<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 1996.
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
GENERAL WIRELESS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 4812 75-2550006
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NUMBER)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)
----------------
6688 N. CENTRAL EXPRESSWAY
DALLAS, TEXAS 75206
(214) 373-0494
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ROGER D. LINQUIST
PRESIDENT AND CHIEF EXECUTIVE OFFICER
GENERAL WIRELESS, INC.
6688 N. CENTRAL EXPRESSWAY
DALLAS, TEXAS 75206
(214) 373-0494
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPIES TO:
EDWARD M. LEONARD, ESQ. JOHN D. WATSON, JR., ESQ.
BROBECK, PHLEGER & HARRISON LLP LATHAM & WATKINS
TWO EMBARCADERO PLACE 1001 PENNSYLVANIA AVE., N.W.
2200 GENG ROAD SUITE 1300
PALO ALTO, CALIFORNIA 94303 WASHINGTON, D.C. 20004-2505
(415) 424-0160 (202) 637-2200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------
<S> <C> <C>
Class C Common Stock, $0.0001 par value.... $189,750,000 $65,432
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a).
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(A), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
GENERAL WIRELESS, INC.
CROSS-REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
FORM S-1 REGISTRATION STATEMENT
ITEM AND HEADING HEADING OR LOCATION IN PROSPECTUS
------------------------------- ---------------------------------
<S> <C>
1.Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus...... Outside Front Cover Page
2.Inside Front and Outside Back
Cover Pages of Prospectus..... Inside Front Cover Page
3.Summary Information and Risk Prospectus Summary; The Company; Risk
Factors....................... Factors
4.Use of Proceeds................. Prospectus Summary; Use of Proceeds
5.Determination of Offering Outside Front Cover Pages; Underwriting
Price.........................
6.Dilution........................ Dilution
7.Plan of Distribution............ Outside Front Cover Page; Underwriting
8.Description of Securities to be Prospectus Summary; Capitalization;
Registered.................... Description of Capital Stock
9.Interests of Named Experts and Experts; Legal Matters
Counsel.......................
10.Information with Respect to the Outside and Inside Front Cover Pages;
Registrant.................... Prospectus Summary; The Company; Risk
Factors; Use of Proceeds; Dividend Policy;
Capitalization; Dilution; Selected
Consolidated Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain
Transactions; Principal Stockholders;
Description of Capital Stock; Description
of Certain Indebtedness; Shares Eligible
for Future Sale; Experts; Financial
Statements
11.Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 28, 1996
PROSPECTUS
SHARES
GENERAL WIRELESS, INC.
CLASS C COMMON STOCK
All of the shares of the Company's Class C Common Stock offered hereby (the
"Stock Offering") are being sold by General Wireless, Inc. ("General Wireless"
or the "Company"). Prior to the Stock Offering, there has been no public market
for the Class C Common Stock of the Company. It is currently estimated that the
initial public offering price will be between $ and $ per share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. Application has been made to have the
Company's Class C Common Stock approved for quotation on the Nasdaq National
Market under the symbol "GWIR."
The Company has three classes of Common Stock authorized and outstanding:
Class A Common Stock, Class B Common Stock and Class C Common Stock
(collectively, the "Common Stock"). The economic rights of each class of Common
Stock are identical but the voting rights are different. Under the Company's
Certificate of Incorporation, the Class C Common Stock, including the shares of
Class C Common Stock being offered hereby, voting as a class, constitutes 49.9%
of the voting power of the Company. The Class A Common Stock, voting as a
class, constitutes 50.1% of the voting power of the Company. The Class B Common
Stock carries no voting power. See "Description of Capital Stock."
Concurrently with the Stock Offering and pursuant to a separate prospectus,
the Company will make a public offering (the "Senior Discount Notes Offering")
of $ aggregate principal amount at maturity of % Senior Discount Notes due
, 2006 (the "Senior Discount Notes"), which will result in approximately
$220 million in gross proceeds to the Company. The Stock Offering and the
Senior Discount Notes Offering are referred to herein collectively as the
"Offerings." The closing of the Senior Discount Notes Offering is conditioned
upon the closing of the Stock Offering, but the closing of the Stock Offering
is not conditioned upon the closing of the Senior Discount Notes Offering.
----------
INVESTMENT IN THE CLASS C COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................... $ $ $
- --------------------------------------------------------------------------------
Total(3)................................ $ $ $
</TABLE>
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- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to an aggregate of additional
shares of Class C Common Stock at the price to the public less underwriting
discounts and commissions for the purpose of covering over-allotments, if
any. If the Underwriters exercise such option in full, the total price to
the public, underwriting discounts and commissions and proceeds to Company
will be $ , , and $ , respectively. See "Underwriting."
----------
The shares of Class C Common Stock are offered subject to prior sale, when,
as and if delivered to and accepted by the Underwriters, and subject to certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares will be made on or about at the office of Bear,
Stearns & Co. Inc., New York, N.Y.
----------
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
SALOMON BROTHERS INC
J.P. MORGAN & CO.
, 1996
<PAGE>
GENERAL WIRELESS PCS MARKETS
19.8 MILLION POPS
[GRAPHIC OF MAP OF UNITED STATES WITH ENLARGEMENTS DEPICTING
THE COMPANY'S MARKETS IN THE SAN FRANCISCO-NORTHERN CALIFORNIA REGION,
THE MIAMI-SOUTHERN FLORIDA REGION AND
THE ATLANTA-NORTHERN GEORGIA REGION APPEARS HERE.]
<TABLE>
<CAPTION>
SAN FRANCISCO CLUSTER MIAMI CLUSTER ATLANTA CLUSTER
- --------------------------------- ------------------------ -----------------
<S> <C> <C>
(10.0 million POPs) (5.6 million POPs) (4.1 million POPs)
.San Francisco--Oakland--San Jose .Miami--Fort Lauderdale .Atlanta
.Sacramento .West Palm Beach .Gainesville
.Monterey--Salinas .Fort Myers .Athens
.Stockton .Naples
.Chico--Oroville .Fort Pierce--Vero Beach
.Yuba City--Marysville
</TABLE>
IN CONNECTION WITH THE STOCK OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS
C COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
General Wireless, Inc. and the General Wireless logo are trademarks of the
Company. This Prospectus also includes trademarks of companies other than the
Company.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and consolidated financial
statements and notes thereto appearing elsewhere in this Prospectus. Unless
otherwise indicated, the information in this Prospectus, other than the
historical financial information, (i) assumes and gives effect to the
completion of the Offerings, (ii) does not give effect to the exercise of the
Underwriters' over-allotment option, (iii) assumes that the Company will be
granted the personal communications services ("PCS") licenses for which the
Company was the high bidder in the recently completed 30 MHz C-Block auction
(the "C-Block Auction") conducted by the Federal Communications Commission
("FCC") and (iv) reflects a 20-for-1 stock split to be effected prior to the
effective date of the Stock Offering. As used in this Prospectus with respect
to a given area, the term "POPs" refers to the aggregate number of persons
located in such area, based on the 1995 estimated U. S. population data in the
1995 PCS Atlas and Data Book published by Paul Kagan Associates, Inc. ("Kagan
Associates"). See the "Glossary" beginning on page 70 for a definition of
certain terms used herein. Certain of the information contained in this summary
and elsewhere in this Prospectus, including information with regard to the
Company's business, are forward-looking statements. For a discussion of
important factors that could affect such matters, see "Risk Factors" beginning
on page 9.
THE COMPANY
General Wireless intends to become a leading provider of affordable wireless
communications services. The Company holds PCS licenses to serve the rapidly
growing metropolitan areas of San Francisco, Atlanta and Miami (the
"Metropolitan Areas"), as well as 11 selected high-growth contiguous markets.
In total, the Company's markets contain 19.8 million POPs, approximately 71% of
which are located in the Metropolitan Areas. The Company believes that this is
the highest percentage of total POPs located in densely populated urban markets
(markets having at least three million POPs) of any PCS or cellular operator in
the United States. Additionally, the Company believes its markets are
particularly attractive because of their high historical and projected
population growth rates, as well as other desirable demographic
characteristics, such as high population densities, favorable business
climates, high median household income levels and long commute times. From 1990
through 1995, the aggregate population of the Company's markets has grown at
over 150% of the national rate and is expected to continue to grow at a rate
above the national average. The Company plans to initiate service on its PCS
networks by the end of 1997.
The demand for wireless communications services in the United States has
grown dramatically during the last five years, notwithstanding the technical
limitations of existing analog cellular technology. The number of cellular
subscribers has grown from 5.3 million at December 31, 1990 to 33.8 million at
December 31, 1995, representing a compound annual growth rate of 45%. Over the
same time period, the wireless telephony penetration rate has grown from
approximately 3% to approximately 13%, and is forecasted by Kagan Associates to
reach approximately 48% by 2006.
The Company believes that, due to relatively high per minute airtime charges
and unpredictable monthly bills, there is a price-sensitive mass consumer
market that refrains from subscribing to or extensively using cellular
services. The Company believes that if the mass consumer market were offered
significantly lower per minute airtime charges and more predictable and
affordable pricing plans, mass consumers would increase their use of wireless
communications services, contributing to a new phase of growth in the industry.
The Company also believes that business customers who are high-volume users of
wireless communications services will be attracted to lower priced airtime
service, as such high-volume users would realize substantial aggregate savings.
3
<PAGE>
STRATEGY
The Company intends to become a leading provider of affordable wireless
communications services. The Company's strategy to achieve this objective is
based upon the following:
OPERATE IN LARGE, RAPIDLY GROWING MARKETS WITH ATTRACTIVE DEMOGRAPHIC
PROFILES. The Company believes there are significant advantages created by
focusing on densely populated major metropolitan markets. First, cell site
efficiencies can be maximized in densely populated areas, thereby reducing
network build-out costs per subscriber and providing greater pricing
flexibility. Accordingly, the Company can achieve a higher ratio of population
coverage to geographic coverage relative to PCS and cellular operators in less
densely populated markets. Second, these markets have multiple business centers
and residential areas that generally have a high demand for mobile
communications services. Third, analog cellular operators typically face
significant capacity constraints in high traffic areas. Fourth, major markets
have numerous local, regional and national retailers as well as agents and
resellers that can facilitate rapid growth by new wireless entrants.
USE A FOCUSED NETWORK BUILD-OUT TO ACHIEVE LOW COSTS. General Wireless
intends to achieve lower operating costs and capital requirements relative to
its PCS and cellular competitors by concentrating its network build-out in
"high-usage areas" rather than building out wide-area cellular-like networks.
The Company defines "high-usage areas" as those areas where the majority of the
population lives, commutes, works and shops. These areas primarily include
densely populated urban areas, commuting corridors and high-growth suburban
areas. The Company plans to limit the construction of its networks outside of
these high-usage areas because it believes the incremental cost of building out
such network coverage is substantial and is inconsistent with the Company's
objective to be the low cost provider of wireless communications services.
Based on network design analysis completed to date, the Company plans to spend
approximately $13 per POP through the end of 1998 for the build-out of its PCS
networks, which would provide coverage to approximately 80% of the aggregate
population of its markets. The Company believes its per POP network build-out
costs will be significantly less than its competitors. The Company believes its
focused build-out strategy differs from the strategy of many existing cellular
operators and from the expected strategy of many PCS operators that are
expected to compete by placing greater emphasis on coverage area rather than on
airtime prices. The Company's strategy parallels those used by certain
competitive local exchange carriers ("CLECs") and interexchange carriers
("IXCs") that have targeted specific coverage areas of major markets and are
interconnected to other carriers' facilities for expanded coverage.
Additionally, the Company intends to use the most cost-effective digital
technology and outsource selected technical and administrative functions.
IMPLEMENT AN INNOVATIVE AND AFFORDABLE PRICING STRUCTURE. General Wireless
plans to implement an innovative and affordable pricing structure to capitalize
on wireless customers' demand sensitivity to price. The Company believes that a
substantial market opportunity exists to narrow the pricing gap between
cellular airtime and wireline telephone rates, which today approximate 45 cents
and 5 cents per minute of use, respectively. Relative to current cellular
service packages, General Wireless expects to offer service packages that
include larger blocks of prepaid minutes consisting of both peak and off-peak
airtime at significantly lower effective prices per minute. Based on this
pricing strategy, General Wireless expects to realize average revenue per unit
("ARPU") similar to that currently achieved by cellular operators without
negatively impacting its operating margins. Additionally, the Company believes
that its cost structure will better support more affordable pricing relative to
PCS competitors that provide wide-area cellular-like coverage.
MAXIMIZE CUSTOMER REACH THROUGH EXTENSIVE USE OF INDIRECT DISTRIBUTION
CHANNELS. The Company's distribution strategy will emphasize indirect channels
in general, and retailers in particular. The Company believes it will realize
several important advantages from this distribution strategy. First, the
Company believes that the use of multiple indirect channels will enable the
Company to achieve a fast ramp-up of subscribers through representation at
numerous points of purchase. Second, the Company believes that indirect
distribution channels will cost-effectively focus the Company's sales and
marketing resources directly on customer creation,
4
<PAGE>
as opposed to investment in Company stores and related infrastructure. Third,
the focus on retailers and agents, rather than resellers, will better allow the
Company to maintain a direct relationship with its customer base through
billing and customer service. The Company believes that direct contact with its
customers will allow it to realize better customer satisfaction and achieve
lower churn.
FINANCING PLAN
The Company expects its financing plan to fund the Company's business through
at least the end of 1998. In the recently completed C-Block Auction, the
Company bid in the aggregate approximately $1.1 billion for its PCS licenses.
By the terms of the C-Block Auction, the Company will receive financing from
the U.S. government (the "Government Financing") for 90% of the purchase price
of the licenses (approximately $954 million) for a 10-year period commencing on
the date of license grant (the "License Grant Date") at a fixed interest rate
equal to the yield on the 10-year U.S. Treasury Note at the License Grant Date.
As of June , 1996 the yield on the 10-year U.S. Treasury Note was %.
Under the terms of the Government Financing, the Company is required to make
installment payments of interest only for the first six years of the license
and payments of interest and principal amortized over the remaining four years
of the license term. The Company raised the remaining 10% of the purchase price
of its PCS licenses from private equity and debt investors. See "Risk Factors--
Government Regulation" and "Description of Certain Indebtedness."
In aggregate, the Company estimates that it will require $553 million of
financing to fund its business plan from the effective date of the Offerings
through the end of 1998. The Company will require funding for capital
expenditures, interest expense payments, operating losses, working capital and
other general corporate purposes. To the extent unexpected expenditures arise
or the Company's estimates prove to be inaccurate, the Company may require
additional financing. See "Risk Factors--Significant Capital Requirements;
Financing Risks" and "Certain Transactions."
In aggregate, the Company intends to have raised or have available $639
million to fund the Company's business plan from the effective date of the
Offerings through the end of 1998. The Company expects sources of funding to
include the Stock Offering, the Senior Discount Notes Offering and drawdowns on
financing to be provided by equipment vendors (the "Vendor Financing"). The
Company is currently in negotiations with manufacturers of infrastructure
equipment for Vendor Financing, which is intended to fund a significant portion
of the Company's required capital expenditures including network design, site
selection, purchase of equipment, network construction and microwave
relocation. See "Risk Factors--PCS Network Construction and Implementation
Risks" and "--Dependence on Third Parties."
The following table sets forth the Company's estimated sources and uses of
funds on an aggregate basis from the effective date of the Offerings through
the end of 1998:
<TABLE>
<S> <C>
AMOUNTS
(IN MILLIONS)
SOURCES OF FUNDS:
Stock Offering net proceeds............................... $153
Senior Discount Notes Offering net proceeds............... 211
Vendor Financing.......................................... 275
----
Total.................................................... $639
====
USES OF FUNDS:
Capital expenditures...................................... $259
Interest expense payments on Government Financing and Ven-
dor Financing............................................ 192
Operating losses and working capital...................... 102
Other, including general corporate purposes............... 86
----
Total.................................................... $639
====
</TABLE>
5
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's capital structure has been designed to meet FCC and other
government rules and requirements. The Company has three classes of Common
Stock authorized and outstanding: Class A Common Stock, Class B Common Stock
and Class C Common Stock. The economic rights of each class of Common Stock are
identical but the voting rights are different. Under the Company's Certificate
of Incorporation, the Class C Common Stock, including the shares of Class C
Common Stock being offered hereby, voting as a class, constitutes 49.9% of the
voting power of the Company. The Class A Common Stock, voting as a class,
constitutes 50.1% of the voting power of the Company. The Class B Common Stock
carries no voting power. Failure to comply with FCC and other government rules
and requirements could have a material adverse effect upon the Company. See
"Risk Factors--Substantial Debt Obligations to the U.S. Government;
Implications of Accounting Treatment," "--C-Block License Requirements," "--
Effect of Control by Certain Stockholders," "--Dilution," "--Government
Regulation," "Legislation and Government Regulation" and "Description of
Capital Stock."
----------------
The Company was incorporated in Delaware in June 1994. Unless the context
otherwise requires, references to "the Company" or "General Wireless" herein
refer to General Wireless, Inc. and its consolidated subsidiaries. Such
subsidiaries will hold the Company's PCS licenses. The Company's principal
executive offices are located at 6688 N. Central Expressway, Dallas, Texas
75206, and its telephone number is (214) 373-0494.
6
<PAGE>
THE STOCK OFFERING
Class C Common Stock offered.... shares
Capital Stock to be outstanding
after the Stock Offering(1)
Class A Common Stock........ 60 shares
Class B Common Stock........ 2,109,440 shares
Class C Common Stock........ shares(2)
Total................... shares
Use of proceeds................. The net proceeds of the Offerings will be
used to finance interest expense payments on
the Government Financing and the Vendor
Financing, operating losses, working capital
requirements, capital expenditures not funded
by the Vendor Financing and for general
corporate purposes. See "Use of Proceeds."
Proposed Nasdaq National Market GWIR
symbol.........................
Senior Discount Notes Concurrently with the Stock Offering and
Offering........................ pursuant to a separate prospectus, the
Company will make a public offering of $
million aggregate principal amount at
maturity of % Senior Discount Notes due
2006, which will result in approximately $220
million in gross proceeds to the Company. The
closing of the Senior Discount Notes Offering
is conditioned upon the closing of the Stock
Offering, but the closing of the Stock
Offering is not conditioned upon the closing
of the Senior Discount Notes Offering.
- --------
(1) Based on the number of shares outstanding as of June 1, 1996. Excludes (i)
stock options to purchase 2,759,480 shares of Class B Common Stock with an
exercise price of $2.50 per share, (ii) warrants to purchase 210,000 shares
of Class B Common Stock with an exercise price of $2.50 per share, (iii)
warrants to purchase 6,773,500 shares of Class C Common Stock with an
exercise price of $5.00 per share and (iv) warrants to purchase 800,000
shares of Class C Common Stock with an exercise price of $0.0005 per share,
all of which were outstanding at June 1, 1996 and which were fully vested
and exercisable as of such date. Also excludes (i) 1,155,300 shares of
Class B Common Stock reserved for issuance under the Company's 1995 Stock
Option Plan not subject to outstanding options, (ii) shares of Class B
Common Stock reserved for issuance under the Company's 1996 Stock Option
Plan and (iii) shares of Class C Common Stock reserved for issuance
under the Company's Employee Stock Purchase Plan. Also excludes warrants to
purchase shares of Class C Common Stock at an exercise price of $5.00
per share to be purchased by Hyundai Electronics America ("Hyundai"). See
"Management--1995 Stock Option Plan," "--1996 Stock Option Plan," "--
Employee Stock Purchase Plan," "Certain Transactions" and Note 3 of Notes
to Consolidated Financial Statements for a description of the completion of
pro forma net loss per share and pro forma weighted average number of
shares outstanding.
(2) Includes shares of Class C Common Stock to be purchased by Hyundai.
See "Certain Transactions."
7
<PAGE>
SUMMARY AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The information below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and Notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
------------------- --------------------------
1994 1995 1995 1996
--------- --------- ----------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues................... $ -- $ -- $ -- $ --
Gross profits.............. -- -- -- --
Loss from operations....... (448) (791) (178) (185)
Net loss................... $ (433) $ (744) $ (170) $ (157)
Pro forma net loss per
share(1)..................
Pro forma weighted average
number of shares
outstanding(1)............
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31, 1996
------------------- --------------------------
PRO FORMA AS
1994 1995 HISTORICAL ADJUSTED (2)
--------- --------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Cash and cash equivalents.. $ 918 $ 2,688 $ 2,415 $ 366,791
PCS license deposits ...... -- 53,982 53,982 --
PCS licenses............... -- -- --
Total assets............... 937 56,693 56,463
Government Financing(3).... -- -- --
Senior Discount Notes...... -- -- -- 220,000
Total stockholders' equi-
ty........................ 868 54,977 54,820 259,880
</TABLE>
- --------
(1) See Note 3 of Notes to Consolidated Financial Statements.
(2) The pro forma as adjusted column gives effect to certain events that
occurred or are expected to occur subsequent to March 31, 1996, including:
(i) the issuance of Class C Common Stock and Class C Common Stock warrants
for an aggregate purchase price of $5.3 million, (ii) the grant of the
Company's PCS licenses, (iii) the payment to the FCC of $105.9 million
representing 10% of the purchase price of the PCS licenses, (iv) the
drawdown of $50.0 million of debt (the "Hyundai Loan") from Hyundai and (v)
the incurrence of $953.7 million of Government Financing. The pro forma as
adjusted column also reflects the following events expected to occur upon
consummation of the Offerings: (i) net proceeds received by the Company of
$152.9 million from the sale of shares of Class C Common Stock offered
hereby at an assumed offering price of $ per share, (ii) net proceeds
received by the Company of $211.3 million from the issuance of the Senior
Discount Notes, (iii) the purchase by Hyundai of $50.0 million of equity
securities (the "Hyundai Stock Purchase"), net of $2.5 million in fees and
expenses related to this purchase, and (iv) the satisfaction of the Hyundai
Loan. See "Use of Proceeds" and "Certain Transactions."
(3) The Government Financing has been recorded at its estimated fair market
value of $ based on an estimated fair market borrowing rate of %, as
estimated by management. The actual obligation under the Government
Financing is $953.7 million. See "Risk Factors--Substantial Debt
Obligations to the U.S. Government; Implications of Accounting Treatment."
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RISK FACTORS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Actual results could differ materially from
those projected in the forward-looking statements as a result of certain of
the risk factors set forth below and elsewhere in this Prospectus. In addition
to the other information contained in this Prospectus, investors should
carefully consider the following risk factors:
DEVELOPMENT STAGE COMPANY; HISTORICAL AND EXPECTED FUTURE OPERATING LOSSES
The Company was incorporated in 1994, is at an early stage of development
and has no operating history. Consequently, the Company does not have any
meaningful historical financial information upon which a prospective investor
could evaluate an investment in the Class C Common Stock offered hereby. The
Company is subject to all risks typically associated with a start-up entity.
These risks include the Company's ability to implement its business plan in
the manner set forth herein, which include attracting and retaining qualified
individuals as managers and employees and raising appropriate financing as
necessary. As such, no assurance can be given as to the timing and extent of
revenues and expenses or the Company's ability to successfully manage all the
tasks associated with developing and maintaining a successful enterprise. Any
failure by management to guide and control growth effectively, which includes
implementing adequate systems, procedures and controls in a timely manner,
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company has incurred cumulative net losses through March 31, 1996 of
approximately $1.3 million. These losses resulted primarily from expenditures
associated with organizational and start-up activities and the Company's
pursuit of PCS licenses in the C-Block Auction. The Company expects to launch
wireless communications services by the end of 1997 and does not expect to
generate any revenues until such time or later. The Company will incur
significant operating losses and generate negative cash flow from operating
activities during the next several years, while it seeks to develop and
construct its PCS networks and build a customer base. These losses and
negative cash flow are expected to be substantial and to increase during the
initial years of the build-out and operation of its PCS networks. There can be
no assurance that the Company will successfully launch its services, or that
it will achieve or sustain profitability or positive cash flow from operating
activities in the future. If the Company cannot achieve operating
profitability or positive cash flow from operating activities, it may not be
able to meet its debt service or working capital requirements and the Class C
Common Stock may have little or no value. See "--Potential Fluctuations in
Future Results" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
SUBSTANTIAL DEBT OBLIGATIONS TO THE U.S. GOVERNMENT; IMPLICATIONS OF
ACCOUNTING TREATMENT
The Company's debt obligations to the U.S. Government pursuant to the
Government Financing will be approximately $954 million. Although the
Company's obligation under the Government Financing will be recorded on the
Company's financial statements at its estimated fair market value of $ ,
based on an estimated fair market borrowing rate of %, the amount that would
be owed to the U.S. Government if the Government Financing were declared
immediately due and payable would be $954 million plus accrued interest. The
Company will be required to make quarterly interest expense payments based on
the 10-year Treasury Note rate at the License Grant Date. The Company will be
required to make installment payments of interest only for the first six years
of the license and payments of interest and principal amortized over the
remaining four years of the license term. In the event that the Company
becomes unable to meet its obligations under the Government Financing or
otherwise violates regulations applicable to holders of FCC licenses, the FCC
could take a variety of actions, including requiring immediate repayment of
all amounts due under the Government Financing, repayment of certain bidding
credits, revoking the Company's PCS licenses and fining the Company an amount
equal to the difference between the price at which the Company acquired the
licenses and the amount of the winning bid at their reauction, plus an
additional penalty of three percent of the lesser of the subsequent winning
bid and the Company's bid amount. There can be no assurance that the Company
will be able to meet its obligations under the Government Financing or that if
it fails to meet such obligations, the FCC will not require
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immediate repayment of all amounts due under the Government Financing or
revoke the Company's PCS licenses. In either such event the Company may be
unable to meet its obligations to other creditors, including holders of the
Senior Discount Notes.
In addition, there can be no assurance that if the Government Financing were
reflected at its face value of $954 million, the Company's pro forma total
debt (as adjusted for the Offerings) would not exceed the total "enterprise
value" of the Company implied by the initial public offering price of the
Class C Common Stock (as determined by adding the market value of the Common
Stock, the market value of the Government Financing and the gross proceeds
from the Senior Discount Notes Offering). See "--Ability to Service Debt;
Substantial Leverage; Restrictive Covenants," "--Government Regulation" and
"Legislation and Government Regulation."
ABILITY TO SERVICE DEBT; SUBSTANTIAL LEVERAGE; RESTRICTIVE COVENANTS
The Company's leverage is substantial in relation to its equity. As of ,
1996, on a pro forma basis after giving effect to the Stock Offering, the
Senior Discount Notes Offering and the Government Financing, the Company's
total indebtedness would have been $ billion ($ billion on a face-amount
basis) and its stockholders' equity would have been $ million. In addition,
the Company will be entitled to draw down up to $ under the Vendor Financing
and, subject to the restrictions in the indenture governing the Senior
Discount Notes (the "Indenture"), to incur substantial additional
indebtedness. On a pro forma basis after giving effect to the Offerings, the
Company's deficiency of earnings before fixed charges to cover fixed charges
for the months ended , 1996 and the year ended December 31, 1995 would
have been $ million and $ million, respectively.
Furthermore, the Indenture and the agreements related to the Vendor
Financing (the "Vendor Financing Agreements") will contain, and any additional
financing agreements are likely to contain, certain restrictive covenants. The
restrictions contained in the Indenture and the Vendor Financing Agreements
will affect, and in some cases will significantly limit or prohibit, among
other things, the ability of the Company to incur indebtedness, make
prepayments of certain indebtedness, pay dividends, make investments, engage
in transactions with stockholders and affiliates, issue capital stock, create
liens, sell assets and engage in mergers and consolidations. If the Company
fails to comply with the restrictive covenants in the Indenture, the Company's
obligation to repay such obligations may be accelerated. In addition to the
restrictive covenants described above, the Vendor Financing Agreements will
require the Company to maintain certain financial ratios. The failure of the
Company and its subsidiaries to maintain such ratios would constitute events
of default under the Vendor Financing Agreements, notwithstanding the ability
of the Company to meet its debt service obligations. An event of default under
the Vendor Financing Agreements would allow the lenders thereunder to
accelerate the maturity of such indebtedness. In such event, a significant
portion of the Company's other indebtedness (including the Senior Discount
Notes) may become immediately due and payable.
The successful implementation of the Company's strategy, among other things,
is necessary for the Company to be able to meet its debt service and
significant capital requirements. In addition, the Company's ability to
satisfy its debt service obligations once its PCS networks are operational
will be dependent upon the Company's future performance, which is subject to a
number of factors that are beyond the Company's control. There can be no
assurance that the Company's PCS networks can be completed or that, once
completed, the Company will generate sufficient cash flow from operating
activities to meet its debt service and working capital requirements. Any
failure or delay in meeting these debt service requirements, and in
particular, the requirements of the Government Financing, could have a
material adverse effect upon the Company's business, results of operations and
financial condition. See "--Substantial Debt Obligations to the U.S.
Government; Implications of Accounting Treatment" and "--Significant Capital
Requirements; Financing Risks."
SIGNIFICANT CAPITAL REQUIREMENTS; FINANCING RISKS
The development, construction and implementation of the Company's PCS
networks will require substantial capital. The Company currently estimates
that the funds required for capital expenditures, including capital
expenditures relating to the construction of its PCS networks, will total
approximately $259 million through the end of 1998. Although the Company
expects that, as a result of the Offerings and the Vendor Financing, it will
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have sufficient funding through at least the end of 1998, there can be no
assurance that the Company's financing plan will be adequately achieved or that
no additional capital requirements will emerge.
The Company's ability to obtain any necessary financing or refinancing will
depend on, among other things, its financial condition, any restrictions
governing its indebtedness and other factors, including market conditions, that
are beyond the control of the Company. In addition, in the event the
implementation of its PCS networks is delayed or the Company does not generate
sufficient cash flow to meet its debt service or capital requirements, the
Company may need to seek additional financing. There can be no assurance that
any such financing or refinancing could be obtained on terms that are favorable
to the Company, or at all. In the absence of such financing or refinancing, the
Company could be forced to dispose of assets in order to make up for any
shortfall in the payments due on its indebtedness under circumstances that
might not be favorable to realizing the highest price for such assets. A
substantial portion of the Company's assets consist of intangible assets,
principally PCS licenses granted by the FCC, the value of which will depend
upon a variety of factors. Such licenses may only be transferred to other
entities that meet the FCC requirements for C-Block license applicants during
the first five years of the term, which will significantly impact the ability
of the Company to realize the value of such licenses. Further, transfers to
entities not meeting such requirements in years six through 10 of the initial
license term will subject the Company to substantial unjust enrichment
penalties. There can be no assurance that the Company's assets could be sold,
or sold quickly enough, or for a sufficient amount, to enable the Company to
meet its obligations. See "--Ability to Service Debt; Substantial Leverage;
Restrictive Covenants," "--C-Block License Requirements" and "--Foreign
Ownership Limitations."
MANAGEMENT OF GROWTH; NEED TO ESTABLISH INFRASTRUCTURE
Implementation of the Company's business plan will place substantial demands
on the Company's managerial, operational and financial resources. As of June
25, 1996, the Company had nine employees and will need to hire a significant
number of new employees in the near future. In addition, the Company will need
to expand its headquarters, establish regional facilities and establish
management information and financial control systems adequate to support its
operations and expected growth. There can be no assurance that the Company will
be able to manage effectively the expansion of its operations and facilities,
that the Company will be able to attract and retain qualified personnel, that
its management team augmented by new management hires will work together
effectively, that the Company's systems, procedures or controls will be
adequate to support the Company's operations or that Company management will be
able to achieve the rapid execution necessary to exploit fully the market
opportunity for the Company's wireless communications services. Any inability
to manage growth effectively could have a material adverse effect on the
Company's business, results of operations and financial condition. See "--
Dependence on Key Personnel," "Business--Employees" and "Management."
PCS NETWORK CONSTRUCTION AND IMPLEMENTATION RISKS
The Company's proposed construction and implementation of its PCS networks
involve a high degree of risk including, but not limited to, network design,
site selection and acquisition, equipment availability and microwave
relocation. See "--Relocation of Incumbent Fixed Microwave Licenses." The
Company intends to rely on third parties to undertake substantially all of the
construction and implementation of its PCS networks. In particular, the Company
expects to engage a single specialized third party to provide a substantial
portion of these services. Furthermore, the Company will rely on such third
party or other third parties to supply network construction and subscriber
equipment. There can be no assurance that the Company will be able to locate or
engage such third parties, or that if engaged, such third parties will
successfully develop and implement the Company's PCS networks. Any failure to
do so will have a material adverse effect upon the Company.
The Company expects to complete substantially the build-out of its PCS
networks and to launch commercial service by the end of 1997. Each phase of the
construction and implemention process involves various risks and contingencies,
most of which are not within the control of the Company and many of which are
not within the control of the primary network vendor to be engaged by the
Company to construct and implement the Company's PCS networks. Any of these
risks or contingencies could adversely affect the construction of the Company's
PCS networks. There can be no assurance that the Company and, in particular,
the primary network vendor, will be able to construct the Company's PCS
networks in any of the Company's markets in accordance with the
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Company's current construction plan and schedule. If the Company's construction
plan is not properly implemented on a timely basis, the Company may not be able
to provide services competitive with those provided by the cellular and other
PCS operators in its markets. In such event, the Company's PCS subscriber
growth would be limited and the Company's business, results of operations and
financial condition would be materially adversely affected.
In addition, each of the Company's PCS licenses is subject to an FCC
requirement that the Company construct PCS networks that offer coverage to at
least one-third of the population in each such PCS market within five years of
the License Grant Date of the applicable license and to at least two-thirds of
the population within 10 years of such date. There can be no assurance that
this required coverage will be achieved by the Company or its primary network
vendor in accordance with the FCC requirements, and failure to comply with
these requirements in any market could cause revocation of the Company's PCS
licenses or the imposition of fines or other sanctions by the FCC. See "--
Government Regulation" and "Legislation and Government Regulation." In
addition, winners of A-Block and B-Block PCS licenses, which were granted in
June 1995, have a significant head-start in constructing their networks.
Likewise, the incumbent cellular licensees in each market have been operating
their networks for five- to 10-years, and are upgrading their networks to use
digital technology. Thus, the construction and implementation of the Company's
PCS networks must be completed on a timely basis, and any delays could have a
material adverse effect on the Company.
Network Design. The Company will rely upon its primary network vendor to
design its PCS networks. Although the Company will be actively involved in the
design process, there can be no assurance that the primary network vendor, or
any other parties that the Company may engage, will provide a design on a
timely basis, or that such design can be achieved. Furthermore, the Company has
selected Code Division Multiple Access ("CDMA") technology, which has not been
implemented on a wide commercial scale in the United States and has been used
internationally on a limited basis. Accordingly, like many new or developing
technologies, the design of the Company's networks may have undetected flaws.
Such design flaws, if any, may result in delay of commencement of service or in
problems in the delivery of service, and could have a material adverse effect
upon the Company.
Site Selection and Acquisition. The successful construction of the Company's
PCS networks will depend, to a significant degree, on the lease or acquisition
of sites for the location of its base station transmitter equipment. The site
selection process will initially require the negotiation of lease or
acquisition agreements for approximately 500 sites for the Company's PCS
networks, and will likely require the Company to obtain zoning variances or
other state and local governmental approvals or permits for certain of these
sites. The Company will engage its primary network vendor and possibly other
third parties to provide site identification and acquisition services in each
of its markets. There can be no assurance that lease or acquisition agreements
will be negotiated on terms favorable to the Company or that necessary
approvals or permits will be obtained.
Equipment Availability. The implementation of the construction plan is
subject to the availability from suppliers of the infrastructure equipment and
subscriber equipment the Company plans to use. There is considerable demand for
PCS infrastructure equipment. Manufacturers of such equipment have substantial
backlogs of orders and lead times for delivery of such equipment may be long.
The Company plans to enter into definitive agreements for the supply of
infrastructure and/or subscriber equipment. However, there can be no assurance
that any such suppliers will be able to supply equipment on a timely basis that
meets the requirements of the Company, that the Company will be able to
purchase equipment from other vendors on terms favorable to the Company or that
any equipment purchased will perform in accordance with the Company's needs or
will otherwise be acceptable to the Company or its customers. There can be no
assurance that the Company will be able to deploy successfully its networks to
achieve optimal population coverage in its targeted markets within the expected
time frame and an acceptable construction budget. See "--Dependence on Third
Parties," --Risks Relating to Selection of Digital Technology; Availability of
Handsets" and "--Limited Territorial Coverage."
DEPENDENCE ON THIRD PARTIES
As part of the Company's strategy to build out rapidly its PCS networks, the
Company will rely significantly upon third parties to provide equipment and
services, to distribute the Company's products and services and to
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provide certain nonstrategic functions such as customer billing. In addition,
the Company intends to engage a primary network vendor and other third parties
for a significant portion of the build-out of the Company's PCS networks. There
can be no assurance that such third parties will provide acceptable equipment
and services on a timely basis and any failure to do so will have a material
adverse effect upon the Company's business, results of operations and financial
condition. See "--PCS Network Construction and Implementation Risks,"
"Business--Strategy" and "--Marketing and Distribution."
RISKS RELATING TO SELECTION OF DIGITAL TECHNOLOGY; AVAILABILITY OF HANDSETS
CDMA technology has not been implemented on a wide commercial scale in the
United States and has been used internationally only on a limited basis. The
first commercial use of CDMA began in October 1995 in Hong Kong. As of June
1996, the Hong Kong network had 24,000 subscribers. There can be no assurance
that CDMA technology will be successful in other markets. In addition, certain
networks implementing CDMA have experienced problems in their early trials,
including poor hand-offs (the transfer of a subscriber from one cell to another
as the subscriber travels through geographic areas) and problems with analog
interference with dual-mode CDMA handsets for 800 MHz cellular operations.
While the Company believes that some of the problems, such as analog
interference, are unique to 800 MHz cellular operations, and that solutions for
other problems have been identified and are in the process of being resolved,
there can be no assurance that the Company will not encounter the same or other
technological problems. See "Wireless Communications Industry."
A risk associated with the Company's selection of CDMA technology is the
ability of the Company to offer PCS roaming service to its subscribers when
they are in other markets or in the Company's markets outside of the Company's
coverage area. In order for the Company's subscribers to roam outside of the
Company's network coverage area, another PCS licensee with network coverage in
the other market or in the Company's market outside of the Company's coverage
area must utilize CDMA technology and enter into a roaming agreement with the
Company, or the subscriber must use a dual-band/dual-mode phone that would
permit use of analog cellular networks when roaming. While the Company believes
that dual-band/dual-mode handsets that allow a user to access both PCS networks
and analog cellular networks will be commercially available in 1997, there can
be no assurance that such handsets can be successfully manufactured or that
consumers can obtain such handsets at competitive prices. In addition, the
Company expects dual-band/dual-mode full digital handsets to be larger and more
expensive than single-mode handsets.
Based on public announcements by A-Block and B-Block licensees and winning
bidders in the C-Block Auction, the Company believes that CDMA will be widely
deployed in the United States. Nevertheless, such PCS licensees are under no
regulatory obligation to use any particular digital technology. There can be no
assurance that PCS licensees planning to use CDMA technology will not instead
elect to use other available digital technology, such as Time Division Multiple
Access ("TDMA") or Groupe Speciale Mobile ("GSM"), or other technologies in the
future.
Currently there are few suppliers of CDMA handsets. Additional suppliers are
scheduled to deliver CDMA handsets commencing in 1997. There can be no
assurance, however, that those suppliers will commence production or, if they
do commence production, that they will be able to deliver quality handsets in
sufficient quantities and at desirable prices. Handsets used for PCS networks
cannot currently be used with analog cellular networks and vice versa. The lack
of interoperability or the comparatively higher cost of dual-band/dual-mode
handsets may impede the Company's ability to attract certain customers. See
"Business--Digital Technology Selection."
RELOCATION OF INCUMBENT FIXED MICROWAVE LICENSEES
For a period of up to five years after the grant of a PCS license, PCS
licensees may be required to share spectrum with existing fixed microwave
licensees operating on the C-Block spectrum. To secure a sufficient amount of
unencumbered spectrum to operate its PCS networks efficiently, the Company may
need to pay to relocate as many as approximately 85 existing licensees to
alternate spectrum locations or transmission technologies. In an effort to
balance the competing interests of existing microwave users and newly
authorized
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PCS licensees, the FCC has adopted (i) a transition plan to relocate such
microwave incumbents and (ii) a cost sharing plan so that if the relocation of
an incumbent benefits more than one PCS licensee, the benefiting PCS licensees
will share the costs of the relocation. The transition and cost sharing plans
expire on April 4, 2005, at which time remaining microwave incumbents in the
PCS spectrum will be responsible for their costs to relocate to alternate
spectrum locations. There can be no assurance that the Company will be able to
reach timely agreements to relocate these incumbents on terms acceptable to the
Company. Any delay in the relocation of such licensees may adversely affect the
Company's ability to commence timely commercial operation of its PCS networks.
Furthermore, depending on the terms of such agreements, if any, the Company's
ability to operate its PCS networks profitably may be adversely affected. See
"Legislation and Government Regulation."
COMPETITION
PCS is a new technology and service and, as a result, the level and timing of
development of a customer base for PCS applications, on which the Company's
future revenues depend significantly, is uncertain. In the development of the
PCS market, the Company and other PCS licensees will be competing with the more
established cellular industry, as well as other wireless communications
technologies, existing and future, with similar service offerings. Many of the
Company's PCS and cellular telephone competitors, including joint ventures
involving the nation's largest local and long distance telephone carriers, have
substantially greater access to capital than the Company, substantially greater
financial, technical, marketing, sales and distribution resources than those of
the Company, and significantly more experience than the Company in providing
wireless services. Several of the Company's competitors are expected to market
other services, such as cable television service, landline telephone service
and Internet access with their wireless communications service offerings. In
addition, several competitors are operating, or planning to operate, through
joint ventures and affiliation arrangements, wireless communications networks
that cover most of the United States.
The Company will compete directly with up to five other PCS providers in each
of its markets. The FCC recently announced that on August 26, 1996, it will
begin the D-, E- and F-Block auctions. Each of these licenses is for 10 MHz of
spectrum. Furthermore, the winners of the PCS A- and B-Block licenses will have
an advantage over the winners of the C-Block licenses because the A- and B-
Block licenses were granted on June 23, 1995. Principal PCS competitors in the
Company's markets are PrimeCo Personal Communications, Pacific Telesis Mobile
Services, Sprint Spectrum L.P., Intercel, Inc. and AT&T Wireless Services, Inc.
Additionally, the Company will compete with existing cellular providers in its
markets, most of which have infrastructure in place, have an established brand
identity, have generated positive cash flow and have been operational for as
many as 10 years or more. The Company expects that many cellular operators will
upgrade their networks to provide comparable digital services in competition
with the Company. The Company also expects that many cellular licensees will
attempt to acquire one or two additional 10 MHz PCS licenses in the D- or E-
Block auctions in areas in which they currently provide cellular telephone
services, as permitted by the FCC under its PCS licensing rules. This would
provide the cellular operators additional capacity and potentially allow them
to add additional customers and to offer digital services in their markets in
the near term. Principal cellular providers in the Company's PCS markets are
AT&T Wireless Services, Inc., BellSouth Mobility, Inc., GTE Mobile
Communications Inc., AirTouch Communications Inc., Centennial Cellular Corp.,
Horizon Cellular Telephone Company, L.P., U.S. Cellular Corp., Independent
Cellular Network Inc. and Palmer Wireless, Inc.
The success of the Company's PCS service business will depend upon its
ability to compete, especially with respect to pricing, service, reliability
and availability of features, such as data and voice transmission, call
waiting, call forwarding and short messaging capability. In addition to PCS and
cellular operators, the Company may also face competition from other existing
communications technologies, such as conventional mobile telephone services,
specialized mobile radio ("SMR") service, enhanced SMR ("ESMR") service, paging
services (including two-way digital paging), and domestic and global mobile
satellite service ("MSS"). In the future, cellular and PCS service will also
compete more directly with traditional landline telephone service operators,
energy utilities, local multipoint distribution service ("LMDS") providers, and
cable and wireless cable operators seeking to offer communications services by
leveraging their existing infrastructure. The Company may also face competition
from new technologies. See "Business--Competition."
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POTENTIAL FLUCTUATIONS IN FUTURE RESULTS
The Company has no significant operating history and expects to incur
significant operating losses and to generate negative cash flow from operating
activities during the next several years. The Company believes that its future
operating results will be subject to annual and quarterly fluctuations due to
several factors, some of which are beyond the Company's control. These factors
include the cost of constructing the Company's PCS networks (including any
unanticipated costs associated therewith), the cost of relocating microwave
licensees, the establishment of a market for PCS, pricing strategies for
competitive services, new offerings of competitive services, changes in the
regulatory environment, changes in technology, the cost and availability of PCS
infrastructure and subscriber equipment, delays in the introduction of the
Company's services resulting from any of such factors and general and local
economic conditions. In addition, the extent of the potential demand for PCS
cannot be estimated with any degree of certainty. Due to the foregoing factors,
it is likely that in some future period, the Company's operating results may be
below the expectations of public market analysts and investors. In such event,
the price of the Company's Class C Common Stock would likely be materially
adversely affected. See "--Development Stage Company; Historical and Expected
Future Operating Losses," "--Significant Capital Requirements; Financing
Risks," "--PCS Network Construction and Implementation Risks," "--Risks
Relating to Selection of Digital Technology; Availability of Handsets," "--
Relocation of Incumbent Fixed Microwave Licensees," "--Competition" and "--
Government Regulation."
LIMITED OPERATING HISTORY FOR PCS NETWORKS
PCS networks have an extremely limited operating history in the United States
and there can be no assurance that operation of these networks will become
profitable. In addition, the extent of potential demand for PCS in the
Company's markets cannot be estimated with any degree of certainty. The
wireless communications industry is experiencing significant technological
changes, as evidenced by the increasing pace of digital upgrades in existing
analog wireless systems, evolving industry standards, ongoing improvements in
the capacity and quality of digital technology, shorter development cycles for
new products and enhancements, and changes in end-user requirements and
preferences. There is also uncertainty as to the extent of customer demand. As
a result, the future prospects of the industry and the Company and the success
of PCS and other competitive services remain uncertain.
GOVERNMENT REGULATION
The spectrum licensing, construction, operation, sale and interconnection
arrangements of wireless communications networks are regulated to varying
degrees by state regulatory agencies, the FCC, Congress, the courts and other
governmental bodies. There can be no assurance that any of these governmental
bodies having jurisdiction over the Company will not adopt or change
regulations or take other actions that would adversely affect the Company's
business, financial condition or results of operations. Although the FCC has
issued rules regarding the C-Block Auction and numerous other matters relevant
to the PCS industry, these rules are ambiguous on certain key matters and not
all of them have been subject to FCC or judicial interpretation. Accordingly,
for certain matters, the Company is relying on public and private informal
interpretation of the rules from the staff of the FCC. The FCC is not bound by
such informal interpretation of FCC staff and there can be no assurance that
the FCC or the courts will agree with the staff's interpretation. Many of these
rules also require ongoing compliance that the Company may not be able to
satisfy despite diligent efforts. A failure to comply with FCC rules could
subject the Company to serious penalties and have a material adverse effect
upon the Company's business, results of operations and financial condition. In
addition, although the Company's PCS licenses are renewable after the
expiration of their 10-year terms, there can be no assurance that the Company's
licenses will be renewed.
The Telecommunications Act of 1996 (the "1996 Act") mandates significant
changes in existing regulation of the telecommunications industry that are
intended by Congress to promote competitive development of new service
offerings, to expand public availability of telecommunications services and to
streamline regulation of the industry. Included in these mandates are
requirements that local exchange carriers ("LECs") must: (i) permit other
competitive carriers, which may include PCS licensees, to interconnect to their
networks; (ii) establish
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reciprocal compensation agreements with competitive carriers to terminate
traffic on each other's networks and (iii) offer resale of its local loop
facilities. The implementation of these mandates by the FCC and state
authorities potentially involves numerous changes in established rules and
policies that could adversely affect the Company's business, financial
condition and results of operations.
The FCC has proceedings in process that could open up other frequency bands
for wireless telecommunications and PCS-like services. The FCC also is
presently considering the eligibility of PCS licensees to offer a variety of
fixed services. There can be no assurance that these proceedings will not
adversely affect the Company and the Company's ability to offer a full range of
PCS services. See "--Substantial Debt Obligations to the U.S. Government;
Implications of Accounting Treatment," "--C-Block License Requirements," "--
Foreign Ownership Limitations," "--Effect of Control by Certain Stockholders"
and "Legislation and Government Regulation."
C-BLOCK LICENSE REQUIREMENTS
When the FCC allocated spectrum to public auction for PCS, it designated the
C-Block as an "Entrepreneurs' Block." FCC rules require C-Block applicants and
licensees (collectively, "Entrepreneurs") to meet various qualifications. The
FCC also determined that Entrepreneurs that qualify as a Small Business would
be eligible to receive a loan from the federal government for 90% of the dollar
amount of their winning bids in the C-Block Auction (a "C-Block Loan"). The
Company's Government Financing is a C-Block Loan. See "Description of Certain
Indebtedness." In order to ensure continued compliance with the FCC rules, the
FCC has announced its intention to conduct random audits during the initial 10-
year PCS license terms. There can be no assurance that the Company will
continue to satisfy any of the C-Block license requirements, and the failure to
do so would have a material adverse effect on the Company.
Entrepreneurs Requirements. In order to hold a C-Block license, an entity
must have: (i) less than $125 million in gross revenues (the "Entrepreneurs
Revenues Limit") and (ii) less than $500 million in total assets (the
"Entrepreneurs Asset Limit" and, together with the Entrepreneurs Revenues
Limit, the "Entrepreneurs Requirements"). To qualify for the C-Block Auction,
an entity had to have met the Entrepreneurs Revenues Limit for each of the two
years prior to the auction and the Entrepreneurs Asset Limit at the time it
filed its application to qualify for the C-Block Auction on FCC Form 175 (the
"Short Form"). For at least five years after winning a C-Block license, a
licensee must continue to meet the Entrepreneurs Requirements, which are
modified for such five-year period to exclude certain assets and revenues from
being counted toward the Entrepreneurs Asset Limit and the Entrepreneurs
Revenues Limit, respectively. Additional amounts are excluded if the licensee
maintains an organizational structure that satisfies the Control Group
Requirements described below. In calculating a licensee's gross revenues for
purposes of the Entrepreneurs Requirements, the FCC includes the gross revenues
of the licensee's affiliates, those persons or entities that hold interests in
the licensee, and the affiliates of such persons or entities.
By claiming status as an Entrepreneur, the Company qualified for the C-Block
Auction. If the FCC were to determine that the Company did not satisfy the
Entrepreneurs Requirements at the time it participated in the C-Block Auction
or that the Company fails to meet the ongoing Entrepreneurs Requirements, the
FCC could revoke the Company's PCS licenses, fine the Company or take other
enforcement actions, including imposing the Unjust Enrichment Penalties (as
defined herein). See "Legislation and Government Regulation--C-Block License
Requirements--License Transfer Restrictions--Unjust Enrichment." Although the
Company believes it has met the Entrepreneurs Requirements, there can be no
assurance that it will continue to meet such requirements or that, if it fails
to continue to meet such requirements, the FCC will not take action against the
Company, which could include revocation of its PCS licenses.
Small Business Requirements. An entity that meets the Entrepreneurs
Requirements may also apply to receive certain preferential financing terms if
it meets certain requirements to qualify as a Small Business (the "Small
Business Requirements"). These preferential financing terms include a 25%
bidding credit (the "Bidding Credit") and the ability to make interest-only
installment payments on its C-Block Loan for the first seven years of the
license term. To meet the Small Business Requirements, a licensee must have had
annual average gross
16
<PAGE>
revenues of not more than $40 million for the three calendar years preceding
the date it filed its Short Form. In calculating a licensee's gross revenues
for purposes of the Small Business Requirements, the FCC includes the gross
revenues of the licensee's affiliates, those persons or entities that hold
interests in the licensee, and the affiliates of such persons or entities.
By claiming status as a Small Business, the Company qualified for the Bidding
Credit. If the FCC were to determine that the Company does not qualify as a
Small Business, the Company would, at a minimum, be forced to repay the full
value of the Bidding Credit. Further, the FCC could revoke the Company's PCS
licenses, fine the Company or take other enforcement actions, including
imposing the Unjust Enrichment Penalties. Although the Company has structured
itself to meet the Small Business Requirements, there can be no assurance that
it will remain in compliance with these requirements or that, if it fails to
continue to meet such requirements, the FCC will not take action against the
Company, which could include revocation of its PCS licenses.
Control Group Requirements. If a C-Block licensee maintains an organizational
structure in which at least 25% of its total equity on a fully diluted basis is
held by a control group (the "Control Group") that meets certain requirements
(the "Control Group Requirements"), the FCC excludes certain assets and
revenues from such licensee's total revenues and assets, making it easier for
the licensee to meet the Entrepreneurs Requirements and the Small Business
Requirements. The Control Group Requirements mandate that the Control Group,
among other things, have both actual and legal control of the licensee.
Further, the FCC permits licensees to qualify under the Control Group
Requirements pursuant to an alternative structural option (the "Qualifying
Investor Option"), in which: (i) an established group of investors meeting
certain financial qualifications (the "Qualifying Investors") that own at least
15% of the equity interest on a fully diluted basis and 50.1% of the voting
power in the C-Block licensee and (ii) additional members ("Additional Control
Group Members") that hold at least 10%, on a fully diluted basis, of the equity
interest in the C-Block licensee. Additional Control Group Members must be
either: (a) the same Qualifying Investors in the Control Group, (b) members of
the licensee's management or (c) non-controlling institutional investors,
including venture capital firms. To take advantage of the FCC's Qualifying
Investor Option, a C-Block licensee must have met the Qualifying Investor
Option requirements at the time it filed its Short Form and must continue to
meet the Qualifying Investor Option requirements for three years following the
License Grant Date. Commencing the fourth year of the license term, the FCC
rules (i) eliminate the requirement that the Additional Control Group Members
hold any of the licensee's equity interest and (ii) allow the licensee to
reduce the minimum required equity interest held by the Qualifying Investors
from 15% to 10%.
In order to meet the Control Group Requirements, the Company's Certificate of
Incorporation provides that the Company's Class A Common Stock, as a class,
must constitute 50.1% of the voting power of the Company. Further, the
Company's Certificate of Incorporation limits the ability of the Company's
Class B Common Stock to be converted into Class C Common Stock of the Company.
See "Description of Capital Stock." There can be no assurance that the Company
will remain in compliance with the Control Group Requirements or, if it fails
to continue to meet such requirements, that the FCC will not take action
against the Company, which could include revocation of its PCS licenses.
