEIGHTED AVERAGE SHARES OUTSTANDING 40,375,738 NET LOSS $(14,831,000) NET LOSS PER SHARE $ (0.37) ============
EX-11.2 9 COMPUTATION OF PER SHARE EARNINGS (LOSS)-12/97 QTR 1 EXHIBIT 11.2 PAGEMART WIRELESS, INC. COMPUTATION OF PER SHARE EARNINGS (LOSS)
THREE MONTHS ENDED DECEMBER 31, 1997 ------------------------------------------ NUMBER PERCENT EQUIVALENT OF SHARES OUTSTANDING SHARES ----------- ----------- ---------- 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) ============
EX-11.3 10 COMPUTATION OF PER SHARE EARNINGS (LOSS)-12/96 QTR 1 EXHIBIT 11.3 PAGEMART WIRELESS, INC. COMPUTATION OF PER SHARE EARNINGS (LOSS)
THREE MONTHS ENDED DECEMBER 31, 1996 ------------------------------------------ NUMBER PERCENT EQUIVALENT OF SHARES OUTSTANDING SHARES ----------- ----------- ---------- 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) ============
EX-11.4 11 COMPUTATION OF PER SHARE EARNINGS (LOSS)-12/98 YE 1 EXHIBIT 11.4 PAGEMART WIRELESS, INC. COMPUTATION OF PER SHARE EARNINGS (LOSS)
YEAR ENDED DECEMBER 31, 1998 ------------------------------------------- NUMBER PERCENT EQUIVALENT OF SHARES OUTSTANDING SHARES ---------- ----------- ------------ COMMON STOCK From Founders' Stock 2,300,000 100.00% 2,300,000 Stock Options Exercised 1,060,225 88.35% 936,674 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 110,943 75.19% 83,423 1997 Warrants Exercised 49,450 98.26% 48,590 ----------- ------------ 40,398,292 40,246,361 WEIGHTED AVERAGE SHARES OUTSTANDING 40,246,361 LOSS BEFORE EXTRAORDINARY ITEMS (41,710,000) EXTRAORDINARY ITEMS (17,606,000) ------------ NET LOSS $(59,316,000) LOSS BEFORE EXTRAORDINARY ITEMS (1.03) EXTRAORDINARY ITEMS (0.44) ------------ NET LOSS PER SHARE $ (1.47) ============
EX-11.5 12 COMPUTATION OF PER SHARE EARNINGS (LOSS)-12/97 YE 1 EXHIBIT 11.5 PAGEMART WIRELESS, INC. COMPUTATION OF PER SHARE EARNINGS (LOSS)
YEAR ENDED DECEMBER 31, 1997 ------------------------------------------- NUMBER PERCENT EQUIVALENT OF SHARES OUTSTANDING SHARES ---------- ----------- ------------ 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) ============
EX-11.6 13 COMPUTATION OF PER SHARE EARNINGS (LOSS)-12/96 YE 1 EXHIBIT 11.6 PAGEMART WIRELESS, INC. COMPUTATION OF PER SHARE EARNINGS (LOSS)
YTD ENDED JUNE 13, 1996 ---------------------------------------- NUMBER PERCENT EQUIVALENT OF SHARES OUTSTANDING SHARES ---------- ----------- ---------- 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 ---------- ----------- ----------- 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 37,462,264 NET LOSS $(48,598,000) NET LOSS PER SHARE $ (1.30) ============
EX-12.1 14 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12.1 PAGEMART WIRELESS, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (IN THOUSANDS)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1993 1994 1995 1996 1997 ------------ ------------ ------------ ------------ ------------ Earnings: Net loss ......................... $(31,121) $(45,813) $(53,113) $(48,598) $(43,887) Add: Amount of previously capitalized interest amortized ............ -- -- -- -- -- Add: Fixed charges ............... 6,538 12,933 30,720 35,041 38,499 Adjusted earnings ................ (24,583) (32,880) (22,393) (13,557) (5,388) Fixed charges: Interest on indebtedness .................. 5,785 11,209 28,383 32,368 36,672 Amortization of debt issuance costs ................ 159 800 1,052 2,143 844 Other interest expense ....................... 594 924 1,285 530 983 Fixed charges .................... 6,538 12,933 30,720 35,041 38,499 Deficiency of earnings available to cover fixed charges .............. $(31,121) $(45,813) $(53,113) $(48,598) $(43,887) ======== ======== ======== ======== ======== Earnings to fixed charges ratio .... -- -- -- -- -- THREE MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1998 (1) 1998 (1) ------------ ------------ Earnings: Net loss ......................... $(14,831) $(59,316) Add: Amount of previously capitalized interest amortized ............ 196 252 Add: Fixed charges ............... 11,441 43,798 Adjusted earnings ................ (3,194) (15,266) Fixed charges: Interest on indebtedness .................. 13,840 52,645 Amortization of debt issuance costs ................ 307 1,172 Other interest expense ....................... 506 1,428 Fixed charges .................... 14,653 55,245 Deficiency of earnings available to cover fixed charges .............. $(17,847) $(70,511) ======== ======== Earnings to fixed charges ratio .... -- --
(1) The fixed charge adjustment to earnings excludes $3.2 million and $11.4 million of capitalized interest for the three months and year ended December 31, 1998. EX-21.1 15 SUBSIDIARIES OF THE REGISTRANT 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 California, Inc. Delaware PageMart Operations, Inc. of Virginia Delaware PageMart International, Inc. Delaware Telephone North, Inc. Delaware PageMart Asia Holdings, Ltd. Cayman Islands PageMart Latino America, S.A. de C.V. Mexico PageMart de Mexico, S.A. de C.V. Mexico PageMart de Columbia Limitada Columbia EX-23.1 16 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into the Company's previously filed Registration Statements on Form S-8 File Nos. 333-98116, 333-09083, and 333-09087, on Form S-3 File Nos. 33-91142 and 333-48971. /s/ ARTHUR ANDERSEN LLP Dallas, Texas, March 26, 1999 EX-27.1 17 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S DECEMBER 31, 1998 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 17,476 1,000 40,884 2,580 6,747 74,537 390,505 116,326 494,055 120,750 462,079 0 0 4 (90,026) 494,055 56,838 311,652 69,150 125,734 43,420 0 43,798 (41,710) 0 (41,710) 0 (17,606) 0 (59,316) (1.47) (1.47)
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