Although the Company has taken these and other steps to meet the Control Group
Requirements, there can be no assurance that the Company has or will continue
to meet the Control Group Requirements, and the failure to meet such
requirements would have a material adverse effect on the Company.
Asset and Revenue Calculation. In determining whether an entity qualifies as
an Entrepreneur and/or as a Small Business, the FCC counts the gross revenues
and assets of the entity's "financial affiliates" toward the entity's total
gross revenues and total assets. Financial affiliation can arise from common
investments, familial or spousal relationships, contractual relationships,
voting trusts, joint venture agreements, stock ownership, stock options,
convertible debentures and agreements to merge. Affiliates of noncontrolling
investors with ownership interests that do not exceed the applicable FCC
"passive" investor ownership thresholds are not attributed to C-Block licensees
for purposes of determining whether such licensees financially qualify for the
applicable C-Block Auction preferences. The Entrepreneurs Requirements and the
Small Business Requirements provide that, to qualify as passive investor, an
entity may not own more than 25% of the Company's total equity on a fully
diluted basis. There can be no assurance that the Company will not exceed these
passive investor limits or otherwise violate the Entrepreneur Requirements
and/or the Small Business Requirements.
17
<PAGE>
In addition, if an entity makes bona fide loans to a C-Block licensee, the
assets and revenues of the creditor would not be attributed to the licensee
unless the creditor is otherwise deemed an affiliate of the licensee, or the
loan is treated by the FCC as an equity investment and such treatment would
cause the creditor/investor to exceed the applicable ownership interest
thresholds (for purposes of both the financial affiliation and foreign
ownership rules). Although the FCC permits a creditor/investor to use standard
terms to protect its investment in C-Block licensees, such as covenants, rights
of first refusal and super-majority voting rights on specified issues (such as
those for which the holders of the Company's Class C Common Stock have voting
rights), the FCC has stated that it will be guided but not bound by criteria
used by the Internal Revenue Service to determine whether a debt investment is
bona fide debt. The FCC's application of its financial affiliation rules is
largely untested and there can be no assurance that the FCC or the courts will
not treat certain of the Company's lenders or investors as financial affiliates
of the Company.
Transfer Restrictions. In addition, the FCC prohibits C-Block licensees from
assigning or transferring control of any of their C-Block licenses for a period
of at least five years from the License Grant Date to any entity that fails to
satisfy the Entrepreneurs Requirements during such period. After the fifth
year, all transfers and assignments remain subject to the Unjust Enrichment
Penalties. See "Legislation and Government Regulation--C-Block License
Requirements--License Transfer Restrictions--Unjust Enrichment."
The Company (i) believes that it has structured itself to satisfy the
Entrepreneurs Requirements, (ii) intends to diligently pursue and maintain its
qualification as a Small Business and (iii) has structured the securities being
offered, including certain restrictions on ownership and transfer, in a manner
intended to ensure compliance with the applicable FCC Rules. The Company has
relied on representations of its investors to determine its compliance with the
FCC's rules applicable to C-Block licensees. There can be no assurance,
however, that the Company's investors or the Company itself will continue to
satisfy these requirements during the term of any PCS license granted to the
Company or that the Company will be able to successfully implement divestiture
or other mechanisms included in the Company's Certificate of Incorporation that
are designed to ensure compliance with FCC rules. Any non-compliance with FCC
rules could subject the Company to serious penalties, including revocation of
its PCS licenses. See "--Effect of Control by Certain Stockholders," "--
Substantial Debt Obligations to the U.S. Government; Implications of Accounting
Treatment," "--Foreign Ownership Limitations" and "Legislation and Government
Regulation."
FOREIGN OWNERSHIP LIMITATIONS
The FCC can revoke PCS licenses if it finds that it would not be in the
public interest for more than 25% of the capital contribution to the parent of
a PCS licensee to be owned, directly or indirectly, or voted by non-U.S.
citizens or their representatives, by a foreign government or its
representatives or by a foreign corporation (and such licenses are so held).
The restrictions on foreign ownership could also adversely affect the ability
of the Company to attract additional equity financing from entities that are,
or are owned by, non-U.S. entities. The FCC Form 600 (the "Long Form") filed by
the Company with the FCC after the completion of the C-Block Auction indicates
that the Company's foreign ownership does not exceed 25%. However, if the
foreign ownership of the Company were to exceed 25% in the future, the FCC
could revoke the Company's PCS licenses. Further, the Company's Certificate of
Incorporation enables the Company to redeem shares from holders of the Common
Stock whose acquisition of shares results in a violation of such limitation.
The restrictions on foreign ownership could adversely affect the Company's
ability to attract additional equity financing from entities that are, or are
owned by, non-U.S. entities. See "Description of Capital Stock--Redemption by
the Company" and "Legislation and Government Regulation."
EFFECT OF CONTROL BY CERTAIN STOCKHOLDERS
In accordance with the Control Group Requirements, the Qualifying Investors
of the Company currently own at least 15% of the outstanding equity of the
Company on a fully diluted basis and 50.1% of the total voting power and will
continue to do so following the Stock Offering. In particular, Mr. Roger
Linquist holds 40 of the 60 shares of Class A Common Stock outstanding, and Mr.
Frederic Hamilton holds the remaining 20 shares. Accordingly, Messrs. Linquist
and Hamilton together have the right to vote 50.1% of the voting power of the
18
<PAGE>
outstanding equity of the Company and will be entitled to elect four members to
the Company's Board of Directors, each with one full vote. The remaining
members of the Board of Directors, as elected by the holders of Class C Common
Stock, will have fractional votes comprising a total of three full votes. Other
investors that meet the requirements of the Additional Control Group Members
collectively hold in excess of 50% of the total equity of the Company currently
and, following the Stock Offering, will hold at least 10% of the total equity
of the Company. There can be no assurance that the Company has met or will
continue to meet the Control Group Requirements. See "--C-Block License
Requirements."
LIMITED TERRITORIAL COVERAGE
A core element to the Company's strategy is to concentrate its network build-
out on "high-usage areas" rather than building out wide-area cellular-like
networks. The Company defines "high-usage areas" as those areas where the
majority of the population lives, commutes, works and shops. These areas
primarily include densely populated urban areas, commuting corridors and high-
growth suburban areas. The Company plans to limit the construction of its
networks outside of these high-usage areas because it believes the incremental
cost of building out such network coverage is substantial and is inconsistent
with the Company's objective to be the low-cost provider of wireless
communications services. Based on network design analysis completed to date,
the Company plans to spend approximately $13 per POP through the end of 1998
for the build-out of its PCS networks, which would provide coverage to
approximately 80% of the aggregate population of its markets. Subscribers to
the Company's service will not obtain direct service from the Company when
traveling outside of the Company's network coverage area. There can be no
assurance that this strategy as applied to the Company's industry and markets
will be successful or that the Company will achieve a significant penetration
of its markets. Any failure to do so will materially adversely affect the
Company's business, results of operations and financial condition. See "--Risks
Relating to Selection of Digital Technology; Availability of Handsets" and
"Business--Strategy."
DEPENDENCE ON KEY PERSONNEL
The Company's future performance depends in substantial part upon the
continued contributions of its key senior management personnel, in particular,
Mr. Roger D. Linquist, a founder, director and the Company's President and
Chief Executive Officer, and Mr. Malcolm M. Lorang, a founder and the Company's
Vice President of Engineering and Chief Technical Officer. Neither Mr. Linquist
nor Mr. Lorang is bound by an employment agreement and the loss of the services
of Mr. Linquist or Mr. Lorang would have a material adverse effect upon the
Company's business, results of operations and financial condition. The
Company's future success also depends substantially upon its ability to attract
and retain highly qualified technical and management personnel. The Company
believes there is and will continue to be intense competition for personnel
with experience in the wireless industry as the emerging PCS market develops.
There can be no assurance that the Company can retain its key personnel or that
it can attract, assimilate or retain other highly qualified technical and
management personnel in the future. See "Risk Factors--Management of Growth;
Need to Establish Infrastructure."
HEALTH RISKS
Allegations have been raised that the use of hand-held cellular/PCS phones
may pose health risks to humans due to radio frequency ("RF") emissions from
the handsets. Studies performed by wireless telephone equipment manufacturers
dispute these allegations, and a major industry trade association and certain
governmental agencies have stated publicly that the use of such phones poses no
undue health risk. Regardless of the truth of these allegations, they could
have an adverse effect on the Company. In addition, digital wireless telephones
have been shown to cause interference to some electronic devices, such as
hearing aids and pacemakers.
Concerns over RF emissions also may have the effect of discouraging the use
of wireless communications devices, such as the PCS phones to be used with the
Company's networks. The FCC currently is conducting a rulemaking proceeding to
update the guidelines and methods used for evaluating RF emissions from radio
equipment, including wireless telephones. The FCC's proposal, if adopted, would
impose more restrictive
19
<PAGE>
standards on RF emissions from devices such as hand-held PCS telephones.
Although CDMA handsets operate at lower power than other wireless handsets and
therefore would comply with the proposed standards, if adopted, the same
concerns about RF emissions could remain present with CDMA handsets. These
concerns could have an adverse effect on the Company's financial condition and
the results of its operations.
DILUTION
Investors participating in the Stock Offering will incur immediate,
substantial dilution. In addition, Qualifying Investors must own at least 15%
of the equity of the Company for at least the first three years of the initial
10-year license term and 10% for the remainder of the license term and
Additional Control Group Members must own 10% of the equity of the Company for
the first three years. The Company may have to issue additional shares of
Common Stock or options to purchase shares of Common Stock to Qualifying
Investors or Additional Control Group Members before or simultaneous with an
equity offering or other dilutive event. To the extent such shares are issued,
such options are granted and exercised, or outstanding options and warrants to
purchase the Common Stock are exercised, there will be further dilution. See
"--Effect of Control by Certain Stockholders," "Dilution" and "Business--
Government Regulation."
UNCERTAINTY OF C-BLOCK LICENSE AWARDS AT LICENSE GRANT DATE
A C-Block license grant by the FCC will not become final until after a 30- or
40-day reconsideration period expires following the License Grant Date where
such order of license grant is not subject to any FCC staff reconsideration or
any petition for reconsideration or application for review or judicial appeal,
in cases where petitions to deny were filed. Any preparation for PCS network
construction prior to the final grant (e.g., negotiation with incumbent
microwave licensees, site acquisition activities and equipment procurement and
construction) will be performed at the Company's risk and expense. If any PCS
licenses are subsequently not finally granted to the Company, the Company would
have to attempt to sell the benefits of such activities, to the extent
possible, to the entity that ultimately wins a PCS license for that service
area. At the License Grant Date, the Company will have authorization to
commence construction of its PCS network for the licensed service area.
However, parties can file for reconsideration or review of the FCC's license
grant or the FCC can reconsider the grant on its own motion. Parties can also
petition a federal court to overturn a license grant.
ABSENCE OF DIVIDENDS
The Company has never paid any cash dividends and currently intends to retain
any future earnings to develop and operate its PCS networks, for working
capital and for other corporate purposes. In addition, the Indenture will
prohibit the payment of dividends to the Company's stockholders for the
foreseeable future.
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Application will be made for listing of the Class C Common Stock on the
Nasdaq National Market under the symbol "GWIR." Prior to the Stock Offering,
there has been no public market for the Class C Common Stock. There can be no
assurance that an active trading market will develop or that the purchasers of
the Class C Common Stock will be able to resell their Class C Common Stock at
prices equal to or greater than the initial public offering price. The initial
public offering price of the Class C Common Stock will be determined through
negotiations between the Company and the representatives of the Underwriters
and may not reflect the market price of the Class C Common Stock after the
Stock Offering. See "Underwriting" for a discussion of factors to be considered
in determining the initial public offering price. The trading price of the
Class C Common Stock could be subject to wide fluctuations in response to
quarterly variations in operating results, announcements of technical
innovations or new products by the Company or its competitors, changes in
financial estimates by securities analysts and other events or factors. In
addition, the stock market has experienced volatility that has particularly
affected the market prices of equity securities of many emerging
telecommunications companies and that often has been unrelated to the operating
performance of such companies. These broad market fluctuations may adversely
affect the market price of the Class C Common Stock. See "Underwriting."
20
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON FUTURE MARKET
PRICES
Sales of substantial amounts of Class C Common Stock (including shares issued
upon the exercise of outstanding options or warrants) in the public market
after the Stock Offering could materially adversely affect the market price of
the Class C Common Stock. Such sales also might make it more difficult for the
Company to sell equity securities or equity-related securities in the future at
a time and price that the Company deems appropriate. In addition to the
shares of Class C Common Stock offered hereby, upon completion of the Stock
Offering, the Company will have 14,294,280 shares of Common Stock outstanding,
all of which are restricted shares ("Restricted Shares") under the Securities
Act of 1933, as amended (the "Securities Act"). The number of outstanding
shares that will be available for sale in the public market, after giving
effect to lock-up agreements, will be as follows: (i) no shares of Class C
Common Stock will be eligible for sale as of the effective date of the Stock
Offering (the "Effective Date") and (ii) shares of Class C Common Stock will
be eligible for sale beginning 180 days after the Effective Date, subject in
some cases to certain volume and other limitations. The remaining
Restricted Shares will not be eligible for sale pursuant to Rule 144 until the
expiration of their two-year holding periods. In addition, following the
closing of the Stock Offering, the holders of Restricted Shares and
warrants to purchase shares will be entitled to certain rights with respect
to registration of such shares for sale in the public market.
On or about the Effective Date, the Company intends to register approximately
shares reserved for issuance under its stock plans. As of , 1996,
options to purchase a total of shares were outstanding (although all of the
shares issuable upon exercise of such options will be subject to lock-up
restrictions on sale for 180 days after the Effective Date) and shares were
reserved for future issuance under the stock plans. See "Shares Eligible for
Future Sale."
USE OF PROCEEDS
In total, net proceeds to the Company from the Offerings are estimated to be
$364.2 million. The net proceeds to the Company from the Stock Offering are
estimated to be approximately $152.9 million ($ if the Underwriters' over-
allotment option is exercised in full), at an assumed initial public offering
price of $ per share to the public and after deducting estimated
underwriting discounts and commissions and the offering expenses. The net
proceeds to the Company from the Senior Discount Notes Offering are estimated
to be approximately $211.3 million after deducting estimated underwriting
discounts and commissions and the offering expenses.
The Company intends to use the net proceeds of the Offerings to fund interest
expense payments on the Government Financing and the Vendor Financing,
operating losses, working capital requirements, capital expenditures not funded
by the Vendor Financing and for general corporate purposes. The closing of the
Senior Discount Notes Offering is conditioned upon the closing of the Stock
Offering, but the Stock Offering is not conditioned upon the closing of the
Senior Discount Notes Offering. Pending use of the net proceeds, the Company
intends to invest the funds in short-term, interest-bearing, U.S. government
and other highly rated securities. See "Financing Plan," "Certain Transactions"
and "Description of Certain Indebtedness."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock, and does not expect to pay cash dividends on its Common Stock in the
foreseeable future. In addition, the Company will effectively be prohibited
from paying cash dividends for the foreseeable future pursuant to restrictions
contained in the Indenture. The Company currently intends to retain its
earnings, if any, for use in its business. See "Description of Certain
Indebtedness."
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<PAGE>
DILUTION
The pro forma net tangible book value of the Company's Common Stock as of
March 31, 1996 was $ , or approximately $ per share. Pro forma net
tangible book value per share represents the amount of the Company's
stockholders' equity, less intangible assets, divided by the shares of Common
Stock outstanding.
Dilution per share represents the difference between the amount per share
paid by purchasers of shares of Class C Common Stock in the Stock Offering and
the as adjusted net tangible book value per share of Common Stock immediately
after completion of the Stock Offering. After giving effect to the sale of
shares of Class C Common Stock offered by the Company in the Stock Offering at
an assumed offering price of $ per share to the public and after deducting
the underwriting discount and estimated offering expenses, the as adjusted net
tangible book value of the Company as of March 31, 1996 would have been $ ,
or $ per share. This represents an immediate increase in net tangible book
value of $ per share to existing stockholders and an immediate dilution in
net tangible book value of $ per share to purchasers of Class C Common
Stock in the Stock Offering, as illustrated in the following table:
<TABLE>
<CAPTION>
PER SHARE
---------
<S> <C> <C>
Assumed public offering............................................... $
----
Net tangible book value at March 31, 1996........................... $
----
Increase in net tangible book value attributable to new investors...
Pro forma net tangible book value after the Stock Offering............
----
Dilution to new investors............................................. $
====
</TABLE>
The following table sets forth on a pro forma basis as of , 1996 the
number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by the existing
stockholders and by new public investors (assuming an initial public offering
price of $ per share to the public before deduction of estimated
underwriting discounts and commissions and offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- -------- ---------- ---------- --------- ---
<S> <C> <C> <C> <C> <C> <C>
Existing stockholders... % $ % $
New stockholders........
-------- ---------- --------- ----
Total............... % $ % $
======== ========== ========= ====
</TABLE>
The foregoing computations do not include shares of Common Stock issuable
upon exercise of stock options outstanding as of March 31, 1996 at a weighted
average exercise price of $ per share, shares of Common Stock issuable
upon exercise of warrants outstanding as of March 31, 1996 at a weighted
average exercise price of $ per share, additional shares of Common
Stock reserved for issuance and available for grant under the Company's 1995
Stock Option Plan, additional shares reserved for issuance under the
Company's 1996 Stock Option Plan and shares reserved for issuance under
the Company's Employee Stock Purchase Plan. To the extent options or warrants
are exercised, there will be further dilution to new investors in the
Offering. See "Management--1995 Stock Option Plan," "--1996 Stock Option
Plan," "--Employee Stock Option Plan" and Note of Notes to Consolidated
Financial Statements.
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<PAGE>
CAPITALIZATION
The following table sets forth the historical and pro forma as adjusted
capitalization of the Company at March 31, 1996. This table should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
-----------------------------
PRO FORMA AS
HISTORICAL ADJUSTED(1)(2)
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents.................... $ 2,415 $366,791
======= ========
Indebtedness:
Government Financing(3).................... $ -- $
Senior Discount Notes...................... -- 220,000
------- --------
Total debt............................... -- 220,000
Stockholders' equity:
Class A Common Stock; 0.0001 par value; 100
shares authorized; 60 shares issued and
outstanding; actual and pro forma, as ad-
justed.................................... -- --
Class B Common Stock; 0.0001 par value;
20,000,000 shares authorized; 2,109,440
shares issued and outstanding, actual and
pro forma, as adjusted.................... -- --
Class C Common Stock; 0.0001 par value;
79,999,900 shares authorized; 11,126,660
shares issued and outstanding actual;
shares issued and outstanding pro forma,
as adjusted............................... 1 1
Additional paid-in capital................. 59,078 264,429
Less subscriptions receivable.............. (2,925) (3,216)
Losses accumulated during the development
stage..................................... (1,334) (1,334)
------- --------
Total stockholders' equity............... 54,820 259,880
------- --------
Total capitalization.................... $54,820 $
======= ========
</TABLE>
- --------
(1) Does not include commitments for $ in Vendor Financing obtained by the
Company, which it has not yet drawn down. In the event the Senior Discount
Notes Offering is not consummated, the Company will have substantially
less cash and cash equivalents. See "Use of Proceeds."
(2) The pro forma as adjusted column gives effect to certain events that
occurred or are expected to occur subsequent to March 31, 1996, including:
(i) the issuance of Class C Common Stock and Class C Common Stock warrants
for an aggregate purchase price of $5.3 million, (ii) the grant of the
Company's PCS licenses, (iii) the payment to the FCC of $105.9 million
representing 10% of the purchase price of the PCS licenses, (iv) the
drawdown of $50.0 million of debt from Hyundai and (v) the incurrence of
$953.7 million of Government Financing. The pro forma as adjusted column
also reflects the following events expected to occur upon consummation of
the Offerings: (i) net proceeds received by the Company of $152.9 million
from the sale of shares of Class C Common Stock offered hereby at an
assumed offering price of $ per share, (ii) net proceeds received by the
Company of $211.3 million from the issuance of the Senior Discount Notes,
(iii) the purchase by Hyundai of $50.0 million of equity securities, net
of $2.5 million in fees and expenses related to this purchase, and (iv)
the satisfaction of the Hyundai Loan. See "Use of Proceeds" and "Certain
Transactions."
(3) The Government Financing has been recorded at its estimated fair market
value of $ based on an estimated fair market borrowing rate of %, as
estimated by management. The actual obligation under the Government
Financing is $953.7 million. See "Risk Factors--Substantial Debt
Obligations to the U.S. Government; Implications of Accounting Treatment."
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and related
notes thereto and Management's Discussion and Analysis of Financial Condition
and Results of Operations included elsewhere in this Prospectus. The
Consolidated Statements of Operations Data for the years ended December 31,
1994 and 1995 and the consolidated balance sheet data as of December 31, 1994
and 1995, have been derived from, and should be read in conjunction with, the
consolidated financial statements of the Company, which have been audited by
Arthur Andersen LLP, independent public accountants, and are included herein.
The consolidated statements of operations data for the three month periods
ended March 31, 1995 and 1996 and the consolidated balance sheet data as of
March 31, 1996 have been derived from the unaudited consolidated financial
statements of the Company included elsewhere herein and, in management's
opinion, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the information. The results
for the three months ended March 31, 1996, are not indicative of the results
that may be expected for the year ending December 31, 1996.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
-------------------- -------------------------
1994 1995 1995 1996
--------- ---------- ---------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues.................. $ -- $ -- $ -- $ --
Gross profits............. -- -- -- --
Loss from operations...... (448) (791) (178) (185)
Net loss.................. $ (433) $ (744) $ (170) $ (157)
Pro forma net loss per
share(1).................
Pro forma weighted average
number of shares out-
standing(1)..............
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31, 1996
-------------------- -----------------------------
PRO FORMA
1994 1995 HISTORICAL AS ADJUSTED(2)
--------- ---------- ---------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Cash and cash equiva-
lents.................... $ 918 $ 2,688 $ 2,415 $ 366,791
PCS license deposits...... -- 53,982 53,982 --
PCS licenses ............. -- -- --
Total assets.............. 937 56,693 56,463
Government Financing(3)... -- -- --
Senior Discount Notes..... -- -- -- 220,000
Total stockholders' equi-
ty....................... 868 54,977 54,820 259,880
</TABLE>
- --------
(1) See Note 3 of Notes to Consolidated Financial Statements.
(2) The pro forma as adjusted column gives effect to certain events that
occurred or are expected to occur subsequent to March 31, 1996, including:
(i) the issuance of Class C Common Stock and Class C Common Stock warrants
for an aggregate purchase price of $5.3 million, (ii) the grant of the
Company's PCS licenses, (iii) the payment to the FCC of $105.9 million
representing 10% of the purchase price of the PCS licenses, (iv) the
drawdown of $50.0 million of debt from Hyundai and (v) the incurrence of
$953.7 million of Government Financing. The pro forma as adjusted column
also reflects the following events expected to occur upon consummation of
the Offerings: (i) net proceeds received by the Company of $152.9 million
from the sale of shares of Class C Common Stock offered hereby at an
assumed offering price of $ per share, (ii) net proceeds received by the
Company of $211.3 million from the issuance of the Senior Discount Notes,
(iii) the purchase by Hyundai of $50.0 million of equity securities, net
of $2.5 million in fees and expenses related to this purchase, and (iv)
the satisfaction of the Hyundai Loan. See "Use of Proceeds" and "Certain
Transactions."
(3) The Government Financing has been recorded at its estimated fair market
value of $ based on an estimated fair market borrowing rate of %, as
estimated by management. The actual obligation under the Government
Financing is $953.7 million. See "Risk Factors--Substantial Debt
Obligations to the U.S. Government; Implications of Accounting Treatment."
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Prospectus, including the following discussion, contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual
results could differ materially from those projected in the forward-looking
statements as a result of certain of the risk factors commencing on page as
well as other factors described below and elsewhere in this Prospectus.
General Wireless intends to become a leading provider of affordable wireless
communications services. The Company holds PCS licenses to serve the rapidly
growing metropolitan areas of San Francisco, Atlanta and Miami, as well as 11
selected high-growth contiguous markets. In total, the Company's markets
contain 19.8 million POPs, approximately 71% of which are located in the
Metropolitan Areas. The Company believes that this is the highest percentage
of total POPs located in densely populated urban markets (markets having at
least three million POPs) of any PCS or cellular operator in the United
States. Additionally, the Company believes its markets are particularly
attractive because of their high historical and projected population growth
rates, as well as other desirable demographic characteristics, such as high
population densities, favorable business climates, high median household
income levels and long commute times. From 1990 through 1995, the aggregate
population of the Company's markets has grown at over 150% of the national
rate and is expected to continue to grow at a rate significantly above the
national average. The Company plans to initiate service on its PCS networks by
the end of 1997.
The Company was incorporated in 1994, is at an early stage of development
and has no operating history. Consequently, the Company does not have any
meaningful historical financial information upon which a prospective investor
could evaluate an investment in the Class C Common Stock offered hereby. The
Company is subject to all risks typically associated with a start-up entity.
The Company has incurred cumulative net losses through March 31, 1996 of
approximately $1.3 million. These losses resulted primarily from expenditures
associated with organizational and start-up activities and the Company's
pursuit of PCS licenses in the C-Block Auction. The Company expects to launch
wireless communication services by the end of 1997 and does not expect to
generate any revenues until such time or later. The Company will incur
significant operating losses and generate negative cash flow from operating
activities during the next several years, while it seeks to develop and
construct its PCS networks and build a PCS customer base. These losses and
negative cash flow are expected to be substantial and to increase during the
initial years of the PCS networks build-out and operation. The Company is
substantially leveraged in relation to its equity and it has significant debt
service obligations. In addition, the Company believes that its future
operating results will be subject to annual and quarterly fluctuations due to
several factors, some of which are beyond the control of the Company. These
factors include the cost of constructing the Company's PCS networks (including
any unanticipated costs associated therewith), the cost of relocating
microwave licensees, the establishment of a market for PCS, pricing strategies
for competitive services, new offerings of competitive services, changes in
the regulatory environment, changes in technology, the cost and availability
of PCS infrastructure and subscriber equipment, delays in the introduction of
the Company's services resulting from any of such factors and general and
local economic conditions. In addition, the extent of the potential demand for
PCS cannot be estimated with any degree of certainty. See "Risk Factors--
Development Stage Company; Historical and Expected Future Operating Losses."
LIQUIDITY AND CAPITAL RESOURCES
From inception through June 1, 1996, the Company has raised approximately
$68 million from the sale of equity securities. Further, the Company entered
into the Hyundai Loan, pursuant to which Hyundai agreed to loan up to $50
million to the Company upon the satisfaction of certain conditions. The
Company expects to draw down the full amount of the Hyundai Loan subsequent to
the License Grant Date. The term of any note issued under the Hyundai Loan
will be for one year, with a fixed interest rate of 6.5% during the term of
the note. Based on the sale of equity and amounts outstanding to be drawn
under the Hyundai Loan, the Company has raised a total of approximately $118
million, which will be used primarily to fund the payment of 10% of the
purchase price of the Company's PCS licenses. See "Certain Transactions."
25
<PAGE>
Upon completion of the C-Block Auction, the Company had bid approximately
$1.1 billion to qualify as the high bidder for its PCS licenses. As of May 15,
1996, the Company had paid $53.0 million to the FCC representing the first
five percent payment of the purchase price of its PCS licenses. Five business
days subsequent to the granting of its PCS licenses, a second five percent
payment of the purchase price of its PCS licenses, also equal to $53.0
million, will be payable to the FCC. The remaining 90% of the purchase price
of the licenses, or $953.7 million will be financed with the Government
Financing, and will be carried on the Company's financial statements at $ .
The Company will be required to make quarterly interest expense payments based
on the 10-year U.S. Treasury Note rate at the License Grant Date. The Company
will be required to make installment payments of interest only for the first
six years of the license and payments of interest and principal amortized over
the remaining four years of the license term.
In aggregate, the Company estimates that it will require $553 million of
financing to fund its business plan from the effective date of the Offerings
through the end of 1998. The Company will require funding for capital
expenditures, interest expense payments, operating losses, working capital and
other general corporate purposes. To the extent unexpected expenditures arise
or the Company's estimates prove to be inaccurate, the Company may require
additional financing. See "Risk Factors--Significant Capital Requirements;
Financing Risks" and "Certain Transactions."
In aggregate, the Company intends to have raised or have available $639
million to fund the Company's business plan from the effective date of the
Offerings through the end of 1998. The Company expects sources of funding to
include the Stock Offering, the Senior Discount Notes Offering and drawdowns
on the Vendor Financing. The Company is currently in negotiations with
manufacturers of infrastructure equipment for Vendor Financing, which is
intended to fund a significant portion of the Company's required capital
expenditures including network design, site selection, purchase of equipment,
network construction and microwave relocation. See "Risk Factors--PCS Network
Construction and Implementation Risks" and "--Dependence on Third Parties."
The following table sets forth the Company's estimated sources and uses of
funds on an aggregate basis from the effective date of the Offerings through
the end of 1998:
<TABLE>
<CAPTION>
AMOUNTS
-------------
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Stock Offering net proceeds.............................. $153
Senior Discount Notes Offering net proceeds.............. 211
Vendor Financing......................................... 275
----
Total.................................................. $639
====
USES OF FUNDS:
Capital expenditures..................................... $259
Interest expense payments on Government Financing and
Vendor Financing........................................ 192
Operating losses and working capital..................... 102
Others, including general corporate purposes............. 86
----
Total.................................................. $639
====
</TABLE>
26
<PAGE>
THE WIRELESS COMMUNICATIONS INDUSTRY
GROWING DEMAND FOR WIRELESS SERVICES
Demand for wireless communications has grown rapidly over the past decade
and has been driven by technological advancements and increased competition.
Wireless communication products and services have evolved from basic tone-only
paging services to mass-market cellular technology services and are now
entering the next generation of development with the evolution of PCS wireless
communication technology. Each new generation of wireless communication
products and services has generally been characterized by improved product
quality, broader service offerings and enhanced features.
The Company believes that the demand for wireless communications will
continue to grow dramatically and that PCS will capture a significant share of
the wireless market. Currently, wireless telephony penetration in the United
States is estimated to be 13% and, according to Kagan Associates, is expected
to grow to 48% by 2006. As reported by the Cellular Telecommunications
Industry Association ("CTIA"), the compound annual growth rate of cellular
subscribers exceeded 45% from 1990 through 1995. Despite this rapid growth in
the number of cellular subscribers, wireless minutes of use only represent
approximately one percent of total telecommunications switched minutes of
traffic, due in part to capacity constraints which discourage cellular
operators from aggressively pricing their services.
INDUSTRY OVERVIEW
General. Wireless communications networks use a variety of radio frequencies
to transmit voice and data signals. Wireless communications technologies
include one-way radio applications, such as paging or beeper services, and
two-way radio applications, such as cellular telephone, SMR networks and
emerging PCS services. Each application operates on a distinct portion of
radio frequency spectrum. Although the principal wireless voice application to
date has been cellular telephony, PCS is expected to develop rapidly.
Cellular. The cellular telephone industry commenced in 1983 when the FCC
began granting two 20 MHz licenses per market throughout the United States. In
1986, the FCC granted an additional 5 MHz of spectrum per cellular license to
provide a total of 25 MHz for each cellular operator. Today, there are two
cellular operators in each market.
PCS. In order to increase competition in wireless communications, promote
improved quality and service, and make available the widest possible range of
wireless services to U.S. consumers, Federal legislation was enacted in 1993
directing the FCC to allocate radio frequency spectrum for PCS by competitive
bidding. The FCC established PCS service areas in the United States based upon
Rand McNally & Co.'s market definition of 51 major trading areas ("MTAs") and
493 basic trading areas ("BTAs"), which are the geographic territories for
which PCS licenses have been or will be auctioned.
PCS licenses differ from existing cellular licenses in three basic ways:
location of the licensed frequencies on the radio spectrum, amount of spectrum
allocated per license and geographic area licensed. PCS networks will operate
at higher frequencies (140 MHz in the 1850-1990 MHz frequency band) compared
to cellular frequencies (50 MHz in the 800-900 MHz frequency band). Also, PCS
licenses will permit the use of spectrum blocks of 30 MHz (like those of the
Company) or 10 MHz versus spectrum blocks of 25 MHz for cellular licenses.
Finally, the geographic areas for PCS licenses are divided differently than
for cellular licenses. PCS is segmented among 51 MTAs for A- and B-Block
licenses and 493 BTAs for other PCS licenses, including C-Block licenses, as
opposed to cellular's 306 metropolitan statistical areas and 428 rural service
areas.
In March 1995, the FCC completed the A- and B-Block PCS auction, resulting
in the award of two 30 MHz licenses in each of the MTAs. In May 1996, the FCC
completed the C-Block Auction, resulting in the award of
27
<PAGE>
one license for 30 MHz of spectrum in each of the BTAs. Beginning on July 3,
1996, the FCC plans to reauction 18 C-Block licenses for which the high
bidders failed to make initial post-auction down payments. The Company has
made a deposit of $2.6 million with the FCC for the purpose of reserving the
right to participate in such reauction. The FCC has announced that it will
auction the D-, E- and F-Block licenses in a single auction commencing on
August 26, 1996, which will be for licenses of only 10 MHz of spectrum in each
of the BTAs. Although the F-Block licenses are reserved for Entrepreneurs, the
D- and E-Block licenses are not reserved for any specific class of applicants.
LIMITATIONS OF CELLULAR TELEPHONE INDUSTRY
Despite its widespread availability and growth to date, cellular services
have several limitations, including inconsistent service quality, lack of
privacy, limited capacity and, currently, the inability to transfer data
without a modem. Most current cellular services transmit voice and data
signals over analog-based systems, which use one continuous electronic signal
that varies in amplitude or frequency over a single radio channel
accommodating one conversation. In contrast, digital networks, including PCS
networks, convert voice or data signals into a stream of digits and typically
use voice compression techniques to allow a single radio channel to carry
multiple simultaneous signal transmissions. This enhanced capacity, along with
improvements in digital protocols, allows PCS and other digital wireless
technologies to offer greater call privacy and single number service, and more
robust data transmission features.
The Company believes that due to relatively high per minute airtime charges
and unpredictable monthly bills, there is a price-sensitive mass consumer
market that refrains from subscribing to or extensively using cellular
services. The Company believes that if the mass consumer market were offered
significantly lower per minute airtime charges and more predictable and
affordable pricing plans, mass consumers would increase their use of wireless
communications services, contributing to a new phase of growth in the
industry. The Company also believes that business customers who are high-
volume users of wireless communications will be attracted to lower priced
airtime service as they would realize substantial aggregate savings. The
Company believes that PCS operators have the opportunity to capture a
substantial market share due to technical and other advantages that they will
have relative to incumbent cellular operators, including (i) greater
flexibility to reduce per minute airtime usage charges, (ii) increased network
capacity, (iii) enhanced voice quality and (iv) the ability to include
enhanced capabilities such as advanced calling features, data transmissions to
and from portable computers, and short messaging and facsimile services
without need of a modem.
THE PCS SOLUTION
PCS operators plan to construct all-digital wireless telephony networks and
will compete primarily with existing cellular telephone operators. PCS
operators using digital technology will have several technical and capacity
related advantages relative to analog cellular providers. The Company believes
that the enhanced capacity of PCS networks will allow PCS operators to offer
wireless communications services at per minute airtime prices significantly
below the per minute airtime prices currently being charged by cellular
operators. As a result PCS subscribers are expected to use more airtime
minutes per month than cellular subscribers due to both lower effective
airtime pricing and enhanced features. The Company believes that PCS operators
will realize substantial revenue growth from broad penetration and greater
levels of usage.
PCS was introduced in the United States in the Washington, D.C. MTA in late
1995. Despite the PCS network having a much smaller geographic coverage area
than existing cellular competitors and no current roaming capability,
approximately 90,000 customers subscribed for PCS services in the first seven
months of commercial availability. The Company believes that the experience in
international markets where PCS has already been introduced provides
additional support for the potential growth of PCS in the United States. For
example, in approximately 30 months, the two PCS operators in the United
Kingdom have gained over 900,000 subscribers, representing approximately 16%
of the market share of the total wireless market. In Japan, approximately
600,000 new PCS subscriptions were activated during the first year of
operations.
28
<PAGE>
INDUSTRY OUTLOOK
Industry sources expect the wireless telecommunications market in general
and the PCS market in particular to grow at a rapid rate in the United States.
Kagan Associates forecasts wireless telephony penetration at approximately 48%
by 2006. Wireless communication technology developments are expected to evolve
and continue to drive mass consumer growth as users demand more sophisticated
services and products. The Company believes that wireless communications
penetration rates will increase as prices fall and greater emphasis is placed
on the development and use of mass retail distribution channels.
29
<PAGE>
BUSINESS
THE COMPANY
General Wireless intends to become a leading provider of affordable wireless
communications services. The Company holds PCS licenses to serve the rapidly
growing metropolitan areas of San Francisco, Atlanta and Miami, as well as 11
selected high-growth contiguous markets. In total, the Company's markets
contain 19.8 million POPs, approximately 71% of which are located in the
Metropolitan Areas. The Company believes that this is the highest percentage
of total POPs located in densely populated urban markets (markets having at
least three million POPs) of any PCS or cellular operator in the United
States. Additionally, the Company believes its markets are particularly
attractive because of their high historical and projected population growth
rates, as well as other desirable demographic characteristics, such as high
population densities, favorable business climates, high median household
income levels and long commute times. From 1990 through 1995, the aggregate
population of the Company's markets has grown at over 150% of the national
rate and is expected to continue to grow at a rate above the national average.
The Company plans to initiate service on its PCS networks by the end of 1997.
The demand for wireless communications services in the United States has
grown dramatically during the last five years, notwithstanding the technical
limitations of existing analog cellular technology. The number of cellular
subscribers has grown from 5.3 million at December 31, 1990 to 33.8 million at
December 31, 1995, representing a compound annual growth rate of 45%. Over the
same time period, the wireless telephony penetration rate has grown from
approximately 3% to approximately 13%, and is forecasted by Kagan Associates
to reach approximately 48% by the year 2006.
The Company believes that due to relatively high per minute airtime charges
and unpredictable monthly bills, there is a price-sensitive mass consumer
market that refrains from subscribing to or extensively using cellular
services. The Company believes that if the mass consumer market were offered
significantly lower per minute airtime charges and more predictable and
affordable pricing plans, mass consumers would increase their use of wireless
communications services, contributing to a new phase of growth in the
industry. The Company also believes that business customers who are high-
volume users of wireless communications services will be attracted to lower
priced airtime service, as such high-volume users would realize substantial
aggregate savings.
STRATEGY
The Company intends to become a leading provider of affordable wireless
communications services. The Company's strategy to achieve this objective is
based upon the following:
Operate in large, rapidly growing markets with attractive demographic
profiles. The Company has acquired PCS licenses in densely populated, high
growth major metropolitan areas. These licenses will enable the Company to
provide wireless communications services in the San Francisco, Atlanta, and
Miami BTAs, all of which are among the 12 largest BTAs in the United States,
Sacramento, which is the 26th largest BTA, and 10 selected BTAs that are
contiguous to these major cities. Approximately 71% of the Company's 19.8
million POPs are located in the Metropolitan Areas, which the Company believes
is the highest concentration of POPs located in densely populated urban
markets (markets having at least three million POPs) of any PCS or cellular
operator in the United States. The remaining 29% of the Company's POPs are
located in selected contiguous markets that represent commuting corridors and
rapidly growing suburban areas that have a high level of commerce and
interaction with the Metropolitan Areas.
The Company believes there are significant advantages created by focusing on
densely populated major metropolitan markets. First, cell site efficiencies
can be maximized in densely populated areas, thereby reducing network build-
out costs per subscriber and providing greater pricing flexibility.
Accordingly, the Company can achieve a higher ratio of population coverage to
geographic coverage relative to PCS and cellular operators in less densely
populated markets. Second, these markets have multiple business centers and
residential areas that generally have a high demand for mobile communications
services. Third, analog cellular operators typically face
30
<PAGE>
significant capacity constraints in high traffic areas. Fourth, major markets
have numerous local, regional and national retailers as well as agents and
resellers that can facilitate rapid growth by new wireless entrants.
The Company also believes it will benefit from the continued population
growth of its markets. The aggregate population of the Company's markets has
grown at over 150% of the national rate over the last five years and is
projected to continue to grow at rates significantly above the national
average. This rapid growth will provide the Company with an expanding base of
potential customers, which the Company believes will allow the Company to
leverage significantly its infrastructure and reduce per POP operating and
network build-out costs.
Furthermore, the Company's markets have attractive demographic
characteristics. Relative to national averages, the Company's markets have
above-average population densities, favorable business climates, high median
household income levels and long commute times. The Company's Metropolitan
Areas were all ranked in the top 10 U.S. markets in terms of the number of
cellular subscribers as of December 31, 1995. The Company believes that these
attractive demographic characteristics will enable it to achieve higher-than-
average penetration rates.
Use a focused network build-out to achieve low costs. General Wireless
intends to achieve lower operating costs and capital requirements relative to
its PCS and cellular competitors by concentrating its network build-out in
"high-usage" areas rather than building out wide-area cellular-like networks.
Additionally, the Company intends to use the most cost-effective digital
technology and outsource selected technical and administrative functions.
The Company plans to offer high quality network coverage in the "high-usage"
areas of its markets, which the Company defines as those areas where the
majority of the population lives, commutes, works and shops. These areas
primarily include densely populated urban areas, commuting corridors and high-
growth suburban areas. The Company plans to limit the construction of its
networks outside of these high-usage areas because it believes the incremental
cost of building out such network coverage is substantial and is inconsistent
with the Company's objective to be the low cost provider of wireless
communications services. Based on network design analysis completed to date,
the Company plans to spend approximately $13 per POP through the end of 1998
for the build-out of its PCS networks, which would provide coverage to
approximately 80% of the aggregate population of its markets. The Company
believes its per POP network build-out costs will be significantly less than
its competitors. The Company believes its focused build-out strategy differs
from the strategy of many existing cellular operators and from the expected
strategy of many PCS operators that are expected to compete by placing greater
emphasis on coverage area rather than on airtime prices. The Company's
strategy parallels those used by certain CLECs and IXCs that have targeted
specific coverage areas of major markets and are interconnected to other
carriers' facilities for expanded coverage.
The Company believes it will further reduce network build-out and operating
costs by using CDMA digital technology. The Company believes that CDMA is the
most efficient and cost-effective network technology that is capable of
delivering high-quality network service. CDMA is expected to enable greater
privacy and fraud prevention, as well as fewer dropped calls than competing
technologies. CDMA technology allows increased capacity within the allocated
frequency by reusing the entire frequency in each cell rather than using only
a fraction of the frequency in each cell as is typically the case with analog
cellular, TDMA and GSM technologies. In addition, CDMA technology requires
fewer cells than these other technologies in order to provide coverage over
the same geographic area, thereby reducing the overall infrastructure, and
operating costs of the Company's networks. See "--Digital Technology
Selection."
The Company intends to maintain a low level of corporate overhead while
maintaining high quality standards and a rapid build-out schedule by
outsourcing certain engineering and non-strategic administrative functions.
The Company plans to contract with its primary network vendor for project
management of a turnkey network solution including network design, site
selection, microwave relocation, construction and installation. In addition,
the Company plans to take advantage of existing third-party vendors of such
administrative services as billing, collection and customer service. The
Company believes that specialized third-party vendors can deliver such non-
strategic services at high quality and low costs, and that outsourcing will
enable management to focus
31
<PAGE>
on the implementation of its core business strategy. The Company may, in the
future, internalize these non-strategic services to the extent that increased
operating scale allows it to do so on a cost-effective basis.
Implement an innovative and affordable pricing structure. General Wireless
plans to implement an innovative and affordable pricing structure to
capitalize on wireless customers' demand sensitivity to price. The Company
believes that a substantial market opportunity exists to narrow the pricing
gap between cellular airtime and wireline telephone rates, which today
approximate 45 cents and 5 cents per minute of use, respectively. Relative to
current cellular service packages, General Wireless expects to offer service
packages that include larger blocks of prepaid minutes consisting of both peak
and off-peak airtime at significantly lower effective prices per minute. Based
on this pricing strategy, General Wireless expects to realize ARPU similar to
that currently achieved by cellular operators without negatively impacting
operating margins. Additionally, the Company believes that its cost structure
will better support more affordable pricing relative to PCS competitors that
provide wide-area cellular-like coverage.
The Company believes that its service packages will provide enhanced value
to both business customers and the mass consumer market. Business customers
who are heavy-volume users and account for a disproportionate amount of
current cellular usage and airtime revenue would realize substantial aggregate
savings from airtime price reductions. Also, the Company believes that the
mass consumer market will be attracted by the prospect of an affordable and
predictable monthly bill at high usage levels.
Maximize customer reach through extensive use of indirect distribution
channels. The Company's distribution strategy will emphasize indirect channels
in general, and retailers in particular. The Company believes it will realize
several important advantages from this distribution strategy. First, the
Company believes that the use of multiple indirect channels will enable the
Company to achieve a fast ramp-up of subscribers through representation at
numerous points of purchase. Second, the Company believes that indirect
distribution channels will cost-effectively focus the Company's sales and
marketing resources directly on customer creation, as opposed to investment in
Company stores and related infrastructure. Third, the focus on retailers and
agents, rather than resellers, will better allow the Company to maintain a
direct relationship with its customer base through billing and customer
service. The Company believes that direct contact with its customers will
allow it to realize better customer satisfaction and achieve lower churn.
32
<PAGE>
MARKETS
As part of its bidding strategy in the C-Block Auction, the Company has
selectively acquired PCS licenses serving the Metropolitan Areas and other
contiguous BTAs, creating three market clusters: the San Francisco cluster,
the Miami cluster and the Atlanta cluster. Each of these clusters consists of
an anchor market containing a major urban center and two to five contiguous
BTAs. The Company believes that these market clusters represent densely
populated urban areas, commuting corridors and high growth communities that
have a high level of intercity commerce with the Metropolitan Areas. The
Company believes its markets are particularly attractive because of their high
historical and projected population growth rates, as well as other desirable
demographic characteristics, such as favorable business climates, high median
household income levels and long commute times. Over the past five years, the
aggregate population of the Company's markets has grown at over 150% of the
national rate and is expected to continue to grow at a rate significantly
above the national average.
<TABLE>
<CAPTION>
1995 POPULATION
POPS GROWTH RATE(1)
----------- --------------
(THOUSANDS)
<S> <C> <C>
SAN FRANCISCO CLUSTER:
San Francisco--Oakland--San Jose.............. 6,840 1.3%
Sacramento.................................... 1,879 2.5%
Stockton...................................... 575 2.3%
Monterey--Salinas............................. 383 1.5%
Chico--Oroville............................... 230 2.1%
Yuba City--Marysville......................... 141 2.8%
------ ----
Subtotal POPs/Weighted Average Growth Rate... 10,048 1.6%
MIAMI CLUSTER:
Miami--Fort Lauderdale........................ 3,495 1.3%
West Palm Beach............................... 1,012 2.5%
Fort Meyers................................... 554 3.0%
Fort Pierce--Vero Beach....................... 385 2.5%
Naples........................................ 185 4.0%
------ ----
Subtotal POPs/Weighted Average Growth Rate... 5,631 1.9%
ATLANTA CLUSTER:
Atlanta....................................... 3,712 3.0%
Gainesville................................... 193 2.6%
Athens........................................ 179 1.5%
------ ----
Subtotal POPs/Weighted Average Growth Rate... 4,084 2.9%
------ ----
Total POPs/Weighted Average Growth Rate.......... 19,763 1.9%
U.S. Average..................................... -- 1.3%
</TABLE>
- --------
(1) Average compound annual growth rates in population between 1990 through
1995, based upon the 1990 U.S. Census and the 1995 PCS Atlas and Databook.
MARKETING AND DISTRIBUTION
The Company will use a wide range of indirect distribution channels,
including mass retailers, agents and resellers, to market and sell its service
offerings. The Company believes that a focus on indirect channels for the
majority of its sales and customer activations will provide it with the most
cost effective distribution reaching the largest percentage of potential
customers. In particular, the Company intends to target those indirect
channels, such as retailers and agents, that allow the Company to maintain a
direct relationship with customers. In addition to indirect distribution
channels, the Company will also employ direct marketing targeted to specific
customer segments using its own sales force, telemarketing and direct mail.
33
<PAGE>
The Company believes that the mass consumer and business segments can be
best accessed through retailers and other non-exclusive indirect distribution
channels. Currently, many cellular operators distribute their products and
services through direct sales channels and exclusive agents. General Wireless
believes that wireless products and services will be purchased increasingly
from retailers, which will sell such products on a non-exclusive basis where
consumers and businesses are accustomed to purchasing other electronic
products such as wireline telephones, pagers, personal computers and
televisions. In addition to its differentiation based on affordable prices for
large amounts of monthly minutes of use, General Wireless intends to provide
incentives to retailers to insure that its brands are prominently displayed
and effectively promoted at the point of purchase. These incentives include
traditional upfront commission payments and airtime revenue sharing
arrangements.
In addition to retailers, the Company plans to use agents that can cost-
effectively penetrate important segments of the target market. These agents
include direct marketing organizations that represent third-party products and
services and ethnic marketing companies focused on particular nationalities in
major cities. In addition, the Company believes that resellers of other
telecommunications services such as long distance and paging services will
find the Company's agent program attractive. As with retailers, General
Wireless plans to compensate agents through upfront commission payments and
airtime revenue sharing arrangements.
To a lesser extent than retailers and agents, the Company will also use
resellers to distribute its wireless products and services. Resellers
typically purchase wholesale airtime and consequently perform all services
otherwise performed by the operator. As a result, resellers are typically able
to negotiate substantial retail airtime discounts as their sole compensation.
Many wireless service providers employ resellers to distribute their products
and services. General Wireless believes that undue reliance on resellers can
lead to their gaining bargaining power over rates that can limit the
operators' flexibility and impair margins. Further, General Wireless believes
that the value of directly billing, servicing and maintaining its own customer
base can be a source of competitive advantage. As a result, the Company does
not intend to rely heavily on resellers.
In addition to its indirect distribution channels, the Company plans to
utilize a direct sales force to target existing high-volume cellular
subscribers. The Company expects such subscribers to be the most attracted to
lower airtime rates, higher quality and additional features that digital
technology provides and that are most likely to purchase digital telephones
from the service operator. The Company may also market directly to potential
customers through Company-owned kiosks, direct mail, the Internet and other
forms of direct marketing.
PRODUCTS AND SERVICES
The Company expects to offer a variety of commercialized wireless services
through state-of-the-art wireless CDMA technology, which the Company intends
to support with Advanced Intelligent Network ("AIN") capability. The Company's
planned services and features are designed to increase usage and provide
consumers with greater capabilities in call management, including the
following:
High Quality Voice Service. CDMA networks have more powerful error
correction, less susceptibility to fading and reduced interference relative
to competing digital technologies. CDMA networks achieve voice quality that
is comparable to the typical wireline telephone. CDMA technology also
employs adaptive equalization which filters out background noise more
effectively than existing wireline or analog cellular phones.
Advanced Handsets. In addition to supporting high-quality voice
transmissions, the Company expects that CDMA handsets will allow digital
data transmission without a phone line modem and will have advanced power
management to maximize handset battery life.
Short Messaging Services. This allows alphanumeric incoming messages to
the handset to be received, stored and displayed on demand.
Caller ID. This displays the telephone number and directory name of the
incoming call on the customer's handset, allowing the customer to decide
whether or not to accept the call.
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Allowable Called Number Table. This limits the outgoing calls to the
phone numbers on the allowable call number table in order to limit
unauthorized use.
Over-the-Air Activation. This allows the subscriber to initiate and
obtain feature changes in services by over-the-air activation or
deactivation via handset entry.
Message Waiting Notification. This initiates a voice message waiting
indicator on the handset that notifies the subscriber of a new message.
Custom Calling Features. Additional features that the Company anticipates
offering include call waiting, call forwarding, distinctive ringing and
call blocking.
The Company believes that new features and services will be developed to
take advantage of CDMA's expected position as the most widely deployed digital
wireless protocol in the United States. The Company intends to offer a
portfolio of products to accommodate the growth in data and image transmission
as well as other new applications for wireless data services that are
currently envisioned (e.g., facsimile, wireless local area network and point
of sale terminal connections).
DIGITAL TECHNOLOGY SELECTION
There are three prominent network technologies that provide digital service
in the 1850-1990 MHz frequency band: CDMA, TDMA and GSM. The Company has
selected CDMA as the digital technology for its PCS networks based on several
key advantages relative to other digital protocols:
Broader availability of CDMA to facilitate roaming. Numerous cellular
operators and PCS licensees have announced that they plan to use CDMA
technology in their market areas, which cover more than 90% of the U.S.
population. Conversely, GSM and TDMA have been chosen by other wireless
service providers whose markets cover only 54% and 45%, respectively, of the
U.S. population. The Company believes the widespread selection of the CDMA
standard by wireless telephony operators will facilitate roaming outside of
its service areas by its subscribers, and also roaming in its service areas by
other companies' subscribers. The table below lists certain major cellular
operators and PCS licensees who have selected CDMA technology.
CELLULAR
--------------------------- PCS A- AND B-BLOCK PCS C-BLOCK
AirTouch Communications --------------------- ---------------------
Ameritech General Wireless
ALLTEL Mobile Communications Inc.
Centennial Cellular Chase
Corp. Telecommunications,
GTE MobilNet Inc.
Ameritech Cellular Communications Mercury PCS, LLC
Inc.
PrimeCo Personal
Communications NextWave Telecom
Bell Atlantic NYNEX Mobile Inc. Inc.
Sprint Spectrum L.P.
Urban Communications
Comcast Cellular Corp.
GTE MobilNet
360(degrees) Communications
Southern New England Telephone
Company
U S WEST NewVector Group, Inc.
Higher network capacity. CDMA technology allows increased capacity within
the allocated frequency by reusing the entire frequency in each cell rather
than using only a fraction of the frequency in each cell as is typically the
case with analog cellular, TDMA and GSM technologies. The Company believes
that the use of CDMA technology will increase capacity with fewer cells
relative to other digital technologies.
Lower infrastructure costs. Cells using CDMA technology can achieve a
greater range of coverage or subscriber density per base station because of
the more efficient modulation of CDMA technology. As a result, CDMA networks
can achieve the same level of coverage as the current analog, TDMA or GSM
networks with fewer cells, which is expected to reduce the overall
infrastructure and operational costs of CDMA networks.
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Greater privacy and fraud prevention. One of the benefits of CDMA technology
is that it combines a constantly changing coding scheme with a low power
signal to enhance security and privacy. Vendors are currently developing
additional encryption capabilities to enhance further overall network
security. Partly because of its security and privacy features, spread spectrum
technology (upon which CDMA is based) has been used by government, military
and intelligence agencies for over 30 years.
Longer handset battery life. Power control characteristics of CDMA reduce
interference levels. The power regulating nature of CDMA establishes a
communication link with a subscriber handset at the lowest possible power
level suitable for high quality voice transmission. Average power output from
subscriber handsets for CDMA is 200 milliwatts compared to 600 milliwatts for
analog cellular and TDMA and 1,000 milliwatts for GSM. Not only is co-channel
and adjacent channel interface minimized, but battery life in subscriber
handsets can be proportionately extended to provide longer periods between
recharge.
Fewer dropped calls. CDMA technology is designed, unlike other technologies,
so that the mobile telephone will generally not switch frequencies during
hand-off from one cell to another. Therefore, CDMA networks are able to use
the "soft hand-off" where the original cell site of a mobile user does not
discontinue handling a call until the mobile user has established connection
in a new cell, resulting in a decreased number of dropped calls relative to
other technologies. See "Risk Factors--Risks Relating to Selection of Digital
Technology; Availability of Handsets."
Simplified frequency planning. Frequency planning is the process by which
wireless service providers analyze and test alternative patterns of frequency
use within their systems to minimize interference and maximize capacity.
Currently, cellular service providers spend considerable time and money on
frequency planning. Because TDMA and GSM networks have frequency reuse
constraints similar to present analog systems, frequency reuse planning for
TDMA and GSM networks is expected to be comparable to planning for the current
analog systems. With CDMA technology, however, the same subset of allocated
frequencies can be reused in every cell, substantially reducing the need for
costly frequency reuse patterning and constant frequency plan management.
NETWORK BUILD-OUT
The Company will outsource its network build-out in all of its markets to a
primary network vendor under a "turnkey" services agreement that will
capitalize on such vendor's expertise in broadly managing highly skilled
professional personnel in RF engineering, network design and construction.
This turnkey services agreement will be structured to enable management to
monitor and control the major activities of the network build-out, which will
include (i) program management, (ii) RF engineering, (iii) site acquisition,
(iv) network design, (v) microwave removal, and (vi) site construction
engineering.
Program Management. Day-to-day management of the network build-out process
will be performed by the primary network vendor under the monitoring and
control of the Company. The Company's management will define the economic
limits and network coverage requirements within which the primary network
vendor will operate, and will also monitor and manage progress in order to
anticipate potential delays and exceptional cost variances.
RF Engineering. The RF engineering process utilizes advanced computer models
containing topographic, demographic and building structure data for the
Company's markets, along with the Company's specific design criteria and
coverage plan, to develop optimal solutions for cell site locations. To
facilitate this process and to reduce site acquisition costs, the RF engineers
will incorporate information on pre-identified potential cell sites, such as
existing rental sites and sites whose owners are willing to co-locate with
other wireless operators. The Company intends to work closely with the primary
network vendor to insure that the most cost effective RF engineering plan is
developed, and to manage directly the process of balancing geographic
coverage, population coverage and system activation schedules.
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Site Acquisition. The Company's site selection process will require the
negotiation of lease or acquisition agreements for approximately 500 sites for
the Company's PCS networks. The Company intends to utilize cell sites that are
a part of the large inventory of potential cell sites that have been pre-
identified by companies that acquire and manage cell sites and those offered
by existing operators willing to co-locate. The Company anticipates that a
number of these sites may fulfill its needs, and that by utilizing them it may
significantly reduce its network build-out costs.
Network Design. The Company intends to leverage the primary network vendor's
extensive expertise in optimizing network design to minimize the investment
and operating costs of its "backhaul" network. The Company believes that
microwave links can form the backbone of its backhaul network for each market
cluster and that the use of microwave links will provide significant savings
over utilizing landline networks. A preliminary investigation by potential
vendors of microwave equipment indicates that suitable spectrum will be
available to construct these microwave links.
Microwave Removal. Approximately 85 microwave paths exist in the Company's
target coverage area that must be removed to clear its entire C-Block
frequency band. The Company believes that as many as 57 of these microwave
paths are eligible for cost sharing between the Company and other affected
licensees, which will reduce the Company's cost of relocating these microwave
paths. The primary network vendor will subcontract with others to assist the
Company in negotiating compensation, timing and location of microwave
relocation.
Site Construction and Engineering. The primary network vendor will outsource
site construction and engineering activities once sites are acquired and
network design has been completed. In addition, the Company will work closely
with the primary network vendor to identify and select certain key system
elements that affect system performance, such as antennas, to insure that both
cost and performance objectives are met. See "Risk Factors--PCS Network
Construction and Implementation Risks" and "--Relocation of Incumbent Fixed
Microwaves Licenses."
COMPETITION
The wireless communications market in the United States is expected to
become increasingly competitive. Cellular operators and other wireless
services providers are already exploiting existing wireless technology and
have established and continue to augment wireless telecommunications networks
that will directly compete with many of the services to be offered by the
Company. Additionally, other PCS operators are expected to compete with the
Company in each market. The success of the Company will depend largely upon
its ability to satisfy the mass consumer and business markets, which the
Company believes have not been adequately served by existing cellular service
operators. The Company plans to compete with cellular and other PCS operators
on the basis of affordable pricing, predictable monthly bills and voice
transmission quality.
Cellular Operators. The Company will compete with established cellular
telephone service operators in the markets it intends to enter. Principal
cellular providers in the Company's markets are AT&T Wireless Services, Inc.,
BellSouth Mobility, Inc., GTE Mobile Communications Inc., AirTouch
Communications, Inc., Centennial Cellular Corp., Horizon Cellular Telephone
Company, L.P., U.S. Cellular Corp., Independent Cellular Network Inc. and
Palmer Wireless, Inc. Under FCC rules, cellular telephone service licensees
have enjoyed a duopoly because the FCC only permits two licensees in each
market. Cellular licensees to date have faced limited competition from
businesses that "resell" cellular telephone service to customers, but the
Company could face additional competition from resellers of cellular and PCS
networks.
The introduction of digital transmission technologies to supplant
traditional analog cellular systems will increase the capacity and quality of
existing cellular telephone systems once deployed. However, the Company
believes that upgrading from analog to digital is expensive and that it will
likely be several years before cellular networks are fully converted to
digital technology. The Company expects the analog infrastructure to continue
to be used for the foreseeable future due in part to a lack of a national
digital technology standard. The Company
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further expects that many cellular licensees will also attempt to acquire an
additional 10 MHz PCS license in the D- and E-Block auctions in areas in which
they currently provide cellular telephone services, as permitted by the FCC
under its PCS licensing rules. This would provide the cellular operators with
greater capacity and potentially allow them to add additional customers and
offer more advanced services in their markets in the near term. The Company
believes that by providing low-priced services and new wireless features on
its digital PCS networks, it will be competitive with cellular services.
Other PCS Operators. The Company will compete with A- and B-Block licensees,
many of whom are cellular-affiliated companies that will utilize PCS spectrum
in new markets to expand their national or regional coverage. Principal A- and
B-Block licensees in the Company's markets are PrimeCo Personal
Communications, Pacific Telesis Mobile Services, Sprint Spectrum L.P.,
InterCel, Inc. and AT&T Wireless Services, Inc. These parties, whose licenses
were granted on June 23, 1995, have all had substantial lead-time to develop
their networks and have significantly greater financial, technical, marketing
and other resources than the Company.
In addition, the Company will compete with the D-, E- and F-Block license
winners to the extent that such licenses are not acquired by existing cellular
or A- or B-Block PCS licenses. Although the D-, E- and F-Block licenses are
for only 10 MHz, entities can, subject to the Entrepreneur Requirements and
the FCC's rules limiting entities to 45 MHz of cellular, broadband PCS and SMR
spectrum in a given market, acquire two or three of the 10 MHz licenses and
consolidate them so as to design a 20 MHz or 30 MHz PCS system similar to that
of the Company.
SMR and "Enhanced" SMR Services. As a result of advances in digital
technology, some service providers have begun to design and deploy digital
mobile networks, which are referred to as "Enhanced SMR" or "ESMR." ESMR
networks increase the capacity of SMR system frequencies to a level that may
be competitive with that of analog cellular networks. SMR service providers
offer or plan to offer fleet dispatch services, short messaging, data services
and interconnected voice telephony services over wide geographic service
areas. Given similar developments in the deployment of digital technology in
the cellular operators' networks, it is unclear at this time whether the
quality and capacity of SMR-based digital mobile networks will be able to
compete effectively with analog and digital cellular and PCS networks.
Other Competition. The FCC has proposed or adopted final rules to authorize
additional wireless mobile services. First, the FCC has proposed to authorize
the use of the 37 and 39 GHz bands for the provision of fixed and mobile
communications services. Second, in May 1996 the FCC adopted final rules to
permit Interactive Video and Data Service ("IVDS") licensees to provide mobile
two-way data services. Because of the limited amount of spectrum allocated for
IVDS, however, it is expected to be technically infeasible to provide voice
services to IVDS customers for the foreseeable future. Third, the FCC
authorized the use of LMDS licenses to provide certain fixed and mobile
services. Finally, the FCC has proposed to reallocate former federal
government spectrum located at 4 GHz for a broad range of wireless fixed and
mobile services, and is expected to reallocate additional former federal
government spectrum for wireless mobile services in the future. The Company
may also face competition from MSS.
In addition, as a result of the enactment of the 1996 Act, regional energy
utility companies are expected to enter the wireless and wireline
telecommunications markets by leveraging their significant capital assets,
brand-name value, existing customer base and infrastructure advantages in
their geographical areas of operation. Similarly, the 1996 Act also eliminates
barriers for cable television system operators to provide wireline local loop
services over their existing wireline infrastructure. See "Risk Factors--
Competition."
EMPLOYEES
As of June 25, 1996, the Company had a total of nine employees. The
Company's future success depends in substantial part upon its ability to
attract and retain highly qualified technical and managerial personnel, and
upon the continued service of Mr. Roger D. Linquist and Mr. Malcolm M. Lorang.
Prior to the conclusion of the C-Block Auction and the grant of its PCS
licenses, the Company has maintained a small management group to
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make the most efficient use of resources. Going forward, the Company plans to
expand the senior management team and other corporate staff significantly. In
addition, following the grant of its PCS licenses and as the Company
approaches the commercial launch of its services, the Company expects to hire
field personnel in its markets including operations management, field
technicians, administration staff, customer service representatives and sales
and marketing personnel. Competition for such personnel is intense, and there
can be no assurance that the Company can retain its key technical, managerial
or other employees or that it can attract, assimilate or retain other highly
qualified technical, managerial or other personnel in the future. See "Risk
Factors--Management of Growth; Need to Establish Infrastructure" and "--
Dependence on Key Personnel."
FACILITIES
The Company's principal administrative facility is located in Dallas, Texas.
In connection with the Company's expansion, the Company intends to relocate to
larger facilities for its corporate headquarters functions. In addition, the
Company intends to establish regional facilities in each of the Metropolitan
Areas. There can be no assurance that the Company will be able to locate
adequate facilities on terms favorable to the Company. See "Risk Factors--
Management of Growth; Need to Establish Infrastructure."
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LEGISLATION AND GOVERNMENT REGULATION
As a recipient of licenses acquired through the C-Block Auction, the
Company's ownership structure and operations are and will be subject to
substantial FCC regulation.
OVERVIEW
FCC Authority. The Communications Act of 1934, as amended (the
"Communications Act") grants the FCC the authority to regulate the licensing
and operation of all non-federal government radio-based services in the United
States. The scope of the FCC's authority includes (i) allocating radio
frequencies, or spectrum, for specific services, (ii) establishing
qualifications for applicants seeking authority to operate such services,
including PCS applicants, (iii) approving initial licenses, modifications
thereto, license renewals, and the transfer or assignment of such licenses,
(iv) promulgating and enforcing rules and policies that govern the operation
of spectrum licensees, (v) the technical operation of wireless services,
interconnection responsibilities between and among PCS, other wireless
services such as cellular, and landline carriers, and (vi) imposition of fines
and forfeitures for any violations of those rules and regulations. Under its
broad oversight authority with respect to market entry and the promotion of a
competitive marketplace for wireless providers, the FCC regularly conducts
rulemaking and adjudicatory of proceedings to determine and enforce rules and
policies potentially affecting broadband PCS operations.
Regulatory Parity. The FCC has adopted rules designed to create symmetry in
the manner in which it and the states regulate similar types of mobile service
providers. According to these rules, all "commercial mobile radio service"
("CMRS") providers that provide substantially similar services will be subject
to similar regulation. A CMRS service is one in which the mobile radio service
is provided for a profit, interconnected to the public switched telephone
networks, and made available to the public. Under these rules, providers of
PCS, SMR, and ESMR services are subject to regulations similar to those
governing cellular carriers if they offer an interconnected commercial mobile
service. The FCC announced that it would forbear from applying several
regulations to these services, including its rules concerning the filing of
tariffs for the provision of interstate services. Congress specifically
authorized the FCC to forbear from applying such regulation in the Omnibus
Budget Reconciliation Act of 1993. With respect to PCS, the FCC has stated its
intent to continue monitoring competition in the PCS service marketplace. The
FCC also concluded that Congress intended to preempt state and local rate and
entry regulation of all CMRS providers, including PCS, but established
procedures for state and local governments to petition the FCC for authority
to continue or initiate such regulation.
Commercial Mobile Radio Source Spectrum Ownership Limit. The FCC has limited
the amount of broadband CMRS spectrum (including cellular, broadband PCS and
SMR) in which an entity may hold an attributable interest in a given
geographic area to 45 MHz. For these purposes only PCS and other CMRS licenses
are attributed to an entity where its investments exceed certain thresholds or
the entity is an officer or director of a broadband PCS, cellular or SMR
licensee. Thus, entities with attributable interests in cellular licenses
(which are for 25 MHz) in certain markets cannot hold more than 20 MHz of PCS
spectrum in the same markets. The Company's ability to raise capital from
entities with attributable broadband CMRS interests in certain geographic
areas is likely to be limited by this restriction.
Interconnection Requirements. The FCC has pending proceedings to address
various forms of interconnection obligations which could affect broadband PCS
and other wireless service providers. In its mutual compensation proceedings,
the FCC is examining its policies regarding the compensation arrangements
which apply when CMRS providers, including broadband PCS providers,
interconnect with an LEC. In addition, the FCC is considering whether to rely
upon private negotiations between wireless providers to determine whether
direct interconnections between wireless networks should occur or whether such
direct interconnect should be obligatory. The FCC also is considering whether
private negotiations should be the preferred basis for wireless providers to
permit the customers of one such provider to obtain service while roaming in
the service area of the other.
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In related parts of the foregoing proceedings, the FCC is considering
whether to require all wireless providers to provide capacity to non-
facilities based resellers, whether wireless licensees should be permitted to
resell capacity acquired from other wireless providers in the markets where
they hold licenses at least during the initial startup period and whether
wireless providers should be required to offer unbundled communications
capacity to resellers who intend to operate their own switching facilities.
Other FCC Requirements. The FCC also has pending proceedings regarding the
scope of permissible uses of broadband PCS networks to provide fixed local
loop and other fixed services in competition with the wireline offerings of
the LEC.
Other Federal Regulations. Wireless networks are subject to certain Federal
Aviation Administration and FCC guidelines regarding the location, lighting
and construction of transmitter towers and antennas. In addition, the FCC has
authority to enforce certain provisions of the National Environmental Policy
Act as they would apply to the Company's facilities. The Company intends to
use common carrier point-to-point microwave and traditional landline
facilities to connect base station sites and to link them to their respective
main switching offices. These microwave facilities have historically been
separately licensed by the FCC on a first-come, first-served basis (although
the FCC has proposed to auction certain such licenses) and are subject to
specific service rules.
Wireless providers also must satisfy a variety of FCC requirements relating
to technical and reporting matters. One such requirement is the coordination
of proposed frequency usage with adjacent wireless users, permittees and
licensees in order to avoid electrical interference between adjacent networks.
In addition, the height and power of base station transmitting facilities and
the type of signals they emit must fall within specified parameters.
State and Local Regulation. The scope of state regulatory authority covers
such matters as the terms and conditions of interconnection between LECs and
wireless carriers under FCC oversight, customer billing information and
practices, billing disputes, other consumer protection matters, certain
facilities construction issues, transfers of control, the bundling of services
and equipment and requirements relating to making capacity available to third
party carriers on a wholesale basis. In these areas, particularly the terms
and conditions of interconnection between LECs and wireless providers, the FCC
and state regulatory authorities share regulatory responsibilities with
respect to interstate and intrastate issues, respectively.
The FCC and a number of state regulatory authorities have initiated
proceedings or indicated their intention to examine access charge obligations,
mutual compensation arrangements for interconnections between LECs and
wireless providers, the pricing of transport and switching facilities provided
by LECs to wireless providers, the implementation of "number portability"
rules to permit telephone customers to retain their telephone numbers when
they change telephone service providers, and alterations in the structure of
universal service funding, among other matters.
The Company and its subsidiaries have been and intend to remain active
participants in rulemaking and other administrative policy proceedings before
the FCC and before state regulatory authorities. Proceedings with respect to
the foregoing policy issues before the FCC and state regulatory authorities
could have a significant impact on the competitive market structure among
wireless providers and the relationships between wireless providers and other
carriers.
GENERAL PCS REGULATIONS
In June 1994 the FCC allocated spectrum for broadband PCS services between
the 1850 to 1990 MHz bands. Of the 140 MHz available for PCS services, the FCC
created six separate blocks of spectrum identified as the A-, B-, C-, D-, E-
and F-Blocks. The A-Block, B-Block and C-Block are each allocated 30 MHz of
spectrum, the D-Block, E-Block and F-Block are allocated 10 MHz each. For each
block, the FCC adopted a 10-year PCS license term with an opportunity to
renew. 20 MHz of spectrum is unallocated.
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The FCC adopted a "rebuttable presumption" that all PCS licensees are common
carriers, subject to Title II of the Communications Act. Accordingly, each PCS
licensee deemed to be a common carrier must provide services upon reasonable
request and the rates, terms and conditions of service must not be unjustly or
unreasonably discriminatory.
Structure of PCS Block Allocations. The FCC defines the geographic contours
of the licenses within each PCS block based on the MTAs and BTAs developed by
Rand McNally & Co. The FCC awarded A-Block and B-Block licenses in 51 MTAS.
The C-Block, D-Block, E-Block and F-Block spectrum were allocated on the basis
of 493 smaller BTAS. In addition, there are spectrum aggregation caps on PCS
licensees limiting them to 45 MHz of broadband CMRS spectrum (e.g., no more
than one 30 MHz PCS license and one 10 MHz license) in any given market.
All but three of the 102 total A-Block licenses and all B-Block licenses
were auctioned in 1995. The three A-Block licenses were awarded separately
pursuant to the FCC's "pioneer's preference" program. The auctioned A-Block
and B-Block licenses were awarded in June 1995. The C-Block and F-Block
spectrums are reserved for Entrepreneurs. See "--C-Block License
Requirements." The FCC has proposed extending certain auction preferences to
the D-Block and E-Block licenses in a pending rulemaking proceeding and has
also proposed to auction the D-, E- and F-Block licenses in a single auction,
which would make it easier for entities to aggregate two or three of these 10
MHz licenses and offer services competitive with 30 MHz licenses. The outcome
of these proceedings cannot be determined.
PCS Licensing Auctions. Before granting licenses won by a successful bidder,
the FCC requires that such bidder submit a Long Form for each market in which
it has submitted a winning bid. The Company filed its Long Form on May 22,
1996. This submission began an administrative process in which parties have an
opportunity to challenge the winning bidders' qualifications to be FCC
licensees. The Company may receive challenges to its license applications
("Petitions to Deny"). The Company has an opportunity to respond to the
Petitions to Deny to demonstrate its compliance with the FCC's rules including
the eligibility requirements. Based on the Petitions to Deny and the responses
thereto, the FCC will determine whether to grant such licenses. In addition,
if the FCC determines that the Company violated FCC rules, then the Company
could be subject to substantial financial and regulatory penalties, including
refusal to grant the PCS licenses.
RECENTLY ADOPTED FCC REGULATIONS
On June 12, 1996, the FCC announced the adoption of rules prohibiting all
cellular and broadband PCS providers, and providers of SMR services licensed
in the 800 MHz and 900 MHz bands to provide real time, two-way switched,
interconnected voice service, from unreasonably restricting the resale of
their services. In adopting these rules, the Commission concluded that the
availability of resale will increase competition at a faster pace by allowing
new entrants to enter the wireless market quickly by reselling the services of
their competitors while they build out their own facilities. The prohibition
on resale restrictions will expire five years after the Commission concludes
its initial licensing of existing broadband PCS spectrum, which is expected to
conclude in 1997. The Commission has not yet released the full text of the
decision and rules, thus the full extent of the rules and their effect on the
Company cannot be determined.
On June 12, 1996, the FCC also announced the adoption of rules governing the
implementation of enhanced 911 for wireless services. Within 12 months after
the effective date of the rules, cellular, broadband PCS and geographic area
SMR licensees will be required to transmit 911 emergency calls, without any
credit checks or validation, to a Public Safety Answering Point ("PSAP") from
a handset that transmits a mobile identification number. Between 12 and 18
months after the effective date of the rules, such licensees will be required
to offer certain 911 enhancements, such as the ability to relay to the PSAP a
caller's telephone number and the location of the base station or cell site
receiving the 911 call. Within five years after the effective date of the
rules, such licensees will be required to provide to the PSAP the location of
the mobile station in two dimensions, with an accuracy within a radius of 125
meters in 67% of all cases. The Commission has not yet released the full text
of the decision and rules; thus the full extent of the rules and their effect
on the Company cannot be determined.
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1996 ACT
On February 8, 1996, Congress enacted the 1996 Act, which effected a
sweeping overhaul of the Communications Act. In particular, the 1996 Act
substantially amended Title II of the Communications Act, which governs
telecommunications common carriers. The policy underlying this legislative
reform was the opening of the telephone exchange service markets to full
competition. The 1996 Act makes all state and local barriers to competition
unlawful, whether they are direct or indirect. It directs the FCC to initiate
rulemaking proceedings on local competition matters and to preempt all
inconsistent state and local laws and regulations. The 1996 Act requires
incumbent wireline LECs to open their networks to competition through
interconnection and access to unbundled network elements and prohibits state
and local barriers to the provision of interstate and intrastate
telecommunications services.
The 1996 Act prohibits state and local governments from enforcing any law,
rule or legal requirement that prohibits or has the effect of prohibiting any
person from providing interstate or intrastate telecommunications services.
States retain jurisdiction under the 1996 Act to adopt laws necessary to
preserve universal service, protect public safety and welfare, ensure the
continued quality of telecommunications services and safeguard the rights of
consumers.
Implementation of the provisions of the 1996 Act will be the task of the
FCC, the state public utility commissions and a joint federal-state board.
Much of the implementation of the 1996 Act must be completed in numerous
rulemaking proceedings with short statutory deadlines. These proceedings are
expected to address issues and proposals already before the FCC in pending
rulemaking proceedings affecting the wireless industry as well as additional
areas of telecommunications regulation not previously addressed by the FCC and
the states.
Some specific provisions of the 1996 Act which are expected to affect
wireless providers are summarized below:
Expanded Interconnection Obligations: The 1996 Act establishes a general
duty of all telecommunications carriers, including C-Block PCS licensees, to
interconnect with other carriers, directly or indirectly. The 1996 Act also
contains a detailed list of requirements with respect to the interconnection
obligations of LECs. These "interconnect" obligations include resale, number
portability, dialing parity, access to rights-of-way and reciprocal
compensation.
LECs designated as "incumbents" (i.e., those providing landline local
exchange telephone service at the time the 1996 Act was adopted) have
additional obligations including: to negotiate in good faith; to interconnect
on terms that are reasonable and non-discriminatory; to provide non-
discriminatory access to facilities, equipment, features, functions and
capabilities; to offer for resale at wholesale rates any service that LECs
provide on a retail basis; and to provide actual co-location of equipment
necessary for interconnection or access.
The 1996 Act establishes a framework for state commissions to mediate and
arbitrate negotiations between incumbent LECs and carriers requesting
interconnection, services or network elements. The 1996 Act establishes
deadlines, policy guidelines for state commission decision making and federal
preemption in the event a state commission fails to act. The FCC is in the
process of promulgating rules to implement these provisions of the 1996 Act,
as well as the provision discussed immediately below and the outcome of such
proceedings or the effect of the Company cannot be determined.
Review of Universal Service Requirements. The 1996 Act contemplates that
interstate telecommunications providers, including CMRS providers, will "make
an equitable and non-discriminatory contribution" to support the cost of
providing universal service, although the FCC can grant exemptions in certain
circumstances.
Prohibition Against Subsidized Telemessaging Services. The 1996 Act
prohibits incumbent LECs from subsidizing telemessaging services (i.e., voice
mail, voice storage/retrieval, live operator services and related ancillary
services) from their telephone exchange service or exchange access and from
discriminating in favor of its own telemessaging operations.
43
<PAGE>
Conditions on RBOC Provision of In-Region InterLATA Services. The 1996 Act
generally requires that before engaging in landline long distance services in
the states in which they provide landline local exchange service referred to
as in-region interLATA services, the Regional Bell Operating Companies
("RBOCs") must (1) provide access and interconnection to one or more
unaffiliated competing facilities-based providers of telephone exchange
service, or after 10 months after enactment of the 1996 Act, no such provider
requested such access and interconnection more than three months before the
RBOCs has applied for authority and (2) demonstrate to the FCC its
satisfaction of the 1996 Act's "competitive checklist."
The specific interconnection requirements contained in the competitive
checklist, which the RBOCs must offer on a non-discriminatory basis, include
interconnection and unbundled access; access to poles, ducts, conduits and
rights-of-way owned or controlled by the RBOCs; unbundled local loops,
unbundled transport and unbundled switching; access to emergency 911,
directory assistance, operator call completion and white pages; access to
telephone numbers, databases and signaling for call routing and completion;
number portability; local dialing parity; reciprocal compensation; and resale.
The 1996 Act eliminates the previous prohibition on RBOC provision of out-
of-region, interLATA services and all interLATA services associated with the
provison of CMRS service, including in-region CMRS service.
RBOC Commercial Mobile Joint Marketing. The RBOCs are permitted to market
jointly and sell wireless services in conjunction with telephone exchange
service, exchange access, intraLATA and interLATA telecommunications and
information services.
CMRS Facilities Siting. The 1996 Act limits the rights of states and
localities to regulate placement of CMRS facilities so as to "prohibit" or
prohibit effectively the provision of wireless services or to "discriminate"
among providers of such services. It also eliminates environmental effects
from RF emissions (provided the wireless system complies with FCC rules) as a
basis for states and localities to regulate the placement, construction or
operation of wireless facilities. The FCC's implementation of these provisions
and the scope thereof have neither been adopted by the agency nor reviewed by
the courts.
Equal Access. The 1996 Act provides that wireless providers are not required
to provide equal access to common carriers for toll services. The FCC is
authorized to require unblocked access subject to certain conditions.
Deregulation. The FCC is required to forebear from applying any statutory or
regulatory provision that is not necessary to keep telecommunications rates
and terms reasonable or to protect consumers. A state may not apply a
statutory or regulatory provision that the FCC decides to forebear from
applying. In addition, the FCC must review its telecommunications regulations
every two years and change any that are no longer necessary.
RELOCATION OF INCUMBENT FIXED MICROWAVE LICENSEES
In an effort to balance the competing interests of existing microwave users
and newly authorized PCS licensees in the spectrum allocated for PCS use, the
FCC has adopted (i) a transition plan to relocate fixed microwave operators
that currently are operating in the PCS spectrum, and (ii) a cost sharing plan
so that if the relocation of an incumbent benefits more than one PCS licensee,
the benefiting PCS licensees will help defray the costs of the relocation. PCS
licensees will only be required to relocate fixed microwave incumbents if they
cannot share the same spectrum. The transition and cost sharing plans expire
on April 4, 2005, at which time remaining incumbents in the PCS spectrum will
be responsible for their costs to relocate to alternate spectrum locations.
Relocation generally involves a PCS operator compensating an incumbent for
costs associated with system modifications and new equipment required to move
to alternate, readily available spectrum. This transition plan allows most
microwave users to operate in the PCS spectrum for a two-year voluntary
negotiation period and an additional one-year mandatory negotiation period.
For public safety entities dedicating a majority of their system
communications for police, fire, or emergency medical service operations, the
voluntary negotiation period is
44
<PAGE>
three years. The FCC currently is considering whether to shorten the voluntary
negotiation period by one year. Parties unable to reach agreement within these
time periods may refer the matter to the FCC for resolution, but the existing
microwave user is permitted to continue its operations until final FCC
resolution of the matter.
The FCC's cost-sharing plan allows PCS licensees that relocate fixed
microwave links outside of their license areas to receive reimbursements from
later-entrant PCS licensees that benefit from the clearing of their spectrum.
A non-profit clearinghouse will be established to administer the FCC's cost-
sharing plan.
C-BLOCK LICENSE REQUIREMENTS
When the FCC allocated spectrum to PCS, it designated the C-Block as an
"Entrepreneurs' Block." FCC rules require C-Block Entrepreneurs to meet
various qualifications to hold C-Block licenses or to receive certain
financing preferences. Among these are: (i) the various structural
requirements governing equity investments, including the Entrepreneurs
Requirements, Small Business Requirements and Control Group Requirements, all
of which apply specifically to Entrepreneurs, and the Foreign Ownership
Limitations, which apply to all communications entities governed by the FCC;
(ii) transfer restrictions limiting, among other things, the sale of C-Block
licenses; and (iii) other ongoing requirements that mandate network build-out
schedules and limit cross-ownership of cellular and other wireless
investments. The Company was the winning bidder for 14 licenses in the C-Block
Auction. The FCC also determined that Entrepreneurs that qualify as a Small
Business would be eligible to receive a C-Block Loan from the federal
government for 90% of the dollar amount of their winning bids in the C-Block
Auction. The Company's Government Financing is a C-Block Loan. See
"Description of Certain Indebtedness." In order to ensure continued compliance
with the FCC rules, the FCC has announced its intention to conduct random
audits during the initial 10-year PCS license terms. There can be no assurance
that the Company will continue to satisfy any of the FCC's qualifications or
requirements, and the failure to do so would have a material adverse effect on
the Company. See "Risk Factors--C-Block Requirements" and "--Foreign Ownership
Limitations."
Structural Requirements
Entrepreneurs Requirements. In order to hold a C-Block license, an entity
must: (i) meet the Entrepreneurs Revenues Limit by having less than $125
million in gross revenues and (ii) meet the Entrepreneurs Asset Limit by
having less than $500 million in total assets. To qualify for the C-Block
Auction, an entity had to have met the Entrepreneurs Revenues Limit for each
of the two years prior to the auction and the Entrepreneurs Asset Limit at the
time it filed its Short Form. For at least five years after winning a C-Block
license, a licensee must continue to meet the Entrepreneurs Requirements,
which are modified for such five-year period to exclude certain assets and
revenues from being counted toward the Entrepreneurs Asset Limit and the
Entrepreneurs Revenues Limit, respectively. Additional amounts are excluded if
the licensee maintains an organizational structure that satisfies the Control
Group Requirements described below. In calculating a licensee's gross revenues
for purposes of the Entrepreneurs Requirements, the FCC includes the gross
revenues of the licensee's affiliates, those persons or entities that hold
interests in the licensee and the affiliates of such persons or entities.
By claiming status as an Entrepreneur, the Company qualified to enter the C-
Block Auction. If the FCC were to determine that the Company did not satisfy
the Entrepreneur Requirements at the time it participated in the C-Block
Auction or that the Company fails to meet the ongoing Entrepreneurs
Requirements, the FCC could revoke the Company's PCS licenses, fine the
Company or take other enforcement actions, including imposing the Unjust
Enrichment Penalties. Although the Company believes it has met the
Entrepreneurs Requirements, there can be no assurance that it will continue to
meet such requirements or that, if it fails to continue to meet such
requirements, the FCC will not take action against the Company, which could
include revocation of its PCS licenses. See "Risk Factors--C-Block License
Requirements--Entrepreneurs Requirements."
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<PAGE>
Small Business Requirements. An entity that meets the Entrepreneurs
Requirements may also receive certain preferential financing terms if it meets
the Small Business Requirements. These preferential financing terms include
the 25% Bidding Credit and the ability to make interest-only installment
payments on its C-Block Loan for the first six years of the license term. To
meet the Small Business Requirements, a licensee must have had annual average
gross revenues of not more than $40 million for the three calendar years
preceding the date it filed its Short Form. In calculating a licensee's gross
revenues for purposes of the Small Business Requirements, the FCC includes the
gross revenues of the licensee's affiliates, those persons or entities that
hold interests in the licensee, and the affiliates of such persons or
entities.
By claiming status as a Small Business, the Company qualified for the
Bidding Credit. If the FCC were to determine that the Company does not qualify
as a Small Business, the Company would, at a minimum, be forced to repay the
full value of the Bidding Credit. Further, the FCC could revoke the Company's
PCS licenses, fine the Company or take other enforcement actions, including
imposing the Unjust Enrichment Penalties. Although the Company has structured
itself to meet the Small Business Requirements, there can be no assurance that
it will remain in compliance with these requirements or that, if it fails to
continue to meet such requirements, the FCC will not take action against the
Company, which could include revocation of its PCS licenses. See "Risk
Factors--C-Block Requirements--Small Business Requirements."
Control Group Requirements. If a C-Block licensee meets the Control Group
Requirements, the FCC excludes certain assets and revenues from such
licensee's total revenues and assets, making it easier for the licensee to
meet the Entrepreneurs Requirements and the Small Business Requirements. The
Control Group Requirements mandate that the Control Group, among other things,
have both actual and legal control of the licensee. Further, the FCC permits
licensees to qualify under the Control Group Requirements pursuant to the
Qualifying Investor Option if its Control Group is comprised of the following:
(i) Qualifying Investors that own at least 15% of the equity interest on a
fully diluted basis and 50.1% of the voting power in the C-Block licensee and
(ii) Additional Control Group Members that hold at least 10% of the equity
interest in the C-Block licensee. Additional Control Group Members must be
either: (a) the same Qualifying Investors in the Control Group, (b) members of
the licensee's management or (c) non-controlling institutional investors,
including venture capital firms. To take advantage of the FCC's Qualifying
Investor Option, a C-Block licensee must have met the Qualifying Investor
Option requirements at the time it filed its Short Form and must continue to
meet the Qualifying Investor Option requirements for three years following the
License Grant Date. Commencing the fourth year of the license term, the FCC
rules (i) eliminate the requirement that the Additional Control Group Members
hold any of the licensee's equity interest and (ii) allow the licensee to
reduce the minimum required equity interest held by the Qualifying Investors
from 15% to 10%.
In order to meet the Control Group Requirements, the Company's Certificate
of Incorporation provides that the Company's Class A Common Stock, as a class,
must constitute 50.1% of the voting power of the Company. Further, the
Company's Certificate of Incorporation limits the ability of the Company's
Class B Common Stock to be converted into Class C Common Stock of the Company.
See "Description of Capital Stock." There can be no assurance that the Company
will remain in compliance with the Control Group Requirements or, if it fails
to continue to meet such requirements, that the FCC will not take action
against the Company, which could include revocation of its PCS licenses.
Although the Company has taken these and other steps to meet the Control Group
Requirements, there can be no assurance that the Company has or will continue
to meet the Control Group Requirements, and the failure to meet such
requirements would have a material adverse effect on the Company. See "Risk
Factors--C-Block Requirements--Control Group Requirements."
Asset and Revenue Calculation. In determining whether an entity qualifies as
an Entrepreneur and/or as a Small Business, the FCC counts the gross revenues
and assets of the entity's "financial affiliates" toward the entity's total
gross revenues and total assets. Financial affiliation can arise from common
investments, familial or spousal relationships, contractual relationships,
voting trusts, joint venture agreements, stock ownership, stock options,
convertible debentures and agreements to merge. Affiliates of noncontrolling
investors with ownership interests that do not exceed the applicable FCC
"passive" investor ownership thresholds are not attributed to C-Block
licensees for purposes of determining whether such licensees financially
qualify for the applicable C-Block
46
<PAGE>
Auction preferences. The Entrepreneurs Requirements and the Small Business
Requirements provide that, to qualify as a passive investor, an entity may not
own more than 25% of the Company's total equity on a fully diluted basis.
There can be no assurance that the Company will not exceed these passive
investor limits or otherwise violate the Entrepreneur Requirements and/or the
Small Business Requirements.
In addition, if an entity makes bona fide loans to a C-Block licensee, the
assets and revenues of the creditor would not be attributed to the licensee
unless the creditor is otherwise deemed an affiliate of the licensee, or the
loan is treated by the FCC as an equity investment and such treatment would
cause the creditor/investor to exceed the applicable ownership interest
thresholds (for purposes of both the financial affiliation and foreign
ownership rules). Although the FCC permits a creditor/investor to use standard
terms to protect its investment in C-Block licensees, such as covenants,
rights of first refusal and super-majority voting rights on specified issues
(such as those for which the holders of the Company's Class C Common Stock
have voting rights), the FCC has stated that it will be guided but not bound
by criteria used by the Internal Revenue Service to determine whether a debt
investment is bona fide debt. The FCC's application of its financial
affiliation rules is largely untested and there can be no assurance that the
FCC or the courts will not treat certain of the Company's lenders or investors
as financial affiliates of the Company.
Foreign Ownership Limitations. The Communications Act requires that non-U.S.
citizens, their representatives, foreign governments or corporations otherwise
subject to domination and control by non-U.S. citizens may not own of record
or vote (i) more than 20% of the capital contribution to a common carrier
directly, or (ii) more than 25% of the capital contribution to the parent
corporation of a common carrier licensee if the FCC determines such holding
are not within the public interest. Because the FCC classifies PCS as a common
carrier offering, PCS licensees are subject to the foreign ownership limits.
Congress recently eliminated restrictions on non-U.S. citizens serving as
members on the board of directors and officers of a common carrier radio
licensee or its parent. The FCC also recently adopted rules that, subject to a
public interest finding by the FCC, could allow additional indirect foreign
ownership of CMRS companies to the extent that the relevant foreign states
extend reciprocal treatment to U.S. investors. The Company's Long Form filed
by the Company with the FCC after the completion of the C-Block Auction
indicates that the Company is in compliance with the FCC foreign-ownership
rules. However, if the foreign ownership of the Company were to exceed 25% in
the future, the FCC could refuse to grant or subsequently revoke the Company's
PCS licenses or other penalties. Further, the Company's Certificate of
Incorporation enables the Company to redeem shares from holders of Common
Stock whose acquisition of such shares results in a violation of such
limitation. The restrictions on foreign ownership could adversely affect the
Company's ability to attract additional equity financing from entities that
are, or are owned by, non-U.S. entities. See "Risk Factors--Foreign Ownership
Limitations."
Transfer Restrictions
License Transfer Restrictions. During the first five years after the License
Grant Date, transfer or assignment of a C-Block license is prohibited to any
entity that fails to satisfy the Entrepreneurs Requirements. If such a
transfer occurs to an entity that does not qualify for bidding credits, such a
sale would be subject to full payment of the bidding credit and the license
must adjust its installment payments to the FCC to effect the payment plan
applicable to the new entity (e.g., an enterprise that is not a Small Business
or an Entrepreneur). After five years, all such transfers and assignments of
the licenses remain subject to the Unjust Enrichment Penalties.
Unjust Enrichment. Any transfer during the full license term (10 years) may
require certain costs and reimbursements to the government of bidding credits
and/or outstanding principal and interest payments (the "Unjust Enrichment
Penalties"). In addition, if the Company wishes to make any change in
ownership structure during the initial license term involving the de facto and
de jure control of the Company, it must seek FCC approval and may be subject
to the same costs and reimbursement conditions indicated above.
The Company (i) believes that it has structured itself to satisfy the
Entrepreneurs Requirements, (ii) intends to diligently pursue and maintain its
qualification as a Small Business and (iii) has structured the securities
being offered, including certain restrictions on ownership and transfer, in a
matter intended to ensure compliance with
47
<PAGE>
the applicable FCC Rules. The Company has relied on representations of its
investors to determine its compliance with the FCC's rules applicable to C-
Block licenses. There can be no assurance, however, that the Company's
investors or the Company itself will continue to satisfy these requirements
during the term of any PCS license granted to the Company or that the Company
will be able to successfully implement divestiture or other mechanisms
included in the Company's Certificate of Incorporation that are designed to
ensure compliance with FCC rules. Any non-compliance with FCC rules could
subject the Company to serious penalties, including revocation of its PCS
licenses. See "Risk Factors--C-Block License Requirements," "--Effect of
Control by Certain Stockholders," "--Substantial Debt Obligations to the U.S.
Government; Implications of Accounting Treatment," "--Foreign Ownership
Limitations" and "Legislation and Government Regulation."
OTHER ONGOING REQUIREMENTS
Build-Out Requirements. The FCC has mandated that recipients of PCS licenses
adhere to five year and 10-year build-out requirements. Under both five- and
10-year build-out requirements, all 30 MHz PCS licensees (such as C-Block
licensees) must construct facilities provide offer coverage to at least one-
third of the population in their service area within five years from the date
of initial license grants. Service must be provided to two-thirds of the
population within 10 years. Violations of these regulations could result in
license revocations or forfeitures on fines.
Additional Requirements. As a C-Block licensee, the Company will be subject
to certain restrictions that limit, among other things, the number of PCS
licenses it may hold as well as certain cross-ownership restrictions
pertaining to cellular and other wireless investments.
Penalties for Payment Default. In the event that the Company becomes unable
to meet its obligations under the Government Financing, the FCC could reclaim
the Company's PCS licenses, reauction them, and subject the Company to a
penalty comprised of the difference between the price at which it acquired its
license and the amount of the winning bid at reauction, plus an additional
penalty of three percent of the lesser of the subsequent winning bid and the
defaulting bidders bid amount. See "Risk Factors--Government Regulation" and
"--Substantial Debt Obligations to the U.S. Government; Implications of
Accounting Treatment."
48
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and their ages as of
June 1, 1996, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Roger D. Linquist................ 57 President and Chief Executive Officer,
Chairman of the Board of Directors and
Secretary
Malcolm M. Lorang................ 61 Vice President of Engineering
Robert Fugate.................... 35 Vice President of Corporate Development
and Chief Financial Officer
John R. Lister................... 57 Vice President and General Manager (San
Francisco)
Albert S. Loverde................ 56 Vice President and General Manager
(Atlanta)
Robert G. Barrett................ 51 Director
Ralph M. Baruch.................. 72 Director
Frederic C. Hamilton............. 68 Director
Joseph T. McCullen, Jr. ......... 61 Director
Arthur Patterson................. 51 Director
John Sculley..................... 56 Director
Toshihiro Soejima................ 49 Director
</TABLE>
Roger D. Linquist founded the Company and has served as President, Chief
Executive Officer and a director since its inception. Prior to working at the
Company, Mr. Linquist was President and Chief Executive Officer of PacTel
Personal Communications, a subsidiary of Pacific Telesis, and Communications
Industries Inc. from 1982 through 1988. In 1989, Mr. Linquist founded PageMart
Wireless, Inc. ("PageMart"), a major U.S. paging company. Mr. Linquist served
as PageMart's Chief Executive Officer from 1989 to 1993, and as Chairman
through March 1994, when he resigned to form General Wireless. Mr. Linquist
presently serves as a director of PageMart. Mr. Linquist has experience in
management consulting with McKinsey & Company and has held various management
positions at Texas Instruments Research Laboratories. Mr. Linquist was a
founding director of the CTIA.
Malcolm M. Lorang has served as the Vice President of Engineering since the
Company's inception. Mr. Lorang has a broad background in RF communications
systems and systems engineering, most recently serving as Vice President of
Engineering for PageMart from 1989 to 1994. Previously, Mr. Lorang served as a
senior engineer at PacTel Teletrac, Inc. ("PacTel Teletrac") from 1988 to
1989, Texas Instruments Research Laboratories from 1972 to 1988 and Magnavox
Research Laboratories from 1958 to 1972. Mr. Lorang has authored numerous
patents, including patents in the RF communication systems area, and was
heavily involved in the military applications for spread spectrum, upon which
CDMA is based.
Robert Fugate has served as the Vice President of Corporate Development
since June 1996. In addition, Mr. Fugate currently serves as acting Chief
Financial Officer of the Company and was employed as a consultant to the
Company from March 1996 to June 1996. From 1988 to 1996 Mr. Fugate was
employed at Mobile Telecommunication Technologies Corp. where he served as
Senior Vice President, Finance and Chief Financial Officer.
John R. Lister joined the Company as Vice President and General Manager (San
Francisco) in June 1996. Prior to joining the Company, from 1992 through 1995,
Mr. Lister served as President and Co-Chief Executive Officer of PacTel
Teletrac, which later became AirTouch Teletrac, Inc. ("AirTouch"). Prior to
joining PacTel Teletrac, Mr. Lister served in various management positions for
PacTel Personal Communications ("PacTel"), including President and Chief
Operating Officer from 1990 to 1992 and Vice President and General Manager of
its Los Angeles cellular market from 1988 through 1990. Mr. Lister joined
PacTel in 1988 as Vice President of Corporate Development.
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<PAGE>
Albert S. Loverde joined the Company as Vice President and General Manager
(Atlanta) in June 1996. Prior to joining the Company, from 1995 to June 1996,
Mr. Loverde served as Director of Engineering for PriCellular Wireless. From
1990 to 1995, Mr. Loverde served as Vice President and General Manager for
Sterling Cellular, Inc. ("Sterling"). Prior to joining Sterling, Mr. Loverde
served as Executive Director of Mobile Systems for Bell South International,
Inc. from 1989 to 1990, Vice President and General Manager for PacTel
Cellular, Inc. (AirTouch) operations in Atlanta and Athens, Georgia from 1987
to 1989, and President and CEO of BBL Industries, Inc. from 1985 to 1987. From
1961 to 1985, Mr. Loverde designed and developed various telecommunications
systems at Bell Telephone Laboratories, Incorporated.
Robert G. Barrett, a director of the Company since December 1995, has been a
Managing Partner of Battery Ventures, a venture capital firm specializing in
communications and software investment. Mr. Barrett serves on the Board of
Directors of Brooktrout Technology, Inc., Marcam Corporation and several
privately held high technology companies.
Ralph M. Baruch, a director of the Company since December 1995, was a
founder of Viacom International, Inc. ("Viacom") and served as its President
and Chief Executive Officer from 1971 to 1983, and as Chairman and a member of
the Office of the Chief Executive Officer from 1983 until July 1987. Mr.
Baruch currently serves as a consultant to Viacom. Mr. Baruch also is a
director of Orange & Rockland Utilities, Inc., and several privately held and
not-for-profit organizations.
Frederic C. Hamilton, a director of the Company since December 1995, is
Chairman, President and Chief Executive Officer of the Hamilton Companies. Mr.
Hamilton currently serves on the Boards of Directors of Tejas Gas Corporation
(as its Chairman), the American Petroleum Institute and the United States
Trust Corp. Mr. Hamilton has also served as a director of several other
companies, including BHP Petroleum (Americas) Inc., Celanese Corporation, ITT
Corp., Volvo International and Norwest Corporation.
Joseph T. McCullen, Jr., a director of the Company since December 1995, has
been a General Partner of OneLiberty Ventures, a venture capital firm
specializing in developing early stage technology companies, since September
1986. Mr. McCullen is also a director of several privately held companies.
Arthur Patterson, a director of the Company since its inception, is a
founder and Managing Partner of Accel Partners, a venture capital firm
specializing in developing telecommunications companies. Mr. Patterson is also
a director of several other telecommunication services companies including
PageMart and UUNet Technologies, Inc., and software companies including
Axtent, Unify Corp. and VIASOFT.
John Sculley, a director of the Company since December 1995, is Chief
Executive Officer and Founder of Sculley Associates, Inc., a high technology
and marketing consulting and investment firm, specializing in new companies
and emerging markets. From November 1993 to February 1994, Mr. Sculley served
as Chief Executive Officer of Spectrum Information Technologies Inc. From
April 1983 to October 1993, Mr. Sculley served as Chairman and Chief Executive
Officer of Apple Computer Inc. ("Apple"). Prior to joining Apple, Mr. Sculley
served in various marketing and management positions for Pepsico Inc. for 16
years, including serving as President and Chief Executive Officer for five
years. Mr. Sculley is a director of NFO, Inc., Professional Sports Care
Management, Inc. and several privately held companies.
Toshihiro Soejima, a director of the Company since December 1995, is
President and Chief Executive Officer of Mitsui Comtek Corp. as well as Senior
Vice President and General Manager of the Electronics & Information Business
Division of Mitsui & Co. (U.S.A.), Inc. Both companies are wholly-owned
subsidiaries of Mitsui & Co., Ltd. of Japan. Mr Soejima joined Mitsui Comtek
Corp. in Tokyo in 1970.
The Company currently has authorized 11 directors, with the current number
set at eight. Each director holds office until the next annual meeting of
stockholders or until his or her successor is duly elected and qualified. The
Company's Board of Directors is divided into two classes, the Class A Common
Stock directors and the Class C Common Stock directors. Pursuant to the
Stockholders Agreement among the Company and the holders of Class A Common
Stock and Class C Common Stock (the "Stockholders Agreement"), there are four
Class A Common Stock directors, each with one vote and all of whom are elected
by the holders of the Class A
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<PAGE>
Common Stock, and seven Class C Common Stock directors who collectively have
three votes, all of whom are elected by the holders of the Class C Common
Stock and each of whom have a fractional vote. All of the Company's directors
have been elected pursuant to the terms of the Stockholders Agreement. Under
the terms of the Hyundai Loan and the Hyundai stock purchase agreement between
Hyundai and the Company (the "Hyundai Stock Purchase Agreement"), the Company
has agreed to amend the Stockholders Agreement so that Hyundai may appoint a
designee as a Class C Common Stock director to the Board of Directors. There
are no family relationships among any of the directors and executive officers
of the Company. See "Certain Transactions" and "Description of Capital Stock."
COMPENSATION OF DIRECTORS
Members of the Company's Board of Directors who are neither employees of the
Company nor representatives of investors will receive stock options as
compensation for serving on the Board of Directors. Other directors receive no
compensation for serving on the Board of Directors, but are reimbursed for
expenses incurred to attend Board and committee meetings. Messrs. Baruch,
Hamilton and Sculley have each received options to purchase 47,780 shares of
Class B Common Stock, each with an exercise price of $2.50 per share.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the other executive officer (collectively, the
"Named Officers") whose salary and bonus for fiscal 1995 were in excess of
$100,000 for services rendered in all capacities to the Company and its
subsidiaries for that fiscal year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
NAME AND PRESENT ----------------------- AWARDS
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)
------------------ ---- --------- -------- ------------
<S> <C> <C> <C> <C>
Roger D. Linquist
President and Chief Executive Officer..... 1995 $240,000 $ -- 2,063,800
Malcolm M. Lorang
Vice President of Engineering............. 1995 $110,000 -- 230,700
</TABLE>
- --------
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning stock option grants made
to each of the Named Officers during fiscal 1995. No stock appreciation rights
were granted any persons in fiscal 1995.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
---------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES STOCK
UNDERLYING % OF TOTAL PRICE APPRECIATION
OPTIONS OPTIONS GRANTED EXERCISE FOR OPTION TERM(3)
GRANTED TO EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME (#) FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
---- ---------- --------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Roger D. Linquist....... 2,063,800 78.4% $2.50 12/1/2010 $5,566,730 $6,557,205
Malcolm M. Lorang....... 230,700 8.7% $2.50 12/1/2010 $ 622,272 $ 732,991
</TABLE>
- --------
(1) Each of the options listed in the table is fully vested and immediately
exercisable for shares of Class B Common Stock.
(2) The exercise price may be paid in cash, in shares of the Company's Class B
Common Stock valued at fair market value on the exercise date or through a
cashless exercise procedure involving a same-day sale of the purchased
shares. The Company may also finance the option exercise by loaning the
optionee sufficient funds to pay the exercise price for the purchased
shares, together with any federal and state income tax liability incurred
by the optionee in connection with such exercise.
51
<PAGE>
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There is
no assurance that the actual stock price appreciation over the 15-year
option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the Class B Common Stock
appreciates over the option term, no value will be realized from the
option grants made to the executive officers.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information concerning option holdings as of
the end of fiscal 1995 with respect to each of the Named Officers. No options
were exercised by any option holder as of such date. No stock appreciation
rights were exercised during fiscal 1995 and no stock appreciation rights were
outstanding as of the end of fiscal 1995.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS
AT FY-END(#) AT FY-END($)(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Roger D. Linquist.......... 2,063,800 -- $ 0 --
Malcolm M. Lorang.......... 230,700 -- $ 0 --
</TABLE>
- --------
(1) Based on the fair market value of the Company's Class B Common Stock at
December 31, 1995, $2.50 per share (as determined by the Company's Board
of Directors), less the exercise price payable for such shares.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board is currently comprised of
. None of these individuals has been at any time an officer or employee
of the Company. No member of the Compensation Committee of the Company serves
as a member of the Board of Directors or compensation committee of any entity
that has one or more executive officers serving as a member of the Company's
Board of Directors or Compensation Committee.
1995 STOCK OPTION PLAN
The Company has adopted a 1995 Stock Option Plan (the "Plan") pursuant to
which, 3,914,780 shares of Class B Common Stock were available for issuance as
of June 1, 1996. The individuals who will be eligible to receive option grants
under the Plan are employees (including officers and directors), consultants
of the Company or any parent or subsidiary corporations and non-employee
members of the Board. All eligible participants will become members of the
Control Group of the Company.
The Plan will be administered by a committee of two or more non-employee
Board members (the "Option Committee") appointed by the Board. Eligible
individuals may, at the discretion of the Option Committee, be granted
incentive stock options to purchase shares of Class B Common Stock at not less
than the fair market value of such shares on the grant date or non-statutory
options to purchase shares of Class B Common Stock at not less than 85% of the
fair market value of such shares on the grant date. The Option Committee will
determine the vesting or exercise schedule for each granted option; however,
the Option Committee may accelerate the vesting and/or exercisability of any
outstanding option in whole or in part at any time.
Each granted option will have a maximum term of 15 years, subject to earlier
termination following the optionee's cessation of service with the Company.
Options are not assignable or transferable by the optionee except by will or
the laws of inheritance following the optionee's death. An optionee will have
no rights with respect to the shares subject to his or her outstanding options
until such options are exercised and the purchase price is paid for the
shares.
52
<PAGE>
One or more officers of the Company may be granted a limited cash-out right
which will become exercisable should the Company's stock be publicly traded
and the officer become subject to the short-swing trading restrictions of
federal securities laws upon the acquisition of more than 50% of the Company's
outstanding voting stock pursuant to a hostile tender offer. Each option with
such a limited right outstanding for at least six months would automatically
be canceled in return for a cash distribution from the Company based upon the
tender offer price payable per share of Common Stock subject to the canceled
option.
The Option Committee has the authority to effect, from time to time, the
cancellation of outstanding options under the Plan in return for the grant of
new options for the same or different number of options shares with an
exercise price per share based upon the lower fair market value of the Common
Stock on the new grant date.
The Board may amend or modify the Plan at any time. The Plan will terminate
January 1, 2004, unless sooner terminated by the Board.
1996 STOCK OPTION PLAN
The Company's 1996 Stock Option Plan (the "1996 Plan") was adopted by the
Board of Directors on , 1996 and approved by the stockholders on ,
1996. shares of Class B Common Stock have been authorized for issuance
under the 1996 Plan. The share reserve under the 1996 Plan is equal to
approximately 18% of the shares of Class C Common Stock to be sold in this
Stock Offering. The share reserve under the 1996 Plan will automatically
increase from time to time so that there is a sufficient reserve available for
issuance upon exercise of options granted to the trust as described below.
On , 1996, the Company established the General Wireless, Inc. Employee
Trust (the "Trust") for the benefit of the employees, non-employee Board
members and consultants and other independent advisors who provide services to
the Company (collectively, the "Beneficiaries"). On , 1996, the Company
granted a fully-vested immediately exercisable and assignable option (the
"Trust Option") to purchase shares of Class B Common Stock to the Trust.
The Trust has been structured to meet the requirements of a Qualifying
Investor; the purpose of this grant is to ensure that the Small Business
Requirements are maintained. All Trustees and Beneficiaries of the Trust shall
meet the requirements of a Qualifying Investor.
The exercise price per shares of Class B Common Stock subject to the Trust
Option shall be no greater than the fair market value of such shares on the
date of grant, which amount is currently $ per share. As the Trust assigns
portions of the Trust Option to the beneficiaries, the exercise price per
share of Class B Common Stock subject to the assigned portion will be adjusted
to be equal to the fair market value per share of Class B Common Stock on the
date of such assignment.
The Company will from time to time grant additional options to the Trust so
that the Small Business Requirements are at all times satisfied. Such
additional options will have terms similar to those described with respect to
the Trust Option.
The Trust will, from time to time, assign a portion of the Trust Option (and
all other options granted to it under the 1996 Plan) by granting options to
purchase shares of Class B Common Stock pursuant to the provisions of the 1996
Plan to one or more Beneficiaries of the Trust.
The Plan will be administered by the Trustees. The Trustees as Plan
Administrator will have complete discretion to determine which eligible
individuals are to receive option grants, the time or times when such option
grants are to be made, the number of shares subject to each such grant, the
vesting schedule to be in effect for the option grant and the maximum term for
which any granted option is to remain outstanding.
Upon an acquisition of the Company by merger or asset sale, each outstanding
option granted by the Trustees will be subject to accelerated vesting under
certain circumstances.
53
<PAGE>
Stock appreciation rights are authorized for issuance under the Plan which
provide the holders with the election to surrender their outstanding options
for an appreciation distribution from the Company equal to the excess of (i)
the fair market value of the vested shares of Common Stock subject to the
surrendered option over (ii) the aggregate exercise price payable for such
shares. Such appreciation distribution may be made in cash or in shares of
Common Stock.
The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Plan in return for the grant of new options for
the same or different number of option shares with an exercise price per share
based upon the fair market value of the Common Stock on the new grant date.
The 1996 Plan will terminate on , 2016, unless sooner terminated by the
Board.
EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan (the "Purchase Plan") was adopted
by the Board of Directors on , 1996 and approved by the stockholders on
, 1996. The Purchase Plan is designed to allow eligible employees of the
Company and participating subsidiaries to purchase shares of Class C Common
Stock, at semi-annual intervals, through their periodic payroll deductions
under the Purchase Plan, and a reserve of shares of Class C Common Stock
has been established for this purpose.
The Purchase Plan will be implemented in a series of successive offering
periods, each with a maximum duration of 24 months. The initial offering
period will begin on the day the Underwriting Agreement is executed and priced
in connection with this Offering and will end on the last business day in
, 1998. Each offering period will be comprised of consecutive purchase
intervals, each of a duration of six months. Shares of Class C Common Stock
will be purchased for each participant at the end of each purchase interval
during the offering period.
Payroll deductions may not exceed 15% of base salary for each purchase
interval. The purchase price per share will be 85% of the lower of (i) the
fair market value of the Common Stock on the participant's entry date into the
offering period or (ii) the fair market value on the semi-annual purchase
date.
The Board may terminate the Purchase Plan at any time. The Purchase Plan
will terminate in all events on the last business day in , 2016.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
The Company does not presently have any employment contracts in effect with
the Chief Executive Officer or the other executive officer named in the
Summary Compensation Table.
The Trustees as Plan Administrator of the 1996 Plan will have the authority
to provide for the accelerated vesting of the shares of Common Stock subject
to outstanding options held by the Chief Executive Officer and any other
executive officer in connection with certain changes in control of the Company
or the subsequent termination of the officer's employment following the change
in control event.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law ("Delaware Law"),
the Company has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act. The Company's Certificate of Incorporation provides that
directors and officers of the Company shall be indemnified to the fullest
extent of Delaware law.
The Delaware Law provides that a corporation may limit the liability of each
director to the corporation or its stockholders for monetary damages except
for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or that involve intentional
54
<PAGE>
misconduct or a knowing violation of law, (iii) in respect of certain unlawful
dividend payments or stock redemptions or repurchases and (iv) for any
transaction which the director derives an improper personal benefit. The
Certificate of Incorporation provides for the elimination and limitation of
the personal liability of directors of the Company for monetary damages to the
fullest extent permitted by Delaware Law. In addition, the Certificate of
Incorporation provides that if Delaware Law is amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of the directors shall be eliminated or limited to the fullest
extent permitted by Delaware Law, as so amended. The effect of this provision
is to eliminate the rights of the Company and its stockholders (through
stockholders' derivative suits on behalf of the Company) to recover monetary
damages against a director for breach of the fiduciary duty of care as a
director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described in clauses (i) through (iv)
above. This provision does not limit or eliminate the rights of the Company or
any stockholder to seek non-monetary relief such as an injunction or recision
in the event of a breach of a director's duty of care. The Company's
Certificate of Incorporation also provides that the Company shall, to the full
extent permitted by Delaware Law, as amended from time to time, indemnify and
advance expenses to each of its currently acting and former directors,
officers, employees and agents.
The Company has and intends to expand its directors and officers liability
insurance to insure each person who was, is, or will be a director or officer
of the Company against specified losses and wrongful acts of such director or
officer in his or her capacity as such, including breaches of duty, trust,
neglect, error and misstatement. In accordance with the directors and officers
insurance policy, each insured party will be entitled to receive advances of
specified defense costs.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened
litigation or proceeding that might result in a claim for such
indemnification.
CERTAIN TRANSACTIONS
Initial Equity Capital
The Company has raised approximately $67.6 million (net of repurchases)
through private sales of equity securities. From inception to December 1995,
the Company raised approximately $2.3 million (net of repurchases) through the
sale of equity securities to Mr. Roger Linquist, Mr. Malcolm Lorang and the
Accel Entities (consisting of Accel IV, L.P., Accel Investors '94, L.P., Accel
Keiretsu L.P., Ellmore C. Patterson Partners and Prosper Partners). In June
1994, such parties acquired (after adjusting for stock splits,
reclassifications and exchanges), respectively, 144,540, 15,100 and 369,660
shares of Class B Common Stock at a purchase price of $1.37 per share. In
September 1994, Mr. Linquist, Mr. Lorang and the Accel Entities acquired
(after adjusting for stock splits, reclassifications and exchanges) 243,440,
24,340 and 730,340 shares of Class B Common Stock at the same price. In
addition, the Accel Entities received warrants to purchase an aggregate of
1,149,980 shares of Class C Common Stock in connection with the exchanges and
the private placement effected in December 1995 described below. In June 1995,
Battery Ventures III, L.P. acquired 550,000 (after adjusting for stock splits
and reclassifications) shares of Class B Common Stock at the same price. Mr.
Arthur Patterson and Mr. Robert Barrett, both directors of the Company, are
affiliated with the Accel Entities and Battery Ventures III, L.P.,
respectively. Messrs. Linquist and Lorang purchased a portion of their stock
through the issuance of promissory notes to the Company as follows: in June
1994, five year notes in the principal amounts of $166,750 and $16,675 at an
interest rate of seven percent issued by Messrs. Linquist and Lorang,
respectively; and in September 1994, five year notes in the principal amounts
of $333,400 and $33,340 at an interest rate of 7.05%. In December 1995, the
Company repurchased all 387,980 shares sold to Mr. Linquist at a purchase
price equal to the price paid by Mr. Linquist plus any interest due under the
promissory notes issued by Mr. Linquist to the Company. Also on December 12,
1995, Mr. Lorang refinanced his notes with a new promissory note having a
principal amount of $54,415, term of 12 years and an interest rate of 6.36%.
55
<PAGE>
Since December 1995, the Company has raised approximately $65.3 million
through the sale of Common Stock and warrants to purchase Common Stock. The
following table summarizes the securities purchased by directors, officers and
five percent stockholders of the Company and persons associated with them in
connection with the private placements of the Company's Class B and Class C
Common Stock effected in December 1995 and May 1996. Except as otherwise
noted, Class B units consisting of two shares of Class B Common Stock and a
warrant to purchase one share of Class B Common Stock with an exercise price
of $2.50 per share were sold at a price of $5.00 per unit and Class C units
consisting of two shares of Class C Common Stock and a warrant to purchase one
share of Class C Common Stock with an exercise price of $5.00 per share were
sold at a price of $10.00 per unit.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS B CLASS C CLASS C
INVESTOR(1) STOCK STOCK WARRANTS STOCK WARRANTS
- ------------------------------ -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Roger D. Linquist(2).......... 40 -- -- 620,000 310,000
Frederic Hamilton/The Hamilton
Companies (3)................ 20 200,000 100,000 4,680 2,340
Ralph M. Baruch Revocable
Trust dated January 26,
1996......................... -- -- -- 104,680 52,340
John Sculley.................. -- 100,000 50,000 -- --
Accel Entities(4)............. -- -- -- 1,910,680 955,340
Battery Ventures III, L.P.
(5).......................... -- -- -- 1,050,000 525,000
Mitsui Entities(6)............ -- -- -- 2,000,000 100,000
Chancellor Capital Management
Entities(7).................. -- -- -- 1,800,000 900,000
Mellon Bank, N.A., as Trustee
for First Plaza Group Trust.. -- -- -- 1,200,000 1,800,000
OneLiberty Ventures Enti-
ties(8)...................... -- -- -- 628,000 314,000
Primus Capital Fund III Lim-
ited Partnership(9).......... -- -- -- 600,000 300,000
Trailhead Ventures, L.P.(10).. -- -- -- 500,000 250,000
</TABLE>
- --------
(1) Shares held by affiliated persons and entities have been aggregated. See
"Principal Stockholders."
(2) Mr. Linquist paid for the Class C units by issuing a 12 year promissory
note in the principal amount of $2,809,375 with an interest rate of 6.36%,
secured by shares of PageMart common stock.
(3) The shares of Class A Common Stock are held by Mr. Hamilton in his name.
All other shares are held by The Hamilton Companies, LLC.
(4) Mr. Patterson is affiliated with and is the Board designee of the Accel
Entities. Includes 66,920 shares of Class C Common Stock owned by and
33,460 shares subject to warrants to purchase Class C Common Stock issued
to Accel Investors '94 L.P.; 1,750,160 shares of Class C Common Stock
owned by and 875,080 shares subject to warrants to purchase Class C Common
Stock issued to Accel IV, L.P.; 40,120 shares of Class C Common Stock
owned by and 20,060 shares subject to warrants to purchase Class C Common
Stock issued to Accel Keiretsu L.P.; 42,040 shares of Class C Common Stock
owned by and 21,020 shares subject to warrants to purchase Class C Common
Stock issued to Ellmore C. Patterson Partners; and 11,440 shares of Class
C Common Stock owned by and 5,720 shares subject to warrants to purchase
Class C Common Stock issued to Prosper Partners.
(5) Mr. Barrett is affiliated with and is the Board designee of Battery
Ventures III, L.P.
(6) Toshihiro Soejima is affiliated with and is the Board designee of the
Mitsui Entities. The 1,000,000 units purchased by Mitsui consist of two
shares of Class C Common Stock and 1/10 of a warrant per unit. Includes
1,500,000 shares of Class C Common Stock owned by and 75,000 shares
subject to warrants to purchase Class C Common Stock issued to Mitsui &
Co., Ltd.; 50,000 shares of Class C Common Stock owned by and 2,500 shares
subject to warrant to purchase Class C Common Stock issued to Mitsui & Co.
(U.S.A.), Inc.; and 450,000 shares of Class C Common Stock owned by and
22,500 shares subject to warrants to purchase Class C Common Stock issued
to Mitsui Comtek Corp. In March 1996, Mitsui & Co., Inc. sold 400,000
shares of Class C Common Stock, and a warrant to purchase 20,000 shares of
Class C Common Stock to Kenwood Corporation.
56
<PAGE>
(7) Chancellor Capital Management from December 1995 to June 1996. Includes
1,000,000 shares of Class C Common Stock owned by and 500,000 shares
subject to warrants to purchase Class C Common Stock issued to Los Angeles
County Employees Retirement Association; 626,900 shares of Class C Common
Stock owned by and 313,400 shares subject to warrants to purchase Class C
Common Stock issued to Drake & Co., for the account of Citiventure III;
and 173,100 shares of Class C Common Stock owned by and 86,560 shares
subject to warrants to purchase Class C Common Stock issued to other
Chancellor Capital Management entities.
(8) Joseph McCullen is affiliated with and is the Board designee of the
OneLiberty Ventures Entities. Includes 622,000 shares of Class C Common
Stock owned by and 311,000 shares subject to warrants to purchase Class C
Common Stock issued to OneLiberty Fund III, L.P.; and 6,000 shares of
Class C Common Stock owned by and 3,000 shares subject to warrants to
purchase Class C Common Stock issued to Gilde Investment Fund, B.V.
(9) Primus Capital Fund III Limited Partnership designated a member of the
Board of Directors from December 1995 to June 1996.
(10) Trailhead Ventures, L.P. designated a member of the Board of Directors
from December 1995 to June 1996.
Also, effective the date of the December 1995 private placement, the Company
and Mitsui entered into (i) a Procurement Agreement pursuant to which Mitsui
would act as a procurement consultant to the Company for five years, receiving
fees based on the extent of Mitsui's involvement in the negotiation or
financing of a particular equipment purchase plus an annual retainer fee of
$350,000 and (ii) a Personnel Agreement pursuant to which a representative of
Mitsui would serve as a purchasing consultant within the Company for five
years, receiving an annual fee of $150,000.
Hyundai Relationship
On March 15, 1996, the Company and Hyundai entered into the Hyundai Loan,
pursuant to which Hyundai agreed to loan up to $50 million to the Company upon
the satisfaction of certain conditions. Such conditions include (i) the grant
of PCS licenses for at least 10 million POPs within the top 50 BTAs and (ii)
approval of any required U.S. and/or foreign governmental agencies. The
closing for any amounts borrowed under the Hyundai Loan is scheduled to occur
no later than three business days prior to the second five percent down
payment to the FCC. The Hyundai Loan and any promissory note to be issued
thereunder contain certain restrictive covenants, including, among other
things, restrictions on the issuance of additional debt, the declaration of
dividends and the redemption or repurchase of any capital stock and liens. The
term of any note issued under the Hyundai Loan is for one year, with fixed
interest rate of 6.5% during the term of the note. However, if the note is not
paid at maturity, interest will accrue at a fixed rate of 9.0% thereafter. The
Company expects that it will draw down $50.0 million under the Hyundai Loan to
finance a portion of the Company's second five percent payment for the
purchase price of its PCS licenses, which will be due on the fifth business
day following the License Grant Date.
Also on March 15, 1996, the Company and Hyundai entered into a Stock
Purchase Agreement under which HEA agreed to purchase and the Company agreed
to sell, subject to FCC restrictions and limitations, up to 10 million units
of the Company's securities, each unit consisting of one share of Class C
Common Stock and a warrant to purchase 0.05 shares of Class C Common Stock
("Hyundai Units"), at a price of $5.00 per unit. The total number of Hyundai
Units saleable under the Stock Purchase Agreement will be determined at the
time of closing of the Offerings, but will not be less than 1.0 million
Hyundai Units. Currently, FCC regulations and rules provide that, in general,
if more than 25% of the capital contribution to companies acquiring licenses
in the C-Block Auction is from foreign entities, then the FCC can revoke such
licenses if warranted in the public interest. Based upon the Company's
capitalization as of March 31, 1996, approximately 24% of the capital
contribution to the Company has been from foreign sources. Thereafter, the
Hyundai Units will automatically be purchased by Hyundai to the extent
permissible under such FCC restrictions. To the extent additional foreign
capital contribution to the Company is permissible under FCC restrictions, the
Company has agreed that any such amounts would be sold first to Hyundai under
the Stock Purchase Agreement, until all the Hyundai Units
57
<PAGE>
saleable under the Stock Purchase Agreement (as determined on the Closing
Date) are sold to Hyundai (or until the Stock Purchase Agreement is
terminated). Further, Hyundai will be granted certain rights to register the
shares of Class C Common Stock issuable as part of the Hyundai Units and will
become a party to the Stockholders Agreement. See "Description of Capital
Stock--Registration Rights" and "Certain Transactions."
In connection with the Stock Purchase Agreement, Hyundai, its parent,
Hyundai Electronics Industries Co. Ltd. (the "Parent") and the Company entered
into an Equipment Purchase Agreement and an Employee Training Agreement, which
will become effective upon the closing of the Loan Agreement and the Stock
Purchase Agreement, respectively. The Equipment Purchase Agreement has a term
of 10 years from the date of effectiveness. Under the Equipment Purchase
Agreement, the Company agreed to purchase certain of its infrastructure
equipment requirements in product categories where Hyundai and the Parent
offer products that meet the Company's specifications and are compatible with
equipment supplied by the Company's primary vendor. In addition, the Company
agreed to purchase certain of its handset requirements sold through the
Company's direct sales channels in handset categories where Hyundai and the
Parent offer products that meet the Company's specifications. Although the
Company acknowledged to Hyundai and its Parent in each of the Loan Agreement,
the Stock Purchase Agreement and the Equipment Purchase Agreement that it had
adopted the CDMA technology, the Company retains the discretion to alter such
decision if CDMA technology is determined to be commercially or technically
impracticable in the U.S. PCS industry. Under the Employee Training Agreement,
the Company agreed to provide certain training services to employees of
Hyundai and its Parent for a period of two years.
Other
The holders of shares of Class C Common Stock are entitled to certain
registration rights and rights of first offer. In addition, the existing
stockholders of the Company have entered into a voting arrangement under the
terms of the Stockholders Agreement. See "Description of Capital Stock--
Registration Rights" and "--Voting Rights."
The Company has granted options to certain of its directors. See "Principal
Stockholders."
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors, principal stockholders and their
affiliates will be approved by a majority of the Board of Directors, including
a majority of the independent and disinterested outside directors on the Board
of Directors.
58
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of June 1, 1996 and as adjusted to
reflect the sale of shares offered hereby, by (i) each person who is known by
the Company to own beneficially more than five percent of the Company's Common
Stock, (ii) each of the Company's directors, (iii) each of the Named Officers
and (iv) all current executive officers and directors as a group.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
OWNED(1)(2)(3)
DIRECTORS, NAMED OFFICERS SHARES -------------------------
5% STOCKHOLDERS AND DIRECTORS AND BENEFICIALLY BEFORE AFTER
EXECUTIVE OFFICERS AS A GROUP OWNED(1)(2) OFFERINGS OFFERINGS
--------------------------------- ------------ ----------- ----------
<S> <C> <C> <C>
Accel Entities(4)................... 5,116,000 31.2% %
Battery Ventures III, L.P.(5)....... 2,125,000 14.3% %
Entities affiliated with Chancellor
Capital Management(6).............. 2,700,000 17.8% %
Mellon Bank, N.A., as Trustee for
First Plaza Group Trust(7)......... 3,000,000 19.4% %
Mitsui & Co. Ltd. and affiliated en-
tities(8).......................... 1,680,000 11.7% %
One Liberty Fund III, L.P.(9)....... 942,000 6.5% *
Roger D. Linquist(10)............... 3,094,540 18.5% %
Malcolm M. Lorang(11)............... 286,740 2.0% *
Robert G. Barrett(5)................ 2,125,000 14.3% *
Ralph M. Baruch(12)................. 204,800 1.4% *
Frederic C. Hamilton(13)............ 354,820 2.5% *
Joseph T. McCullen, Jr.(9).......... 942,000 6.5% *
Arthur Patterson(4)................. 5,116,000 31.2% *
John Sculley(14).................... 197,780 1.4% *
Toshihiro Soejima(8)................ 1,680,000 11.7% *
All directors and executive officers
as a group
(10
persons)(8)(9)(10)(11)(12)(13)(14).. 14,001,680 68.67% %
</TABLE>
- --------
* Less than 1%.
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock.
(2) The number of shares of Common Stock beneficially owned includes the
shares issuable pursuant to stock options that may be exercised within 60
days after June 1, 1996. Shares issuable pursuant to such options are
deemed outstanding for computing the percentage of the person holding such
options but are not deemed outstanding for computing the percentage of any
other person. The number of shares of Common Stock outstanding after the
Stock Offering includes the shares of Class C Common Stock being
offered for sale by the Company in the Stock Offering.
(3) Assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."
(4) The address for this stockholder is One Palmer Square, Princeton, N.J.
08542, Attn: Carter Sednaoui. Includes 66,920 shares beneficially owned by
and 76,000 shares subject to warrants to purchase shares of Class C Common
Stock issued to Accel Investors '94 L.P., 40,700 shares of Class B Common
Stock beneficially owned by Accel Investors '94 L.P., 1,750,160 shares
beneficially owned by and 1,928,480 shares subject to warrants to purchase
shares of Class C Common Stock issued to Accel IV, L.P., 1,007,600 shares
of Class B Common Stock beneficially owned by Accel IV L.P., 40,120 shares
beneficially owned by and 41,900 shares subject to warrants to purchase
shares of Class C Common Stock issued to Accel
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Keiretsu L.P., 20,900 shares of Class B Common Stock beneficially owned by
Accel Keiretsu L.P., 42,040 shares beneficially owned by and 46,320 shares
subject to warrants to purchase shares of Class C Common Stock issued to
Ellmore C. Patterson Partners, 24,200 shares of Class B Common Stock
beneficially owned by Ellmore C. Patterson Partners, 11,440 shares
beneficially owned by and 12,620 shares subject to warrants to purchase
shares of Class C Common Stock issued to Prosper Partners and 6,600 shares
of Class B Common Stock beneficially owned by Prosper Partners. Mr.
Patterson, a director of the Company, is affiliated with the Accel Partners
Entities, and may be deemed to share voting and investment power with
respect to such shares. Mr. Patterson disclaims beneficial ownership of
such shares, except to the extent of his interest in such shares arising
from his interests in the entities referred to above.
(5) The address for this stockholder is 200 Portland Street, Boston, MA 02114,
Attn: Robert Barrett. Includes 1,050,000 shares beneficially owned by and
525,000 shares subject to a warrant to purchase shares of Class C Common
Stock. Mr. Barrett, a director of the Company, is affiliated with Battery
Ventures III, L.P., and may be deemed to share voting and investment power
with respect to such shares. Mr. Barrett disclaims beneficial ownership of
such shares, except to the extent of his interest in such shares arising
from his interests in the entities referred to above.
(6) The address for this stockholder is 1166 Avenue of the Americas, New York,
NY 10036, Attn: Parag Saxena. Includes 1,000,000 shares beneficially owned
by and 500,000 shares subject to a warrant to purchase shares of Class C
Common Stock issued to the Los Angeles County Employees Retirement
Association, 626,920 shares beneficially owned by and 313,440 shares
subject to a warrant to purchase shares of Class C Common Stock issued to
Drake & Co., for the account of Citiventure III, 30,000 shares
beneficially owned by Evermore Corporation, 60,000 shares beneficially
owned by Mellon Bank, N.A., for the account of Michael A. Wall, 49,660
shares beneficially owned by Northpass & Co., for the account of KME
Ventures III, L.P., 30,000 shares beneficially owned by Carol Wong Chiu
Yee, 30,000 shares beneficially owned by Shirley Wong Shun Yee, 30,000
shares beneficially owned by Sophia Wong Wai Yee, and 30,000 shares
beneficially owned by Claire Wong Yuk Yee.
(7) The address for this stockholder is One Mellon Bank Center, Pittsburg, PA
15258-0001, Attn: Bernadette Rist. Represents shares held as Trustee for
the First Plaza Group Trust.
(8) The address for this stockholder is 12980 Saratoga Avenue, Saratoga, CA
95070, Attn: Toshihiro Soejima. Includes 50,000 shares beneficially owned
by and 2,500 shares subject to a warrant to purchase shares of Class C
Common Stock issued to Mitsui & Co. (U.S.A.), Inc., 1,100,000 shares
beneficially owned by and 55,000 shares subject to a warrant to purchase
shares of Class C Common Stock issued to Mitsui & Co., Ltd., and 450,000
shares beneficially owned by and 22,500 shares subject to a warrant to
purchase shares of Class C Common Stock issued to Mitsui Comtek Corp. Mr.
Soejima, a director of the Company, is affiliated with the Mitsui
Entities, and may be deemed to share voting and investment power with
respect to such shares. Mr. Soejima disclaims beneficial ownership of such
shares, except to the extent of his interest in such shares arising from
his interests in the entities referred to above.
(9) The address for this stockholder is One Liberty Square, 2nd Floor, Boston,
MA 02109, Attn: Joseph T. McCullen, Jr. Includes 622,000 shares
beneficially owned by and 311,000 shares subject to a warrant to purchase
shares of Class C Common Stock issued to OneLiberty Fund III, L.P. and
6,000 shares beneficially owned by and 3,000 shares subject to a warrant
to purchase shares of Class C Common Stock issued to Gilde Investment
Fund, B.V. Mr. McCullen, a director of the Company, is affiliated with the
foregoing entities and may be deemed to share voting and investment power
with respect to such shares. Mr. McCullen disclaims beneficial ownership
of such shares, except to the extent of his interest in such shares
arising from his interests in the entities referred to above.
(10) Includes 40 shares of Class A Common Stock, 620,000 shares beneficially
owned by and 310,000 shares subject to a warrant to purchase shares of
Class C Common Stock, and options exercisable for 2,164,500 shares of
nonvoting Class B Common Stock.
(11) Includes 39,440 shares of nonvoting Class B Common Stock and options
exercisable for 247,300 shares of Class B Common Stock.
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(12) Includes 104,680 shares of Class C Common Stock beneficially owned by and
52,340 shares subject to a warrant to purchase Class C Common Stock
issued to Ralph M. Baruch Revocable Trust dated January 26, 1996, and
options exercisable for 47,780 shares of Class B Common Stock granted to
Mr. Baruch.
(13) Includes 20 shares of Class A Common Stock, 200,000 shares of Class B
Common Stock and 4,680 shares of Class C Common Stock beneficially owned
by, and 100,000 and 2,340 shares subject to warrants to purchase Class B
Common Stock and Class C Common Stock, respectively, issued to, The
Hamilton Companies LLC, and options exercisable for 47,780 shares of
Class B Common Stock granted to Mr. Hamilton.
(14) Includes 100,000 shares of nonvoting Class B Common Stock, options
exercisable for 47,780 shares of nonvoting Class B Common Stock and
50,000 shares subject to a warrant to purchase shares of nonvoting Class
B Common Stock.
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DESCRIPTION OF CAPITAL STOCK
The Company has three classes of Common Stock: Class A Common Stock, Class B
Common Stock and Class C Common Stock. The authorized capital stock of the
Company upon the closing of the Offerings will consist of 100 shares of Class
A Common Stock, 20,000,000 shares of Class B Common Stock, and 79,999,900
shares of Class C Common Stock. As of June 1, 1996, there were 60 shares of
Class A Common Stock outstanding held of record by two stockholders (40 shares
held by Mr. Roger D. Linquist and 20 shares held by Mr. Frederic Hamilton),
2,109,440 shares of Class B Common Stock outstanding held of record by 14
stockholders and 12,184,780 shares of Class C Common Stock outstanding held of
record by approximately 70 stockholders. The holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from
time to time by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of the liquidation, dissolution
or winding up of the Company, the holders of Common Stock are entitled to
share ratably in all assets remaining after payment of liabilities, if any,
then outstanding. The Class C Common Stock has no preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are fully paid and nonassessable, and the shares of Class C Common Stock
to be issued upon completion of the Stock Offering will be fully paid and
nonassessable.
OPTIONS AND WARRANTS
As of June 1, 1996, options to purchase 2,762,240 shares of Class B Common
Stock, each at an exercise price of $2.50 per share, were outstanding, all of
which are vested. The Company also had outstanding warrants to purchase
210,000 shares of Class B Common Stock, each at an exercise price of $2.50 per
share, and warrants to purchase 6,773,500 shares of Class C Common Stock, each
at an exercise price of $5.00 per share. In addition, the Company has
outstanding warrants to purchase 800,000 shares of Class C Common Stock, each
at an exercise price of $0.0005 per share. Such warrants expire on various
dates, the latest of which is 10 years from May 20, 1996. See "Certain
Transactions."
CONVERSION RIGHTS
Each share of Class A Common Stock and Class B Common Stock is automatically
converted into one share of Class C Common Stock upon the tenth anniversary of
the date of grant of license(s) to the Company by the FCC. In addition, at any
time following the consummation of the Stock Offering, the Board of Directors
may approve the conversion of shares of Class B Common Stock into shares of
Class C Common Stock, at which point, each share of Class B Common Stock shall
be convertible, at the option of the holder thereof, at the office of the
Company or any transfer agent for such stock, into one share of Class C Common
Stock. Any conversion will not be permitted to the extent such conversion
would cause the Company to be in violation of any requirement, rule or
regulation of the FCC.
VOTING RIGHTS
Each share of Class A Common Stock has one vote and together, as a class,
represents 50.1% of the votes on all matters except the election of directors.
With respect to the election of directors, the Class A Common Stock voting
together, as a class, elects four members of the Board of Directors (the
"Class A Directors"). Each Class A Director shall have one vote on each matter
submitted to a vote of the Board of Directors, and collectively represent four
of the seven votes of the Company's Board of Directors.
Class B Common Stock carries no voting rights, except as otherwise required
by law.
Each share of Class C Common Stock has one vote and together, as a class,
represents 49.9% of the votes on all matters except the election of directors.
The holders of the Class C Common Stock as a class will be entitled to elect
members to the Company's Board of Directors (the "Class C Directors") who
collectively will represent three of the seven votes of the Company's Board of
Directors.
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REDEMPTION BY THE COMPANY
If a holder of Class C Common Stock acquires additional shares of Class C
Common Stock or otherwise is attributed with ownership of such shares that
would cause the Company to violate the Entrepreneurs Requirements or the
Foreign Ownership Restrictions (collectively, "FCC Violations"), the Company,
at its option, may redeem such shares at a redemption price equal to (i) 75%
of the fair market value of such shares where such holder caused the FCC
Violation or (ii) 100% of the fair market value where the FCC Violation was
caused by no fault of the holder.
REGISTRATION RIGHTS
After this offering, the holders of 12,184,780 shares of Class C Common
Stock and holders of warrants to purchase 7,573,500 shares of Class C Common
Stock will be entitled to certain rights with respect to the registration of
such shares under the Securities Act. Under the terms of the agreement between
the Company and the holders of such registrable securities, if the Company
proposes to register any of its securities under the Securities Act, either
for its own account or for the account of other security holders exercising
registration rights, such holders are entitled to notice of such registration
and are entitled to include shares of such Class C Common Stock therein.
Certain of such stockholders benefiting from these rights may also require the
Company to file a registration statement under the Securities Act at the
Company's expense with respect to their shares of Class C Common Stock, and
the Company is required to use its diligent reasonable efforts to effect such
registration. Further, holders may require the Company to file additional
registration statements on Form S-3 at the Company's expense. These rights are
subject to certain conditions and limitations, among them the right of the
underwriters of an offering to limit the number of shares included in such
registration in certain circumstances.
ANTITAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
Certificate of Incorporation and Bylaws
The Bylaws provide that stockholder action may be effected either at a duly
called meeting or by a consent in writing. The Bylaws provide that the
Company's stockholders may call a special meeting of stockholders only upon a
request of stockholders owning at least a majority of the Company's capital
stock. These provisions of the Certificate of Incorporation and Bylaws could
discourage potential acquisition proposals and could delay or prevent a change
in control of the Company. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the Board of
Directors and in the policies formulated by the Board of Directors and to
discourage certain types of transactions that may involve an actual or
threatened change of control of the Company. These provisions are designed to
reduce the vulnerability of the Company to an unsolicited acquisition
proposal. These provisions are also intended to discourage certain tactics
that may be used in proxy fights. However, such provisions could have the
effect of discouraging others from making tender offers for the Company's
shares and, as a consequence, they also may inhibit fluctuations in the market
price of the Company's shares that could result from actual or rumored
takeover attempts. Such provisions also may have the effect of preventing
changes in the management of the Company.
Delaware Takeover Statute
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which, subject to certain exceptions, prohibits a
Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that
such stockholder became an interested stockholder, unless: (i) prior to such
date, the board of directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction that
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares
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owned (a) by persons who are directors and also officers and (b) by employee
stock plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer; or (iii) on or subsequent to such date, the business
combination is approved by the board of directors and authorized at an annual
or special meeting of stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock that is
not owned by the interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition of 10% or more of the assets
of the corporation involving the interested stockholder; (iii) subject to
certain exceptions, any transaction that results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder; (iv) any transaction involving the corporation that has the
effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested stockholder; or
(v) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation. In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Class C Common Stock is .
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Government Financing
The Company's debt obligations to the U.S. Government pursuant to the
Government Financing will be approximately $954 million. Although the Company's
obligation under the Government Financing will be recorded on the Company's
financial statements at its estimated fair market value of $ , based on an
estimated fair market borrowing rate of %, the amount that would be owed to
the U.S. Government if the Government Financing were declared immediately due
and payable would be $954 million plus accrued interest. The Company will be
required to make quarterly interest expense payments based on the 10-year
Treasury Note rate at the License Grant Date. The Company will be required to
make installment payments of interest only for the first six years of the
license and payments of interest and principal amortized over the remaining
four years of the license term. In the event that the Company becomes unable to
meet its obligations under the Government Financing or otherwise violates
regulations applicable to holders of FCC licenses, the FCC could take a variety
of actions, including requiring immediate repayment of all amounts due under
the Government Financing, repayment of certain bidding credits, revoking the
Company's PCS licenses and fining the Company an amount equal to the difference
between the price at which the Company acquired the licenses and the amount of
the winning bid at their reauction, plus an additional penalty of three percent
of the lesser of the subsequent winning bid and the Company's bid amount. There
can be no assurance that the Company will be able to meet its obligations under
the Government Financing or that if it fails to meet such obligations, the FCC
will not require immediate repayment of all amounts due under the Government
Financing or revoke the Company's PCS licenses. In either such event the
Company may be unable to meet its obligations to other creditors, including
holders of the Senior Discount Notes.
In addition, there can be no assurance that if the Government Financing were
reflected at its face value of $954 million, the Company's pro forma total debt
(as adjusted for the Offerings) would not exceed the total "enterprise value"
of the Company implied by the initial public offering price of the Class C
Common Stock (as determined by adding the market value of the Common Stock to
the discounted value of the Government Financing). See "--Ability to Service
Debt; Substantial Leverage; Restrictive Covenants," "--Ability to Service
Debt," "--Government Regulation" and "Legislation and Government Regulation."
Vendor Financing
The Company is in the process of negotiating financing for its purchase of
network equipment and build-out services with vendors. Management believes that
terms and conditions acceptable to the Company will be arranged with the other
vendor who will become the prime network supplier.
Senior Discount Notes
The Company is offering $ in aggregate principal amount of its Senior
Discount Notes which will mature on , 2006 for estimated gross proceeds of
$220 million. The Senior Discount Notes will be issued pursuant to the
Indenture. From and after , 2001, interest on the Senior Discount Notes
will accrue from , 2001 or from the most recent interest payment date to
which interest has been paid or provided for, payable semiannually. The Senior
Discount Notes are redeemable at the Company's option after , 2001 and
prior thereto certain circumstances. See "Use of Proceeds."
The Senior Discount Notes will rank pari passu in right of payment with all
existing and future unsecured, unsubordinated indebtedness of the Company and
will be senior in right of payment to all existing and future subordinated
indebtedness of the Company. The Senior Discount Notes will be effectively
subordinated to all liabilities of the Company's subsidiaries, including trade
payables and indebtedness that may be incurred by the Company's subsidiaries
under certain vendor financing arrangements.
The Indenture relating to the Senior Discount Notes contains, covenants with
respect to among other things incurrence of indebtedness, restricted payments,
consensual limitations on distributions and transfers, issuance of guarantees
by subsidiaries, transactions with shareholders and affiliates, liens and asset
dispositions.
The closing of the Senior Discount Notes Offering is conditioned upon the
closing of the Stock Offering.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Stock Offering, there has been no market for the Class C Common
Stock of the Company. Therefore, future sales of substantial amounts of Class
C Common Stock in the public market could adversely affect market prices
prevailing from time to time. Furthermore, since only a limited number of
shares will be available for sale shortly after the Stock Offering because of
certain contractual and legal restrictions on resale (as described below),
sales of substantial amounts of Class C Common Stock of the Company in the
public market after the restrictions lapse could adversely affect the
prevailing market price and the ability of the Company to raise equity capital
in the future.
Upon completion of the Stock Offering, the Company will have outstanding an
aggregate of shares of Common Stock. Of these outstanding shares of
Common Stock, the shares of Class C Common Stock sold in the Stock
Offering will be freely tradeable without restriction or further registration
under the Securities Act, unless purchased by an "affiliate" of the Company,
as that term is defined in Rule 144 under the Securities Act (an "Affiliate").
The remaining 14,294,280 shares of Common Stock, consisting of 60 shares of
Class A Common Stock 2,109,440 shares of Class B Common Stock and 12,184,780
shares of Class C Common Stock, are "restricted securities" as that term is
defined in Rule 144 under the Act ("Restricted Shares"). Restricted Shares may
be sold in the public market only if registered or if they qualify for an
exemption from registration under Section 4(1) or Rules 144, 144(k), 145 or
701 promulgated under the Securities Act, which are summarized below. Sales of
the Restricted Shares in the public market, or the availability of such shares
for sale, could adversely affect the market price of the Class C Common Stock.
All holders of Common Stock and options to purchase Common Stock have agreed
pursuant to certain "lock-up" agreements that they will not offer, sell,
contract to sell or grant any option to purchase or otherwise dispose of the
shares of Class C Common Stock owned by them or that could be purchased by
them through the exercise of options to purchase Class C Common Stock of the
Company for a period of 180 days after the effective date of this offering
without the prior written consent of Bear, Stearns & Co. Inc. As a result of
these contractual restrictions, notwithstanding possible earlier eligibility
for sale under the provisions of Section 4(1) or Rules 144, 144(k), 145 and
701, shares subject to lock-up agreements will not be saleable until the
agreements expire. The number of outstanding shares that will be available for
sale in the public market, after giving effect to lock-up agreements, will be
as follows: (i) no shares of Class C Common Stock will be eligible for sale as
of the Effective Date and (ii) shares of Class C Common Stock will be
eligible for sale beginning 90 days after the Effective Date, subject in some
cases to certain volume and other limitations. The remaining Restricted
Shares will not be eligible for sale pursuant to Rule 144 until the expiration
of their two-year holding periods.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least two years (including
the holding period of any prior owner except an Affiliate) would be entitled
to sell within any three-month period a number of shares that does not exceed
the greater of: (i) one percent of the number of shares of Class C Common
Stock then outstanding; or (ii) the average weekly trading volume of the Class
C Common Stock during the four calendar weeks preceding the filing of a Form
144 with respect to such sale. Sales under Rule 144 are also subject to
certain manner of sale provisions, notice and broker/dealer requirements and
to the availability of current public information about the Company. Under
Rule 144(k), a person who is not deemed to have been an Affiliate of the
Company at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least three years
(including the holding period of any prior owner except an Affiliate), is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
In addition, any employee, officer or director of or consultant to the
Company who purchased his or her shares pursuant to a written compensatory
plan or contract may be entitled to rely on the resale provisions of Rule 701.
Rule 701 permits an Affiliate to sell their Rule 701 shares under Rule 144
without complying with the holding period requirements of Rule 144. Rule 701
further provides that non-affiliates may sell such shares in
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reliance on Rule 144 without having to comply with the public information,
volume limitation or notice provisions of Rule 144. In both cases, a holder of
Rule 701 shares is required to wait until 90 days after the date of this
Prospectus before selling such shares. The Company's 1995 Stock Option Plan
and 1996 Stock Option Plan require that the holders of shares issued upon
exercise of options under such plan will not offer, sell, contract to sell or
grant any option to sell or grant any option to purchase or otherwise dispose
of the shares of Class C Common Stock owned by them for a period of 180 days
after the effective date of this offering.
The Company has agreed not to offer, sell, contract to sell or otherwise
dispose of any shares of Class C Common Stock or any securities convertible
into or exercisable or exchangeable for Class C Common Stock or any rights to
acquire Class C Common Stock for a period 180 days after the date of this
Prospectus, without the prior written consent of the Representatives of the
Underwriters, subject to certain limited exceptions.
The Company intends to file one or more registration statements on Form S-8
under the Securities Act to register all shares of Common Stock subject to
outstanding stock options and Common Stock issued or issuable pursuant to the
Company's 1995 Stock Option Plan, Class C Common Stock issuable pursuant to
the Company's Employee Stock Purchase Plan and Common Stock issuable pursuant
to the 1996 Stock Option Plan. See "Management--1995 Stock Option Plan," "--
1996 Stock Option Plan" and "--Employee Stock Purchase Plan." Accordingly,
shares registered under such registration statements will, subject to Rule 144
volume limitations applicable to an Affiliate and the lapsing of the Company's
repurchase options, be available for sale in the open market, except to the
extent that such shares are subject to vesting restrictions with the Company
or the contractual restrictions described above. As of June 1, 1996, options
to purchase a total of 2,759,480 shares of Class B Common Stock were
outstanding (although all of the shares issuable upon exercise of such options
will be subject to lock-up restrictions on sale for 180 days after the
Effective Date) and shares were reserved for future issuance under the
stock plans.
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UNDERWRITING
The Underwriters named below, for whom Bear, Stearns & Co. Inc., Lehman
Brothers Inc., Salomon Brothers Inc and J.P. Morgan Securities Inc. are acting
as representatives (the "Representatives"), have severally agreed, subject to
the terms and conditions of the Underwriting Agreement (the form of which is
filed as an exhibit to the Registration Statement, of which this Prospectus is
a part), to purchase from the Company the aggregate number of shares of Class
C Common Stock set forth opposite their names:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
------------ ---------
<S> <C>
Bear, Stearns & Co. Inc.........................................
Lehman Brothers Inc.............................................
Salomon Brothers Inc............................................
J.P. Morgan Securities Inc......................................
---
Total.......................................................
===
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that, if any of the foregoing
shares of Class C Common Stock are purchased by the Underwriters pursuant to
the Underwriting Agreement, all such shares must be so purchased. The Company
has agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
that the Underwriters may be required to make in respect thereof.
The Company has advised that the Underwriters propose to offer the shares of
Class C Common Stock to the public initially at the public offering price set
forth on the cover page of this Prospectus and to certain selected dealers
(who may include the Underwriters) at such public offering price less a
concession not to exceed $ per share. The selected dealers may re-allow a
concession to certain other dealers not to exceed $ per share. After the
initial offering to the public, the concession to selected dealers and the re-
allowance to other dealers may be changed by the Representatives.
The Company has granted to the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to an aggregate of additional
shares of Class C Common Stock at the public price to the public less
underwriting discounts and commissions set forth on the cover page of this
Prospectus, for the purpose of covering over-allotments, if any. To the extent
that the Underwriters exercise this option, each of the Underwriters will be
committed, subject to certain conditions, to purchase a number of additional
shares proportionate to such Underwriter's initial commitment as indicated in
the preceding table.
In connection with the Offering, the Company, its directors and executive
officers have agreed that they will not sell, contract to sell or otherwise
dispose of any shares of Class C Common Stock of the Company for a period of
180 days after the date of this Prospectus without the prior written consent
of the Underwriters, except for the shares offered hereby.
Bear, Stearns & Co. Inc. acted as the placement agent in connection with the
private placements of the Company's equity and debt securities that closed in
1995 and 1996. In addition, Bear, Stearns & Co. Inc. has from time to time,
provided, and may in the future provide, financial advisory services to the
Company for which it has received, and may in the future receive, customary
compensation.
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LEGAL MATTERS
The validity of the issuance of the shares of Class C Common Stock offered
hereby will be passed upon for the Company by Brobeck, Phleger & Harrison LLP,
Palo Alto, California. Federal communications matters will be passed upon for
the Company by Skadden, Arps, Slate, Meagher & Flom, Washington, D.C. Certain
legal matters in connection with the Stock Offering will be passed upon for
the Underwriters by Latham & Watkins, Washington, D.C.
EXPERTS
The Consolidated Financial Statements of the Company at December 31, 1994
and 1995 and for the period from inception (June 24, 1994) to December 31,
1994, the year ended December 31, 1995, and the period from inception (June
24, 1994) to December 31, 1995 included in this Prospectus have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement on Form S-1 under the
Securities Act with respect to the Class C Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules to the Registration
Statement. For further information with respect to the Company and such Class
C Common Stock offered hereby, reference is made to the Registration Statement
and the exhibits and schedules filed as a part of the Registration Statement.
Statements contained in this Prospectus concerning the contents of any
contract or any other document referred to are not necessarily complete;
reference is made in each instance to the copy of such contract or document
filed as an exhibit to the Registration Statement. Each such statement is
qualified in all respects by such reference to such exhibit. The Registration
Statement, including exhibits and schedules thereto, may be inspected without
charge at the Securities and Exchange Commission's principal office in
Washington, D.C. 20549, and copies of all or any part thereof may be obtained
from such office after payment of fees prescribed by the Securities and
Exchange Commission.
The Company intends to furnish its stockholders annual reports containing
consolidated financial statements examined and reported on by its independent
auditors and quarterly reports containing unaudited consolidated financial
information for the first three quarters of each year.
69
<PAGE>
GLOSSARY
1996 Act..................... Telecommunications Act of 1996.
AIN.......................... Advanced Intelligent Network. The means by
which a telecommunications network will provide
call control. Database structure and signal
transfer points facilitate call management
maintenance and control.
Analog....................... A method of storing, processing and
transmitting information through the use of a
continuous (rather than pulsed or digital)
electrical signal that varies in amplitude or
frequency.
Applicant.................... An "applicant" generally refers to an entity
that submits an application to the FCC for a
license and also generally includes parties to
the application, including holders of
partnership and other ownership interests and
any stock interest amounting to 5 percent or
more of the equity, outstanding stock, or
outstanding voting stock of such an entity, and
all officers and directors of that entity.
ARPU......................... Average Revenue Per Unit.
Base Station................. Transmitter, receiver, signaling and related
equipment located at each cell site.
Broadband PCS................ An allocation of 120 MHz spectrum at 2 GHz
authorized for advanced wireless communications
services, including voice, data, paging,
facsimile and other innovative broadband
applications.
BTA.......................... Basic Trading Area, as set forth in the Rand
McNally Commercial Atlas & Marketing Guide
(123d ed. 1992).
C-Block Auction.............. The FCC Auction of 493 30 MHz BTA licenses,
restricted to entities meeting certain
financial and other criteria.
Carrier...................... A third party provider of communications
services by wire or radio.
Cellular..................... The domestic public cellular radio
telecommunications service authorized by the
FCC in the 824-893 MHz band, in which each of
two licenses per market employs 25 MHz of
spectrum to provide service to the public.
Cellular systems are based on multiple base
stations, or "cells," that permit efficient
frequency reuse and on software that permits
the system to hand mobile calls from cell to
cell as subscribers move through the cellular
service area.
CDMA......................... Code Division Multiple Access. One of the three
leading PCS and digital cellular technology
platforms.
CDPD......................... Cellular Digital Packet Data.
CLEC......................... Competitive Local Exchange Carrier.
CMRS......................... Commercial Mobile Radio Service. A provider of
mobile telecom-munications services that
provides communications services (1) to the
public (2) for profit, that are
(3) interconnected to the public switched
telephone network. The FCC has adopted rules to
regulate all similarly situated CMRS providers
under similar regulations.
70
<PAGE>
Common Carriers..............
Companies which own or operate transmission
facilities and offer telecommunication services
to the general public on a non-discriminatory
basis.
CTIA......................... The Cellular Telecommunications Industry
Association. A trade association in North
America comprised primarily of cellular and PCS
telephone service providers and some mobile
satellite service providers.
Digital...................... A method of storing, processing and
transmitting information through the use of
distinct electronic or optical pulses that
represent the binary digits 0 and 1. Digital
transmission/switching technologies employ a
sequence of discrete, distinct pulses to
represent information, as opposed to the
continuously variable analog signal. Digital
PCS networks will utilize digital transmission.
ESMR......................... Enhanced Specialized Mobile Radio Service, an
SMR service that contemplates expanded digital
telephony service offerings to the public in
general rather than local dispatch services to
specialized business subscribers.
FCC.......................... The Federal Communications Commission.
GHz.......................... Gigahertz. A unit of frequency equal to one
billion cycles (or hertz) per second.
GSM.......................... Groupe Speciale Mobile. One of the three
leading PCS and digital cellular technology
platforms, currently widely deployed in Europe.
Handsets..................... Portable, fixed, mobile, wireless or
transportable devices used for the reception
and transmission of voice communications.
IVDS......................... Interactive video and data service.
IXC.......................... Interexchange Carrier.
LATA......................... Local Access and Transport Areas.
LEC.......................... Local Exchange Carrier.
LMDS......................... Local Multipoint Distribution Service.
MHz.......................... Megahertz. A unit of frequency equal to one
million cycles (or hertz) per second.
MSS.......................... Mobile Satellite Service.
MTA.......................... Major Trading Area, as set forth in the Rand
McNally Commercial Atlas & Marketing Guide
(123d ed. 1992).
PCS.......................... Personal Communications Services.
POPs......................... Persons in the U.S. population based upon the
1995 PCS Atlas & Databook, Paul Kagan
Associates, Inc., unless stated otherwise.
PSAP......................... Public Safety Answering Point.
RBOC......................... Regional Bell Operating Company.
RF........................... Radio Frequency.
Roaming...................... A service offered by wireless communications
network carriers which allows subscribers to
use their radio or phone while outside their
carrier's service area. Roaming usually entails
an agreement between participating carriers.
SMR..........................
Specialized Mobile Radio, a two-way mobile
radio telephone system used traditionally
mostly for local dispatch services.
71
<PAGE>
Soft Hand-Off................
Cell transfer method which establishes a new
cell communications channel prior to
disconnecting the existing cell channel.
Spectrum..................... The electromagnetic radio spectrum. The FCC
grants authorizations and licenses to private
and governmental entities to use specified
portions under certain conditions.
TDMA......................... Time Division Multiple Access. One of the three
leading PCS and digital cellular technology
platforms.
72
<PAGE>
GENERAL WIRELESS, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and March 31,
1996..................................................................... F-3
Consolidated Statements of Operations for the period from inception (June
24, 1994) to December 31, 1994, the year ended December 31, 1995, the pe-
riod from inception (June 24, 1994) to December 31, 1995, and for the
three months ended March 31, 1995 and 1996............................... F-4
Consolidated Statements of Stockholders' Equity for the period from incep-
tion (June 24, 1994) to
December 31, 1994, the year ended December 31, 1995, and the three months
ended March 31, 1996..................................................... F-5
Consolidated Statements of Cash Flows for the period from inception (June
24, 1994) to December 31, 1994, the year ended December 31, 1995, the pe-
riod from inception (June 24, 1994) to December 31, 1995, and for the
three months ended March 31, 1995 and 1996............................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
After the 20 for 1 stock split discussed in Note 11 to the Company's
Consolidated Financial Statements is effected, we expect to be in a position
to render the following audit report.
Arthur Andersen llp
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
General Wireless, Inc.:
We have audited the accompanying consolidated balance sheets of General
Wireless, Inc. (a Delaware corporation in the development stage) and
subsidiary as of December 31, 1994 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the period
from inception (June 24, 1994) to December 31, 1994, for the year ended
December 31, 1995, and for the period from inception (June 24, 1994) to
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of General Wireless, Inc. and
subsidiary as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for the period from inception (June 24, 1994)
to December 31, 1994, for the year ended December 31, 1995, and for the period
from inception (June 24, 1994) to December 31, 1995, in conformity with
generally accepted accounting principles.
Dallas, Texas,
April 26, 1996 (except with
respect to the matters
discussed in Notes 10 and 11,
as to which the dates are May
20, 1996 and , 1996,
respectively)
F-2
<PAGE>
GENERAL WIRELESS, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1994 1995 1996
------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................... $ 918 $ 2,688 $ 2,415
------ ------- -------
Total current assets........................ 918 2,688 2,415
------ ------- -------
OFFICE EQUIPMENT, net............................. 19 23 20
------ ------- -------
OTHER ASSETS
PCS license deposits............................ -- 53,982 53,982
Deferred Debt Issue Costs....................... -- -- 46
------ ------- -------
Total other assets.......................... -- 53,982 54,028
------ ------- -------
Total assets.............................. $ 937 $56,693 $56,463
====== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses........... $ 69 $ 1,716 $ 1,643
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Convertible preferred stock, par value $.0001,
per share, 10,000,000 shares authorized--
Series A, 102,500 shares authorized, issued,
and outstanding, with aggregate liquidation
preference of $933,800 at December 31, 1994;
none authorized or outstanding at December
31, 1995, and March 31, 1996................. -- -- --
Series B, 205,000 shares authorized, issued,
and outstanding, with aggregate liquidation
preference of $1,867,040 at December 31,
1994; none authorized or outstanding at
December 31, 1995, and March 31, 1996........ -- -- --
Common stock, par value $.0001 per share;
20,000,000 shares authorized 1,030,000 shares
issued and outstanding at December 31, 1994.... -- -- --
Common stock, par value $.0001 per share--
Class A, 100 shares authorized, 60 shares
issued and outstanding at December 31, 1995
and March 31, 1996........................... -- -- --
Class B, 20,000,000 shares authorized,
2,109,440 shares issued and outstanding at
December 31, 1995 and March 31, 1996......... -- -- --
Class C, 79,999,900 shares authorized,
11,126,660 shares issued and outstanding at
December 31, 1995 and March 31, 1996......... -- 1 1
Additional paid-in capital...................... 1,864 59,032 59,078
Less--Subscriptions receivable.................. (563) (2,879) (2,925)
Losses accumulated during the development
stage.......................................... (433) (1,177) (1,334)
------ ------- -------
Total stockholders' equity.................. 868 54,977 54,820
------ ------- -------
Total liabilities and stockholders'
equity................................... $ 937 $56,693 $56,463
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
GENERAL WIRELESS, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM THREE MONTHS
INCEPTION INCEPTION ENDED
(JUNE 24, 1994) TO YEAR ENDED (JUNE 24, 1994) TO MARCH 31,
DECEMBER 31, DECEMBER 31, DECEMBER 31, --------------
1994 1995 1995 1995 1996
------------------ ------------ ------------------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................ $ -- $ -- $ -- $ -- $ --
----- ----- ------- ------ ------
OPERATING EXPENSES:
General and adminis-
trative.............. 448 791 1,239 178 185
----- ----- ------- ------ ------
Total operating ex-
penses............. 448 791 1,239 178 185
----- ----- ------- ------ ------
LOSS FROM OPERATIONS.... 448 791 1,239 178 185
OTHER INCOME:
Interest income....... (18) (54) (72) (9) (32)
----- ----- ------- ------ ------
Total other income.. (18) (54) (72) (9) (32)
----- ----- ------- ------ ------
NET LOSS BEFORE INCOME
TAXES.................. (430) (737) (1,167) (169) (153)
----- ----- ------- ------ ------
PROVISION FOR INCOME
TAXES.................. 3 7 10 1 4
----- ----- ------- ------ ------
NET LOSS................ $(433) $(744) $(1,177) $ (170) $ (157)
===== ===== ======= ====== ======
PRO FORMA NET
LOSS PER SHARE--
Primary and Fully Di-
luted................
PRO FORMA WEIGHTED
AVERAGE NUMBER OF
SHARES OUTSTANDING--
Primary and Fully Di-
luted................
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
GENERAL WIRELESS, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK LOSSES
---------------- ------------------ ACCUMULATED
NUMBER NUMBER ADDITIONAL DURING THE
OF OF PAID-IN SUBSCRIPTIONS DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE STAGE TOTAL
-------- ------ ---------- ------ ---------- ------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, June 24, 1994
(date of inception).... -- $ -- -- $ -- $ -- $ -- $ -- $ --
Issuance of common
stock at $.04 per
share on July 18,
1994.................. -- -- 1,030,000 -- 41 -- -- 41
Issuance of Series A
Preferred Stock at
$6.67 per share on
July 18, 1994, net of
issuance costs........ 102,500 -- -- -- 680 (184) -- 496
Issuance of Series B
Preferred Stock at
$6.67 per share on
September 30, 1994,
net of issuance
costs................. 205,000 -- -- -- 1,360 (367) -- 993
Accrued interest on
subscriptions
receivable............ -- -- -- -- 12 (12) -- --
Costs incurred to raise
additional capital.... -- -- -- -- (229) -- -- (229)
Net loss............... -- -- -- -- -- -- (433) (433)
-------- ----- ---------- ----- ------- ------- ------- -------
BALANCE, December 31,
1994 .................. 307,500 -- 1,030,000 -- 1,864 (563) (433) 868
Issuance of common
stock at $.04 per
share on June 2,
1995.................. -- -- 75,000 -- 3 -- -- 3
Issuance of Series A
Preferred Stock at
$6.67 per share on
June 2, 1995.......... 37,500 -- -- -- 250 -- -- 250
Issuance of Series B
Preferred Stock at
$6.67 per share on
June 2, 1995.......... 75,000 -- -- -- 500 -- -- 500
Purchase of common
stock at $0.04 per
share on December 1,
1995.................. -- -- (780,000) -- (31) -- -- (31)
Purchase of Series A
Preferred Stock at
$7.32 per share on
December 1, 1995...... (25,000) -- -- -- (183) 183 -- --
Purchase of Series B
Preferred Stock at
$7.22 per share on
December 1, 1995...... (50,000) -- -- -- (362) 362 -- --
Recapitalization....... (345,000) -- 1,364,440 -- -- -- -- --
Issuance of Class A
Common Stock at $5.00
per share on December
1, 1995, net of
issuance costs........ -- -- 60 -- -- -- -- --
Issuance of Class B
Common Stock and
210,000 Class B Common
Stock Warrants at
$2.50 per share of
stock on December 1
and December 28, 1995,
net of issuance
costs................. -- -- 420,000 -- 990 -- -- 990
Issuance of Class C
Common Stock and
4,594,440 Class C
Common Stock Warrants
at $5.00 per share of
stock on December 1
and December 28, 1995,
net of issuance
costs................. -- -- 11,126,660 1 52,195 (2,809) -- 49,387
Issuance of Class C
Common Stock
Warrants.............. -- -- -- -- 3,754 -- -- 3,754
Accrued interest on
subscriptions
receivable............ -- -- -- -- 52 (52) -- --
Net loss............... -- -- -- -- -- -- (744) (744)
-------- ----- ---------- ----- ------- ------- ------- -------
BALANCE, December 31,
1995................... -- -- 13,236,160 1 59,032 (2,879) (1,177) 54,977
Accrued interest on
subscriptions
receivable............ -- -- -- -- 46 (46) -- --
Net loss............... -- -- -- -- -- -- (157) (157)
-------- ----- ---------- ----- ------- ------- ------- -------
BALANCE, March 31, 1996
(unaudited)............ -- $ -- 13,236,160 $ 1 $59,078 $(2,925) $(1,334) $54,820
======== ===== ========== ===== ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
GENERAL WIRELESS, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM THREE MONTHS
INCEPTION INCEPTION ENDED
(JUNE 24, 1994) TO YEAR ENDED (JUNE 24, 1994) TO MARCH 31,
DECEMBER 31, DECEMBER 31, DECEMBER 31, -------------
1994 1995 1995 1995 1996
------------------ ------------ ------------------ ----- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss............... $ (433) $ (744) $ (1,177) $(170) $ (157)
Adjustments to
reconcile net loss to
net cash used by
operating activities--
Depreciation.......... 2 8 10 2 3
Changes in assets and
liabilities--
Accounts payable and
accrued expenses.... 69 250 319 28 (73)
------ -------- -------- ----- ------
Net cash used in
operating
activities.......... (362) (486) (848) (140) (227)
------ -------- -------- ----- ------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Payment for PCS license
deposits.............. -- (53,982) (53,982) -- --
Purchase of office
equipment............. (21) (12) (33) (10) --
------ -------- -------- ----- ------
Net cash used in
investing
activities.......... (21) (53,994) (54,015) (10) --
------ -------- -------- ----- ------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from sale of
common stock.......... 41 51,452 51,493 -- --
Proceeds from issuance
of warrants........... -- 3,850 3,850 -- --
Proceeds from sale of
preferred stock....... 1,489 750 2,239 -- --
Payment for repurchase
of common stock....... -- (31) (31) -- --
Debt issuance costs.... -- -- -- -- (46)
Costs incurred to raise
additional capital.... (229) 229 -- (159) --
------ -------- -------- ----- ------
Net cash provided by
(used in) financing
activities.......... 1,301 56,250 57,551 (159) (46)
------ -------- -------- ----- ------
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS............ 918 1,770 2,688 (309) (273)
CASH AND CASH
EQUIVALENTS, beginning
of period.............. -- 918 -- 918 2,688
------ -------- -------- ----- ------
CASH AND CASH
EQUIVALENTS, end of
period................. $ 918 $ 2,688 $ 2,688 $ 609 $2,415
====== ======== ======== ===== ======
SUPPLEMENTAL CASH FLOW
DISCLOSURES:
Cash paid for
interest.............. $ -- $ -- $ -- $ -- $ --
====== ======== ======== ===== ======
Cash paid for income
taxes................. $ -- $ 3 $ 3 $ -- $ 7
====== ======== ======== ===== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
GENERAL WIRELESS, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
General Wireless, Inc. was incorporated on June 24, 1994, as a Delaware
corporation for the purpose of securing broadband Personal Communications
Services (PCS) licenses and becoming a leading provider of affordable wireless
communications services. The consolidated financial statements include the
accounts of General Wireless, Inc. and its wholly owned subsidiary GWI PCS,
Inc., which was formed to hold any PCS licenses secured. GWI PCS, Inc.,
currently has no assets or operations of its own. General Wireless, Inc. and
its subsidiary are herein referred to as the Company. The Company is in the
development stage and, to date, has devoted substantially all of its efforts
to developing its business strategy and raising capital. Accordingly, the
Company has recognized no operating revenues and has incurred, and continues
to incur, monthly operating losses and operating cash flow deficits.
The Company is targeting the acquisition of PCS licenses in densely
populated urban markets with high population growth rates as well as other
desirable demographic characteristics, such as favorable business climates,
high median household income levels, and long commute times. The Federal
Communications Commission (FCC) is offering PCS licenses through a competitive
bidding process. Winning bidders are subject to FCC approval and continuing
FCC regulations. Management can provide no assurance that the Company will
raise adequate capital to execute its business strategy or obtain PCS licenses
in its target markets (see Note 7). In the event the development efforts
referred to above are successful, management can provide no assurance the
Company will be able to successfully finance and build out the wireless
communications infrastructure needed to provide service, market its product,
or operate at a profit.
2. CAPITALIZATION:
Preferred Stock
On July 25, 1995, the Company effected a reverse stock split of 1 to 10 for
Series A Preferred Stock and 1 to 4 for Series B Preferred Stock. The
financial statements and accompanying notes thereto give retroactive effect to
the reverse stock split as though it had occurred at the beginning of all
periods presented.
On July 18, 1994, 102,500 shares of Series A Preferred Stock were issued at
$6.67 per share for $500,250 in cash and $183,425 in subscriptions receivable
(see Note 3) from certain officers and employees, less issuance costs of
$3,573. On September 30, 1994, 205,000 shares of Series B Preferred Stock were
issued at $6.67 per share for $1,000,200 in cash and $366,740 in subscriptions
receivable (see Note 3) from certain officers and employees, less issuance
costs of $7,157.
On June 2, 1995, 37,500 shares of Series A Preferred Stock were issued at
$6.67 per share for $250,125 in cash and 75,000 shares of Series B Preferred
Stock were issued at $6.67 per share for $500,100 in cash.
On December 1, 1995, in connection with a recapitalization (see below), the
Company repurchased 25,000 shares of Series A Preferred Stock for $7.32 and
50,000 shares of Series B Preferred Stock for $7.22 from an officer of the
Company. The officer used the proceeds of such repurchase to repay
subscription notes receivable. Also, on December 1, 1995, all outstanding
preferred stock was converted to Class B Common Stock. As of December 31,
1995, no shares of preferred stock were authorized or outstanding.
Common Stock
As of December 31, 1994, the Company had authorized 20,000,000 shares of
$0.0001 par value common stock. On July 18, 1994, 1,030,000 shares of common
stock were issued at $0.04 per share for $41,200 in cash. On June 2, 1995,
75,000 shares of common stock were issued at $0.04 per share for $3,000 in
cash. On December 1, 1995, in connection with a recapitalization (see below),
the Company repurchased 780,000 shares of common stock from an officer at
$0.04 per share for $31,200.
F-7
<PAGE>
GENERAL WIRELESS, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On December 1, 1995, in connection with a recapitalization (see below), all
outstanding common stock was converted to Class B Common Stock. At December
31, 1995, the Company has authorized 100,000,000 shares of $0.0001 par value
common stock, of which 100 shares are designated as Class A Common Stock,
20,000,000 shares are designated Class B Common Stock and 79,999,900 shares
are designated as Class C Common Stock. The Company has reserved 3,914,780
shares of Class B Common Stock for issuance under the Company's stock option
plan (see Note 6).
Recapitalization--On December 1, 1995, the Company effected a
recapitalization (the "Recapitalization") in order to enable it to raise
additional equity financing yet remain in compliance with certain FCC
ownership restrictions applicable to the Company. Pursuant to the
Recapitalization, 115,000 shares of then outstanding Series A Preferred Stock
were converted to 560,100 shares of Class B Common Stock, 230,000 shares of
then outstanding Series B Preferred Stock were converted to 1,119,840 shares
of Class B Common Stock, and 325,000 shares of outstanding common stock were
converted to 9,500 shares of Class B Common Stock. In order to effect the
Recapitalization, the Company issued warrants to purchase 1,150,000 shares of
Class C Common Stock at $5.00 per share to an existing investor.
In two closings dated December 1, 1995 and December 28, 1995, the Company
issued an aggregate of 420,000 shares of Class B Common Stock and warrants to
purchase 210,000 shares of Class B Common Stock (the "Class B Warrants") for
an aggregate of $1,050,000 in cash, less issuance costs of $59,903. The
warrants to purchase Class B Common Stock are exercisable at a price of $2.50
per share. Also, in two closings dated December 1, 1995 and December 28, 1995,
the Company issued an aggregate of 11,126,660 shares of Class C Common Stock
and warrants to purchase 4,594,440 shares of Class C Common Stock (the "Class
C Warrants") for an aggregate of $55,633,300 consisting of $52,823,925 in cash
and $2,809,375 in subscriptions receivable (see Note 3), less issuance costs
of $3,436,961. The Class C Warrants are exercisable at a price of $5.00 per
share. On December 1, 1995, the Company sold warrants to purchase 800,000
shares and 400,000 shares of Class C Common Stock, exercisable at prices of
$.0005 and $5.00 per share, respectively, for an aggregate of $4,000,000, less
issuance costs of $246,102. Also on December 1, 1995, the Company issued to a
consultant warrants to purchase 100,000 shares of Class C Common Stock,
exercisable at a price of $5.00 per share in exchange for consultation and
assistance on the Recapitalization.
Redemption--If, at any time, ownership of shares of Class C Common Stock by
a holder would cause the Company to violate any FCC ownership requirements or
restrictions, the Company may, at the option of the Board of Directors, redeem
a number of shares of Class C Common Stock sufficient to eliminate such
violation.
Conversion Rights--Each share of Class A and B Common Stock shall
automatically be converted into one share of Class C Common Stock upon the
tenth anniversary of the date of grant of licenses to the Company by the FCC
or such earlier date as may be determined by the Board of Directors. The Board
of Directors may approve the conversion of shares of Class B Common Stock into
shares of Class C Common Stock at any time following the consummation of an
initial public offering of the Company's capital stock.
Voting Rights--The holders of Class A Common Stock, as a class, shall have
the right to (i) vote 50.1% of the Company's voting interests on all matters
and (ii) elect four (of seven) members of the Board of Directors. The holders
of Class B Common Stock, as a class, shall have no voting rights. The holders
of Class C Common Stock, as a class, shall have the right to (i) vote 49.9% of
the Company's voting interests on all matters and (ii) elect that remaining
number of members of the Board of Directors (collectively, three of seven) as
are from time-to-time set forth in the Company's bylaws.
F-8
<PAGE>
GENERAL WIRELESS, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company prepares its financial statements in accordance with generally
accepted accounting principles ("GAAP"). Significant accounting policies are
as follows:
Consolidation
The accompanying financial statements include the accounts of General
Wireless, Inc. and its majority owned subsidiaries. All significant
intercompany balances and transactions are eliminated.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company includes as cash and cash
equivalents (i) cash on hand, (ii) cash in bank accounts, (iii) investments in
money market funds, and (iv) highly liquid investments in debt securities with
original maturities of three months or less.
Office Equipment
Office equipment is stated at cost and depreciated using the straight-line
method over an estimated useful life of three years. Maintenance and repair
costs are charged to expense as incurred. Office equipment consisted of the
following at December 31, 1994 and 1995 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C> <C>
Office equipment, at cost......................... $21 $ 33
Less--Accumulated depreciation.................... (2) (10)
--- ---- ---
Office equipment, net........................... $19 $ 23
=== ====
</TABLE>
PCS License Deposits
PCS license deposits include deposits made in connection with the FCC
license bidding process. After license grant, such deposits will be included
as a cost of the PCS licenses.
Subscriptions Receivable
Subscriptions receivable represent promissory notes from certain officers of
the Company in connection with the officers' purchases of the Company's
capital stock. The Company's capital stock issued in connection with such
promissory notes is reported as issued and outstanding in the accompanying
financial statements in the amount of the related promissory note plus accrued
interest. The promissory notes and related accrued interest receivable are
classified as subscriptions receivable and included as a reduction of
stockholders' equity in the accompanying financial statements.
F-9
<PAGE>
GENERAL WIRELESS, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Subscriptions receivable consisted of the following at December 31, 1994 and
1995 (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
Promissory Notes from officers of the Company bear-
ing interest at 7% per annum, compounded annually;
principal and accrued interest due July 18, 1999,
with accelerated payment required under certain
conditions; 4,765 and 52,408 shares of stock of an-
other corporation are pledged to secure certain of
these notes at December 31, 1995 and 1994, respec-
tively............................................. $184 $ 18
Promissory Notes from officers of the Company bear-
ing interest at 7.05% per annum, compounded annual-
ly; principal and accrued interest due September
30, 1999, with accelerated payment required under
certain conditions; 9,526 and 104,784 shares of
stock of another corporation are pledged to secure
certain of these notes at December 31, 1995 and
1994, respectively................................. 367 36
Promissory Note from officer of the Company bearing
interest at 6.36% per annum, compounded annually;
principal and accrued interest due November 30,
2007; 906,250 shares of stock of another corpora-
tion are pledged to secure this note............... -- 2,809
Accrued interest receivable related to these promis-
sory notes......................................... 12 16
---- ------
Total subscriptions receivable.................... $563 $2,879
==== ======
</TABLE>
Fair Value of Financial Instruments
Pending use of cash balances for development activities, the Company enters
into various short-term financial instruments. The carrying values of the
Company's short-term financial instruments, including cash and short-term
investments, approximate their fair value.
Use of Estimates in Financial Statements
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts
of certain assets and liabilities and disclosure of contingent liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those
estimates.
Pro Forma Net Loss Per Share
Pro forma net loss per share is based upon the pro forma weighted average
number of shares outstanding. The pro forma weighted average number of shares
outstanding includes common shares and common share equivalents. The pro forma
weighted average number of shares outstanding also gives effect to the
Recapitalization (see Note 2) as if such Recapitalization had occurred at
inception (June 24, 1994) as amounts outstanding prior to the Recapitalization
are not deemed meaningful. Additionally, as required by the Securities and
Exchange Commission rules, all warrants, options, and shares issued during the
year immediately preceding the initial public offering are assumed to be
outstanding for all periods presented.
New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS No. 121),
which establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill. This statement becomes
effective for the Company in fiscal year 1996. The Company has evaluated the
rules set forth in this pronouncement and does not believe that adoption of
SFAS No. 121 will have a material effect on its financial position or results
of operations.
In November 1995, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation: (SFAS No. 123). This statement becomes
F-10
<PAGE>
GENERAL WIRELESS, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
effective for the Company in fiscal year 1996. This statement requires
companies to provide additional disclosures related to employee stock-based
compensation plans, or allows companies to change the accounting for
compensation expense associated with its stock-based compensation. The Company
expects to maintain its current accounting for stock-based compensation and
include the additional disclosures required by SFAS No. 123.
Interim Financial Presentation
The accompanying unaudited financial statements have been prepared by the
Company in accordance with GAAP for interim financial information and
substantially in the form prescribed by the Securities and Exchange Commission
in instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the financial information and footnotes required by
GAAP for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the three
month period ended March 31, 1996, are not indicative of the results that may
be expected for the year ending December 31, 1996.
4. COMMITMENTS AND CONTINGENCIES:
Lease Commitments
The Company has entered into various operating lease agreements for office
space and equipment. Future minimum lease obligations related to the Company's
operating leases are not material at December 31, 1995. Total rent expense for
the period from inception (June 24, 1994) to December 31, 1994, and for the
year ended December 31, 1995, was approximately $16,305 and $35,332,
respectively.
Effective December 1995, the Company entered into agreements with Mitsui
Comtek and Mitsui & Co. (U.S.A.), Inc. (together "Mitsui") pursuant to which
(i) Mitsui would act as a procurement consultant to the Company for five
years, receiving fees based on the extent of Mitsui's involvement in the
negotiation or financing of a particular equipment purchase plus an annual
retainer fee of $350,000 and (ii) a representative of Mitsui would serve as a
purchasing consultant within the Company for five years, receiving an annual
fee of $150,000.
5. INCOME TAXES:
The Company has certain net deferred tax assets related primarily to net
losses incurred during the development stage. The Company has recorded a
valuation allowance equal to the net deferred tax asset at December 31, 1994
and 1995, due to the uncertainty of future operating results. The valuation
allowance will be reduced at such time as management believes it is more
likely than not that the related net deferred tax assets will be realized. Any
reductions in the valuation allowance will reduce future income tax
provisions.
The Company's significant deferred tax assets and liabilities and the
changes in those assets and liabilities, were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 CHANGE 1995
------------ ------ ------------
<S> <C> <C> <C>
Start-up costs capitalized for tax
purposes............................. $ 146 $ 106 $ 252
Valuation allowance................... (146) (106) (252)
----- ----- -----
$ -- $ -- $ --
===== ===== =====
</TABLE>
F-11
<PAGE>
GENERAL WIRELESS, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Under existing tax law, all expenses incurred by a company prior to the
company earning any revenues, are capitalizable for tax purposes. Accordingly,
for tax purposes, the Company had taxable income of $17,649 and $45,811 for
the years ended December 31, 1994 and 1995, respectively, which represents
interest income earned on the Company's cash and cash equivalents, and results
in income tax expense of $2,647 and $7,000, respectively.
6. STOCK OPTION PLAN:
The Company has a stock option plan (the "Plan") under which it grants
options to purchase Class B Common Stock. As of December 31, 1995, the maximum
number of shares issuable under the Plan may not exceed 3,914,780 shares. The
Plan is administered by the Board of Directors. Vesting periods and terms for
stock option grants are determined by the plan administrator. No option
granted shall have a term in excess of ten years. All options outstanding as
of December 31, 1995, were vested. As of December 31, 1995, 3,914,780 shares
of Class B Common Stock are reserved for the Plan (see Note 2). The stock
option activity was as follows:
<TABLE>
<CAPTION>
SHARES PRICE PER SHARE
--------- ---------------
<S> <C> <C>
Options outstanding at December 31, 1994......... -- --
Options granted................................ 2,494,500 $2.50
---------
Options outstanding at December 31, 1995......... 2,494,500 $2.50
=========
</TABLE>
7. UNCERTAINTIES REGARDING FUTURE OPERATIONS:
The Company's success will be affected by, among other things, the problems,
expenses, difficulties, complications, and delays encountered in connection
with the formation of any new business, the introduction of a new range of
service offerings on a commercial basis, the need for additional equity and
debt financing, and the competitive environment in which the Company intends
to operate.
To address these risks, the Company must, among other things, be granted PCS
licenses following a competitive bidding process held by the FCC, obtain
substantial additional capital to support the construction and initial
operation of its PCS networks and the relocation of incumbent microwave
licensees to clear spectrum for its PCS networks, establish technical
feasibility and acceptance of its products and services, develop a market for
its PCS services and exploit that market, respond to competitive and
technological developments, and continue to attract, retain, and motivate
qualified personnel. Although management believes that the Company will be
able to successfully mitigate these risks, management can provide no assurance
that the Company will be able to do so or that the Company will ever operate
profitably.
Expenses are expected to exceed revenues in each location in which the
Company offers service until a sufficient customer base is established. It is
anticipated that this will take a number of years, and positive cash flows
from operations are not expected in the near future. Although management
believes that the Company will generate cash flows in excess of its start-up
costs and the cost of its PCS licenses, management can provide no assurance
that the Company will be able to do so.
PCS licensees are subject to an FCC-mandated minimum build-out schedule
which will generate a significant need for additional capital resources for
several years after the FCC auctions. The Company will be required to offer
service to at least one-third of the population within five years and at least
two-thirds of the population within ten years. The Company plans to build out
its system to cover over 80% of the population of most major market service
areas within five years, which exceeds the FCC-mandated minimum build-out
schedule. To provide service within the required time frame, the Company must
secure adequate and reliable sources of supply and the requisite financing to
provide the funding necessary to build the infrastructure needed
F-12
<PAGE>
GENERAL WIRELESS, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
to provide services. Although management believes that sufficient sources of
capital will be available to the Company to complete its build-out plans,
management can provide no assurance that such sources of capital will be
available.
8. RELATED-PARTY:
The President and Chief Executive Officer of the Company is a stockholder
and member of the Board of Directors of the company from which GWI subleases
its office space. During 1994 and 1995, the Company paid $10,763 and $22,157,
respectively, pursuant to this lease.
9. FINANCING AGREEMENT:
On March 15, 1996, the Company and Hyundai Electronics America ("Hyundai")
entered into a loan agreement (the "Loan Agreement") pursuant to which Hyundai
agreed to loan $50 million to the Company upon the grant of PCS Licenses
covering a population of at least 10 million subject to approval of the Korean
government. The loan will be used to make the second five percent up front
payment to the FCC. Under the Loan Agreement, Hyundai is entitled to designate
one person to the Company's board of directors, so long as at least $10
million of the loan amount is outstanding. The Loan Agreement and any
promissory note to be issued thereunder contain certain restrictive covenants
which will restrict the Company's ability to issue debt senior to the
promissory note, make dividends, or create liens. The note term is one year,
with a fixed interest rate of 6.5% during the term of the note, increasing to
nine percent for any unpaid portion after the maturity date. The Company may
elect, with Hyundai's approval, to make payment in the form of Class C
Warrants with fair market value (as determined by investment bankers) equal to
the prepayment or maturity amount.
10. SUBSEQUENT EVENTS:
On May 6, 1996, the FCC competitive bidding auctions, in which the Company
was a participant, concluded. The Company's winning bids totalled
approximately $1,059,658,000. License grants for which winning bids were
submitted are subject to an approval process. Should such approval be granted,
the Company will be required to construct a system in each of its markets that
offers coverage to at least one-third of the population within five years and
at least two-thirds of the population within ten years. As a result of being
the winning bidder, the Company's PCS License Deposits were retained by the
FCC to cover a five percent up front payment on the licenses. Approximately
$999,000, representing deposit amounts in excess of the required five percent
up front payment, was returned to the Company by the FCC. The Company will be
required to make a second five percent up front payment five business days
subsequent to the date of license grant. Management believes that the cash on
hand, combined with the proceeds from the Loan Agreement (See Note 9), will be
sufficient to cover the second five percent down payment due. The remaining
90% of the purchase price will be financed by the U.S. government for a 10-
year period at a fixed rate of interest equal to the yield on a 10-year U.S.
Treasury Note at the date of license grant (the "Government Debt"). Under the
terms of the Government Debt, the Company will be required to make installment
payments of interest only for the first six years of the license and payments
of interest and principal amortized over the remaining four years of the
license term. The Company anticipates that it will record the debt based upon
its estimated fair value at the date of license grant.
Grant of the licenses by the FCC will subject the Company to certain FCC
ownership restrictions. Should the Company fail to qualify under such
ownership restrictions, the PCS license may be subject to FCC revocation
provisions. Management believes that the Company currently complies and will
continue to comply with such restrictions. All licenses granted will expire
ten years from the date of grant; however, FCC rules provide for renewal
provisions.
F-13
<PAGE>
GENERAL WIRELESS, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On May 20, 1996, the Company issued an aggregate of 1,058,120 shares of
Class C Common Stock and warrants to purchase 529,060 shares of Class C Common
Stock for an aggregate of $5,290,600 consisting of $5,000,000 in cash and
$290,600 in subscriptions receivable, less issuance costs of $253,000. The
Class C Warrants are exercisable at a price of $5.00 per share.
11. SUBSEQUENT OFFERINGS AND STOCK SPLIT:
The Company is currently in the process of an initial public offering of its
Class C Common Stock (the "Stock Offering") and a public offering of senior
discount notes (the "Notes Offering"). The Company plans to use the proceeds
of these offerings to finance capital expenditures, to finance debt service on
the Government Debt and any other debt incurred, to fund operating losses and
working capital requirements, and other general corporate purposes.
Immediately prior to the effectiveness of the Stock Offering, the Company
will effect a 20 for 1 stock split. The historical consolidated financial
statements have been adjusted to give retroactive effect to such split.
12. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET INFORMATION:
The following schedule sets forth the Company's unaudited historical and pro
forma consolidated balance sheets as of March 31, 1996. The unaudited pro
forma consolidated balance sheet as of March 31, 1996, is based on the
historical balance sheet as of March 31, 1996, adjusted to give pro forma
effect to certain financing activities of the Company occurring subsequent to
March 31, 1996, as described below, as if these events occurred as of March
31, 1996.
The unaudited pro forma consolidated balance sheet information is not
necessarily indicative of the financial position of the Company as of March
31, 1996, that would have actually have existed if the events described above
had occurred on March 31, 1996, nor are they necessarily indicative of the
financial position which may be obtained in the future.
F-14
<PAGE>
GENERAL WIRELESS, INC. AND SUBSIDIARY
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
MARCH 31, ADJUST- MARCH 31,
1996 MENTS 1996
---------- --------- ---------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.... $ 2,415 $5,746 (/1/)(/2/) $ 8,161
------- ------ -------
Total current assets..... 2,415 5,746 8,161
------- ------ -------
OFFICE EQUIPMENT, net.......... 20 -- 20
OTHER ASSETS:
PCS license deposits......... 53,982 (999)(/2/) 52,983
Deferred debt issue costs.... 46 -- 46
------- ------ -------
Total other assets....... 54,028 (999) 53,029
------- ------ -------
Total assets........... $56,463 $4,747 $61,210
======= ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
expenses.................... $ 1,643 $ -- $ 1,643
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value
$.0001 per share--
Class A, 100 shares
authorized, 60 shares
issued and outstanding at
March 31, 1996, historical
and pro forma............. -- -- --
Class B, 20,000,000 shares
authorized, 2,109,440
shares issued and
outstanding at March 31,
1996, historical and pro
forma..................... -- -- --
Class C, 79,999,900 shares
authorized, 11,126,660
shares issued and
outstanding at March 31,
1996, and 12,184,780
shares issued and
outstanding pro forma..... 1 -- 1
Additional paid-in capital... 59,078 5,038 (/1/) 64,116
Less--Subscriptions receiv-
able........................ (2,925) (291)(/1/) (3,216)
Losses accumulated during the
development stage........... (1,334) -- (1,334)
------- ------ -------
Total stockholders' equi-
ty...................... 54,820 4,747 59,567
------- ------ -------
Total liabilities and
stockholders' equity.. $56,463 $4,747 $61,210
======= ====== =======
</TABLE>
- --------
(1) To reflect issuance by the Company of 1,058,120 shares of Class C Common
Stock and 529,060 Class C Common Stock Warrants at $5.00 per share of stock
for aggregate proceeds of $5,290,600 less issuance costs of $253,000.
(2) To reflect a return to the Company of approximately $999,000 of funds on
deposit with the FCC after application of the PCS license deposits to cover
the five percent up front payment (see Note 10).
F-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OF-
FERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SHARES OF COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO, OR A
SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICI-
TATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 9
Use of Proceeds.......................................................... 21
Dividend Policy.......................................................... 21
Dilution................................................................. 22
Capitalization........................................................... 23
Selected Consolidated Financial Data..................................... 24
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 25
The Wireless Communications Industry..................................... 27
Business................................................................. 30
Legislation and Government Regulation.................................... 40
Management............................................................... 49
Certain Transactions..................................................... 55
Principal Stockholders................................................... 59
Description of Capital Stock............................................. 62
Description of Certain Indebtedness...................................... 65
Shares Eligible for Future Sale.......................................... 66
Underwriting............................................................. 68
Legal Matters............................................................ 69
Experts.................................................................. 69
Additional Information................................................... 69
Glossary................................................................. 70
Index to Financial Statements............................................ F-1
</TABLE>
----------------
UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GENERAL WIRELESS, INC.
SHARES OF
CLASS C COMMON STOCK
----------------
PROSPECTUS
----------------
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
SALOMON BROTHERS INC
J.P. MORGAN & CO.
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Class C Common Stock being registered. All amounts are
estimates except the SEC registration fee and the NASD filing fees.
<TABLE>
<S> <C>
SEC Registration fee............................................. $65,432
NASD fee......................................................... *
Printing and engraving........................................... *
Legal fees and expenses of the Company........................... *
Accounting fees and expenses..................................... *
Blue sky fees and expenses....................................... *
Transfer agent fees.............................................. *
Miscellaneous.................................................... *
-------
Total.......................................................... $
=======
</TABLE>
- --------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, as amended ("Delaware
Law"), provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding,
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Section 145 further provides that a corporation similarly may
indemnify any such person serving in any such capacity who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor, against expenses actually and reasonably incurred in connection
with the defense or settlement of such action or suit if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Delaware Court of Chancery or such other court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 102(b)(7) of Delaware Law permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of Delaware Law (relating to unlawful payment of dividends and unlawful stock
purchase and redemption) or (iv) for any transaction from which the director
derived an improper personal benefit.
II-1
<PAGE>
The Registrant's Restated Certificate of Incorporation provides that the
Registrant's directors shall not be liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent that exculpation from liabilities is not permitted under
Delaware Law as in effect at the time such liability is determined. The
Registrant has entered into indemnification agreements with all of its
officers and directors, as permitted by Delaware Law. Reference is also made
to Section 6 of the Underwriting Agreement contained in Exhibit 1.1 hereto,
indemnifying officers and directors of the Registrant against certain
liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) Since inception, the Registrant has issued and sold the following
securities (as adjusted to reflect the stock conversions and exchanges
effected to date, as well as the proposed 20-for-1 split to be effected prior
to the effectiveness of this Registration Statement):
1. On July 18, 1994, September 30, 1994 and June 2, 1995, the Registrant
issued and sold an aggregate of 2,077,420 shares of Class B Common Stock
at a price of $1.37 per share to its founding members consisting of
Messrs. Roger Linquist, Malcolm Lorang, entities affiliated with Accel
Partners and Battery Ventures III, L.P. (387,980 of which were
repurchased by the Company in December 1995). In addition, on December
1, 1995, entities affiliated with Accel Partners received warrants to
purchase 1,149,980 shares of Class C Common Stock at an exercise price
of $5.00 per share in connection with the exchange of securities
effected in November 1995.
2. On December 1, 1995, December 28, 1995 and May 20, 1996, the Registrant
issued and sold to several private placement investors the following:
(a) 420,000 shares of Class B Common Stock and warrants to purchase
210,000 shares of Class B Common Stock with an exercise price of
$2.50 per share for an aggregate price of $1,050,000 ($5.00 for each
unit consisting of two shares of Class B Common Stock and a warrant
to purchase one share of Class B Common Stock);
(b) 10,047,040 shares of Class C Common Stock and warrants to purchase
5,023,520 shares of Class C Common Stock with an exercise price of
$5.00 per share for an aggregate purchase price of $50,235,200
($10.00 for each unit consisting of two shares of Class C Common
Stock and warrant to purchase one share of Class C Common Stock);
(c) 2,000,000 shares of Class C Common Stock and warrants to purchase
100,000 shares of Class C Common Stock with an exercise price of
$5.00 per share for an aggregate price of $10,000,000 ($10.00 for
each unit consisting of two shares of Class C Common Stock and a
warrant to purchase 0.1 shares of Class C Common Stock);
(d) Warrants to purchase 400,000 shares of Class C Common Stock at an
exercise price of $5.00 per share and warrants to purchase 800,000
shares of Class C Common Stock at an exercise price of $0.0005 per
share for an aggregate price of $3,999,600 ($9.999 for each unit
consisting of one warrant to purchase one share with an exercise
price of $5.00 per share and one warrant to purchase two shares with
an exercise price of $0.0005 per share);
In addition, on February 20, 1996, the Registrant issued 137,740 shares of
Class C Common Stock to its placement agent in connection with the placements
effected in December 1995, pursuant to the terms of the Registrant's
Engagement Letter with the agent. See Exhibit 10.2.
3. On December 1, 1995, the Company issued warrants to purchase 100,000
shares of Class C Common Stock with an exercise price of $5.00 per share
to an advisor to the Company for advisory services rendered.
4. On March 15, 1996, the Registrant and Hyundai entered into a Stock
Purchase Agreement (Exhibit 10.8) under which the Registrant is
obligated to purchase and Hyundai is obligated to purchase up to
10,000,000 units at a price of $5 per unit, each unit consisting of one
share of Class C Common Stock and one warrant to purchase 0.05 shares of
Class C Common Stock with an exercise price of $5 per
II-2
<PAGE>
share. This transaction is conditioned upon and subject to (a)
governmental approval (including approval by the Republic of Korea), (b)
the Registrant obtaining certain number of PCS licenses and (c)
restrictions under the rules and regulations promulgated by the Federal
Communications Commission and under telecommunications laws, in
particular, regarding the amount of foreign investment in the Registrant.
5. The Registrant granted stock options to purchase 2,759,480 shares of
Class B Common Stock with an exercise price of $2.50 per share to
employees, directors and consultants under its 1995 Stock Option Plan.
The issuances described in Item 15(a)(1) were deemed exempt from registration
under the Securities Act in reliance upon Rule 701 promulgated under the
Securities Act. The issuances of the securities described in item 15(a)(2) were
deemed to be exempt from registration under the Act in reliance on Section 4(2)
of the Act as transactions by an issuer not involving any public offering. In
addition, the recipients of securities in each such transaction represented
their intentions to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the share certificates issued in such transactions. All
recipients had adequate access, through their relationships with the
Registrant, to information about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1* Form of Underwriting Agreement (preliminary form).
3.1 Certificate of Incorporation of the Registrant, as amended to
date.
3.2 Bylaws of the Registrant, as amended.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2* Specimen Class C Common Stock certificate.
4.3 Registration Rights Agreement dated December 1, 1995, among the
Registrant and the investors named therein, as amended.
4.4 Stockholders Agreement dated December 1, 1995, among the
Registrant and the stockholders named therein, as amended.
4.5 Form of Subscription Agreements entered into between the
Registrant and its existing Class B and Class C Common Stock
investors.
4.6 Form of Class B Common Stock Warrant.
4.7 Form of Class C Common Stock Warrant.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1* Form of Indemnification Agreement entered into between the
Registrant and its directors and officers.
10.2 Engagement Letter dated December 9, 1994, Agency Agreement, dated
November 20, 1995, Placement Certificate, dated December 1, 1995,
by and between the Registrant and Bear, Stearns & Co. Inc.
10.3* Procurement Agreement, effective December 1, 1995, among the
Registrant, Mitsui Comtek Corp. and Mitsui & Co. (U.S.A.), Inc.
10.4* Loan Agreement, dated March 15, 1996, among the Registrant and
Hyundai Electronics America ("Hyundai"), including form of
promissory note.
10.5* Stock Purchase Agreement, dated March 15, 1996, among the
Registrant and Hyundai.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.6* Equipment Purchase Agreement, dated March 15, 1996, among the
Registrant and Hyundai Electronics Industries Co., Ltd. ("HEI").
10.7 Employee Training Agreement, dated March 15, 1996, among the
Registrant and HEI.
11.1* Computation of Earnings/(Loss) Per Share.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants
(see page II-7).
23.2 Consent of Counsel. Reference is made to Exhibit 5.1.
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be supplied by amendment.
(B) FINANCIAL STATEMENT SCHEDULES -- All required information is set forth
in the consolidated financial statements included in the Prospectus
constituting part of this Registration Statement.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware Corporations Law, the Certificate of
Incorporation or the Bylaws of the Registrant, Indemnification Agreements
entered into between the Registrant and its officers and directors, the
Underwriting Agreement, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered hereunder, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DALLAS,
STATE OF TEXAS, ON THIS 28TH DAY OF JUNE, 1996.
General Wireless, Inc.
By: _________________________________
Roger D. Linquist
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints jointly and severally, Roger D. Linquist and
Robert Fugate, and each one of them, his attorneys-in-fact, each with the power
of substitution, for him in any and all capacities, to sign any and all
amendments to this Registration Statement (including post effective
amendments), and to sign any registration statement for the same offering
covered by this Registration Statement that is to be effective upon filing
pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and all
post-effective amendments thereto, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-in-
fact, or his substitute or substitutes, may do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE
- ------------------------------------- President and Chief June 28, 1996
(ROGER D. LINQUIST) Executive Officer
(Principal
Executive Officer),
Chairman of the
Board of Directors
and Secretary
Vice President of June 28, 1996
- ------------------------------------- Corporate
(ROBERT FUGATE) Development and
Chief Financial
Officer (Principal
Financial and
Accounting Officer)
Director June 28, 1996
- -------------------------------------
(ROBERT G. BARRETT)
Director June 28, 1996
- -------------------------------------
(RALPH M. BARUCH)
II-5
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------------- Director June 28, 1996
(FREDERIC C. HAMILTON)
Director June 28, 1996
- -------------------------------------
(JOSEPH T. MCCULLEN, JR.)
Director June 28, 1996
- -------------------------------------
(ARTHUR PATTERSON)
Director June 28, 1996
- -------------------------------------
(JOHN SCULLEY)
- ------------------------------------- Director June 28, 1996
(TOSHIHIRO SOEJIMA)
II-6
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
Registration Statement on Form S-1.
Arthur Andersen LLP
Dallas, Texas June 25, 1996
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
1.1* Form of Underwriting Agreement (preliminary form).
3.1 Certificate of Incorporation of the Registrant, as
amended to date.
3.2 Bylaws of the Registrant, as amended.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2* Specimen Class C Common Stock certificate.
4.3 Registration Rights Agreement dated December 1, 1995,
among the Registrant and the investors named therein,
as amended.
4.4 Stockholders Agreement dated December 1, 1995, among
the Registrant and the stockholders named therein, as
amended.
4.5 Form of Subscription Agreements entered into between
the Registrant and its existing Class B and Class C
Common Stock investors.
4.6 Form of Class B Common Stock Warrant.
4.7 Form of Class C Common Stock Warrant.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1* Form of Indemnification Agreement entered into between
the Registrant and its directors and officers.
10.2 Engagement Letter dated December 9, 1994, Agency
Agreement, dated November 20, 1995, Placement
Certificate, dated December 1, 1995, by and between
the Registrant and Bear, Stearns & Co. Inc.
10.3* Procurement Agreement, effective December 1, 1995,
among the Registrant, Mitsui Comtek Corp. and Mitsui &
Co. (U.S.A.), Inc.
10.4* Loan Agreement, dated March 15, 1996, among the
Registrant and Hyundai Electronics America
("Hyundai"), including form of promissory note.
10.5* Stock Purchase Agreement, dated March 15, 1996, among
the Registrant and Hyundai.
10.6* Equipment Purchase Agreement, dated March 15, 1996,
among the Registrant and Hyundai Electronics
Industries Co., Ltd. ("HEI").
10.7 Employee Training Agreement, dated March 15, 1996,
among the Registrant and HEI.
11.1* Computation of Earnings/(Loss) Per Share.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants (see page II-7).
23.2 Consent of Counsel. Reference is made to Exhibit 5.1.
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be supplied by amendment.
<PAGE>
EXHIBIT 3.1
CORRECTED
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF GENERAL WIRELESS, INC.
a Delaware Corporation
(to correct the Amended and Restated Certificate of
Incorporation containing inaccuracies
which was filed on November 28, 1995, pursuant to
Section 103(f) of the Delaware General Corporation Law)
The Amended and Restated Certificate of Incorporation was filed with the
Secretary of State of Delaware on August 28, 1995 and that said Certificate
requires correction as permitted by Section 103(f) of the General Corporation
Law of the State of Delaware;
The inaccuracy or defect of said Certificate exists in Article
IV(B)(3)(a)(iii), subsection (B), which incorrectly states "(B) the Control
Group, as defined from time to time by the FCC, of the Corporation to hold less
than 25% of the Corporation's capital stock and 50% of the Corporation's total
voting stock." The Board of Directors and the Stockholders of the Corporation
intended that that subsection (B) should read "(B) the Control Group, as defined
from time to time by the FCC, of the Corporation to hold less than 25% of the
Corporation's capital stock and less than 50.1% of the Corporation's total
voting stock." The second inaccuracy exists in Article IV(B)(3)(a)(iii),
subsection (C), which incorrectly states "(C) the Qualifying Investors, as
defined from time to time by the FCC, of the Corporation to hold less than 15%
of the Corporation's total equity during the first three years of the initial
FCC license term(s) and 10% during the remaining seven (7) years and 50% of the
total voting stock through the FCC license term(s) unless the FCC materially
amends the above requirements (collectively, such requirements shall be referred
to as the "Entrepreneurs' Requirements") and in such instance such conversion by
the Passive Investors, Control Group and Qualifying Investors shall be governed
accordingly." The Board of Directors and the Stockholders of the Corporation
intended that that subsection (C) should read "(C) the Qualifying Investors, as
defined from time to time by the FCC, of the Corporation to hold less than 15%
of the Corporation's total equity during the first three years of the initial
FCC license term(s) and less than 10% during the remaining seven (7) years and
less than 50.1% of the total voting stock through the FCC license term(s) unless
the FCC materially amends the above requirements (collectively, such
requirements shall be referred to as the "Entrepreneurs' Requirements") and in
such instance such conversion by the Passive Investors, Control Group and
Qualifying Investors shall be governed accordingly."
The entire Amended and Restated Certificate of Incorporation, filed
November 28, 1995 and corrected on November 30, 1995 with the Secretary of State
of Delaware, in its corrected form is hereby set forth below.
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF GENERAL WIRELESS, INC.
a Delaware Corporation
(Pursuant to Sections 228, 242 and 245
of the Delaware General Corporation Law)
The undersigned, Roger D. Linquist and Edward M. Leonard, hereby certify
that,
FIRST: They are the duly elected and acting President and Assistant
Secretary, respectively of the Corporation;
SECOND: That the Corporation was originally incorporated on June 24,
1994, under the name General Wireless, Inc. pursuant to the General Corporation
Law;
THIRD: That the Amended and Restated Certificate of Incorporation be
amended and restated in its entirety as follows:
ARTICLE I
The name of this corporation is General Wireless, Inc.
ARTICLE II
The address of the registered office of this corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Prentice-Hall Corporation
System, Inc.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
(A) Classes of Stock. This corporation is authorized to issue three
----------------
classes of stock to be designated, respectively, "Class A Common Stock," Class B
Common Stock" and "Class C Common Stock." The total number of shares which the
corporation is authorized to issue is Five Million (5,000,000) shares. Five (5)
shares shall be Class A Common Stock, par value $0.0001, One Million (1,000,000)
shares shall be Class B Common Stock, par value $0.0001 and Three Million Nine
Hundred Ninety-Nine Thousand Nine Hundred and Ninety-Five (3,999,995) shares
shall be Class C Common Stock, par value $0.0001.
Upon the filing of this Amended and Restated Certificate of
Incorporation: (i) each share of Series A Preferred Stock issued and outstanding
is converted into 0.2435195 shares of Class B Common Stock without any action by
the holder thereof; (ii) each share of Series B Preferred Stock issued and
outstanding is converted into 0.2434465 shares of Class B Common Stock without
any action by the holder thereof; and (iii) each share of Common Stock issued
and outstanding is converted into 0.0014604 shares of Class B Common Stock
without any action by
<PAGE>
the holder thereof. No fractional shares of Class B Common Stock shall be issued
pursuant to the foregoing conversions and any such conversion into Class B
Common Stock that would result in a fractional share of Class B Common Stock
shall be redeemed by the Corporation at the fair market value so determined by
the Corporation's Board of Directors.
(B) Rights of Common Stock.
----------------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Class A, Class B and Class C Common Stock shall be entitled
to receive, when and as declared by the Board of Directors, out of any assets of
the corporation legally available therefor, and on a pari passu basis, such
dividends as may be declared from time to time by the Board of Directors.
2. Liquidation Preference. In the event of any liquidation,
----------------------
dissolution or winding up of this corporation, either voluntary or involuntary,
the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Class A,
Class B and Class C Common Stock in proportion to the amount of such stock owned
by each such holder.
3. Conversion. The Class A and Class B Common Stock may be
----------
converted as follows ("Conversion Rights"):
(a) Right to Convert.
----------------
(i) Subject to part (3)(a)(iii) below, each share of Class A and B
Common Stock shall automatically be converted into one share of Class C Common
Stock upon the tenth anniversary of the date of grant of license(s) to the
corporation by the Federal Communications Commission (the "FCC") (or such
earlier date as may be determined by the Board of Directors).
(ii) At any time following the consummation of the initial public
offering of the corporation's capital stock, the Board of Directors may approve
the conversion of shares of Class B Common Stock into shares of Class C Common
Stock. Upon such approval by the Board of Directors, each share of Class B
Common Stock shall be convertible, at the option of the holder thereof, at the
office of this corporation or any transfer agent for such stock, into one share
of Class C Common Stock.
(iii) Any conversion of Class A or Class B Common Stock into Class C
Common Stock pursuant to this Section 3 shall not be permitted to the extent
that such conversion would cause (A) any Passive Investor, as defined from time
to time by the Federal Communications Commission ("FCC"), in the corporation to
hold in excess of 25% of the Corporation's outstanding capital stock, (B) the
Control Group, as defined from time to time by the FCC, of the Corporation to
hold less than 25% of the Corporation's capital stock and less than 50.1% of the
Corporation's total voting stock, or (C) the Qualifying Investors, as defined
from time to time by the FCC, of the Corporation to hold less than 15% of the
Corporation's total equity during the first three years of the initial FCC
license term(s) and less than 10% during the remaining seven (7) years and less
than 50.1% of the total voting stock through the FCC license term(s) unless the
FCC materially amends the above requirements (collectively, such requirements
shall be referred to as the "Entrepreneurs' Requirements") and in such instance
such conversion by the Passive Investors, Control Group and Qualifying Investors
shall be governed accordingly. Notwithstanding the above, the limitations on
conversion set forth in this Subpart (iii) shall have no force and effect if the
Company is unsuccessful in its bid to acquire the rights to a broadband PCS
license.
2.
<PAGE>
(b) Mechanics of Conversion. Before any holder of shares of Class A
-----------------------
or Class B Common Stock shall be entitled to convert the same into shares of
Class C Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of this corporation, and
shall give written notice by mail, postage prepaid, to this corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Class C Common Stock are to be issued. This corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
shares of Class A or Class B Common Stock, or to the nominee or nominees of such
holder, a certificate or certificates for the number of shares of Class C Common
Stock to which such holder shall be entitled as aforesaid. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Class A or Class B Common Stock to
be converted, and the person or persons entitled to receive the shares of Class
C Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Class C Common Stock as of
such date.
(c) No Fractional Shares and Certificate as to Adjustments. No
------------------------------------------------------
fractional shares shall be issued upon conversion of the Class A and Class B
Common Stock, and the number of shares of capital stock to be issued shall be
rounded to the nearest whole share.
(d) Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Class A, B and C Common Stock, at least
20 days prior to the date specified therein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
(e) Reservation of Stock Issuable Upon Conversion. This corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Class C Common Stock solely for the purpose of effecting the
conversion of the shares of the Class A and Class B Common Stock such number of
its shares of Class C Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of the Series A and Series B
Preferred Stock; and if at any time the number of authorized but unissued shares
of Class C Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Class A and Class B Common Stock, this
corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Class C
Common Stock to such number of shares as shall be sufficient for such purposes.
3.
<PAGE>
(f) Notices. Any notice required by the provisions of this Section 3
-------
to be given to the holders of shares of Class A and Class B Common Stock shall
be deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of this
corporation.
4. Voting Rights. The holders of the corporation's stock shall have
-------------
voting rights and, pursuant to (S)141 of the General Corporation Law, a member
of the Board of Directors of the corporation may have more or less than one vote
per director as follows:
(a) Class A Common. The holders of Class A Common Stock, as a class,
--------------
shall have the right to (i) vote 50.1% of the corporation's voting interests on
all matters and (ii) elect four members of the Board of Directors (the "Class A
Board Designees"). Each Class A Board Designee shall have one (1) vote on each
matter submitted to a vote of the Board of Directors. Subject to the foregoing,
the holder of each share of Class A Common Stock shall have the right to one
vote, and shall be entitled to notice of any shareholders' meeting in accordance
with the bylaws of this corporation, and shall be entitled to vote upon such
matters and in such manner as may be provided by law.
(b) Class B Common. Except as may be specifically required by law,
--------------
the holders of Class B Common Stock shall have no voting rights.
(c) Class C Common. The holders of the Class C Common Stock, as a
--------------
class, shall have the right to (i) vote 49.9% of the Company's voting interests
on all matters and (ii) elect that number of members of the Board of Directors
as are from time to time set forth in the corporation's bylaws (the "Class C
Board Designees"). The Class C Board Designees collectively will have three (3)
votes on each matter submitted to a vote of the Board of Directors. Subject to
the foregoing, the holder of each share of Class C Common Stock shall have the
right to one vote, and shall be entitled to notice of any shareholders' meeting
in accordance with the bylaws of this corporation, and shall be entitled to vote
upon such matters and in such manner as may be provided by law.
5. Redemption.
----------
(a) If, at any time, a holder of shares of Class C Common Stock
acquires additional shares of Class C Common Stock, or is otherwise attributed
with ownership of such shares, that would cause the corporation to violate any
Entrepreneurs' Requirement (as defined in subsection 3(a)(iii) of this Article)
or any requirement of the FCC regarding foreign ownership ("Foreign Ownership
Requirement") (Entrepreneurs' Requirement and Foreign Ownership Requirement,
collectively known as "FCC Violation"), then this corporation may, at the option
of the Board of Directors, redeem such sufficient number of shares of Class C
Common Stock to eliminate the FCC Violation by paying in cash therefor a sum
equal to the Redemption Price; provided that in the event there is a violation
of the Foreign Ownership Requirement caused by a holder of Class C Common Stock,
the corporation shall first redeem the stock of the foreign stockholder which
most recently purchased its first shares of the stock of the corporation at the
Redemption Price set forth in subsection (i) below and then if necessary shall
redeem at the Redemption Price set forth in subsection (ii) below the stock of
other foreign stockholders of the corporation, always redeeming first the stock
of the foreign stockholder which most recently purchased its first shares of the
stock of the Company. The Redemption Price shall equal such price as mutually
determined by such stockholders and the corporation, or, if no agreement can be
reached, shall equal either (i) seventy-five percent (75%) of the fair market
value of the Class C Common Stock where such holder caused the FCC Violation, or
(ii) one hundred percent (100%) of the fair market value where the FCC Violation
was caused by no fault of the holder; provided that the determination of whether
such party caused the FCC Violation shall be made, in
4.
<PAGE>
good faith, by the Board of Directors. The fair market value of such shares of
Class C Common Stock described in the preceding sentences shall be determined as
follows:
(i) If the Class C Common Stock is traded on a national
securities exchange or through the Nasdaq National Market the
value shall be deemed to be the average of the closing prices
of the securities on such exchange over the thirty-day period
ending three (3) days prior to the closing;
(ii) If traded over-the-counter, the value shall be deemed to
be the average of the closing bid or sale prices (whichever is
applicable) over the thirty-day period ending three (3) days
prior to the closing; and
(iii) If there is no active public market, the value shall be
the fair market value thereof, as determined in good faith by
the Board of Directors.
(b) At least five (5) but no more than thirty (30) days prior to a
Redemption Date, written notice shall be mailed, first class postage prepaid, to
each holder of record (at the close of business on the business day next
preceding the day on which notice is given) of the shares of Class C Common
Stock to be redeemed, at the address last shown on the records of this
corporation for such holder, notifying such holder of the redemption to be
effected, specifying the number of shares to be redeemed from such holder, the
Redemption Date, the Redemption Price, the place at which payment may be
obtained and calling upon such holder to surrender to this corporation, in the
manner and at the place designated, his, her or its certificate or certificates
representing the shares to be redeemed (the "Redemption Notice"). Except as
provided in subsection (5)(c) on or after the Redemption Date, each holder of
shares of Class C Common Stock to be redeemed shall surrender to this
corporation the certificate or certificates representing such shares, in the
manner and at the place designated in the Redemption Notice, and thereupon the
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be cancelled. In the event less than all the
shares represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.
(c) From and after the Redemption Date, unless there shall have been a
default in payment of the Redemption Price, all rights of the holders of shares
of Class C Common Stock designated for redemption in the Redemption Notice as
holders of such shares of Class C Common Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of this corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the corporation legally
available for redemption of shares of Class C Common Stock on any Redemption
Date are insufficient to redeem the total number of shares of Class C Common
Stock to be redeemed on such date, those funds which are legally available will
be used to redeem the maximum possible number of such shares ratably among the
holders of such shares to be redeemed based upon their holdings of Class C
Common Stock. The shares of Class C Common Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences provided herein. At
any time thereafter when additional funds of the corporation are legally
available for the redemption of shares of Class C Common Stock, such funds will
immediately be used to redeem the balance of the shares which the corporation
has become obliged to redeem on any Redemption Date but which it has not
redeemed.
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ARTICLE V
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of the corporation.
ARTICLE VI
The number of directors of the corporation shall be fixed from time to
time by a bylaw or amendment thereof duly adopted by the Board of Directors or
by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws of
the corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the corporation.
ARTICLE IX
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is hereafter amended
to authorize, with the approval of a corporation's stockholders, further
reductions in the liability of the corporation's directors for breach of
fiduciary duty, then a director of the corporation shall not be liable for any
such breach to the fullest extent permitted by the Delaware General Corporation
Law as so amended. Any repeal or modification of the foregoing provisions of
this Article VIII by the stockholders of the corporation shall not adversely
affect any right or protection of a director of the corporation existing at the
time of such repeal or modification.
ARTICLE X
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation."
FOURTH: The foregoing Amended and Restated Certificate of Incorporation
has been duly adopted by the Corporation's Board of Directors and Stockholders
in accordance with the applicable provisions of Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
6.
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[intentionally blank]
7.
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IN WITNESS WHEREOF, the undersigned have caused the Corporation to
execute this certificate on this 15th day of May, 1996.
GENERAL WIRELESS, INC.
By:/s/ Roger D. Linquist
--------------------------------
Roger D. Linquist, President
Attest: /s/ Edward M. Leonard
---------------------
Edward M. Leonard
Assistant Secretary
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
GENERAL WIRELESS, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be at the principal office of the
Prentice-Hall Corporation System, Inc. in the City of Wilmington, County of New
Castle, State of Delaware, or at such other place as shall be determined by the
Board.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held at such time and place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year 1994,
shall be held at such date and time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which they
shall elect by a plurality vote a board of directors, and transact such other
business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
<PAGE>
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the Board of
Directors, of all of the directors designated by the holders of shares of Class
C Common Stock or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not fewer than ten (10) nor more than sixty (60) days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of incorporation
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three years
from its date, unless the proxy provides for a longer period.
Section 11. Unless otherwise provided in the certificate of incorporation,
any action required to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt
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notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be determined by resolution of the Board of Directors or by the
stockholders at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.
Section 2. Except as otherwise provided in the Stockholders Agreement,
dated as of December 1, 1995 among the corporation and the stockholders party
thereto (the "Stockholders Agreement"), vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify, unless sooner displaced. If there are no directors
in office, then an election of directors may be held in the manner provided by
statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these bylaws directed or required to
be exercised or done by the stockholders.
Section 4. In accordance with the certificate of incorporation, the Class
A Board Designees (as defined in the certificate of incorporation) shall each be
entitled to one (1) vote on all matters presented to a vote of the Board of
Directors and the Class C Board Designees (as defined in the certificate of
incorporation) shall collectively be entitled to three (3) votes on all matters
presented to a vote of the Board of Directors. Accordingly, each Class C Board
Designee may have more or less than one (1) vote in accordance with (S)141 of
the Delaware General Corporations Law.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 6. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in
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order legally to constitute the meeting, provided a quorum shall be present. In
the event of the failure of the stockholders to fix the time or place of such
first meeting of the newly elected Board of Directors, or in the event such
meeting is not held at the time and place so fixed by the stockholders, the
meeting may be held at such time and place as shall be specified in a notice
given as hereinafter provided for special meetings of the Board of Directors, or
as shall be specified in a written waiver signed by all of the directors.
Section 7. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
Section 8. Special meetings of the board may be called by the president on
two (2) days' notice to each director by mail or forty-eight (48) hours notice
to each director either personally or by telegram; special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of two directors unless the board consists of only one director,
in which case special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of the sole director.
Section 9. At all meetings of the board a majority of the voting power of
all directors shall constitute a quorum for the transaction of business and the
act of a majority of the voting power of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 10. Unless otherwise restricted by the certificate of
incorporation of these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 11. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF THE BOARD OF DIRECTORS
Section 12. The Board of Directors may, by resolution passed by a majority
of the whole board, designate one or more committees, each committee to consist
of one or more of the directors of the corporation. The board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member.
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Any such committee, to the extent provided in the resolution of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 13. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
REMOVAL OF DIRECTORS
Section 15. Unless otherwise restricted by the certificate of
incorporation or these bylaws, any director or the entire Board of Directors may
be removed, with or without cause, by the holders of a majority of shares
entitled to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
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Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board of
Directors and shall include a president, chief financial officer, secretary and
assistant secretary and may include such additional officers as may from time to
time be authorized by these bylaws. The Board of Directors may elect from among
its members a Chairman of the Board and a Vice Chairman of the Board. The Board
of Directors may also choose one or more vice-presidents, assistant secretaries
and assistant treasurers. Any number of offices may be held by the same person,
unless the certificate of incorporation or these bylaws otherwise provide.
Section 2. The Board of Directors, at its first meeting after each annual
meeting of stockholders, shall choose a president, chief financial officer,
secretary and assistant secretary and may include such additional officers as
may from time to time be authorized by these bylaws.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such powers as are, from time to time,
assigned to him by the Board and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders at which he shall be present. He shall have
and may exercise such powers as are, from time to time, assigned to him by the
Board and as may be provided by law.
THE PRESIDENT AND VICE-PRESIDENTS
Section 8. The president shall be the chief executive officer of the
corporation; and in the absence of the Chairman and Vice Chairman of the Board
he shall preside at all
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meetings of the stockholders and the Board of Directors; he shall have general
and active management of the business of the corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect.
Section 9. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
Section 10. In the absence of the president or in the event of his
inability or refusal to act, the vice-president, if any, (or in the event there
be more than one vice-president, the vice-presidents in the order designated by
the directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 11. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 12. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the
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president and the Board of Directors, at its regular meetings, or when the Board
of Directors so requires, an account of all his transactions as treasurer and of
the financial condition of the corporation.
Section 15. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 16. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by the
chairman or vice-chairman of the Board of Directors, or the president or a vice-
president, and by the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Certificates may be issued for partly-paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock; provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
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LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholder or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty (60) nor less than ten (10)
days before the date of such meeting, nor more than sixty (60) days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
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ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, deem proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized
under the laws of the State of Delaware, as those laws may be amended and
supplemented from time to time, indemnify any director made, or threatened to be
made, a party to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of being a director of the
corporation or a predecessor corporation or, at the corporation's request, a
director or officer of another corporation; provided, however, that the
corporation shall indemnify any such agent in connection with a proceeding
initiated by such agent only if such proceeding was authorized by the Board of
Directors of the corporation. The indemnification provided for in this Section 6
shall: (i) not be deemed exclusive of any other rights to which those
indemnified may be entitled under any bylaw, agreement or vote of stockholders
or disinterested directors
10.
<PAGE>
or otherwise, both as to action in their official capacities and as to action in
another capacity while holding such office, (ii) continue as to a person who has
ceased to be a director, and (iii) inure to the benefit of the heirs, executors
and administrators of such a person. The corporation's obligation to provide
indemnification under this Section 6 shall be offset to the extent of any other
source of indemnification or any otherwise applicable insurance coverage under a
policy maintained by the corporation or any other person.
Expenses incurred by a director of the corporation in defending a
civil or criminal action, suit or proceeding by reason of the fact that he is or
was a director of the corporation (or was serving at the corporation's request
as a director or officer of another corporation) shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized by relevant sections of the
General Corporation Law of Delaware. Notwithstanding the foregoing, the
corporation shall not be required to advance such expenses to an agent who is a
party to an action, suit or proceeding brought by the corporation and approved
by a majority of the Board of Directors of the corporation which alleges willful
misappropriation of corporate assets by such agent, disclosure of confidential
information in violation of such agent's fiduciary or contractual obligations to
the corporation or any other willful and deliberate breach in bad faith of such
agent's duty to the corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract between the corporation and each director who serves in such capacity
at any time while this bylaw is in effect, and any repeal or modification
thereof shall not affect any rights or obligations then existing with respect to
any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in part upon any
such state of facts.
The Board of Directors in its discretion shall have power on behalf of
the corporation to indemnify any person, other than a director, made a party to
any action, suit or proceeding by reason of the fact that he, his testator or
intestate, is or was an officer or employee of the corporation.
To assure indemnification under this Section 6 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been "fiduciaries" of any employee benefit plan of the corporation
which may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Section 6, be interpreted as follows:
an "other enterprise" shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the corporation which is governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974,"
as amended from time to time; the corporation shall be deemed to have requested
a person to serve an employee benefit plan where the performance by such person
of his duties to the corporation also imposes duties on, or otherwise involves
services by, such person to the plan or participants or beneficiaries of the
plan; excise taxes assessed on a person with respect to an employee benefit plan
pursuant to such Act of Congress shall be deemed "fines."
QUALIFYING INVESTORS AND FCC REQUIREMENTS
Section 7. In order that the corporation may determine the
stockholders that are
11.
<PAGE>
eligible to be Qualifying Investors of the corporation (as such term may be
defined by the Federal Communications Commission ("FCC") from time to time and
as identified in the corporation's applications and filings with the FCC), the
officers of the corporation shall obtain from each Qualifying Investor such
investor's consent to be treated by the corporation as a Qualifying Investor,
which consent shall identify those securities of the corporation that such
Qualifying Investor deems to be subject to the Qualifying Investors transfer
restrictions adopted by the corporation (the "Qualifying Investor Equity") and
which consent may not be subsequently amended by the Qualifying Investor without
consent of the corporation. If the percentage of Qualifying Investor Equity
would, as a result of any securities issuance, sale by a Qualifying Investor or
other dilutive event, drop below the percentage of equity required by the FCC to
be held by Qualifying Investors (which, as of December 1, 1995, is fifteen
percent (15%)), the corporation shall, on or prior to the date of the such
event, automatically grant stock options (pursuant to a stock incentive plan as
adopted by the Board of Directors and as approved by the stockholders of the
corporation) to the Qualifying Investors to meet the appropriate FCC
requirements; provided, however, that the Board of Directors may designate those
Qualifying Investors that shall receive such options, but absent such
designation, such options shall be granted on a pro-rata basis to the Qualifying
Investors based upon the percentage of the Qualifying Investor Equity held by
each Qualifying Investor; provided, further, that the Board of Directors may
elect to not grant such options if an alternative legal and appropriate means is
approved to meet the FCC requirements.
12.
<PAGE>
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new
bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the certificate of
incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws.
13.
<PAGE>
CERTIFICATE OF ASSISTANT SECRETARY
OF
GENERAL WIRELESS, INC.
The undersigned, Edward M. Leonard, hereby certifies that he is the
duly elected and acting Assistant Secretary of General Wireless, Inc., a
Delaware corporation (the "Corporation"), and that the Bylaws attached hereto
constitute the Bylaws of said Corporation as duly adopted by Unanimous Written
Consent of the Board of Directors on November 30, 1995.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his name
this 30th day of November, 1995.
/s/ Edward M. Leonard
---------------------
Edward M. Leonard
Assistant Secretary
14.
<PAGE>
EXHIBIT 4.3
GENERAL WIRELESS, INC.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of December
1, 1995, between General Wireless, Inc., a Delaware corporation (the "Company"),
and the undersigned holders of Class C Common Stock, par value $0.01 per share
(the "Class C Common Stock"), of the Company (the "Stockholders").
WHEREAS, in order to induce the Stockholders to invest in the Company,
the Company has agreed to grant to them certain registration rights on the terms
and conditions set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. Certain Definitions. As used in this Agreement the following
-------------------
initially capitalized terms shall have the following meanings:
License Grant Date. That date which is 360 days after the date PCS
------------------
licenses are granted to the Company.
Permitted Transferee: Any transferee to which a Stockholder may have
--------------------
hereafter lawfully transferred all or a part of the Restricted Stock.
Participating Stockholder: As defined in Section 2.2 and as modified
-------------------------
in accordance with Section 5.
Person: A corporation, an association, a partnership, an
------
organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
Restricted Stock: The shares of Class C Common Stock of the Company,
----------------
including shares of Class C Common Stock issuable upon the exercise of any
warrant, or any capital stock of the Company issued in exchange or in
replacement of shares of Class C Common Stock; provided, however, that any such
-------- -------
securities shall cease to be Restricted Stock with respect to a proposed offer
or sale thereof (i) when a registration statement with respect to the sale of
such securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with the plan of
distribution set forth in such registration statement, (ii) if the Class C
Common Stock of the Company is admitted to trading or is listed on a national
securities exchange, the Nasdaq National Market or the National Association of
Securities Dealers, Inc. Automated Quotations System ("NASDAQ") and to the
extent that such securities, in the opinion of counsel to
<PAGE>
the Stockholders, are permitted to be distributed pursuant
to Rule 144 without volume limitations and without an effective registration
statement or (iii) they shall have ceased to be outstanding.
Registration Expenses: As defined in Section 2.8 of this Agreement.
---------------------
Rule 144: Rule 144 promulgated under the Securities Act, or any
--------
successor rule to similar effect.
SEC: The United States Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, or any
--------------
successor statute.
Subsidiaries: All corporations or partnerships as to which the
------------
designated Person has either a direct or indirect ownership interest, by way of
stock ownership or otherwise, representing at least 51% of the voting power of
such corporations or the right to otherwise control the decision making of such
corporation or partnership.
2. Registration under Securities Act.
---------------------------------
2.1 Demand Registration.
-------------------
a. Request. Subject to the provisions of this Section
-------
2.1, at any time after the License Grant Date, the Stockholders shall have up to
two demand rights (exercisable by the request of Stockholders of at least 25% of
the outstanding shares of Restricted Stock) that the Company effect the
registration under the Securities Act of (i) all Restricted Stock or (ii) shares
of common stock that represent at least 15% of the Restricted Stock originally
issued to such Stockholders if Stockholders are requesting registration of less
than all of their Restricted Stock. Thereupon, the Company will (i) notify all
other holders of record of shares of Restricted Stock that the Company has
received a demand for registration of the Restricted Stock and (ii) use its best
efforts to effect the registration under the Securities Act of the Restricted
Stock which the Company has been requested to register by all participating
Stockholders who elect to participate in the registration within 10 business
days of the notice referenced in (i) above.
b. Registration of Other Securities. Except as set
--------------------------------
forth in Section 2.1(g) below, whenever the
2
<PAGE>
Company shall effect a registration pursuant to this Section 2.1, no securities
other than Restricted Stock shall be included among the securities covered by
such registration unless (i) the managing underwriter of such offering shall
have advised the Stockholders in writing that the inclusion of such other
securities would not adversely affect such offering or (ii) the Stockholders
shall have consented in writing to the inclusion of such other securities.
c. Registration Statement Form. Registrations under
---------------------------
this Section 2.1 shall be on such appropriate registration form of the SEC (i)
as shall be selected by the Company and as shall be reasonably acceptable to the
Stockholders and (ii) as shall permit the disposition of such Restricted Stock
in accordance with the intended method or methods of disposition. The Company
agrees to include in any such registration statement all information which, in
the opinion of counsel to the Stockholders and counsel to the Company, is
required to be included.
d. Effective Registration Statement. A registration
--------------------------------
requested pursuant to this Section 2.1 shall not be deemed to have
been effected and will not be considered one of the two demand registrations
which may be requested by the Stockholders (i) unless a registration statement
with respect thereto has become effective, (ii) if after it has become
effective, it does not remain effective for a period of at least 180 days
(unless the Restricted Stock registered thereunder has been sold or disposed of
prior to the expiration of such 180 day period) or such registration is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court for any reason and has not
thereafter become effective for a period of at least 180 days, or (iii) if the
conditions to closing specified in any underwriting agreement entered into in
connection with such registration are not satisfied or waived other than by
reason of the failure or refusal of the Stockholders to satisfy or perform a
condition to such closing.
e. Priority in Demand Registrations. If a demand
--------------------------------
registration pursuant to this Section 2.1 involves an underwritten offering, the
Stockholders shall cause the managing underwriter to advise the Company in
writing (with a copy sent to each participating Stockholder) as to the number of
securities that can be included in such registration within a price range
acceptable to the Stockholders (the "Maximum Offering Amount"). Such
registration will include only up to that number of shares of Restricted Stock
which does not exceed the Maximum Offering Amount, drawn pro
---
3
<PAGE>
rata from the Stockholders on the percentage that the Restricted Stock held
- ----
by each Stockholder is of the total number of shares of Restricted Stock which
all Stockholders hold. If any participating Stockholder determines to include
less than its pro rata share of the Maximum Offering Amount in such offering,
--- ----
such difference shall be divided pro rata among the other participating
--- ----
Stockholders in proportion to the respective holdings of Restricted Stock of all
such participating Stockholders desiring to include additional Restricted Stock.
f. Number and Size of Demand Registrations; Other
----------------------------------------------
Limitations. Notwithstanding anything in this Section 2.1 to the contrary,
- -----------
the Company shall not be required to effect more than two demand registrations
at the request of the Stockholders pursuant to Section 2.1. of this Agreement,
without regard to any subsequent transfer of any Restricted Stock by a
Stockholder and the assignment of any rights hereunder pursuant to Section 5. A
registration shall not count as one of the permitted demand registrations
hereunder unless the holders of Restricted Securities are able to register and
sell at least 80% of the Restricted Securities requested to be included in such
registration. The Company shall not be required to effect more than one
registration pursuant to Sections 2.1(a) or (h) hereof during any 12-month
period. Moreover, no Stockholder shall be allowed to participate in any
registration pursuant to Sections 2.1(a) or 2.1(h) hereof if the Class C Common
Stock is admitted to trading or is listed on a national securities exchange, the
Nasdaq National Market or NASDAQ and such Stockholder is eligible to sell its
shares of Restricted Stock without volume limitations and without an effective
registration statement.
g. Incidental Company Registration. If the
-------------------------------
Stockholders make a request for a registration pursuant to Section 2.1(a), the
Company may determine to include securities of the same class sought to be
registered by the Stockholders for sale for the Company's own account by giving
written notice thereof to the Stockholders specifying the number of shares or
amount of interests which the Company wishes to have registered, but only to the
extent that the number of shares or amount of interests the Company seeks to
include does not, when aggregated with the number of shares of Restricted Stock
requested to be registered by the Stockholders, exceed the Maximum Offering
Amount, and subject to the limitations of Section 2.1(b).
h. Form S-3 Demand Registration. Notwithstanding the
----------------------------
foregoing, if the Company at any time qualifies
4
<PAGE>
to register common stock under the Securities Act by registration on Form S-3
and such registration of common stock is expected to generate gross proceeds in
an amount equal to or exceeding $10 million, the Stockholders shall then be
entitled to request the registration under the Securities Act of the Restricted
Stock from time to time without regard to number, pursuant to the notice and
other applicable provisions of this Section 2.1.
5
<PAGE>
2.2 Incidental Registration.
-----------------------
a. Right to Include the Restricted Stock. If the Company
-------------------------------------
at any time proposes to register securities under the Securities Act by
registration on Forms S-1, S-2 or S-3 or any successor or similar form(s)
(except registrations on Forms S-4 or S-8 or any successor or similar forms),
whether for sale for its own account or pursuant to another demand for
registration granted any other party, it will give prompt written notice each
such time to the Stockholders of its intention to do so and of the Stockholders'
rights under this Section 2.2. Upon the written request of any Stockholder
(specifying the Restricted Stock intended to be disposed of and the intended
method of disposition thereof), made within 15 business days after the receipt
of any such notice, the Company will use its best efforts to effect the
registration under the Securities Act of all Restricted Stock which the Company
has been so requested to register by the Stockholders to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of such Restricted Stock to be so registered (any Stockholder if
giving notice following receipt of such a notice from the Company being herein
referred to in this Section 2.2 as a "Participating Stockholder"). If the
Company thereafter determines for any reason not to register or to delay
registration of such securities, the Company, by act of its Board of Directors,
may, at its election, give written notice of such determination to each
Participating Stockholder and, thereupon, (i) in the case of a determination not
to register, shall be relieved of the obligation to register such Restricted
Stock in connection with such registration (but not from any obligation of the
Company to pay the Registration Expenses in connection therewith, as provided in
Section 2.8), without prejudice, however, to the rights (if any) of a
Stockholder to request that such registration be effected as a registration
under Section 2.1, and (ii) in the case of a determination to delay
registration, shall be permitted to delay registering any Restricted Stock, for
the same period as the delay in registration of such other securities. The
Company will pay all Registration Expenses in connection with registration of
Restricted Stock requested pursuant to this Section 2.2.
b. Priority in Incidental Registration Rights in
---------------------------------------------
Connection with Registrations for Company Account. If the registration referred
- -------------------------------------------------
to in Section 2.2(a) is to be an underwritten primary registration on behalf of
the Company, and the managing underwriter(s) advise the Company in writing that
in their good faith opinion such offering would
6
<PAGE>
be materially and adversely affected by the inclusion therein of the total
number of shares of Restricted Stock requested to be included therein by
Participating Stockholders under this Agreement, the Company shall include in
such registration: (1) first, all securities the Company proposes to sell for
its own account ("Company Securities"), and (2) second, up to the full number of
shares of Restricted Stock requested to be included in such registration by the
Participating Stockholders drawn from them pro rata based on the number of
--- ----
shares of Restricted Stock owned by each Participating Stockholder.
c. Limitations; Exceptions. The Company shall not
-----------------------
be required to effect any registration of Restricted Stock under this Section
2.2 incidental to the registration of any of its securities in connection with
mergers, acquisitions, exchange offers, subscription offers, dividend
reinvestment plans or stock option or other employee benefit plans. No
Participating Stockholder shall be allowed to participate in any registration
pursuant to this Section 2.2 hereof if the Class C Common Stock is admitted to
trading or listed on a national securities exchange, the Nasdaq National Market
or NASDAQ and such Stockholder is eligible to sell its shares of Restricted
Stock without volume limitations and without an effective registration
statement. No registration of Restricted Stock effected under this Section 2.2
shall relieve the Company of its obligation to effect registrations of
Restricted Stock pursuant to Section 2.1 hereof.
2.3 Registration Procedures. In connection with the Company's
-----------------------
obligations pursuant to Sections 2.1 and 2.2 hereof, the Company will use its
best efforts to effect such registrations to permit the sale of Restricted Stock
in accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible:
a. prepare (within 90 days after a request for registration is made
to the Company in the case of a registration pursuant to Section 2.1(a) and in
any event as soon as possible) and file with the SEC, a registration statement
or registration statements on any appropriate form under the Securities Act,
which form shall be available for the sale of the Restricted Stock by the
holders thereof in accordance with the intended method or methods of
distribution thereof, and use its best efforts to cause such registration
statement to become effective and to remain continuously effective for a period
of 180 days following the date on which such registration statement is declared
effective,
7
<PAGE>
provided that the Company shall have no obligation to maintain the effectiveness
of such registration statement after the sale of all Restricted Stock registered
thereunder;
b. prepare and file with the SEC such amendments and post-effective
amendments to a registration statement as may be necessary to keep such
registration statement effective for the applicable period; cause the related
prospectus to be supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities Act; and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during the applicable
period in accordance with the intended methods of disposition by a Stockholder
or a Participating Stockholder set forth in such registration statement or
supplement to such prospectus;
c. notify each Stockholder or a Participating Stockholder whose
Restricted Stock is to be covered by the registration statement and the managing
underwriters, if any, promptly, and (if requested by any such Person) confirm
such advice in writing, (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and, with respect to a registration
statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the SEC for amendments or supplements to a registration
statement or related prospectus or for additional information, (iii) of the
issuance by the SEC of any stop order suspending the effectiveness of a
registration statement or the initiation of any proceedings for that purpose,
(iv) if at any time the representations and warranties of the Company made as
contemplated by paragraph (m) below cease to be true and correct, (v) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of any of the Restricted Stock for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (vi) of the
happening of any event which requires the making of any changes in a
registration statement or related prospectus so that such documents will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (vii) of the Company's reasonable determination that a post-
effective amendment to a registration statement would be appropriate;
d. make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a registration statement, or the lifting
of any suspension
8
<PAGE>
of the qualification of any of the Restricted Stock for sale in any
jurisdiction, at the earliest possible moment;
e. if requested by the managing underwriters, a Stockholder or a
Participating Stockholder, immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters, the
Stockholders and the Participating Stockholders agree should be included therein
relating to the sale and distribution of Restricted Stock, including, without
limitation, information with respect to the number of shares of Restricted Stock
being sold to such underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten (or best
efforts) offering of the Restricted Stock to be sold in such offering; make all
required filings of such prospectus supplement or post-effective amendment as
soon as notified of the matters to be incorporated in such prospectus supplement
or post-effective amendment; and supplement or make amendments to any
registration statement if requested by a Stockholder, a Participating
Stockholder or any underwriter of such Restricted Stock;
f. furnish to each Stockholder and each Participating Stockholder
whose Restricted Stock is covered by the Registration Statement and each
managing underwriter, without charge, at least one conformed copy of the
registration statement or statements and any post-effective amendment thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits (including those incorporated by reference);
g. deliver to each Stockholder whose Restricted Stock is covered by
the registration statement, each other Participating Stockholder and the
underwriters, if any, without charge, as many copies of the prospectus or
prospectuses (including each preliminary prospectus) and any amendment or
supplement thereto and such other documents as such Persons may reasonably
request; the Company consents to the use of such prospectus or any amendment or
supplement thereto by a Stockholder, a Participating Stockholder and the
underwriters, if any, in connection with the offering and sale of the Restricted
Stock covered by such prospectus or any amendment or supplement thereto;
i. prior to any public offering of Restricted Stock, use its best
efforts to register or qualify or cooperate with each Stockholder whose
Restricted Stock is covered by such registration statement, each other
Participating Stockholder, the underwriters, if any, and their re-
9
<PAGE>
spective counsel in connection with the registration or qualification of such
Restricted Stock for offer and sale under the securities or blue sky laws of
such jurisdictions as each Stockholder, each Participating Stockholder, or any
underwriter reasonably requests in writing; keep each such registration or
qualification effective during the period such registration statement is
required to be kept effective and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of the Restricted
Stock covered by the applicable registration statement; provided that the
--------
Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process in any such jurisdiction where it is
not then so subject;
j. cooperate with each Stockholder whose Restricted Stock is
covered by such registration statement, each Participating Stockholder and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Restricted Stock to be sold and not bearing any
restrictive legends unless required by applicable law; and enable such
Restricted Stock to be in such denominations and registered in such names as the
managing underwriters may request at least two business days prior to any sale
of Restricted Stock to the underwriters;
k. use its best efforts to cause the Restricted Stock covered by
the applicable registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to consummate the
disposition of such Restricted Stock;
l. upon the occurrence of any event contemplated by paragraph
(c)(vi) above, prepare a supplement or post-effective amendment to the
applicable registration statement or related prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Restricted Stock being sold
thereunder, such prospectus will not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
not misleading;
m. enter into such agreements (including an
underwriting agreement) and take all such other actions in connection therewith
in order to expedite or facilitate the disposition of such Restricted Stock and
in such connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registra-
10
<PAGE>
tion, (i) make such representations and warranties to each Stockholder whose
Restricted Stock is covered by such registration statement and each other
Participating Stockholder with respect to the registration statement, prospectus
and documents incorporated by reference, if any, in form, substance and scope as
are customarily made by issuers to underwriters in underwritten offerings and
confirm the same if and when requested; (ii) furnish to each such Stockholder
and each other Participating Stockholder an opinion of counsel for the Company
addressed to each such Stockholder and dated the date of the closing under the
underwriting agreement (if any) (or if such offering is not underwritten, dated
the effective date of the registration statement), and (ii) use its best efforts
to furnish to each such Stockholder and each other Participating Stockholder a
"cold comfort" letter addressed to each such Stockholder and signed by the
independent public accountants who have audited the Company's financial
statements included in such registration statement, in each such case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to underwriters in
underwritten public offerings of securities and such other matters as each such
Stockholder and each other Participating Stockholder may reasonably request and,
in the case of such accountants' letter, with respect to events subsequent to
the date of such financial statements; and (vi) the Company shall deliver such
documents and certificates as may be requested by each such Stockholder, each
Participating Stockholder and the managing underwriters, if any, to evidence
compliance with this clause (m) and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the Company; all
of the above to be done at each closing under such underwriting or similar
agreement or as and to the extent required thereunder;
n. otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make generally available to its security
holders earnings statements satisfying the provisions of Section 11(a) of the
Securities Act, as soon as reasonably practicable after the end of any 12-month
period (i) commencing at the end of any fiscal quarter in which Restricted Stock
are sold to underwriters in a firm or best efforts underwritten offering and
(ii) beginning with the first day of the Company's first fiscal quarter next
succeeding each sale of Restricted Stock after the effective date of a
registration statement, which statements shall cover said 12-month periods; and
11
<PAGE>
o. use its best efforts to cause all Restricted Stock covered by
each registration to be listed on each securities exchange and inter-dealer
quotation system on which a class of common equity securities of the Company is
then listed and to pay all fees and expenses in connection therewith.
The Company may require each Stockholder whose Restricted Stock is
covered by a registration statement and each other Participating Stockholder to
furnish to the Company such information regarding itself and the distribution of
such Restricted Stock as the Company may from time to time reasonably request in
writing in order to comply with the Securities Act and each such Person agrees
to notify the Company as promptly as practicable of any inaccuracy or change in
information it has previously furnished to the Company in writing or of the
happening of any event, in either case as a result of which any prospectus
relating to such registration contains an untrue statement of a material fact
regarding such Person or the distribution of such Restricted Stock or omits to
state any material fact regarding such Person or the distribution of such
Restricted Stock required to be stated therein or necessary to make the
statement therein not misleading in light of the circumstances then existing,
and to promptly furnish to the Company any additional information required to
correct and update any previously furnished information or required such that
such prospectus shall not contain, with respect to such Person or the
distribution of such Restricted Stock, an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing. Each such Stockholder and each Participating Stockholder agrees that,
upon receipt of any notice from the Company of the happening of any event of the
kind described in Sections 2.3(c)(ii), (iii), (v), (vi) or (vii) hereof, such
holder will forthwith discontinue disposition of such Restricted Stock covered
by such registration statement or prospectus until such holder's receipt of the
copies of the supplemented or amended prospectus relating to such registration
statement or prospectus, or until it is advised in writing by the Company that
the use of the applicable prospectus may be resumed, and has received copies of
any additional or supplemental filings which are incorporated by reference in
such prospectus, and, if so directed by the Company, such holder will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies then in such Person's possession, of the prospectus covering the
Restricted Stock current at the time of receipt of such notice.
12
<PAGE>
2.4 Underwritten Offerings.
----------------------
a. Demand Underwritten Offerings. In any offering pursuant
-----------------------------
to a registration requested under Section 2.1 which is to be effected as a firm
commitment underwritten offering, sales shall be made through a nationally
recognized investment banking firm (or syndicate managed by such a firm)
selected by a majority in interest of the Stockholders participating in such
registration and reasonably satisfactory to the Board of Directors of the
Company. The Company shall enter into an underwriting agreement which shall be
reasonably satisfactory in form and substance to a majority in interest of the
Stockholders participating in such registration and which shall contain
representations, warranties and agreements (including indemnification agreements
to the effect and to the extent provided in Section 2.7) as are customarily
included by an issuer in underwriting agreements with respect to secondary
distributions. The Stockholders participating in such registration shall be
parties to such underwriting agreement and the representations and warranties
by, and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of such
Stockholders. The Stockholders shall not be required to make any representations
or warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such Person, such Person's
Restricted Stock and its intended method of distribution and any other
representation required by law.
b. Incidental Underwritten Offerings. If the Company at any
---------------------------------
time proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by a
Participating Stockholder as provided in Section 2.2 and subject to the
provisions of Section 2.2(b), use its best efforts to arrange for such
underwriters to include all the Restricted Stock to be offered and sold by the
Participating Stockholders among the securities to be distributed by
underwriters. The Participating Stockholders participating in the registration
shall be party to the underwriting agreement between the Company and such
underwriters and the representations and warran-
13
<PAGE>
ties by, and the other agreements on the part of, the Company to and for the
benefit of such underwriters shall also be made to and for the benefit of the
Participating Stockholders. Except as provided in this sentence, the
Participating Stockholders shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such Person, such Person's
Restricted Stock and the intended method of distribution and any other
representation required by law.
2.5 Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give each Stockholder participating
in the registration, its underwriters, and its counsel and accountants and each
Participating Stockholder the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
SEC, and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
opinion of each such Stockholder, each Participating Stockholder and such
underwriters' counsel, to conduct a reasonable investigation within the meaning
of the Securities Act.
2.6 Limitations, Conditions and Qualifications to Obligations Under
---------------------------------------------------------------
Registration Covenants. The obligations of the Company to cause the Restricted
- ----------------------
Stock to be registered under the Securities Act are subject to each of the
following limitations, conditions and qualifications:
The Company, by act of its Board of Directors, shall be entitled to
postpone for a reasonable period of time (but not exceeding 90 days during any
12-month period) the filing or effectiveness of any registration statement
otherwise required to be prepared and filed by it pursuant to Section 2.1 if the
Board of Directors of the Company determines, in its reasonable judgment, that
(i) the Company is in possession of material information that has not been
disclosed to the public and the Board of Directors of the Company reasonably
deems it to be advisable not to disclose such information at such time in a
registration statement or (ii) such registration and offering would interfere
with any financing, acquisition, corporate reorganization or other material
transaction involving the Company and its Subsidiaries, taken as a whole, and,
in any such case, the Company promptly gives each Stockholder written notice of
such determination, containing a general statement of the reasons for such
postponement and an approximation of the anticipated delay. If the Company
shall so postpone the filing of a registration statement, a majority of the
Stockholders
14
<PAGE>
shall have the right to withdraw the request for registration by giving written
notice to the Company within 30 days after receipt of the notice of postponement
and, in the event of such withdrawal, such request shall not be counted for
purposes of the requests for registration to which the Stockholders are entitled
pursuant to Section 2.1 hereof.
2.7 Indemnification.
---------------
a. Indemnification by the Company. In the event of any
------------------------------
registration of any Restricted Stock under the Securities Act, the Company will,
and hereby does, indemnify and hold harmless, to the fullest extent permitted by
law, the Stockholders and the Participating Stockholders, their respective
directors, officers, agents, affiliates, each other Person who participates as
an underwriter in the offering or sale of such securities and each other Person,
if any, who controls a Stockholder, a Participating Stockholder or any such
underwriter within the meaning of the Securities Act, against any and all
judgments, fines, penalties, charges, costs, amounts paid in settlement, losses,
claims, damages, liabilities, expenses, or attorney fees, joint or several,
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or SEC, whether pending or threatened, whether or not an indemnified party
is or may be a party thereto, including interest on the foregoing ("Indemnified
Damages"), to which they or any of them may become subject under the Securities
Act or any other statute or common law, insofar as any such Indemnified Damages
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the registration statement relating to
the sale of such securities or any post-effective amendment thereto or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Restricted Stock is
offered ("Blue Sky Filing"), or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading or (ii) any untrue statement or alleged untrue statement of
a material fact contained in any preliminary prospectus, if used prior to the
effective date of such registration statement (unless such statement is
corrected in the final
15
<PAGE>
prospectus and the Company has previously furnished copies thereof to any
Stockholder or Participating Stockholder seeking such indemnification and the
underwriters), or contained in the final prospectus (as amended or supplemented
if the Company shall have filed with the SEC any amendment thereof or supplement
thereto) if used within the period during which the Company is required to keep
the registration statement to which such prospectus relates current, or the
omission or alleged omission to state therein (if so used) a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that the
indemnification agreement contained herein shall not apply to such Indemnified
Damages to a particular Person to be indemnified hereunder arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Person stating that it is for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of a Stockholder, a Participating Stockholder
or any such director, officer, agent, affiliate, underwriter or controlling
Person and shall survive the transfer of such securities by a Stockholder or a
Participating Stockholder.
b. Indemnification by a Stockholder. The Company may require, as
--------------------------------
a condition to including the Restricted Stock of a Stockholder or a
Participating Stockholder in any registration statement filed pursuant to
Section 2.1 or 2.2, that the Company shall have received an undertaking
satisfactory to it from such Stockholder or such Participating Stockholder
severally (in the same manner and to the same extent as each other Stockholder
or Participating Stockholder) to indemnify and hold harmless (in the same manner
and to the same extent as set forth in subdivision (a) of this Section 2.7) the
Company, its officers and directors and each officer of the Company and each
other Person, if any, who controls the Company within the meaning of the
Securities Act with respect to any untrue statement or alleged untrue statement
in, or omission or alleged omission from, such registration statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, if such statement or omission was made in reliance upon
and in conformity with written information such Stockholder or such
Participating Stockholder furnished to the Company through an instrument duly
executed by him specifically stating that it is for use in
16
<PAGE>
the preparation of such registration statement, preliminary prospectus, final
prospectus, amendment or supplement. Such indemnity shall remain in full force
and effect, regardless of any investigation made by or on behalf of the Company
or any such director, officer or controlling Person and shall survive the
transfer of such securities by the Stockholderor the Participating Stockholder
to whom it relates. In no event shall any indemnity paid by a Stockholder or a
Participating Stockholder to the Company or any other Person indemnified
pursuant to this Section 2.7(b) (or to whom contribution is paid pursuant to
Section 2.7(e)), or otherwise, exceed individually or in the aggregate the
proceeds (net of all applicable fees paid by such indemnifying party) received
by such indemnifying party in such offering.
c. Notices of Claims, etc. Promptly after receipt by an
----------------------
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 2.7,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.7, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. In the event that
the indemnifying party advises an indemnified party that it will contest a claim
for indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such
17
<PAGE>
action or claim. In any event, unless and until the indemnifying party elects in
writing to assume and does so assume the defense of any such claim, proceeding
or action, the indemnified party's costs and expenses arising out of the
defense, settlement or compromise of any such action, claim or proceeding shall
be losses subject to indemnification hereunder. The indemnified party shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
indemnified party which relates to such action or claim. The indemnifying party
shall keep the indemnified party fully apprised at all times as to the status of
the defense or any settlement negotiations with respect thereto. If the
indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. If the indemnifying party does not
assume such defense, the indemnified party shall keep the indemnifying party
apprised at all times as to the status of the defense; provided, however, that
the failure to keep the indemnifying party so informed shall not affect the
obligations of the indemnifying party hereunder. Except as provided above with
respect to contested indemnification claims and failures by an indemnifying
party to act, no indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its written consent, provided,
--------
however, that the indemnifying party shall not unreasonably withhold, delay or
- -------
condition its consent. No indemnifying party shall, without the consent of the
indemnified party (which consent shall not be unreasonably withheld), consent to
entry of any judgment or enter into any settlement or other compromise which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
indemnified party with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made.
d. Indemnification Payments. The indemnification required
------------------------
by this Section 2.7 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or Indemnified Damages are incurred.
e. Contribution. If the indemnification provided for in this
------------
Section 2.7 shall for any reason be
18
<PAGE>
held by a court to be unavailable to an indemnified party under subparagraph (a)
or (b) hereof in respect of any Indemnified Damages, then, in lieu of the amount
paid or payable under subparagraph (a) or (b) hereof, the indemnified party and
the indemnifying party under subparagraph (a) or (b) hereof shall contribute to
the aggregate Indemnified Damages, in such proportion as is appropriate to re-
flect the relative fault of the indemnifying party and the indemnified party
with respect to the statements or omissions which resulted in such Indemnified
Damages, as well as any other relevant equitable considerations. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation. The obligations of Stockholders
and Participating Stockholders to contribute as provided in this subparagraph
(e) are several in proportion to the relative value of their respective
Restricted Stock covered by such registration statement and not joint. In
addition, no Person shall be obligated to contribute hereunder any amounts in
payment for any settlement of any action or claim effected without such Person's
consent, which consent shall not be unreasonably withheld.
f. Other Rights, Liabilities. The indemnity agreements contained
-------------------------
herein shall be in addition to (i) any cause of action or similar right of the
indemnified party against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
g. Other Indemnification and Contribution. Indemnification and
--------------------------------------
contribution similar to that specified in the preceding subdivisions of this
Section 2.7 (with appropriate modifications) shall be given by the Company and
each Stockholder whose Registrable Shares are included in a registration and
each other Participating Stockholder with respect to any required registration
or other qualification of Restricted Stock under any federal or state law or
regulation of any governmental authority other than the Securities Act.
2.8 Registration Expenses. The Company will pay all Registration
---------------------
Expenses (as defined below) in connection with any demand registrations of
Restricted Stock; provided that in the case where a registration statement under
--------
Section 2.2 fails to become effective or fails to become effective as provided
in Section 2.1(d), the Company shall additionally pay the fees and expenses of
the Participating Stockholders' counsel and of any other Person retained by
19
<PAGE>
the them. Registration Expenses include all expenses incident to the Company's
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, including fees with respect to filings
required to be made with the SEC and the National Association of Securities
Dealers, Inc., fees and expenses of compliance with securities or blue sky laws,
including, without limitation, reasonable fees and disbursements of counsel for
the underwriters, all word processing, duplicating and printing expenses,
messenger, telephone and delivery expenses, and fees and disbursements of
counsel of the Company, one counsel for the participating stockholders (selected
by a majority in interest of such participating stockholders) and of all
independent certified public accountants of the Company (including the expenses
of any special audit and "cold comfort" letters required by or incident to such
performance), underwriters fees and disbursements (excluding underwriting
discounts and commissions, SEC or fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals relating to the
distribution of the Restricted Stock), securities acts liability insurance if
the Company so desires, fees and expenses of other Persons retained by the
Company (all such expenses being herein called "Registration Expenses").
Registration Expenses shall not include underwriting discounts and commissions
and transfer taxes, if any, and fees and expenses of any counsel to
Participating Stockholders and other expenses of Participating Stockholders.
Except as otherwise provided above, the Company will also pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the listing
of the securities to be registered on any securities exchange, rating agency
fees and the fees and expenses of any Person, including special experts,
retained by the Company.
2.9 Certain Rights of Stockholders If Named in a Registration
---------------------------------------------------------
Statement. If any statement contained in a registration statement under the
- ---------
Securities Act refers to a Stockholder or a Participating Stockholder by name or
otherwise as the holder of any securities of the Company, then a Stockholder or
a Participating Stockholder shall have the right to require the insertion
therein of language, in form and substance reasonably satisfactory to it and the
Company, to the effect that its holdings do not necessarily make it a
"controlling person" of the Company within the meaning of the Securities Act and
is not to be construed as a recommendation of the investment quality of the
Company's securities covered thereby.
20
<PAGE>
3. Rule 144. If the Class C Common Stock is admitted to trading or
--------
listed on a national securities exchange, the Nasdaq National Market or NASDAQ,
the Company shall take all actions and file all such information, documents and
reports as shall be required to enable a Stockholder to sell its Restricted
Stock without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
4. Registration Rights. The Company covenants that it will not grant
-------------------
any right of registration under the Securities Act relating to any of its shares
of capital stock or other securities to any Person other than pursuant to this
Agreement, unless (i) the rights so granted to another Person do not limit or
restrict the Stockholders' right to request two demand registrations as provided
for in Section 2.1 hereof at such times and covering such amount of Restricted
Stock as the Stockholders determine (except as such timing or amount of
Restricted Stock may otherwise be limited by the express terms of this
Agreement) and (ii) the rights so granted to another Person do not limit or
restrict the rights granted pursuant to Section 2.2 hereof to a Stockholder to
have such Restricted Stock included in any registration by the Company under the
Securities Act of any of its securities for its own account (except as such
rights are otherwise expressly limited by the terms of this Agreement).
5. Binding Effect; Assignment. This Agreement shall be binding upon
--------------------------
and inure to the benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns. The Company may not assign its
obligations hereunder. A Stockholder who has not exercised its right to request
a demand registration may assign its rights to request a demand registration to
a Person acquiring by sale, transfer, assignment or other disposition all or at
least 50% of the Restricted Stock such Stockholder holds at such time but only
if such Person agrees in writing to be bound by the terms of this Agreement and
the Stockholder so notifies the Company of the acquisition of its Restricted
Stock and the assignment of its right to request a demand registration; provided
that Mitsui & Co., Ltd., Mitsui & Co. (U.S.A.) and Mitsui Comtek Corp.
(collectively, "Mitsui") shall also have a one-time right to assign its right to
request a demand registration to a Person acquiring by sale, transfer,
assignment or other disposition all or at least 20% of the Restricted Stock held
21
<PAGE>
by Mitsui at such time and only so long as such transferee agrees in writing to
be bound by the terms of this Agreement and Mitsui notifies the Company of the
acquisition and assignment of its right to request a demand registration. A
Stockholder who assigns its right to request a demand registration in connection
with a sale, transfer or disposition of less than all of its Restricted Stock,
shall with respect to its remaining Restricted Stock be entitled to have such
shares included in any demand registration under Section 2.1 or any other
registration under Section 2.2 and in either case, shall be deemed to be a
"Participating Stockholder". In addition, any other Person acquiring Restricted
Stockfrom a Stockholder as to whom a Stockholder did not assign its rights under
this Agreement shall be deemed to be a permitted transferee; provided, however,
such Person shall be required to execute an undertaking agreeing to be bound by
the terms of this Agreement, including the obligations imposed on a
participating Stockholder.
6. Limitations on Sale or Distribution. If a registration under this
------------------------------------
Agreement shall be in connection with the initial public offering of equity
securities of the Company, each holder of Restricted Stock hereby agrees not to
effect any public sale or distribution, including any sale pursuant to Rule 144
under the Securities Act, of any Restricted Stock, and not to effect any such
public sale or distribution of any other equity security of the Company or of
any security convertible into or exchangeable or exercisable for any equity
security of the Company (other than as part of such underwritten public
offering) within 10 days before or 180 days after the effective date of such
registration statement.
7. Miscellaneous.
-------------
a. Injunctions. Irreparable damage would occur in the event that any
-----------
of the provisions of this Agreement was not performed in accordance with its
specific terms or was otherwise breached. Therefore, the parties hereto shall
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court having jurisdiction, such remedy being in
addition to any other remedy to which they may be entitled at law or in equity.
b. Severability. If any term or provision of this Agreement is held
------------
by a court of competent jurisdiction to be invalid, void, or unenforceable, the
remainder of the terms and provisions set forth herein shall remain in
22
<PAGE>
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term or provision.
c. Further Assurances. Subject to the specific terms of this
------------------
Agreement, each of the parties hereto shall make, execute, acknowledge and
deliver such other instruments and documents, and take all such other actions,
as may be reasonably required in order to effectuate the purposes of this
Agreement and to consummate the transactions contemplated hereby.
d. Waivers, Etc. No failure or delay on the part of either party
------------
hereto (or the intended third party beneficiaries referred to herein) in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Agreement
nor consent to any departure therefrom shall in any event be effective unless
the same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given.
e. Entire Agreement. This Agreement contains the entire
----------------
understanding of the parties with respect to the subject matter hereof. The
section headings contained in this Agreement are solely for the purpose of
reference, and shall not in any way affect the meaning or interpretation of this
Agreement.
f. Counterparts; Additional Parties. For the convenience of the
--------------------------------
parties, this Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original but all of which together shall be one
and the same instrument. The Company will permit persons who purchase or
otherwise acquire Class C Common Stock from the Company (including without
limitation, Bear, Stearns & Co. Inc.) after the date hereof to join as parties
to this Agreement from time to time, by executing a signature page in the form
attached hereto for execution by Stockholders; provided, however, that such
signature page shall not be effective unless countersigned by the Company. The
Company shall maintain a master copy of this Agreement, with all such signature
pages attached thereto, and each such holder of Class C Common Stock who has so
executed this
23
<PAGE>
Agreement shall be deemed to be a Stockholder under this Agreement for all
purposes.
g. Notices. All notices, consents, requests, instructions, approvals
--------
and other communications provided for herein shall be validly given, made or
served, if in writing and delivered personally, by facsimile, by overnight
courier or sent by registered mail, postage prepaid as follows:
(ii) if to the Company, to:
General Wireless, Inc.
6688 North Central Expressway
Suite 1170
Dallas, TX 75206
(ii) if to any Stockholder, to the address of such Stockholder set
forth in the Company's register of Stockholders.
Notice given by facsimile shall be deemed delivered on the business day after it
is received by the recipient. Notice given by mail as set out above shall be
deemed delivered five calendar days after the date the same is mailed.
h. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAWS.
i. Amendments. This Agreement may be amended only by a written
----------
agreement signed by the Company and approved by the holders of 66 2/3 of the
outstanding Restricted Stock.
j. Regulated Financial Institutions Compliance Obligations.
-------------------------------------------------------
Nothing in this Agreement shall diminish the continuing obligations of any
financial institution to comply with applicable requirements of law that it
maintain responsibility for the disposition of, and control over its admitted
assets, investments and property, including (without limiting the generality of
the foregoing) the provisions of Section 1411(v) of the New York insurance law,
as amended, and as hereinafter from time to time in effect.
k. Termination of Prior Agreements. All prior agreements
-------------------------------
relating to the matters set forth herein, including the Investors' Rights
Agreement dated July 18,
24
<PAGE>
1994, as amended, the Co-Sale Agreement dated July 18, 1994, as amended and any
Stockholder's Agreement dated July 18, 1994 and June 2, 1995, between the
Company and any party hereto, are hereby terminated in full and superseded in
their entirety by this Agreement and the Stockholders Agreement.
25
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have caused this
Agreement to be duly executed as of the date first above written.
General Wireless, Inc.
By ____________________________
Name:
Title:
Stockholder:____________________
By ____________________________
Name:
Title:
26
<PAGE>
EXHIBIT 4.4
GENERAL WIRELESS, INC.
STOCKHOLDERS AGREEMENT
----------------------
This STOCKHOLDERS AGREEMENT dated as of December 1, 1995 (the
"Agreement") is by and among Roger D. Linquist ("Linquist"), Frederic C.
Hamilton ("Hamilton", and together with Linquist, the "Class A Stockholders"),
the stockholders listed in Schedule 1 hereto (the "Class B Stockholders"), the
stockholders listed in Schedule 2 hereto (the "Class C Stockholders", and
together with the Class A Stockholders and the Class B Stockholders, the
"Stockholders"), and General Wireless, Inc., a Delaware corporation (the
"Company").
WHEREAS, the Stockholders currently own all issued and outstanding
shares of the Company's Class A Common Stock, par value $0.0001 per share (the
"Class A Common Stock"), Class B Common Stock, par value $0.0001 per share (the
"Class B Common Stock"), and Class C Common Stock, par value $0.0001 per share
(the "Class C Common Stock" and together with the Class A Common Stock and Class
B Common Stock, the "Common Stock"); and
WHEREAS, the parties have determined that it is appropriate to enter
into this Agreement governing their relationships with one another.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Representations, Warranties and Covenants of the Parties.
--------------------------------------------------------
1.1 Representations and Warranties. Each of the Stockholders
------------------------------
severally (and not jointly) represents and warrants to each other party to this
Agreement that each of the following statements is true and correct as of the
date hereof and will survive the date hereof:
(a) Organization and Power. Such Stockholder is duly organized,
----------------------
validly existing and in good standing under the laws of its jurisdiction of
formation and has all requisite power and authority to carry on its business as
now conducted, and to execute, deliver and perform its obligations under this
Agreement.
(b) Authorization and Binding Effect. The execution and delivery
--------------------------------
of this Agreement has been duly
<PAGE>
authorized by all requisite action on the part of such Stockholder and
constitutes a valid and binding agreement of such party, enforceable against it
in accordance with its terms, except to the extent that enforcement thereof (i)
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
the availability of equitable remedies which remain subject to the discretion of
a court (regardless of whether enforceability is considered in a proceeding of
law or equity).
1.2 Covenants of the Stockholders. From and after the date hereof
-----------------------------
and so long as such Stockholder owns capital stock of the Company, each of the
Stockholders hereto covenants and agrees as follows:
(a) Attributable Interests. Such Stockholder shall not acquire an
----------------------
attributable interest in shares (as the term attribution is defined by the
Federal Communications Commission (the "FCC")) or hold the positions of officer
or director in the Company or any other Private or Commercial Mobile Radio
Service (as the terms are defined from time to time by the FCC) applicant or
licensee if such actions would cause the Company to lose its eligibility as a
Small Business (as the term is defined from time to time by the FCC) or would
otherwise subject the Company to financial or other penalties imposed by the
FCC. In addition, no Stockholder with an attributable interest (as defined by
the FCC) in the Company will acquire interests or hold a position as an officer
or director attributable to the Company in any other Private or Commercial or
Private Mobile Radio Service applicant or licensee in the same geographic market
as any license held by or applied for by the Company if such Stockholder's
attributable interests under the FCC's rules would cause the Company to exceed
the Company's spectrum ownership limits (as defined by the FCC) for any
particular geographic market. Such Stockholder shall cooperate with the Company
in (i) determining the Stockholder's compliance with this paragraph and (ii) in
the event of noncompliance, executing the measures reasonably necessary to cure
such noncompliance consistent with applicable FCC rules and policies. As of the
date hereof, for example, the FCC defines attributable interests as interests
amounting to (either
2
<PAGE>
directly or through the FCC's "multiplier" rule) five percent or more in a
Commercial or Private Mobile Radio Service licensee held by investors generally,
and interests amounting to (either directly or through the FCC's "multiplier"
rule) ten percent or more in such licensees held by entities defined as
"institutional investors" by the FCC (including, for example, venture capital
firms, insurance companies and pension funds).
(b) Bidding Arrangements. In addition, except as provided for in the
--------------------
FCC's rules no Stockholder shall acquire any interest in or enter into any
contractual arrangement (formal or informal, oral or written) concerning bidding
with any other C block PCS applicant, other than the Company or its
subsidiaries, eligible to participate in the FCC's "C Block" auction of 493
Basic Trading Area Personal Communications Services licenses (as such auction
event is defined by the FCC) or take any other action relating to the C Block
auction that would otherwise conflict with or violate the FCC's competitive
bidding rules prohibiting collusion (as such rules are amended from time to time
by the FCC).
(c) FCC Insulation. Accel Partners IV, L.P. ("Accel") shall make a
--------------
good faith effort to amend by March 1, 1996, its limited partnership agreement
to include language allowing limited partners to insulate their investments in
such partnerships from attribution to the extent required by the FCC's rules,
including but not limited to 47 C.F.R. (S) 24.204(d)(2)(viii)(B) and certify to
the FCC by March 1, 1996 its compliance therewith. In the event Accel Partners
is unable to so amend its limited partnership agreement and its inability to do
so would cause First Plaza Group Trust to have an attributable interest in the
Company under the FCC's rules and policies then in effect, First Plaza Group
Trust covenants that it will cooperate with the Company to cause its ownership
interests therein to be deemed "nonattributable" (for purposes of the FCC's
rules and policies then in effect) by March 1, 1996. First Plaza Group Trust
covenants that it will abide by the insulation provisions of the FCC's rules
with regard to such partnership agreements, including but not limited to 47
C.F.R. (S) 24.204(d)(2)(viii)(B), until such time as the amendment to the Accel
limited partnership agreement is approved or, alternatively, its ownership
interests in
3
<PAGE>
the company are caused to be nonattributable in the manner described in this
paragraph.
(d) Foreign Ownership. Such Stockholder shall comply with the alien
-----------------
ownership restrictions contained in the Communications Act of 1934, as amended,
and the applicable FCC alien ownership rules and policies as they pertain to the
Stockholder's particular investment for as long as such restrictions apply to
the licenses held (directly or indirectly) by the Company. In addition, such
Stockholder shall cooperate with the Company in (i) the Company's preparation
and filing of a waiver request of such alien ownership restrictions, as
necessary, (ii) determining the aggregate total alien ownership interests of the
Company and (iii) complying with any measures necessary for the Company to
remain in compliance with such alien ownership restrictions.
1.3 Covenants of the Company. From and after the date hereof, the
------------------------
Company covenants and agrees as follows:
(a) As long as a Stockholder (together with its affiliates and
subsidiaries) continues to hold at least (i) 25% of the total equity held by
such Stockholder upon consummation of the Offering or (ii) 2% of the total fully
diluted equity of the Company, the Company shall permit any representatives
designated by any such Stockholder, upon reasonable notice and during normal
business hours, to (i) visit and inspect any of the properties of the Company
and its subsidiaries, (ii) examine the corporate and financial records of the
Company and its subsidiaries and make copies thereof or extracts therefrom and
(iii) discuss the affairs, finances and accounts of any such corporations with
the directors, officers, key employees and independent accountants of the
Company and its subsidiaries.
(b) Prior to effecting any redemption pursuant to Section 5 of the
Company's Amended and Restated Certificate of Incorporation, the Company shall
provide such affected Stockholder with reasonable prior notice of the regulatory
problem giving rise to such redemption and, if requested to do so by such
Stockholder, the Company shall cooperate with such affected Stockholder in
arranging another method to minimize or eliminate the regulatory
4
<PAGE>
problem giving rise to such redemption, including but not limited to assisting a
sale of such Stockholder's interest in the Company, amending the Company's
Amended and Restated Certificate of Incorporation and getting relief from the
FCC.
(c) Where a Stockholder is caused to have an attributable interest as
defined by the FCC's rules or exceed any applicable FCC ownership limitations or
other applicable FCC restrictions then in effect as a result of the actions or
omissions by another Stockholder or by the Company, if requested by the
Stockholder the Company shall cooperate with such Stockholder in undertaking the
measures reasonably necessary to cause such Stockholder to not have such an
attributable interest or come into compliance with the applicable FCC rules and
policies then in effect, provided that such measures would not result in a
materially adverse effect on the Company.
2. Rights and Obligations of the Class A Stockholders.
--------------------------------------------------
2.1 Voting Rights. The Class A Stockholders as a class shall at all
-------------
times during the first ten years following the grant of a PCS license (as the
term is defined from time to time by the FCC) to the Company have the right to
vote 50.1% of the Company's voting interests and to elect four members of the
Company's Board of Directors (who will represent four of the seven votes of the
Company's Board of Directors) as provided in Section 2.2 hereof, provided that
the Company and the Class A Stockholders will use their reasonable best efforts
to amend the provisions of this Section 2.1, the Amended and Restated
Certificate of Incorporation and the By-Laws of the Company as each relates to
the special voting rights of the Class A Stockholders of the Company if, and
only to the extent that, (i) the FCC amends or modifies its rules applicable to
the Company relating to voting rights and (ii) counsel for the Company has
delivered a written opinion that the FCC's rules, as amended or modified, allow
the Company to amend or modify the voting rights applicable to its stockholders.
2.2 Designation of Directors. The Class A Stockholders agree to vote
------------------------
all of their Class A Common Stock of the Company and to take all other actions
neces-
5
<PAGE>
sary to cause the election of four directors to the Company's Board of Directors
in the following manner: (a) Linquist shall be entitled to nominate two
directors, (b) Hamilton shall be entitled to nominate one director, and (c)
Linquist and Hamilton, together, shall be entitled to nominate one director
(with any disputes being resolved in accordance with Section 8.13 hereof). The
Class A Stockholders shall vote all their Class A Common Stock to elect the
individuals so nominated to be directors. If the Class A Stockholder or
Stockholders that nominated a particular director give written notice to the
other Class A Stockholders of a desire to remove that director, the Class A
Stockholders shall vote all their Class A Common Stock in favor of removing that
director. If for any reason any director nominated by the Class A Stockholders
ceases to serve as a director, the Class A Stockholder or Stockholders that
nominated that director shall promptly nominate an individual (who is
financially qualified as defined by the FCC) to fill the vacancy so created for
the unexpired term and the Class A Stockholders shall vote all their shares in
the Company for the individual nominated to fill the vacancy.
2.3 Proxy. If any Class A Stockholder fails or refuses to vote its
-----
Class A Common Stock or to nominate a director as provided in this Section 2,
and such failure or refusal continues for more than thirty days beyond the date
on which the vote is scheduled or the director vacancy occurs, without further
action by such Class A Stockholder, each other Class A Stockholder shall have an
irrevocable proxy to so vote those shares in accordance with this Agreement.
2.4 Appointment and Removal. Pursuant to the Amended and Restated
-----------------------
Certificate of Incorporation and the By-Laws of the Company, the Class A Common
Stock Directors in exercising their majority vote of the Board shall have the
authority to appoint and remove all officers and senior executives of the
Company, including but not limited to the Chief Executive Officer.
3. Rights and Obligations of the Class C Stockholders.
--------------------------------------------------
3.1 Voting Rights. Except as otherwise specifically provided in this
-------------
Agreement, the holders of the
6
<PAGE>
Class C Common Stock as a class shall have the right to vote 49.9% of the
Company's voting interests on all matters. The Class C Stockholders shall elect
members of the Company's Board of Directors who collectively will represent
three of the seven votes of the Company's Board of Directors, all of whom shall
be designated as provided in Section 3.2 hereof. Pursuant to the terms of the
Amended and Restated Certificate of Incorporation and the By-Laws of the
Company, each director elected by the Class C Stockholders pursuant to this
Article 3 shall have a fractional vote, which fractional vote shall be
determined by multiplying three (which number represents the collective votes
held by the Class C Common Stock Directors) by a fraction the numerator of which
shall be the total number of shares of Class C Common Stock held by the Class C
Stockholder that appointed such director pursuant to the terms of Section 3.2
hereof, and the denominator of which shall be the total number of outstanding
shares of Class C Common Stock held by all Stockholders entitled to designate a
director pursuant to Section 3.2 hereof.
3.2 Designation of Directors. The Class C Stockholders agree to vote
------------------------
all of their shares of Class C Common Stock and to take all other actions
necessary to cause the election of directors to the Company's Board of Directors
designated in the following manner: each of (a) Accel Partners ("Accel"), (b)
Battery Ventures III, L.P. ("Battery") (c) Mitsui & Co., Ltd., Mitsui & Co.
(U.S.A.), Inc. and Mitsui Comtek Corp. (collectively, "Mitsui"), (d) Primus
Capital Fund III Limited Partnership, (e) OneLiberty Fund III, L.P. (f)
Trailhead Ventures, L.P. and (g) Chancellor Capital Management (on behalf of its
clients for which it acts as investment manager) shall be entitled to nominate
one director; provided, however that the rights of each of the aforementioned
-------- -------
Class C Stockholders to appoint one Director shall continue only as long as such
holder (together with its affiliates and subsidiaries) owns at least (i) 2% of
the total fully diluted equity of the Company or (ii) 80% of the total equity
held by such holder upon consummation of the Offering (as defined in the
Subscription Agreement). The Class C Stockholders each covenant and agree that,
upon the written request of any of the aforementioned stockholders that its
designee to the Company's Board of Directors be removed, they will each vote all
of the
7
<PAGE>
shares of Class C Common Stock owned by them so as to cause such designee to be
removed in accordance with such request; provided, that none of the foregoing
shall prevent any regulated financial institution from comply-ing with any
applicable provision of law requiring it to retain responsibility for, or
control over, its investments. If for any reason any director nominated by the
Class C Stockholders ceases to serve as a director, the Class C Stockholder that
nominated that director shall promptly nominate an individual to fill the
vacancy so created for the unexpired term and the Class C Stockholders shall
vote all their shares in the Company for the individual nominated to fill the
vacancy, subject to the laws relating to regulated financial institutions
discussed above.
3.3 Proxy. If any Class C Stockholder fails or refuses to vote its
-----
shares of Class C Common Stock, as provided in this Section 3, without further
action by such holder, each other Class C Stockholder shall have an irrevocable
proxy to so vote those shares in accordance with this Agreement; provided, that
none of the foregoing shall prevent any regulated financial institution from
complying with any applicable provision of law requiring it to retain
responsibility for, or control over, its investments.
4. Supermajority Voting Rights
---------------------------
4.1 General. In addition to any other vote required by law, the
-------
Amended and Restated Certificate of Incorporation or the By-Laws of the Company,
the Company shall not take any of the following actions, whether directly or
indirectly, and such action shall not be deemed to have been authorized and
approved by the Board of Directors, unless such action has been approved by (i)
a majority of the directors then in office, which approval must include the
affirmative vote and concurrence of both the director nominated by Battery and
the director nominated by Accel (a "Supermajority Board Vote") or (ii) a
majority of the Class C Stockholders voting separately as a class:
(a) any material change to the general terms of the Company's
bidding in the Entrepreneurs' Auction (as that term is defined from time to time
by the
8
<PAGE>
Federal Communications Commission);
(b) any amendment to the Company's By-Laws or Amended and
Restated Certificate of Incorporation, unless such amendment is necessary to
comply with the FCC rules;
(c) any merger or consolidation by or with the Company;
(d) a sale of all or substantially all the Company's assets;
(e) any voluntary dissolution or liquidation of the Company;
(f) any issuance of equity of the Company, except (i) in
connection with the Company's initial public offering at a price per share equal
to or greater than $200 (as adjusted in the event of a stock dividend,
recapitalization, stock split, reorganization, merger or consolidation of the
Company) and expected to generate gross proceeds in an amount equal to $20
million (a "Qualifying Public Offering"), (ii) issuances of additional options
to purchase Class B Common Stock to members of the Control Group necessary to
maintain the Company's eligibility for the Entrepreneurs' Auction and its status
as a Small Business (provided that the exercise price of such options is equal
to fair market value of the Class B Common Stock), (iii) issuances of additional
shares of Class C Common Stock at a purchase price equal to or greater than $100
per share which purchases do not exceed $10 million in the aggregate and (iv)
issuances of additional equity to persons who are then investors in the Company
(provided that all then current investors are entitled to purchase an amount of
equity equal to the percentage of equity owned by such investor immediately
prior to such issuance (treating all Warrants as having been exercised) on equal
terms (except that any investor may pay the cash equivalent of any non-cash
consideration based upon its fair market value);
(g) the declaration of dividends by the Company;
(h) the approval of any arrangement with
9
<PAGE>
any Stockholder that owns more than 5% of the equity of the Company or any
entity owned or controlled by any Stockholder that owns more than 5% of the
equity of the Company, any officer or director of the Company, or any Qualifying
Investor (as that term is defined from time to time by the FCC ) (other than (i)
the Procurement Agreement substantially in the form of Schedule 4.1(h) hereto to
be entered into with Mitsui & Co. (U.S.A.), Inc. and Mitsui Comtek Corp.,
including any renewal in accordance with the terms thereof or any non-material
amendment thereof and (ii) as permitted by clause (f)(ii) above);
(i) any determination of compensation or benefits of any
executive officer of the Company; and
(j) the conversion of Class B Common Stock to Class C Common
Stock.
4.2 Participation Rights. In the event the Company issues Class C
--------------------
Common Stock (or their equivalent) to new investors pursuant to the terms of
Section 4.1(f) at a purchase price less than $100 per share, then current
investors shall be entitled to purchase an amount of equity equal to the
percentage of equity owned by such investor immediately prior to such issuance
(treating all Warrants as having been exercised) on equal terms.
4.3 Qualifying Public Offering. Following a Qualifying Public
--------------------------
Offering the foregoing supermajority voting rights will no longer be applicable,
except that the Board of Directors, by Supermajority Board Vote, may convert
Class B Common Stock to Class C Common Stock.
5. Transfer
--------
5.1 General Prohibition. As used in this Agreement, the term
-------------------
"Securities" includes all shares of capital stock of the Company and any other
securities of the Company exercisable or exchangeable for, or convertible into,
shares or capital stock of the Company. Each Stockholder agrees that such
Stockholder will not, directly or indirectly, offer, sell, assign, transfer,
grant a participation in, pledge or otherwise dispose of or encumber any of such
Stockholder's Securities or any interest therein (or solicit any offers to buy
or otherwise acquire or take a pledge of any of its Securities)
10
<PAGE>
(each, a "Transfer"), except as expressly permitted hereby and in compliance
with the Securities Act of 1933, as amended, and the provisions of this Article
5. Any attempt to Transfer any Securities not made strictly in compliance with
this Agreement shall be null and void and the Company shall not give any effect
in the Company's stock records to such Transfer.
5.2 FCC Restrictions on Transfer. A Stockholder may Transfer all or
----------------------------
any portion of its Securities in the Company to any other person only so long as
such Transfer would not cause the Company or any other Stockholder to violate
any applicable laws or regulations or would not endanger the Company's bidding
or financing preferences for which it is eligible under FCC regulations for the
"Entrepreneurs' Auction"; provided that any transferee receiving Securities
shall be required to sign an undertaking agreeing to be bound by the terms of
this Agreement, if necessary to comply with FCC rules and regulations. The
Company and the other Stockholders shall provide such information as reasonably
requested by any Stockholder in connection with any determination as to whether
such condition is met and the Company shall otherwise cooperate with such
Stockholder in connection therewith. Specifically, no Stockholder may Transfer
any Securities if after giving effect to such Transfer, (i) the Qualifying
Investors would own in the aggregate less than 15% of the Company's total equity
during the first three years and 10% of the Company's total equity during the
fourth through tenth years following the grant of PCS licenses to the Company
(ii) any single Stockholder, other than a Qualifying Investor, would own more
than 25% of the Company's total equity and voting interests or (iii) such
Transfer would cause a violation of the "foreign ownership restrictions imposed
by the Communications Act of 1934, as amended. Such Stockholder shall cooperate
with the Company, and the Company shall cooperate with the Stockholder in (i)
determining the Stockholder's compliance with this paragraph and (ii) in the
event of noncompliance, executing the measures reasonably necessary to cure such
noncompliance consistent with applicable FCC rules and policies.
5.3 Transfer to Permitted Affiliates. Transfers of Securities by a
--------------------------------
Stockholder to any Permitted Affiliate (as hereinafter defined) and from any
Permitted
11
<PAGE>
Affiliate to another Permitted Affiliate shall be exempt from the provisions
hereof and be permitted Transfers hereunder, provided however that any Permitted
Affiliate receiving Securities shall be required to sign an undertaking agreeing
to be bound by the terms of this Agreement. For purposes of this Agreement, a
"Permitted Affiliate" shall mean a person that is controlling, controlled by or
under common control with such Stockholder or, if the Stockholder is a trust, to
any successor or related trust or successor trustee.
5.4 Pledges. Notwithstanding the provisions of Section 5.1 hereof, a
-------
Stockholder may not, directly or indirectly, pledge, hypothecate or grant a
security interest in any Securities of the Company other than through a bona
fide pledge of such Securities as security for indebtedness or obligations of
such Stockholder meeting all of the following criteria: (i) the pledgee is a
nationally or internationally recognized financial institution (a "Permitted
Pledgee"), (ii) the pledgee agrees with the Stockholders and the Company in
writing that, prior to and upon foreclosing or otherwise realizing upon the
shares of Common Stock so pledged, the pledgee will comply with the terms and
conditions of this Agreement, and (iii) a majority of the Board of Directors
have consented to such pledge, which consent shall not be unreasonably withheld.
5.5 Ten-Year Restriction on Transfer. From the date of grant of the
--------------------------------
Company's C block PCS license(s) through the date ten years following such date,
no Class A Stockholder may Transfer any shares of Class A Common Stock to any
person other than a Qualifying Investor. Nothing in this Agreement restricts a
Class A Common Stock shareholder from holding additional Class B or Class C
Common Stock. Such additional classes of common stock held by a Class A Common
Stock shareholder may be allocated towards the FCC minimum ownership requirement
for Qualifying Investors, at the discretion of the Class A Common Stock
shareholder provided that the Company remains in compliance with applicable FCC
rules and policies. Such Class B and C Common Stock shares not allocated by the
Company towards meeting the FCC's minimum ownership requirements will not be
subject to the FCC restrictions applicable to Qualifying Investors. If at
anytime subsequent to three years after the grant of the
12
<PAGE>
Company's C block license(s) the Company's Class A Common Stock shareholders
collectively hold more than the minimum ownership limits then required by the
FCC, the Initial Qualifying Investors (as defined herein) will have first
priority to convert their Class B Common Stock that had been allocated towards
meeting the FCC minimum ownership limits to Class C Common Stock upon approval
by the Board of Directors by a Supermajority Vote. For purposes of this
provision, "Initial Qualifying Investors" are investors who paid cash for Class
B Common Stock in response to the Memorandum.
6. Financial Information.
---------------------
The Company shall furnish to each Stock-
holder (as long as such Stockholder (including its affiliates and subsidiaries)
continues to own at least (i) 80% of the total equity held by such Stockholder
upon consummation of the Offering or (ii) 2% of total fully diluted equity of
the Company),
(a) as soon as available but in any event within 45 days after the
end of each quarterly accounting period in each fiscal year, unaudited
statements of income and cash flows of the Company and its subsidiaries for such
quarterly period and for the period from the beginning of the fiscal year to the
end of such quarter, and unaudited consolidating and consolidated balance sheets
of the Company and its subsidiaries as of the end of such quarterly period,
setting forth in each case comparisons to the Company's annual budget and to the
corresponding period in the preceding fiscal year, and all such statements shall
be prepared in accordance with generally accepted accounting principles,
consistently applied, subject to the absence of footnote disclosures and to
normal year-end adjustments and shall be certified by the Company's chief
financial officer;
13
<PAGE>
(b) within 90 days after the end of each fiscal year, consolidating
and consolidated statements of income and cash flows of the Company and its
subsidiaries for such fiscal year, and balance sheets of the Company and its
subsidiaries as of the end of such fiscal year, setting forth in each case
comparisons to the Company's annual budget and to the preceding fiscal year, all
prepared in accordance with generally accepted accounting principles,
consistently applied, and accompanied by with respect to the consolidated
portions of such statements, an opinion of an independent accounting firm of
recognized national standing;
(c) promptly upon receipt thereof, any additional reports, management
letters or other detailed information concerning significant aspects of the
Company's operations or financial affairs given to the Company by its
independent accountants (to the extent permitted by the Company's independent
accountants and not otherwise contained in other materials provided hereunder);
(d) not more than 30 days after the beginning of each fiscal year, an
annual budget prepared on a monthly basis for the Company and its subsidiaries
for such fiscal year (displaying anticipated statements of income and cash flows
and balance sheets), and within 30 days after any quarterly period in which
there is a material adverse deviation from the annual budget, an officer's
certificate explaining the deviation and what actions the Company has taken and
proposes to take with respect thereto.
7. Miscellaneous.
--------------
7.1 Legend on Certificates. Each of the Company's Class A Common
----------------------
Stock, Class B Common Stock and Class C Common Stock certificates shall contain
the following legends:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED WITHOUT
14
<PAGE>
REGISTRATION UNDER THAT ACT OR ANY APPLICABLE STATE SECURITIES LAWS
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. BY ITS PURCHASE OF
SHARES OF STOCK, THE PURCHASER AGREES THAT IT IS ACQUIRING SUCH SHARES
FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH,
THE PUBLIC DISTRIBUTION THEREOF, AND THAT ANY RESALE OF ANY SHARES OF
STOCK MAY BE MADE ONLY IN ACCORDANCE WITH THE STOCKHOLDERS AGREEMENT.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED UNDER THE
TERMS OF A STOCKHOLDERS AGREEMENT, DATED AS OF DECEMBER 1, 1995, BY
AND AMONG THE COMPANY AND THE STOCKHOLDERS PARTY THERETO, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
7.2 Maintenance of Small Business Eligibility. The Company covenants
-----------------------------------------
that, provided that the Stockholders comply with the applicable FCC rules and
policies, it shall endeavor in good faith to maintain its eligibility as Small
Business (as such term is defined from time to time by the FCC) to the extent
required by the FCC. Where any actions or omissions by the Company to its
knowledge during the course of the initial license term require the Company to
undertake measures to maintain such eligibility, the Company covenants that it
will take such measures provided that the Stockholders reasonably cooperate with
such efforts of the Company.
7.3 Notices. Any notice or other communication under this Agreement
-------
shall be in writing and shall be considered given when delivered personally, by
facsimile, by overnight courier or sent by registered mail, return receipt
requested, to the parties at the following addresses (or at such other address
as a party may specify by notice to the others):
(a) if to the Company, to it at 6668 North Central Expressway,
Suite 1170, Dallas, TX 75206, attention: Corey A. Linquist; and
15
<PAGE>
(b) if to a Stockholder, to it at its address set forth in the
Company's register of Stockholders.
7.4 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the law of the state of New York.
7.5 Complete Agreement and Modification. This Agreement contains a
-----------------------------------
complete statement of all the arrangements among the Company and the
Stockholders with respect to its subject matter, supersedes all existing
agreements among them concerning that subject matter and cannot be changed
except by a written agreement signed by the Company, all Class A Stockholders
and a majority of the Class C Stockholders; provided however that Section 4 may
only be amended by 66 2/3 vote of the outstanding shares of Class C Common Stock
and no amendment of this Stockholders Agreement shall be effective against any
Class C Stockholder if such amendment treats such Class C Stockholder
differently than any other Class C Stockholder; provided further that the
Company may waive any restriction set forth in Section 5.1 without the consent
of any Stockholder, other than those provisions relating to applicable federal
and state securities laws.
7.6 Descriptive Headings. The descriptive headings of the several
--------------------
sections of this Agreement are for convenience only and do not constitute a part
of this Agreement.
7.7 Binding Effect. This Agreement and all of the provisions hereof
--------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
7.8 Further Assurances. Consistent with the terms and conditions
------------------
hereof, each party hereto shall do and perform or cause to be done and performed
all such further acts and things and shall execute and deliver all such other
instruments, certificates, and other documents as any other party hereto may
reasonably require in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
16
<PAGE>
7.9 Counterparts; Additional Parties. This Agreement may be executed
--------------------------------
in two or more counterparts each of which shall be deemed an original but both
of which together shall constitute one and the same agreement. The Company may
permit persons who purchase or otherwise acquire Class B or Class C Common Stock
from the Company (including without limitation, Bear, Stearns & Co. Inc.) after
the date hereof to join as parties to this agreement from time to time, by
executing a signature page in the form attached hereto for execution by
Stockholders; provided, however, that such signature page shall not be effective
unless countersigned by the Company. The Company shall maintain a master copy
of this Agreement, with all such signature pages attached thereto, and each such
holder of Class B or Class C Common Stock who has so executed this Agreement
shall be deemed to be a Stockholder under this Agreement for all purposes.
7.10 Severability. In case any one or more of the provisions or part
------------
thereof contained in this Agreement shall for any reason be held to be invalid,
illegal or unenforceable in any respect in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or part hereof, but this Agreement shall be construed in any such
jurisdiction as if such invalid or illegal or unenforceable provision or part
thereof had been reformed so that it would be valid, legal and enforceable to
the maximum extent permitted in such jurisdiction.
7.11 Invalidity of Provision. The invalidity or unenforceability of
-----------------------
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction.
7.12 Specific Performance. Each of the parties hereto hereby
--------------------
acknowledges that in the event of a breach by any of them of any material
provision of this Agreement, the aggrieved party may be without an adequate
remedy at law. Each of the parties therefore agrees that in the event of a
breach of any material provision of
17
<PAGE>
this Agreement the aggrieved party may elect to institute and prosecute
proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of such provision, as well as to
obtain damages for breach of this Agreement. By seeking or obtaining any such
relief, the aggrieved party will not be precluded from seeking or obtaining any
other relief to which it may entitled.
7.13 Termination. With the exception of Sections 1.2(a)-(d), 2.1-
-----------
2.4, 7.1-7.2, 7.5, 7.11 and 7.12, the provisions of this Agreement shall
terminate and be of no further force and effect on the first to occur of (a) the
tenth anniversary of the execution hereof, or (b) a Qualifying Public Offering
pursuant to registration under the Securities Act of 1933, as amended; provided
that in no event shall the covenants contained in Sections 1.2(a)-(d), 2.1-2.4
prevent a Stockholder from making a public sale of its Class C Common Stock
through an effective registration statement or through a normal broker's
transaction.
7.14 Board Visitation. The Company shall give First Plaza Group
----------------
Trust and New York Life Insurance Company written notice of each meeting of its
and any material subsidiary's board of directors and each committee thereof at
the same time and in the same manner as notice is given to the directors (which
notice shall be promptly confirmed in writing to each such Person), and the
Company shall permit a representative of First Plaza and a representative of New
York Life Insurance Company to attend as an observer all meetings of its board
of directors and all committee thereof; provided that GM Capital Management (in
the case of First Plaza Group Trust) and New York Life Insurance Company each
continue to hold at least (i) 80% of the total equity held by such Stockholder
upon consummation of the Offering or (ii) 2% of the totally fully diluted equity
of the Company; and provided further that in the case of telephonic meetings
conducted in accordance with the Company's or such subsidiary's bylaws and
applicable law, each such Person need receive only actual notice thereof at
least 48 hours prior to any such meeting, and each such Person's representative
shall be given the opportunity to listen to such telephonic meetings. Each
representative shall be entitled to receive all written materials and other
18
<PAGE>
information (including, without limitation, copies of meeting minutes) given to
directors in connection with such meetings at the same time such materials and
information are given to the directors. If the Company or any material
subsidiary proposes to take any action by written consent in lieu of a meeting
of its board of directors or of any committee thereof, the Company shall give
written notice thereof to each describing in reasonable detail the nature and
substance of such action.
7.15 Termination of Prior Agreements. All prior agreements relating
-------------------------------
to the matters set forth herein, including the Investors' Rights Agreement dated
July 18, 1994, as amended, the Co-Sale Agreement dated July 18, 1994, as amended
and any Stockholder's Agreement dated July 18, 1994 and June 2, 1995, between
the Company and any party hereto, are hereby terminated in full and superseded
in their entirety by this Agreement and the Registration Rights Agreement.
7.16 Regulated Financial Institutions Compliance Obligation. Nothing
------------------------------------------------------
in this Agreement shall diminish the continuing obligations of any financial
institution to comply with applicable requirements of law that it maintain
responsibility for the disposition of, and control over its admitted assets,
investments and property, including (without limiting the generality of the
foregoing) the provisions of Section 1411(v) of the New York insurance law, as
amended, and as hereinafter from time to time in effect.
[Intentionally Left Blank]
19
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have caused this
Agreement to be duly executed as of the date above first written.
GENERAL WIRELESS, INC.
By: _________________________
Title: _____________________
_____________________________
Roger D. Linquist
_____________________________
Frederic C. Hamilton
Stockholder:_________________
By: _________________________
Name:
Title:
20
<PAGE>
SCHEDULE 1
CLASS B STOCKHOLDERS NO. OF CLASS B SHARES
- -------------------- ---------------------
<TABLE>
<CAPTION>
Accel Venture Partners:
<S> <C>
Accel IV, L.P. 50,380
Accel Investors '94,L.P. 2,035
Accel Keiretsu L.P. 1,045
Ellmore C. Patterson Partners 1,210
Prosper Partners 330
Battery Ventures III, L.P. 27,500
Malcolm M. Lorang 1,972
The Hamilton Companies, LLC 10,000
John Sculley 5,000
C. Boyden Gray 2,000
Mitchell Kapor 2,000
Theodore H. Ashford 1,000
John Sidgmore (12/28/95) 1,000
</TABLE>
<PAGE>
SCHEDULE 2
CLASS C STOCKHOLDERS NO. OF CLASS C SHARES
- -------------------- ---------------------
<TABLE>
<CAPTION>
<S> <C>
Roger D. Linquist 28,094
Accel Venture Partners:
Accel Investors '94 L.P. 3,146
Accel IV, L.P. 77,860
Accel Keiretsu L.P. 1,616
Ellmore C. Patterson Partners 1,870
Prosper Partners 510
Battery Ventures III, L.P. 52,500
Mitsui & Co., Ltd. 75,000
Mitsui & Co. (U.S.A.), Inc. 2,500
Mitsui Comtek Corp. 22,500
Mellon Bank, N.A., Trustee for
First Plaza Group Trust 60,000
Chancellor Capital Management:
Los Angeles County Employees
Retirement Association 50,000
Drake & Co., for the account
of Citiventure III 31,345
Northpass & Co., custodian for
KME Ventures III, L.P. 1,655
Mellon Bank, N.A., custodian for
Michael A. Wall 2,000
Evermore Corporation 1,000
Wong Chiu Yee, Carol 1,000
Wong Shun Yee, Shirley 1,000
Wong Wai Yee, Sophia 1,000
Wong Yuk Yee, Claire 1,000
One Liberty Ventures:
One Liberty Fund III, L.P. 29,700
Gilde Investment Fund, B.V. 300
Primus Venture Partners, Inc.:
Primus Capital Fund III
Limited Partnership 30,000
Trailhead Ventures, L.P. 25,000
New York Life Insurance Company 10,000
Sani Holdings, Ltd. (Bahamas) 5,000
Berkeley Investments, Ltd. (Hong Kong) 5,000
Paragon Venture Partners II, L.P. 5,000
Bear, Stearns & Co. Inc. Investors:
Andre O. Backar 250
Denis A. Bovin 250
Michael & Sandra Ehrlich 500
Peter Fox 250
Robert L. Harteveldt 250
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Ronald M. Hersch 250
David Kaplan 350
Ralph L. Mack 500
Donald Mullen 500
Steven L. Scari 250
Curtis W. Schade 250
Douglas Sharon 250
David Schoenthal 250
Salvatore A. Tiano 250
Curtis R. Welling 250
James Wolfsberg 250
Technology Venture Associates III (12/28/95) 19,000
</TABLE>
<PAGE>
SCHEDULE 3
Glossary of Terms
-----------------
ANTICOLLUSION RULES. As of the date of this Agreement, the FCC has adopted
- -------------------
certain rules and policies to prohibit applicants for an FCC-administered
spectrum auction to engage in any discussions relating to bidding strategy bid
amounts and related matters with other applicants eligible for the same auction,
among other related restrictions. 47 C.F.R. (S) 1.1205
ATTRIBUTION RULES. Ownership interests amounting to (i) 5 percent or more
- -----------------
(either directly or indirectly through the FCC's multiplier rule) or (ii) if an
institutional investor (as defined by the FCC in 47 C.F.R. (S) 24.720(h) (to
broadly include for example venture capital firms, insurance companies and
pension funds)), 10 percent or more (either directly or through the FCC's
multiplier rule. In addition, officers and directors of a broadband PCS
licensee or applicant or cellular licensee or an entity that controls one of
same are deemed to have an attributable interest in the entity with which they
are so associated. The attribution rules are used by the FCC to determine
compliance with the FCC's spectrum ownership caps described herein.
BROADBAND PCS 40 MHz SPECTRUM CAP. As of the date of this Agreement, the FCC
- ---------------------------------
defines the Broadband PCS 40 MHz Spectrum Cap so that no entity or individual
may have an attributable ownership interest in more than 40 MHz of broadband PCS
licenses in the same geographic area. 47 CFR (S) 24.204
CELLULAR-PCS 35 MHz CROSS-OWNERSHIP CAP. As of the date of this Agreement, the
- ---------------------------------------
FCC defines the Cellular-PCS 35 MHz Cross-Ownership Cap so that no entity or
individual may have an attributable interest in a cellular license and more than
a 10 MHz broadband PCS license in a market where the cellular licensee's CGSA
would cover 10% or more of the PCS service area's population. 47 CFR (S) 24.204
COMMERCIAL MOBILE RADIO SERVICE. As of the date of this Agreement, the FCC
- -------------------------------
defines the Commercial Mobile Radio Service under 47 CFR (S) 20.3 as:
(a)(1) provided for profit, i.e., with the intent of receiving
----
compensation or monetary gain;
(2) An interconnected service; and
(3) Available to the public, or to such classes of eligible users as to be
effectively available to a substantial portion of the public; or
(b) The functional equivalent of such a mobile service described in
paragraph(a) of 47 CFR (S) 20.3.
45 MHz LIMITATION. As of the date of this Agreement, the FCC defines the 45
- -----------------
<PAGE>
MHz Limitation so that no licensee in the broadband PCS, cellular, or SMR
services (including all parties under common control) regulated as CMRS shall
have an attributable interest in a total of more than 45 MHz of licensed
broadband PCS, cellular, and SMR spectrum regulated as CMRS with significant
overlap in any geographic area. 47 CFR (S) 20.6
INSTITUTIONAL INVESTOR. An institutional investor is an insurance company, a
- ----------------------
bank holding stock in trust accounts through its trust department, or an
investment company meeting the definition below:
(a) "Investment company" means any issuer which -
(1) is or holds itself out as being engaged primarily, or proposes to
engage primarily, in the business of investing, reinvesting, or trading in
securities;
(2) is engaged or proposes to engage in the business of issuing face-
amount certificates of the installment type, or has been engaged in such
business and has any such certificate outstanding; or
(3) is engaged or proposes to engage in the business of investing,
reinvesting, owning, holding, or trading in securities, and owns or proposes to
acquire investment securities having a value exceeding 40 per centum of the
value of such issuer's total assets (exclusive of Government securities and cash
items) on an unconsolidated basis.
For purposes of this definition, "investment securities" includes all
securities except (A) Government securities, (B) securities issued by employees'
securities companies, and (C) securities issued by majority-owned subsidiaries
of the owner which are not investment companies.
PRIVATE MOBILE RADIO SERVICE. As of the date of this Agreement, the FCC defines
- ----------------------------
the Private Mobile Radio Service as a mobile service that is neither a
commercial mobile radio service nor the functional equivalent of a service that
meets the definition of commercial mobile radio service. 47 CFR (S) 20.3
QUALIFYING INVESTOR. As of the date of this Agreement, the FCC defines a
- -------------------
Qualifying Investor as a person who is (or holds an interest in) a member of the
applicant's (or licensee's) control group and whose gross revenues and total
assets, when aggregated with those of all other attributable investors and
affiliates, do not exceed the gross revenues and total assets limits specified
in (S) 24.709(a) or (S) 24.715(a), or, in the case of an applicant (or licensee)
that is a Small Business, do not exceed the gross revenues limit specified in
paragraph (b) of that section. 47 CFR (S) 24.720(n)
2
<PAGE>
SMALL BUSINESS. As of the date of this Agreement, the FCC defines a Small
- --------------
Business as an entity that, together with its affiliates and persons or entities
that hold interest in such entity and their affiliates, has average annual gross
revenues that are not more than $ 40 million for the preceding three years. 47
CFR (S) 24.720(b)
SMR SPECTRUM LIMITATION. As of the date of this Agreement, the FCC defines the
- -----------------------
SMR Spectrum Limitation to calculate the amount of attributable SMR spectrum for
purposes of the 45 MHz Limitation so that no more than 10 MHz of SMR spectrum in
the 800 MHz SMR service will be attributed to an entity when determining
compliance with the cap. 47 CFR (S) 20.6
3
<PAGE>
EXHIBIT 4.5
GENERAL WIRELESS, INC.
SUBSCRIPTION AGREEMENT
----------------------
This SUBSCRIPTION AGREEMENT (the "Agreement"), dated as of the date
appearing on the signature page hereto, is by and between General Wireless,
Inc., a Delaware corporation (the "Company"), and the Purchaser whose name
appears on the signature page hereto and as set forth on Exhibit A-1 (the
"Purchaser").
WHEREAS, the Company desires to sell in a private placement (the
"Offering") an aggregate of up to (i) 375,000 units (the "Units") consisting of
two shares of Class C Common Stock (the "Class C Common Stock") and one warrant
to purchase a share of Class C Common Stock at an initial exercise price of $100
per share (the "Warrants") of the Company and (ii) 20,000 shares of Class B
Common Stock of the Company (the "Class B Common Stock") and 10,000 warrants to
purchase a share of Class B Common Stock of the Company at an initial exercise
price of $50 per share (the "Class B Warrants") to certain members of the
Company's Board of Directors and Advisory Committee as set forth in the
Confidential Private Placement Memorandum, dated November 1995, prepared by the
Company (together with all exhibits contained therein and any further amendments
or supplements thereto, the "Memorandum"), on the terms and conditions
hereinafter set forth, and the Purchaser desires to acquire the number of Units,
shares of Class B Common Stock and Class B Warrants, as applicable, set forth on
the signature page hereto; provided that in the Offering, First Plaza Group
Trust will also purchase for $199.98 per unit 20,000 units consisting of 20,000
Warrants and 40,004 warrants to purchase one share of Class C Common Stock at an
initial exercise price of $0.01 per share (the "First Plaza Warrants").
WHEREAS, on _________________, 199__ and ______________, 199__, the
Company consummated the sale of certain of such securities in the amounts and to
the purchasers as identified in Exhibit A (the "Prior Closings"), and now the
Company desires to sell additional securities to the Purchasers, and the
Purchasers desire to acquire such securities, on substantially the same terms as
in the Prior Closings.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF UNITS,
CLASS B COMMON STOCK AND CLASS B WARRANTS
Section 1.1 Subscription. Upon the terms and subject to the
------------
conditions of this Agreement, subject to acceptance of the Purchaser's
subscription by the Company, and in reliance on the representations, warranties
and agree-
<PAGE>
ments of the Company contained herein, the Purchaser hereby irrevocably
subscribes (subject to the terms of the Put Option, as hereinafter defined) for
the number of Units or shares of Class B Common Stock and Class B Warrants, as
applicable, set forth on the signature page hereto (the "Subscribed Securities")
and agrees to pay to the Company in full payment for the Subscribed Securities
an amount equal to the purchase price set forth on the signature page hereto
(the "Purchase Price"). The Company has the right, in its sole discretion, to
accept or reject, in whole or in part, the Purchaser's subscription. If the
Company rejects the Purchaser's subscription in part, the number of Subscribed
Securities and the related Purchase Price shall be reduced in an amount equal to
the amount of the subscription rejected by the Company.
ARTICLE II
THE CLOSING
Section 2.1. Time and Place. The issuance and sale of the Subscribed
--------------
Securities will occur at 10:00 a.m., California time, on _________, 199__ (the
"Closing"), at the offices of Brobeck, Phleger & Harrison, 2200 Geng Road, Palo
Alto, California 94303 (or at such other date on or prior to _______, 199__,
location or time as may be specified by the Company no less than one day prior
to such Closing (the "Closing Date")).
Section 2.2. Deliveries by the Company. At the Closing, the Company
-------------------------
will deliver to the Purchaser the documents required by Article V hereto and (i)
to the Purchasers of Units, certificates representing the shares of the Class C
Common Stock and the Warrants, which together constitute the Units, and (ii) to
the Purchasers of Class B Common Stock and Class B Warrants, certificates
representing the shares of Class B Common Stock and Class B Warrants to be
purchased issued in the name specified on the signature page hereto.
Section 2.3. Deliveries by the Purchaser. At the Closing, the
---------------------------
Purchaser will:
(a) pay to the Company, or cause to be paid, the Purchase Price in
immediately available funds (by wire transfer to such account or accounts
as specified in writing by the Company no later than one business day prior
to the Closing Date); and
(b) deliver to the Company signed signature pages to (i) the
Stockholders Agreement, as amended, among the Company and its stockholders
(the "Stockholders Agreement") and (ii) in the case of Purchasers of Units,
the Registration Rights Agreement, as amended, among the Company and its
stockholders (the "Registration Rights Agreement"), copies of which
agreements have heretofore been delivered to the Purchaser.
2
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES BY THE COMPANY
Subject to the Schedule of Exceptions to this Agreement, the Company
hereby represents and warrants to the Purchaser as follows:
Section 3.1. Formation and Power. The Company (a) is duly
-------------------
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with full power and authority (corporate and other), to own or
lease its properties and assets and to conduct its business, all as described in
the Memorandum, (b) has good and marketable title to, or valid, subsisting and
enforceable leasehold estates in, all properties material to the conduct of its
business, free and clear in each case of any lien, encumbrance, equity or claim
or other restriction, with such exceptions that would not have, individually or
in the aggregate, a material adverse effect on the business, prospects, results
of operations or financial condition of the Company (a "Material Adverse
Effect"), (c) is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction wherein the character of the properties or
assets owned or leased by it or the nature of its activities requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect and (d) is not in breach or violation of any statute,
judgment, decree, order, rule or regulation of any court, regulatory body or
administrative agency or other governmental body, domestic or foreign, having
jurisdiction over the Company or any of its activities or properties, where any
such violations would have, individually or in the aggregate, a Material Adverse
Effect and excluding any breach or violation unknown to the Company arising out
of the status of any Purchaser in the Offering.
Section 3.2. Capitalization. The Company has the authorized and
--------------
issued equity capitalization as set forth on Schedule 3.2 attached hereto. The
outstanding shares of each class of the Company's capital stock are, and at the
Closing the shares of Class B Common Stock or Class C Common Stock to be
purchased by the Purchaser will be, validly issued, fully paid and non-
assessable and were not issued in violation of or subject to any preemptive or
other similar rights. There are no existing plans or obligations to issue
equity securities (or options, rights, warrants or other securities or
indebtedness convertible into equity securities) or incur indebtedness of the
Company, except as described in the Memorandum or as may be required to meet the
Federal Communications Commission's requirements regarding Qualifying Investors.
Section 3.3. Approvals. Except as set forth in the Memorandum, the
---------
Company has obtained all consents, approvals, authorizations, orders,
registrations, filings, qualifications, licenses and permits of and from all
public, regulatory or governmental agencies and bodies, required to own, lease
and operate its
3
<PAGE>
properties and conduct its business as now being conducted and as described in
the Memorandum, except where the failure to obtain any such item or take any
such action would not have, individually or in the aggregate, a Material Adverse
Effect, other than the PCS Licenses on which the Company proposes to bid as
described in the Memorandum, and, no such consent, approval, authorization,
order, registration, qualification, license or permit contains, or, in the case
of the PCS Licenses, is expected to contain, a materially burdensome restriction
that is not disclosed in the Memorandum.
Section 3.4. Authorization; Binding Obligations. The Company has all
----------------------------------
requisite corporate power and authority to (a) enter into this Agreement, the
Stockholders Agreement and the Registration Rights Agreement and to issue and
perform the Warrants and the Class B Warrants (collectively, the "Ancillary
Documents"), (b) issue and sell the Subscribed Securities as contemplated hereby
and in the Memorandum and (c) effect the Use of Proceeds as described in the
Memorandum. This Agreement and the Ancillary Documents have been duly and
validly authorized by all necessary corporate action on the part of the Company
and have been duly executed and delivered by the Company and constitute legal,
valid and binding agreements of the Company, enforceable in accordance with
their terms, except to the extent that enforcement hereof or thereof may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally,
(ii) the availability of equitable remedies which remain subject to the
discretion of a court (regardless of whether enforceability is considered in a
proceeding of law or in equity) and (iii) the unenforceability under certain
circumstances under law or court decisions of provisions providing for the
indemnification of or contribution to a party, where such indemnification or
contribution is contrary to public policy.
Section 3.5. Changes. Since the date as of which information was
--------
given in the Memorandum and, except as disclosed in the Memorandum, there has
not been (a) any material adverse change in the condition (financial or
otherwise), earnings, business, affairs, prospects or properties of the Company,
whether or not arising in the ordinary course of business, (b) any transaction
entered into, or any liabilities or obligations undertaken or incurred, by the
Company, whether or not in the ordinary course of business, that is material to
the Company, or (c) any dividend or distribution of any kind declared, paid or
made by the Company on its capital stock or any other payment or investment made
by the Company.
Section 3.6. Compliance with Other Instruments. The Company is not
---------------------------------
in violation of its Amended and Restated Certificate of Incorporation or bylaws
and not in default (nor has an event, act or condition occurred which with
notice, lapse or time or both could constitute a default) in the performance or
observance of any obligation, agreement or condition contained in any indenture,
mortgage, loan agreement, note, lease or other agreement or instrument to which
it is a party or by which it may be bound or to which any of its properties may
be subject,
4
<PAGE>
except for such defaults that would not result, individually or in the
aggregate, in a Material Adverse Effect, or that would not adversely affect the
consummation of this Agreement or the Ancillary Documents or the transactions
contemplated hereby or thereby or by the Memorandum. The execution and delivery
of this Agreement and the Ancillary Documents, the incurrence of the obligations
herein and therein set forth, the consummation of the transactions described or
contemplated herein, therein or in the Memorandum and compliance with the terms
hereof and thereof by the Company (including, without limitation, the issuance
and sale of the Subscribed Securities) do not and will not result in any
violation of the Amended and Restated Certificate of Incorporation or bylaws of
the Company, and do not and will not conflict with, or result in a breach of any
of the terms or provisions of, or constitute a default (or an event which with
notice or lapse of time or both could constitute a default (or an event which
with notice or lapse of time or both could constitute a default), or require
consent or waiver under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company under (a) any
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which the Company is a party or by which it may be bound or to
which any of its properties may be subject or (b) any existing applicable law,
rule, regulation, judgment, order or decree of any government, governmental
instrumentality or court, domestic for foreign, having jurisdiction over the
Company or any of its respective properties.
Section 3.7. Litigation. There is not pending or, to the knowledge of
----------
the Company, threatened or contemplated, any action, suit or proceeding, at law
or in equity, to which the Company is a party or of which any property or assets
of the Company is the subject before or by any court, arbitrator, governmental
official, commission, board or other governmental or administrative body which,
if determined adversely to the Company, could have a Material Adverse Effect
upon the Company or upon the ability of the Company to conduct its operations as
described in the Memorandum, or that could adversely affect the consummation of
the transactions contemplated by the Ancillary Documents, this Agreement or the
Memorandum.
Section 3.8. Securities Laws. The Company has not violated any
---------------
applicable federal or state securities laws in connection with the offer, sale
or issuance of any of its capital stock, and the offer, sale and issuance of the
Common Stock and Warrants and Class B Warrants under the Memorandum and
hereunder do not require registration under the Securities Act of 1933, as
amended, (the "Securities Act") or any applicable state securities laws.
Neither the Company nor any person authorized to act on the Company's behalf
has, directly or indirectly, taken any action that would prevent the offering
and sale of the Subscribed Securities from complying with the requirements of
all applicable securities laws or render unavailable any exemption from the
registration provisions of the Securities Act relied upon in making any offer or
sale of the Units, or the state securities or "blue sky" laws or jurisdictions
in which the Units will be offered.
5
<PAGE>
Section 3.9. Investment Company. The Company is not, and will not be
------------------
as of the Closing, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
Section 3.10. SEC Filings; Financial Statements. The Company is not
---------------------------------
required to have made, and has not made, any filing or report with the
Securities and Exchange Commission pursuant to the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
has delivered to each Purchaser its audited financial statements for the fiscal
year ended October 31, 1995 and its unaudited balance sheet as of December 31,
1995. The Company's financial statements, together with the notes thereto, are
complete and correct in all material respects, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the period indicated, except as disclosed therein, and present fairly
the consolidated financial condition of the Company as of the date of such
statement.
Section 3.11. Taxes. All tax returns required to be filed by the
-----
Company in any jurisdiction (including foreign jurisdictions) have been so filed
and all taxes, assessments, fees and other charges including, without
limitation, withholding taxes, penalties, and interest ("Taxes") due or claimed
to be due have been paid, other than those Taxes being contested in good faith
and those Taxes for which adequate reserves or accruals have been established in
accordance with generally accepted accounting principles, except where the
failure to file such returns or to pay such Taxes is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect. To the best
knowledge of the executive officers of the Company, the Company knows of no
actual or proposed additional tax assessments for any fiscal period against the
Company.
Section 3.12. Environmental Laws. (i) The Company is in compliance
------------------
with the provisions of all applicable environmental laws relating to its
business, properties, assets and facilities, or the ownership, use, control,
management, operation or occupancy thereof, where the failure to be in such
compliance would be reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect; (ii) the Company has not violated any provision of
any applicable environmental laws, which violation is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect; (iii) the Company
has no liability, absolute or contingent, under any applicable environmental
law, which liability is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect.
Section 3.13. Intellectual Property. The Company is the sole and
---------------------
exclusive owner or licensee of all trade names, unregistered trademarks and
service marks, brand names, patents, registered and unregistered copyrights,
regis-
6
<PAGE>
tered trademarks and service marks, and all applications for any of the
foregoing, and all permits, grants and licenses or other rights with respect
thereto, the absence of which would have or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. As of the
date hereof, the Company has not infringed any intangible property rights of any
third party or been notified or advised of any claim of any other person
relating to any of the intangible property which infringements or claims
(individually or in the aggregate), would have a Material Adverse Effect.
Section 3.14. FCC Qualification. Assuming the accuracy of the
-----------------
representations and warranties of all of the purchasers in the Offering
(including those set forth on Exhibit A and the Purchasers) in the corresponding
Subscription Agreements, upon consummation of the Recapitalization (as defined
in the Memorandum), the sale of the Subscribed Securities and the transactions
contemplated hereby, by the Ancillary Documents and the Memorandum, the Company
will meet all requirements necessary to qualify as a "Small Business" for
purposes of the rules and regulations of the Federal Communications Commission
(the "FCC") applicable to the auction of the PCS Licenses and will be eligible
to bid as such on the 30 MHz "C" frequency blocks to be auctioned in the
"entrepreneurs' auction" of PCS Licenses to be held by the FCC. In addition,
the Company is in compliance with all FCC rules, regulations, policies and the
Communications Act of 1934, as amended.
Section 3.15. Subscription Agreements. In the case of purchases of
-----------------------
Units, except as disclosed in the Memorandum, the terms of the Subscription
Agreements executed or to be executed by other purchasers of Units in the
Offering and the terms of the Warrants issued or to be issued to other
purchasers of Units in the Offering are substantially similar to the terms
hereof and to the terms of the Warrants issued to the Purchaser of Units
hereunder, except for the following material differences (i) the identity of the
purchasers, (ii) the applicable number of shares of Class C Common Stock and
(iii) the applicable number of Warrants to be included in the Subscribed
Securities for each purchaser. In the case of purchases of Class B Common Stock
and Class B Warrants, the terms of the Subscription Agreements to be
executed by other purchasers of Class B Common Stock and Class B Warrants in the
Offering are identical to the terms hereof and the terms of the Subscription
Agreements to be executed by Purchasers of Units in the Offering are
substantially similar to the terms hereof, except for the following material
differences (i) the identity of the purchasers, (ii) the applicable number of
shares of Class B Common Stock and Class B Warrants, (iii) the class of
securities to be purchased and (iv) the absence of Warrants from the Subscribed
Securities of certain purchasers.
Section 3.16. No Other Agreements. Except as set forth in the
-------------------
Memorandum, there are no agreements between the Company and any of its
stockholders or to the best of the Company's knowledge, between any of the
Company's stockholders with respect to the voting, transfer or repurchase of the
7
<PAGE>
Company's capital stock or with respect to any other aspect of the Company's
affairs, except for the Stockholders Agreement.
Section 3.17. Use of Proceeds. The proceeds from the sale of
---------------
Subscribed Securities shall be used for the purposes set forth in the Memorandum
in all material respects.
Section 3.18. Affiliated Transactions. Except as set forth in the
-----------------------
Memorandum and as contemplated by this Agreement and excluding the Procurement
Agreement to be entered into with Mitsui Comtek Corp. and Mitsui & Co. (U.S.A.),
Inc., no officer, director, employee, stockholder or affiliate of the Company or
any individual related by blood, marriage or adoption to any such individual or
any entity in which any such person or individual owns any beneficial interest,
is a party to any agreement, commitment or transaction with the Company or has
any material interest in any material property used by the Company.
Section 3.19. Disclosure. Neither this Agreement, the Memorandum nor
----------
any of the exhibits, schedules, attachments hereto or thereto with respect to
the transactions contemplated hereby contain any untrue statement of a material
fact or omit a material fact necessary to make the statements contained herein
or therein not misleading in light of the circumstances under which they were
made; provided that with respect to the financial projections furnished to the
Purchasers by the Company, the Company represents and warrants only that such
projections were based upon assumptions reasonably believed by the Company to be
reasonable and fair as of the date the projections were prepared in the context
of the current and reasonably foreseeable business conditions; provided further
that the Company makes no representation or warranty as to information contained
in or omitted from this Agreement, the Memorandum or any of the exhibits,
schedules, attachments hereto or thereto in reliance upon and in conformity with
(i) written information furnished to the Company by or on behalf of Bear Stearns
specifically for inclusion herein or therein under "Other Matters - Plan of
Distribution" or any Purchaser specifically for inclusion herein or therein or
(ii) the representations and warranties of any Purchaser.
Section 3.20. Warrant Exercise. The Company shall at all times
----------------
reserve and keep available out of its authorized but unissued shares of common
stock, solely for the purpose of issuance upon the exercise of the Warrants or
Class B Warrants, as applicable, (i) such number of shares of Class C Common
Stock issuable upon the exercise of all outstanding Warrants and (ii) such
number of shares of Class B Common Stock issuable upon the exercise of all
outstanding Class B Warrants. All shares of Class B or Class C Common Stock
which are so issuable shall, when issued, be duly and validly issued, fully paid
and nonassessable and free from all taxes, liens and charges. The Company shall
take all such actions as may be reasonably necessary to assure that all such
shares of Class B or Class C
8
<PAGE>
Common Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
or other trading organization upon which shares of Class B or Class C Common
Stock may be listed (except for official notice of issuance which shall be
immediately transmitted by the Company upon issuance). For purposes of this
Section 3.20 "Warrants" shall include the First Plaza Warrants.
Section 3.21. Auction Date. The date set by the FCC for the
------------
commencement of the "entrepreneurs' auction" is December 18, 1995.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER; COVENANTS
The Purchaser represents and warrants to the Company as follows:
Section 4.1. Organization and Power. The Purchaser is duly
----------------------
organized, validly existing and in good standing under the laws of its
jurisdiction of formation, and has the requisite power and authority to carry on
its business as presently conducted and to execute, deliver and perform its
obligations under this Agreement.
Section 4.2. Authorization. The execution and delivery of this
-------------
Agreement, and the consummation by the Purchaser of the transactions
contemplated hereby, have been duly authorized by all requisite action of the
Purchaser; provided that in the case of a regulated financial institution, its
unconditional delivery of the Purchase Price shall constitute conclusive and
irrevocable evidence of due authorization by such Purchaser.
Section 4.3. Binding Effect. This Agreement constitutes a valid and
--------------
binding obligation of the Purchaser and, assuming that this Agreement is the
valid and binding obligation of the Company, is enforceable against the
Purchaser in accordance with its terms, except to the extent that enforcement
thereof (i) may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) the availability of equitable remedies which remain subject
to the discretion of a court (regardless of whether enforceability is considered
in a proceeding of law or in equity).
Section 4.4. Accredited Investor; Purchaser's Investment
-------------------------------------------
Representations. The Purchaser is an "accredited investor" within the meaning
- ---------------
of Rule 501 of Regulation D promulgated under the Securities Act and is
knowledgeable, sophisticated and experienced in making decisions like those
involved in the purchase of the Subscribed Securities. The Purchaser hereby
represents, and in selling the Subscribed Securities to the Purchaser, the
Company specifically understands and
9
<PAGE>
agrees, that the Purchaser is acquiring the Subscribed Securities for its
account and/or one or more separate accounts maintained by the Purchaser for the
purpose of investment and not for resale or with a view to or for sale in
connection with any public distribution thereof; provided that the disposition
of the Purchaser's property shall at all times be and remain within the control
of the Purchaser. The Purchaser acknowledges that resales of the Subscribed
Securities are restricted by federal and state securities laws, federal
communications laws and further restrictions set forth in the Stockholders
Agreement. The Purchaser agrees not to sell, assign, pledge or otherwise
transfer the Subscribed Securities, either directly or indirectly, to any person
in violation of any securities laws, federal communications laws or such further
restrictions set forth in the Stockholders Agreement and the terms of the
Warrant, if applicable to the Purchaser hereof.
The Purchaser further represents that, except as provided for in the
FCC's rules, no Purchaser shall acquire any interest in or enter into any
contractual arrangement (formal or informal, oral or written) concerning bidding
with any other C block PCS applicant, other than the Company or its
subsidiaries, eligible to participate in the FCC's "C Block" auction of 493
Basic Trading Area Personal Communications Services licenses (as such auction
event is defined by the FCC) or take any other action relating to the C Block
auction that would otherwise conflict with or violate the FCC's competitive
bidding rules prohibiting collusion (as such rules are amended from time to time
by the FCC).
The Purchaser acknowledges that each certificate for the Class B
Common Stock and Class B Warrants, the Class C Common Stock and Warrants will be
imprinted with a legend in substantially the following form:
"THE [SHARES OF STOCK/WARRANTS] REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED WITHOUT REGISTRATION UNDER THAT ACT OR ANY APPLICABLE STATE
SECURITIES LAWS UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. BY ITS
PURCHASE OF [SHARES OF STOCK/WARRANTS], THE PURCHASER AGREES THAT IT IS
ACQUIRING SUCH [SHARES/WARRANTS] FOR INVESTMENT AND NOT WITH A VIEW TO, OR
FOR SALE IN CONNECTION WITH, THE PUBLIC DISTRIBUTION THEREOF, AND THAT ANY
RESALE OF ANY [SHARES OF STOCK/WARRANTS] MAY BE MADE ONLY IN ACCORDANCE
WITH THE STOCKHOLDERS AGREEMENT."
"THE [SHARES OF STOCK/WARRANTS] REPRESENTED BY THIS CERTIFICATE ARE
RESTRICTED UNDER THE TERMS OF A STOCKHOLDERS AGREEMENT, DATED AS OF
DECEMBER 1, 1995, BY AND AMONG THE COMPANY AND ITS STOCKHOLDERS, A
10
<PAGE>
COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY."
Section 4.5. Memorandum. The Purchaser has received a copy of the
----------
Memorandum and has relied upon the Memorandum, the covenants, representations
and warranties set forth herein and its own due diligence investigation in
making the decision to invest in the Subscribed Securities. The Purchaser has
been given the opportunity to ask questions of, and to receive answers from, the
Company concerning all matters related to this investment.
Section 4.6. Irrevocable Subscription. Except as provided under
------------------------
applicable state securities laws or New York law, the subscription is and shall
be irrevocable (subject to the terms of the Put Option, as hereinafter defined),
and further provided that the Purchaser shall have no obligations hereunder if
the subscription is for any reason rejected in full or the offering of
Subscribed Securities is for any reason cancelled.
ARTICLE V
CONDITIONS OF THE OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser under this Agreement are subject to
the compliance by the Company with its obligations under this Agreement, and to
the satisfaction of the following further conditions at the Closing, as set
forth below:
Section 5.1. Certificate of the Company. The Purchaser shall have
--------------------------
received a certificate, dated as of the Closing Date and signed by the Company,
to the effect that the representations and warranties of the Company in this
Agreement are true and correct as of such Closing Date and the Company has
complied with all agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such Closing Date.
Section 5.2. Aggregate Funds of $45,000,000 Raised. The Purchaser
-------------------------------------
shall have received a certificate, dated as of the Closing Date and signed by
the Company certifying that the Company has entered into Subscription Agreements
pursuant to which it will raise an aggregate of $45,000,000 by the Closing Date,
subject to the performance by the Purchasers of their obligations under such
agreements.
Section 5.3. Amendments to Memorandum. The Purchaser shall have
------------------------
received, on or before the Closing Date, any amendments or supplements to the
Memorandum to the extent that such amendments or supplements are issued to
reflect material changes to such Memorandum and such amendments or supplements
shall be reasonably satisfactory to the Purchaser.
11
<PAGE>
Section 5.4. Legal Opinion. The Purchaser shall have received
-------------
opinions, dated the date of the Closing, of Brobeck, Phleger & Harrison and
Skadden, Arps, Slate, Meagher & Flom with respect to the matters set forth on
Schedule 5.4 hereto.
Section 5.5. Class C Common Stock Directors. The members of the
------------------------------
Company's Board of Directors shall consist of the individuals set forth on
Schedule 5.5 hereto.
Section 5.6. Representations and Warranties; Covenants. The
-----------------------------------------
representations and warranties contained in Article III hereof shall be true and
correct at and as of the Closing.
Section 5.7. Amendment of Certificate of Incorporation. The
-----------------------------------------
Company's Certificate of Incorporation (the "Certificate of Incorporation")
shall have been amended and restated in the form of Exhibit B hereto, shall be
in full force and effect under the laws of the State of Delaware as of the
Closing as so amended and shall not have been further amended or modified.
Section 5.8. Stockholders and Registration Rights Agreements. The
-----------------------------------------------
Company and each stockholder of the Company shall have entered into the
Stockholders Agreement and Registration Rights Agreement.
Section 5.9. Closing Documents. The Company shall have delivered to
-----------------
the Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing, stating
that the conditions specified in this Article V have been fully satisfied;
(ii) certified copies of the Certificate of Incorporation and the
Company's bylaws, each as in effect at the Closing.
Section 5.10. Execution of Noncompetition Agreements By Key
---------------------------------------------
Employees. The Company and each of Roger D. Linquist and Malcolm M.
Lorang shall have entered into noncompetition agreements, substantially in the
form of Schedule 5.10 hereto.
Section 5.11. Entrepreneurs' Auction. The "entrepreneurs' auction
----------------------
shall be scheduled to occur within 30 days of the Closing.
12
<PAGE>
ARTICLE VI
CONDITIONS OF THE OBLIGATIONS
OF THE COMPANY
The obligations of the Company under this Agreement are subject to the
fulfillment or waiver, prior to or at the Closing, of the following conditions:
Section 6.1 Representations and Warranties of the Purchaser. The
-----------------------------------------------
representations and warranties made by the Purchaser in this Agreement shall be
true when made, and shall be true on the Closing Date as though such
representations and warranties were made as of such date.
Section 6.2. Receipt of Purchase Price. On the Closing Date, the
-------------------------
Company or Bears Stearns shall have received from the Purchaser (a) the Purchase
Price in immediately available funds (by wire transfer to such account or
accounts as specified in writing by the Company) and (b) signed signature pages
of the Stockholders Agreement and Registration Rights Agreements, in the case of
Purchasers of Class C Common Stock.
ARTICLE VII
INDEMNIFICATION
Section 7.1. Company Indemnification of the Purchaser. In
----------------------------------------
consideration of the execution and delivery of this Agreement by the Purchaser,
the Company agrees to indemnify, defend and hold the Purchaser, and each of the
Purchaser's officers, directors, general and limited partners (and directors
and officers thereof), policy holders, shareholders, employees and agents (the
"Indemnitees") free and harmless from and against any and all actions, causes of
action, suits, losses, liabilities and damages, and reasonable, out-of-pocket
expenses in connection therewith, including, without limitation, counsel fees
and disbursements (the "Indemnified Liabilities"), incurred by the Indemnitees
or any of them as a result of, or arising out of in any manner, or relating to
or in connection with this Agreement, including, without limitation, any breach
of any agreement or representation or warranty made by the Company contained
herein. For purposes of this Section 7.1, the term "Indemnified Liabilities"
shall not include, however, any actions, causes of action or suits, or any
losses, liabilities or damages or expenses in connection therewith, brought by
the Company against any Indemnitee.
ARTICLE VIII
PUT OPTION
13
<PAGE>
Section 8.1. Put Option. If any of the following occur (i) ten
----------
business days following the License Downpayment Date there are Excess Proceeds,
(ii) the Entrepreneurs' Auction has not commenced by March 31, 1996 (which date
may be extended until and including June 30, 1996 by the approval of the holders
of 66 2/3% of the outstanding shares of Class C Common Stock) or (iii) the
Company is the high bidder in the Entrepreneurs' Block for licenses, and such
licenses are not granted to the Company by the FCC due to a final order in an
adjudicative proceeding (after the exhaustion of all applicable appeals) then,
in each case, until the close of business on the 29th day following the Put
Notice (the "Expiration Date"), each holder of the Class B and the Class C
Common Stock will have an option to cause the Company to purchase, for cash up
to the Redemption Amount of such holder's Class B or Class C Common Stock at the
Redemption Price (the "Put Option"); provided, that (i) the Put Option shall not
be available with respect to any shares held by Bear, Stearns on its own behalf
and (ii) the Put Option will not be available to holders of the Class B or Class
C Common Stock if the Excess Proceeds are less than $5 million. For purposes of
this Section 8, the Class C Common Stock shall include the First Plaza Warrants.
Section 8.2. Redemption. Upon due surrender of the certificates for
----------
any shares of Class B or Class C Common Stock to be redeemed, such shares of
Class B or Class C Common Stock shall be promptly redeemed by the Company at the
Redemption Price; provided that if the Company has made payments to the FCC
relating to the Entrepreneurs' Auction, the Company shall not be required to
redeem such shares until the close of business on the fifth business day
following the return of payments from the FCC to the Company; provided further
that if the FCC returns only a portion of payments made by the Company, then the
Company shall use such returned funds to redeem, on a pro rata basis, as many
--------
shares as possible of Class B and Class C Common Stock determined in accordance
with the terms of this Article VIII. In case fewer than all the shares of Class
B or Class C Common Stock represented by such certificate are redeemed, a new
certificate or certificates shall be issued representing the unredeemed shares
of Class B or Class C Common Stock without cost to the holder thereof. Unless
there shall have been a default in payment of the Redemption Price, from and
after the Expiration Date, dividends, if any, on the shares of Class B or Class
C Common Stock so called for redemption shall cease to accrue, such shares of
Class B or Class C Common Stock shall no longer be deemed to be outstanding and
shall not have the status of shares of Class B or Class C Common Stock and all
rights of the holders thereof as stockholders of the Company (except the right
to receive from the Company the Redemption Price without interest) shall cease
with respect to such shares. From and after the Expiration Date, shares of the
Class B or Class C Common Stock redeemed by the Company shall be restored to the
status of authorized but unissued shares of Class B or Class C Common Stock.
Section 8.3. Definitions. The following definitions shall apply to
-----------
14
<PAGE>
terms used in this Article VIII:
"Agent's Cash Fee" means the total cash fee paid to Bear, Stearns & Co. Inc., as
Agent, by the Company as set forth in Schedule 8.3 hereto.
"Class B Proportional Amount" will be calculated by dividing (i) the funds
attributable to the sale of shares of Class B Common Stock by (ii) the total
amount raised in the Offering plus $8.5 million.
"Class C Proportional Amount" will be calculated by dividing (i) the funds
attributable to the sale of shares of Class C Common Stock by (ii) the total
amount raised in the Offering plus $8.5 million.
"Class B Redemption Percentage" will be calculated by dividing the Class B
Proportional Amount by $50.
"Class C Redemption Percentage" will be calculated by dividing the Class C
Proportional Amount by $100.
"Excess Proceeds" means the difference between the Net Proceeds and the Phase I
Development Budget Requirements.
"License Downpayment Date" means the date on which deposits are due to the FCC
from high bidders in the FCC auction for the 30 MHz BTA PCS licenses in the
Entrepreneurs' Auction.
"Net Proceeds" means the difference between (a) the gross proceeds of the
Offering plus $9.55 million and (b) the sum of (i) the Agent's Cash Fee, (ii)
$500,000 and (iii) the lesser of $500,000 and the Company's operating expenses
from the date of the Closing through the License Downpayment Date, excluding
bidding deposits and downpayments.
"Phase I Development Budget Requirements" means 20% of the aggregate Purchase
Price for Licenses for all markets for which the Company was the high bidder in
the Entrepreneurs' Auction (including markets in which the Company is offered
the license as a result of the default by the high bidder in the first five
business days following the Entrepreneurs' Auction); provided, that the Board of
Directors will have the power to adjust the amount of the Phase I Development
Budget Requirement with a Supermajority Board Vote (as defined in the
Stockholders Agreement) and based upon a good faith analysis of the PCS Licenses
won by the Company in the Entrepreneurs' Auction.
"Purchase Price" means the amount of the winning bid for a License, less the 25%
bidding discount applicable to Small Businesses, for a market for which the
Company was the high bidder in the Entrepreneurs' Auction.
15
<PAGE>
"Put Notice" means the written notification of any of (i) the occurrence of the
License Downpayment Date and the existence of Excess Proceeds greater than $5
million, (ii) the failure of the Entrepreneurs' Auction to begin on March 31,
1996 without extension of such date by the holders of 66 2/3 of the outstanding
shares of Class C Common Stock, or (iii) the failure of the FCC to grant
licenses for which the Company was the high bidder due to a final order in an
adjudicative proceeding (after the exhaustion of all applicable appeals) which
notice shall be mailed by the Company to each Stockholder of record of shares of
Class C Common Stock.
"Redemption Amount" means (i) in the case of shares of Class B Common Stock,
that number of shares to be redeemed on a pro rata basis by the holders of Class
--- ----
B Common Stock determined by multiplying the Excess Proceeds by the Class B
Redemption Percentage and (ii) in the case of shares of Class C Common Stock,
that number of shares to be redeemed on a pro rata
--- ----
basis by the holders of Class C Common Stock determined by multiplying the
Excess Proceeds by the Class C Redemption Percentage.
"Redemption Price" will be $100 per share in the case of Class C Shares and $50
per share in the case of Class B Shares to be redeemed by the Company.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Survival of Representations and Agreements. The
------------------------------------------
representations, warranties and agreements made by the Company and the Purchaser
in this Agreement or pursuant hereto shall (i) survive the execution and
delivery of this Agreement and the delivery of the Subscribed Securities to the
Purchaser on the Closing Date, and (ii) be deemed to have been relied upon by
the Purchaser and the Company regardless of any investigation made by the
Purchaser and the Company or on any such party's behalf.
Section 9.2. Further Assurances and Cooperation. From time to time
----------------------------------
at the request of any party to this Agreement, and without further
consideration, any other party will execute and deliver such documents and take
such action as may reasonably be requested in order to consummate more
effectively the transactions contemplated by this Agreement.
Section 9.3. Parties in Interest. This Agreement will be binding
-------------------
upon, inure to the benefit of and be enforceable by (i) the Purchaser and its
representatives, successors and assigns and (ii) the Company and its
representatives, successors and assigns. This Agreement is not for the benefit
of, or enforceable by, any persons other than the undersigned and their
respective representatives, successors and assigns.
16
<PAGE>
Section 9.4. Termination. This Agreement shall terminate (i) if the
-----------
Closing does not occur in accordance with Article II hereof; or (ii) by mutual
agreement of the parties. Nothing contained in this Agreement shall limit any
party's rights in the event of a breach of this Agreement by any other party.
Section 9.5. Notices. All notices, claims, certificates, requests,
-------
demands and other communications hereunder ("Notices") will be in writing and
will be deemed to have been duly given if delivered or sent via telecopy if
confirmed via first class mail (registered or certified mail, postage prepaid,
return receipt) or overnight courier, with receipt confirmed, as follows:
(a) If to the Company, to:
General Wireless, Inc.
6688 N. Central Expressway
Suite 1170
Dallas, TX 75206
Telephone No: 214-373-0494
Fax No: 214-373-8584
Attention: Corey A. Linquist
(b) If to the Purchaser, to the address set forth on the signature
page hereto,
or to such other address as the party to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above.
Section 9.6. Law Governing. The laws of the State of New York govern
-------------
this Agreement, without regard to the conflicts of laws rules thereof.
Section 9.7. Counterparts; Headings. This Agreement may be executed
----------------------
simultaneously, in counterparts, each of which will be deemed to be an original,
but all of which together will constitute one and the same instrument. The
section and paragraph headings contained herein are for reference purposes only
and will not affect in any way the meaning or interpretation of this Agreement.
Section 9.8. Integration and Severability. This Agreement embodies
----------------------------
the entire agreement and understanding between the parties hereto and supersedes
all prior agreements and understandings relating to the subject matter hereof.
In case any one or more of the provisions contained in this Agreement or in any
instrument contemplated hereby, or any application thereof, shall be invalid,
illegal and unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein, and any
other application thereof, shall not in any way be affected or impaired thereby.
17
<PAGE>
Section 9.9. Amendment and Waiver.
--------------------
(a) Any term, covenant, agreement or condition of this Agreement may
be amended with the consent of each of the Purchasers; provided however that the
provisions of Article VIII may be amended with the approval of the holders of
66 2/3% of the outstanding Class C Common Stock. Compliance with any term,
covenant, agreement or condition of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with the approval of the holders of 66 2/3% of the outstanding Class C Common
Stock; provided however that any such waiver shall not materially affect the
rights of any Purchaser hereunder.
(b) Any amendment or waiver pursuant to Subsection (a) of this Section
9.9 shall apply equally to all the Purchasers, except as provided in
Subsection(a) hereof, at the time outstanding and shall be binding upon them,
upon each future holder of any such Units, and upon the Company whether or not a
notation thereof shall have been placed on any certificates representing the
Class C Common Stock and Warrants constituting the Units.
Section 9.10. Definitions. Attached hereto as Schedule 9.10 as of
-----------
the date hereof is a glossary of terms relating to applicable FCC rules and
regulations for illustrative purposes only. The Company makes no representation
or warranty as to the accuracy or completeness of Schedule 9.10 and such
definitions are qualified in their entirety by reference to the FCC rules and
regulations.
Section 9.11. Regulated Financial Institutions Compliance
-------------------------------------------
Obligations. Nothing in this Agreement shall diminish the continuing
- -----------
obligations of any financial institution to comply with applicable requirements
of law that it maintain responsibility for the disposition of, and control over
its admitted assets, investments and property, including (without limitation the
generality of the foregoing) the provisions of Section 1411(v) of the New York
insurance law, as amended, and as hereinafter from time to time in effect.
[Intentionally left blank]
18
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officers of the Company and the Purchaser as of the date set
forth on the signature page hereto.
GENERAL WIRELESS, INC.
By:
--------------------------------------------
Name:
Title:
19
<PAGE>
EXHIBIT A
---------
SCHEDULE OF PURCHASERS
PURCHASERS OF UNITS NO. OF UNITS
- ------------------- ------------
<PAGE>
Subscription Agreement
Counterpart Signature Page
The undersigned hereby executes the Subscription Agreement as of the
date indicated below and irrevocably subscribes for the number of Units set
forth below.
Purchaser:
---------------------------------------------------------
Name:
Title:
Units: _______ Units constituting _______ shares of of
Class C Common Stock and
_______ Warrants
Purchase Price: ______ Units x $200/Unit = $__________
The exact name in which the Class C Common Stock and Warrants in General
Wireless, Inc. are to be registered (the "Registered Holder") (the name that
will appear on the certificate(s)):
- -----------------------------------------
The mailing address of the Registered Holder:
- -----------------------------------------
The Social Security Number or Tax Identification Number of the Registered
Holder:
- -----------------------------------------
If applicable, the jurisdiction of organization of the Registered Holder:
- -----------------------------------------
ACCEPTED BY GENERAL WIRELESS, INC.
By:_______________
Name:
Title:
DATE: The Subscription Agreement to which this Counterpart Signature Page is
attached shall be effective with respect to the above-referenced Purchaser on
_________, 1995.
<PAGE>
Subscription Agreement
Counterpart Signature Page
The undersigned hereby executes the Subscription Agreement as of the
date indicated below and irrevocably subscribes for the number of Shares of
Class B Common Stock and Class B Warrants set forth below.
Purchaser:
---------------------------------------------------------
Name:
Title:
1,000 shares of Class B Common Stock and
-----
500 Class B Warrants
Purchase Price: ____ Shares x $50/Share = $_____
The exact name in which the Class B Common Stock and Class B Warrants in General
Wireless, Inc. are to be registered (the "Registered Holder") (the name that
will appear on the certificate(s)):
- -----------------------------------------
The mailing address of the Registered Holder:
- -----------------------------------------
The Social Security Number or Tax Identification Number of the Registered
Holder:
- -----------------------------------------
If applicable, the jurisdiction of organization of the Registered Holder:
- -----------------------------------------
ACCEPTED BY GENERAL WIRELESS, INC.
By:_______________
Name:
Title:
DATE: The Subscription Agreement to which this Counterpart Signature Page is
attached shall be effective with respect to the above-referenced Purchaser on
the Closing Date (as defined in the Agreement).
<PAGE>
Schedule 3.2
------------
Capitalization
<PAGE>
Schedule 5.4
------------
Legal Opinions of Brobeck, Phleger & Harrison
---------------------------------------------
and Skadden, Arps, Slate, Meagher & Flom
----------------------------------------
<PAGE>
Schedule 5.5
------------
Class C Common Stock Directors
------------------------------
Arthur Patterson Accel Venture Partners
Robert G. Barrett Battery Ventures III, L.P.
Toshihiro Soejima Mitsui & Co., Ltd.
Kevin J. McGinty Primus Venture Partners, Inc.
Joseph T. McCullen, Jr. One Liberty Fund III, L.P.
Mark C. Masur Trailhead Ventures, L.P.
Parag Saxena Chancellor Capital Management
<PAGE>
Schedule 5.10
-------------
Form of Noncompetition Agreement
--------------------------------
<PAGE>
Schedule 8.3
------------
DEFINITION OF AGENT'S CASH FEE
Agent's Cash Fee means the total cash fee payable by the Company to
the Agent as follows:
(1) Upon the December 1, 1995 Closing (the "First Closing"), the Company
shall pay to Bear Stearns a cash fee equal to $1,000,000 minus any
cash fees previously paid by the Company to Bear Stearns. The
aggregate amount of the cash fees required to be paid by the Company
to Bear Stearns pursuant to subparagraph (2) or subparagraph (3) below
shall be reduced, commencing when such fees would otherwise have been
due and payable, by the net amount of the cash fee required to be paid
by Company to Bear Stearns at the First Closing pursuant to this
subparagraph (1).
(2) Upon the Closing, the Company shall pay to Bear Stearns a cash fee
equal to 0.5% of the gross proceeds raised or committed to at or in
contemplation of such closing, excluding proceeds raised or committed
to from any of Roger Linquist or Accel Partners or any of its
affiliates (collectively, the "Excepted Investors"), but including all
gross proceeds raised or committed to from any of (i) Battery Ventures
III (or any of its affiliates), (ii) Mitsui Comtek (or any of its
affiliates), or (iii) any other person or entity (other than the
Excepted Investors) (collectively, "Covered Investors"). The amount
of any cash fees required in fact to be paid by the Company to bear
Stearns pursuant to this subparagraph (2), after giving effect to any
reduction provided for in the last sentence of subparagraph (1), shall
be credited against any fees required to be paid by the Company
pursuant to subparagraph (3) below.
(3) No later than the close of business on the first business day
following any Expiration Date, as defined in Article VIII, the Company
shall pay to Bear Stearns a cash fee equal to 3.00% of Utilized Funds
(as defined below) (other than Utilized Funds attributable to GM
Investment Management Corp. or affiliates, as to which a cash fee of
2.5% shall apply, and Utilized Funds (not to exceed $1,000,000)
attributable to natural persons serving as members (including advisory
members) of the Board of Directors of the Company ("Board Investors"),
as to which a cash fee of 1.5% shall apply), up to a maximum of
$60,000,000 in cumulative Utilized Funds, and 5.00% of cumulative
Utilized Funds in excess of $60,000,000. Utilized Funds attributable
to GM Investment Management Corp. or affiliates and Utilized Funds
attributable to Board Investors shall be included for purposes of
determining whether cumulative Utilized Funds exceed $60,000,000.
<PAGE>
(4) "Utilized Funds" shall mean the gross cash proceeds paid from time to
time by Covered Investors in consideration of the issuance by the
Company of its securities to such Covered Investors minus all cash
paid or required to be paid by the Company to redeem Class B or Class
C Common Stock tendered by the Covered Investors pursuant to any
exercise by the Covered Investors of the Put Option (as defined in
Article VIII). For purposes of calculating the amount of cash fees
provided for in paragraph (3) above payable by the Company to the
Agent in respect of a particular Expiration Date, Utilized Funds at
such Expiration Date shall include gross proceeds paid by Covered
Investors that are not subject to subsequent Put Options arising after
such Expiration Date.
<PAGE>
Schedule 9.10
-------------
Glossary of Terms
-----------------
ANTICOLLUSION RULES. As of the date of this Agreement, the FCC has adopted
- -------------------
certain rules and policies to prohibit applicants for an FCC-administered
spectrum auction to engage in any discussions relating to bidding strategy bid
amounts and related matters with other applicants eligible for the same auction,
among other related restrictions. 47 C.F.R. (S) 1.1205
ATTRIBUTION RULES. Ownership interests amounting to (i) 5 percent or more
- -----------------
(either directly or indirectly through the FCC's multiplier rule) or (ii) if an
institutional investor (as defined by the FCC in 47 C.F.R. (S) 24.720(h) (to
broadly include for example venture capital firms, insurance companies and
pension funds)), 10 percent or more (either directly or through the FCC's
multiplier rule. In addition, officers and directors of a broadband PCS
licensee or applicant or cellular licensee or an entity that controls one of
same are deemed to have an attributable interest in the entity with which they
are so associated. The attribution rules are used by the FCC to determine
compliance with the FCC's spectrum ownership caps described herein.
BROADBAND PCS 40 MHz SPECTRUM CAP. As of the date of this Agreement, the FCC
- ---------------------------------
defines the Broadband PCS 40 MHz Spectrum Cap so that no entity or individual
may have an attributable ownership interest in more than 40 MHz of broadband PCS
licenses in the same geographic area. 47 CFR (S) 24.204
CELLULAR-PCS 35 MHz CROSS-OWNERSHIP CAP. As of the date of this Agreement, the
- ---------------------------------------
FCC defines the Cellular-PCS 35 MHz Cross-Ownership Cap so that no entity or
individual may have an attributable interest in a cellular license and more than
a 10 MHz broadband PCS license in a market where the cellular licensee's CGSA
would cover 10% or more of the PCS service area's population. 47 CFR (S) 24.204
COMMERCIAL MOBILE RADIO SERVICE. As of the date of this Agreement, the FCC
- -------------------------------
defines the Commercial Mobile Radio Service under 47 CFR (S) 20.3 as:
(a)(1) provided for profit, i.e., with the intent of receiving
----
compensation or monetary gain;
(2) An interconnected service; and
(3) Available to the public, or to such classes of eligible users as to be
effectively available to a substantial portion of the public; or
<PAGE>
(b) The functional equivalent of such a mobile service described in
paragraph(a) of 47 CFR (S) 20.3.
45 MHz LIMITATION. As of the date of this Agreement, the FCC defines the 45 MHz
- -----------------
Limitation so that no licensee in the broadband PCS, cellular, or SMR services
(including all parties under common control) regulated as CMRS shall have an
attributable interest in a total of more than 45 MHz of licensed broadband PCS,
cellular, and SMR spectrum regulated as CMRS with significant overlap in any
geographic area. 47 CFR (S) 20.6
INSTITUTIONAL INVESTOR. An institutional investor is an insurance company, a
- ----------------------
bank holding stock in trust accounts through its trust department, or an
investment company meeting the definition below:
(a) "Investment company" means any issuer which -
(1) is or holds itself out as being engaged primarily, or proposes to
engage primarily, in the business of investing, reinvesting, or trading in
securities;
(2) is engaged or proposes to engage in the business of issuing face-
amount certificates of the installment type, or has been engaged in such
business and has any such certificate outstanding; or
(3) is engaged or proposes to engage in the business of investing,
reinvesting, owning, holding, or trading in securities, and owns or proposes to
acquire investment securities having a value exceeding 40 per centum of the
value of such issuer's total assets (exclusive of Government securities and cash
items) on an unconsolidated basis.
For purposes of this definition, "investment securities" includes all
securities except (A) Government securities, (B) securities issued by employees'
securities companies, and (C) securities issued by majority-owned subsidiaries
of the owner which are not investment companies.
PRIVATE MOBILE RADIO SERVICE. As of the date of this Agreement, the FCC defines
- ----------------------------
the Private Mobile Radio Service as a mobile service that is neither a
commercial mobile radio service nor the functional equivalent of a service that
meets the definition of commercial mobile radio service. 47 CFR (S) 20.3
QUALIFYING INVESTOR. As of the date of this Agreement, the FCC defines a
- -------------------
Qualifying Investor as a person who is (or holds an interest in) a member of the
applicant's (or licensee's) control group and whose gross revenues and total
assets,
<PAGE>
when aggregated with those of all other attributable investors and affiliates,
do not exceed the gross revenues and total assets limits specified in (S)
24.709(a) or (S) 24.715(a), or, in the case of an applicant (or licensee) that
is a Small Business, do not exceed the gross revenues limit specified in
paragraph (b) of that section. 47 CFR (S) 24.720(n)
SMALL BUSINESS. As of the date of this Agreement, the FCC defines a Small
- --------------
Business as an entity that, together with its affiliates and persons or entities
that hold interest in such entity and their affiliates, has average annual gross
revenues that are not more than $ 40 million for the preceding three years. 47
CFR (S) 24.720(b)
SMR SPECTRUM LIMITATION. As of the date of this Agreement, the FCC defines the
- -----------------------
SMR Spectrum Limitation to calculate the amount of attributable SMR spectrum for
purposes of the 45 MHz Limitation so that no more than 10 MHz of SMR spectrum in
the 800 MHz SMR service will be attributed to an entity when determining
compliance with the cap. 47 CFR (S) 20.6
<PAGE>
Schedule 8.3
------------
DEFINITION OF AGENT'S CASH FEE
Agent's Cash Fee means the total cash fee payable by the Company to the
Agent as follows:
(1) Upon the December 1, 1995 Closing (the "First Closing"), the Company
shall pay to Bear Stearns a cash fee equal to $1,000,000 minus any cash
fees previously paid by the Company to Bear Stearns. The aggregate
amount of the cash fees required to be paid by the Company to Bear
Stearns pursuant to subparagraph (2) or subparagraph (3) below shall be
reduced, commencing when such fees would otherwise have been due and
payable, by the net amount of the cash fee required to be paid by
Company to Bear Stearns at the First Closing pursuant to this
subparagraph (1).
(2) Upon the Closing, the Company shall pay to Bear Stearns a cash fee equal
to 0.5% of the gross proceeds raised or committed to at or in
contemplation of such closing, excluding proceeds raised or committed to
from any of Roger Linquist or Accel Partners or any of its affiliates
(collectively, the "Excepted Investors"), but including all gross
proceeds raised or committed to from any of (i) Battery Ventures III (or
any of its affiliates), (ii) Mitsui Comtek (or any of its affiliates),
or (iii) any other person or entity (other than the Excepted Investors)
(collectively, "Covered Investors"). The amount of any cash fees
required in fact to be paid by the Company to Bear Stearns pursuant to
this subparagraph (2), after giving effect to any reduction provided for
in the last sentence of subparagraph (1), shall be credited against any
fees required to be paid by the Company pursuant to subparagraph (3)
below.
(3) No later than the close of business on the first business day following
any Expiration Date, as defined in Article VIII, the Company shall pay
to Bear Stearns a cash fee equal to 3.00% of Utilized Funds (as defined
below) (other than Utilized Funds attributable to GM Investment
Management Corp. or affiliates, as to which a cash fee of 2.5% shall
apply, and Utilized Funds (not to exceed $1,000,000) attributable to
natural persons serving as members (including advisory members) of the
Board of Directors of the Company ("Board Investors"), as to which a
cash fee of 1.5% shall apply), up to a maximum of $60,000,000 in
cumulative Utilized Funds, and 5.00% of cumulative Utilized Funds in
excess of $60,000,000. Utilized Funds attributable to GM Investment
Management Corp. or affiliates and Utilized Funds attributable to Board
Investors shall be included for purposes of determining whether
cumulative Utilized Funds exceed $60,000,000.
<PAGE>
(4) "Utilized Funds" shall mean the gross cash proceeds paid from time to
time by Covered Investors in consideration of the issuance by the
Company of its securities to such Covered Investors minus all cash paid
or required to be paid by the Company to redeem Class B or Class C
Common Stock tendered by the Covered Investors pursuant to any exercise
by the Covered Investors of the Put Option (as defined in Article VIII).
For purposes of calculating the amount of cash fees provided for in
paragraph (3) above payable by the Company to the Agent in respect of a
particular Expiration Date, Utilized Funds at such Expiration Date shall
include gross proceeds paid by Covered Investors that are not subject to
subsequent Put Options arising after such Expiration Date.
<PAGE>
Schedule 9.10
-------------
Glossary of Terms
-----------------
ANTICOLLUSION RULES. As of the date of this Agreement, the FCC has adopted
- --------------------
certain rules and policies to prohibit applicants for an FCC-administered
spectrum auction to engage in any discussions relating to bidding strategy bid
amounts and related matters with other applicants eligible for the same
auction, among other related restrictions. 47 C.F.R. (S) 1.1205
ATTRIBUTION RULES. Ownership interests amounting to (i) 5 percent or more
- ------------------
(either directly or indirectly through the FCC's multiplier rule) or (ii) if
an institutional investor (as defined by the FCC in 47 C.F.R. (S) 24.720(h) (to
broadly include for example venture capital firms, insurance companies and
pension funds)), 10 percent or more (either directly or through the FCC's
multiplier rule. In addition, officers and directors of a broadband PCS
licensee or applicant or cellular licensee or an entity that controls one of
same are deemed to have an attributable interest in the entity with which they
are so associated. The attribution rules are used by the FCC to determine
compliance with the FCC's spectrum ownership caps described herein.
BROADBAND PCS 40 MHz SPECTRUM CAP. As of the date of this Agreement, the FCC
- ----------------------------------
defines the Broadband PCS 40 MHz Spectrum Cap so that no entity or
individual may have an attributable ownership interest in more than 40 MHz of
broadband PCS licenses in the same geographic area. 47 CFR (S) 24.204
CELLULAR-PCS 35 MHz CROSS-OWNERSHIP CAP. As of the date of this Agreement,
- ----------------------------------------
the FCC defines the Cellular-PCS 35 MHz Cross-Ownership Cap so that no entity or
individual may have an attributable interest in a cellular license and more than
a 10 MHz broadband PCS license in a market where the cellular licensee's CGSA
would cover 10% or more of the PCS service area's population. 47 CFR (S) 24.204
COMMERCIAL MOBILE RADIO SERVICE. As of the date of this Agreement, the FCC
- -------------------------------
defines the Commercial Mobile Radio Service under 47 CFR (S) 20.3 as:
(a)(l) provided for profit, i.e., with the intent of receiving
----
compensation or monetary gain;
(2) An interconnected service; and
(3) Available to the public, or to such classes of eligible users as to be
effectively available to a substantial portion of the public; or
<PAGE>
(b) The functional equivalent of such a mobile service described in
paragraph(a) of 47 CFR (S) 20.3.
45 MHz LIMITATION. As of the date of this Agreement, the FCC defines the 45
- ------------------
MHz Limitation so that no licensee in the broadband PCS, cellular, or SMR
services (including all parties under common control) regulated as CMRS shall
have an attributable interest in a total of more than 45 MHz of licensed
broadband PCS, cellular, and SMR spectrum regulated as CMRS with significant
overlap in any geographic area. 47 CFR (S) 20.6
INSTITUTIONAL INVESTOR. An institutional investor is an insurance company, a
- -----------------------
bank holding stock in trust accounts through its trust department, or an
investment company meeting the definition below:
(a) "Investment company" means any issuer which--
(1) is or holds itself out as being engaged primarily, or proposes to
engage primarily, in the business of investing, reinvesting, or trading in
securities;
(2) is engaged or proposes to engage in the business of issuing
face-amount certificates of the installment type, or has been engaged in such
business and has any such certificate outstanding; or
(3) is engaged or proposes to engage in the business of investing,
reinvesting, owning, holding, or trading in securities, and owns or proposes to
acquire investment securities having a value exceeding 40 per centum of the
value of such issuer's total assets (exclusive of Government securities and
cash items) on an unconsolidated basis.
For purposes of this definition, "investment securities" includes all
securities except (A) Government securities, (B) securities issued by
employees' securities companies, and (C) securities issued by majority-owned
subsidiaries of the owner which are not investment companies.
PRIVATE MOBILE RADIO SERVICE. As of the date of this Agreement, the FCC
- ----------------------------
defines the Private Mobile Radio Service as a mobile service that is neither a
commercial mobile radio service nor the functional equivalent of a service that
meets the definition of commercial mobile radio service. 47 CFR (S) 20.3
QUALIFYING INVESTOR. As of the date of this Agreement, the FCC defines a
- --------------------
Qualifying Investor as a person who is (or holds an interest in) a member of
the applicant's (or licensee's) control group and whose gross revenues and
total assets,
<PAGE>
when aggregated with those of all other attributable investors and
affiliates, do not exceed the gross revenues and total assets limits specified
in (S) 24.709(a) or (S) 24.715(a), or, in the case of an applicant (or
licensee) that is a Small Business, do not exceed the gross revenues limit
specified in paragraph (b) of that section. 47 CFR (S) 24.720(n)
SMALL BUSINESS. As of the date of this Agreement, the FCC defines a Small
- ---------------
Business as an entity that, together with its affiliates and persons or
entities that hold interest in such entity and their affiliates, has average
annual gross revenues that are not more than $ 40 million for the preceding
three years. 47 CFR (S) 24.720(b)
SMR SPECTRUM LIMITATION. As of the date of this Agreement, the FCC defines
- ------------------------
the SMR Spectrum Limitation to calculate the amount of attributable SMR spectrum
for purposes of the 45 MHz Limitation so that no more than 10 MHz of SMR
spectrum in the 800 MHz SMR service will be attributed to an entity when
determining compliance with the cap. 47 CFR (S) 20.6
<PAGE>
GENERAL WIRELESS, INC.
Class B Common Stock Purchase Warrants
Expiring May ___, 2006
New York, N.Y.
May ___, 1996
GENERAL WIRELESS, INC., a Delaware corporation (the "Company"), hereby
issues and delivers to _________________________ (the "Holder") a warrant (the
"Warrant") to purchase ___________ shares of the Company's Class B Common Stock,
par value $0.0001 per share (the "Class B Common Stock").
This Warrant is being issued together with other warrants
(collectively, the "Warrants") for the purchase of Class B Common Stock in
connection with an offering by the Company of an aggregate of up to 375,000
Units, each Unit consisting of two shares of the Company's Class C Common Stock,
par value $0.0001 per share (the "Class C Common Stock"), and one warrant
entitling the registered owner thereof to purchase one share of Class C Common
Stock. The initial exercise price of a Warrant shall be equal to $50 per share,
subject, however, to the provisions and upon the terms and conditions
hereinafter set forth (such exercise price, as from time to time adjusted in
accordance with the terms hereof, being hereinafter referred to as the "Warrant
Price").
Certain capitalized terms used in the Warrants are defined in Section
7; references to a "Section" are, unless otherwise specified, to one of the
sections of the Warrants.
1. Exercise of Warrant.
--------------------
1.1 Time of Exercise. The Warrants may be exercised, in whole or in
----------------
part, any time from the date first set forth above until 5:00 p.m. New York City
time on May __, 2006 (the "Expiration Date"). If the Warrants is not exercised
on or prior to the Expiration Date, it shall become null and void and all rights
hereunder shall cease as of that time.
1.2 Manner of Exercise. The Warrants may be exercised by the holder
------------------
hereof, in whole or in part, during normal business hours on any Business Day
prior to the Expiration Date, by surrender of the Warrants to the Company at the
principal office of the Company (or, if such exercise shall be in connection
with an underwritten public offering of shares of Class B Common Stock subject
to the Warrants or Class C Common Stock into which the Class B Common Stock is
convertible by the board of directors of the Company, at the location at which
the Company shall have agreed to deliver the shares of Class B or Class C Common
Stock subject to such offering), accompanied by either:
(a) a Subscription Form in substantially the form attached to the
Warrants (or a reasonable facsimile thereof) duly executed by the holder hereof
and setting forth such holder's election to receive the number of shares of
Class B Common Stock specified in the Subscription Form. The Subscription Form
shall be accompanied by payment for the shares of Class B Common Stock to be
purchased by either (i) certified or official bank check payable to the order of
the Company, or (ii) delivery of equity securities of the Company with duly
executed stock powers and signature guarantees (provided that such securities,
other than Class B Common Stock, are admitted to trading or listed on a national
securities exchange, the Nasdaq
1
<PAGE>
National Market or the National Association of Securities
Dealers, Inc. Automated Quotations System) in either case in an amount or having
a value equal to the product of (x) the Warrant Price and (y) the number of
shares of Class B Common Stock specified in the Subscription Form; or
(b) a Cashless Exercise Form in substantially the form attached to the
Warrants (or a reasonable facsimile thereof) duly executed by the holder (such
exercise being referred to herein as a "Cashless Exercise") and setting forth
such holder's election to receive the number of shares of Class B Common Stock
specified in the Cashless Exercise Form. Such presentation and surrender shall
be deemed a waiver of the Class B holder's obligation to pay all or any portion
(as the case may be) of the Aggregate Warrant Price in connection with such
cashless exercise. In the event of a Cashless Exercise, the holder hereof shall
exchange the Warrants for that number of shares of Class B Common Stock
determined by multiplying the number of shares of Class B Common Stock for which
the holder hereof desires to exercise the Warrants by a fraction, the numerator
of which shall be the result (but not less than zero) obtained by subtracting
the Warrant Price then in effect from the current market price per share (the
"Current Market Price") of the Class B Common Stock as of the date of exercise,
and the denominator of which shall be such Current Market Price. For purposes of
any computation under this Section 1.2(b) or Section 2 hereof, the Current
Market Price of Class B Common Stock as of any date shall be deemed to be the
average for the ten consecutive Business Days immediately prior to such date of
the daily closing prices of the Class B Common Stock on the principal national
securities exchange on which the Class B Common Stock is admitted to trading or
listed, or if not listed or admitted to trading on any such exchange, the
closing prices as reported by the Nasdaq National Market, or if not then listed
on the Nasdaq National Market, the average of the highest reported bid and
lowest reported asked prices as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or if not then
publicly traded, the fair market price of the Class B Common Stock as determined
in good faith by the Board of Directors of the Company (the "Board"); and such
holder shall thereupon be entitled to receive such number of duly authorized,
validly issued, fully paid and nonassessable shares of Class B Common Stock in
respect of which the Warrants is so exercised.
1.3 When Exercise Effective. The exercise of the Warrants shall be
-----------------------
deemed to have been effected immediately prior to the close of business on the
Business Day on which the Warrants shall have been surrendered to the Company as
provided in Section 1.2, and upon such exercise the Person or Persons in whose
name or names any certificate or certificates for shares of Class B Common Stock
shall be issuable as provided in Section 1.4 shall be deemed to have become the
holder or holders of record of such Class B Common Stock.
1.4 Delivery of Stock Certificates etc.
------------------------------------
(a) As soon as practicable after the exercise of the Warrants and in
any event within five Business Days thereafter (unless such exercise shall be in
connection with an underwritten public offering of shares of Class B Common
Stock subject to the Warrants or Class C Common Stock into which the Class B
Common Stock is convertible by the board of directors of the Company, in which
event concurrently with such exercise), the Company at its expense (including
the payment by it of any applicable taxes) will cause to be issued in the name
of and delivered to the holder hereof or, subject to Section 5, any Person
designated by such holder (upon payment by such holder of any applicable
transfer taxes) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Class B Common Stock to
which such holder shall be entitled upon the exercise.
2
<PAGE>
(b) The Company shall pay any and all documentary, stamp, transfer or
other transactional taxes attributable to the issuance of the Warrants or any
shares of Class B Common Stock issuable upon exercise of the Warrants, except as
set forth in Section 1.4(a) with respect to any applicable transfer taxes in the
case of exercise by a holder and issuance of Class B Common Stock upon such
exercise to another Person.
(c) In the event the holder of the Warrants shall exercise the
Warrants with respect to less than all of the shares of Class B Common Stock
issuable upon exercise of the Warrants, the Company shall execute a new warrant,
registered in the name of such holder, in the form of the Warrants for the
balance of the shares of Class B Common Stock remaining to be issued hereunder
and deliver such new warrant to the holder of the Warrants as soon as
practicable after exercise of the Warrants and in any event within five Business
Days thereafter.
1.5 FCC Restrictions on Exercise. No holder shall exercise the
----------------------------
Warrants, acquire shares or otherwise be attributed with ownership of any shares
of capital stock (as such attribution is defined by the FCC) that would cause
the Company to lose its status as a Small Business, as that term is defined by
the FCC, or would otherwise subject the Company to financial or other penalties
imposed by the FCC. The Company shall provide such information as reasonably
requested by any Warrant holder in connection with any determination as to
whether such condition is met and shall otherwise cooperate with such Warrant
holder in connection therewith. Specifically, no Stockholder may exercise this
warrant, acquire shares or otherwise be attributed with ownership of any shares
in the Company if after giving effect to such actions, (i) the Qualifying
Investors (as defined in the Stockholders Agreement) would own in the aggregate
less than 15% of the Company's total equity during the first three years and 10%
of the Company's total equity during the fourth through tenth years following
the grant of PCS licenses (personal communications services) to the Company or
(ii) any single Stockholder, other than a Qualifying Investor, would own more
than 25% of the Company's total equity and voting interests; provided, however
that if the Expiration Date occurs and the holder hereof is restricted from
exercising the Warrants pursuant to the terms of this Section 1.5, the Warrants
shall continue in full force and effect and all rights hereunder shall continue
for a period of 30 days following written notification by the Company that the
terms of this Section 1.5 do not restrict the exercise of the Warrants by the
holder hereof; provided further that any extension pursuant to the terms of this
Section 1.5 shall equally extend the exercise period applicable to other holders
of Warrants. In addition, except as provided for in the FCC's rules no
Stockholder with an attributable interest (as defined by the FCC) in shares in
the Company will acquire shares or otherwise be attributed interests
attributable to the Company in other Commercial or Private Mobile Radio Service
(as defined by the FCC) applicants or licenses in the same geographic market as
licenses held by or applied for by the Company if such Stockholder's
attributable interests would cause the Company to exceed the Company's
applicable spectrum ownership limits (as defined by the FCC) for any geographic
market. Such Stockholder shall cooperate with the Company in (i) determining the
Stockholder's compliance with this paragraph and (ii) in the event of
noncompliance, executing the measures reasonably necessary to cure such
noncompliance consistent with applicable FCC rules and policies. As of the date
hereof, for example, the FCC defines attributable interests as interests of five
percent or more in a Commercial or Private Mobile Radio Service licensee held by
investors generally, and interests of ten percent or more in such licensees held
by entities defined as "institutional investors" by the FCC (including, for
example, venture capital firms, insurance companies and pension funds).
2. Certain Adjustments.
--------------------
2.1 Adjustment of Warrant Price and Number of Shares. The number and
------------------------------------------------
kind
3
<PAGE>
of securities purchasable upon the exercise of the Warrants and the Warrant
Price shall be subject to adjustment from time to time upon the happening of any
of the following events after the date hereof:
(a) Recapitalization, Reorganization, Reclassification, Consolidation,
------------------------------------------------------------------
Merger or Sale. In case of any recapitalization or reorganization of the Company
- --------------
or any reclassification or change of outstanding securities issuable upon
exercise of the Warrants (other than a change in par value, or from par value to
no par value, or from no par value to par value or as a result of a subdivision
or combination) or in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with another corporation in which
the Company is the surviving corporation and which does not result in any
reclassification or change (other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a
subdivision or combination) of outstanding securities issuable upon exercise of
the Warrants), or in case of any sale or transfer to another corporation of the
Property of the Company as an entirety or substantially as an entirety, the
Company or such successor or purchasing corporation, as the case may be, shall,
without payment of any additional consideration therefor, issue a new Warrant,
providing that the holder of the Warrants shall have the right to exercise such
new Warrant and procure upon such exercise in lieu of each share of Class B
Common Stock theretofore issuable upon exercise of the Warrants the kind and the
highest amount of shares of capital stock, other securities, money and property
receivable upon such recapitalization, reorganization, reclassification, change,
consolidation, merger, sale or transfer by a holder of one share of Class B
Common Stock issuable upon exercise of the Warrants had it been exercised
immediately prior to such recapitalization, reorganization, reclassification,
change, consolidation, merger, sale or transfer. Such new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 2. The provisions of this subsection
(a) shall similarly apply to successive recapitalizations, reorganizations,
reclassifications, changes, consolidations, mergers, sales and transfers.
(b) Subdivision or Combination of Shares. If the Company, at any time
------------------------------------
while the Warrants are outstanding, shall subdivide or combine any class or
classes of its Class B Common Stock, (i) in case of subdivision of shares, the
Warrant Price shall be proportionately reduced (as at the effective date of such
subdivision or, if the Company shall take a record of holders of its Class B
Common Stock for the purpose of so subdividing, as at the applicable record
date, whichever is earlier) to reflect the increase in the total number of
shares of Class B Common Stock outstanding as a result of such subdivision, or
(ii) in the case of a combination of shares, shall be proportionately increased
(as at the effective date of such combination or, if the Company shall take a
record of holders of its Class B Common Stock for the purpose of so combining,
as at the applicable record date, whichever is earlier) to reflect the reduction
in the total number of shares of Class B Common Stock outstanding as a result of
such combination. In the event that an adjustment pursuant to this subsection
(b) is made as of the record date for purposes of any subdivision or combination
and such subdivision or combination is not so made, the Warrant Price shall
again be adjusted to be the Warrant Price which would then be in effect if such
record date had not been fixed.
(c) Certain Dividends and Distributions. If the Company shall:
------------------------------------
(i) Stock Dividends. Pay a dividend in, or make any other distribution
---------------
of shares of any class or classes of Class B Common Stock, the Warrant Price
shall be adjusted, as at the date the Company shall take a record of the holders
of such class or classes of Class B Common Stock, for the purpose of receiving
such dividend or other distribution
4
<PAGE>
(or if no such record is taken, as at the date of such payment or other
distribution), to that price determined by multiplying the Warrant Price in
effect immediately prior to such record date (or if no such record is taken,
then immediately prior to such payment or other distribution), by a fraction (1)
the numerator of which shall be the total number of shares of Class B Common
Stock outstanding immediately prior to such dividend or distribution, and (2)
the denominator of which shall be the total number of shares of Class B Common
Stock outstanding immediately after such dividend or distribution (plus in the
event that the Company paid cash for fractional shares, the number of additional
shares which would have been outstanding had the Company issued fractional
shares in connection with said dividends); provided, however, that in the event
such dividend or distribution is not so paid or made, the Warrant Price shall
again be adjusted to be the Warrant Price which would then be in effect if such
record date had not been fixed; or
(ii) Special Dividend or Distribution. Issue or distribute to the
--------------------------------
holders of shares of Class B Common Stock evidences of indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
distribution referred to in subsection (a), (b) or (d) of this Section 2 or the
preceding paragraph (i) and also excluding dividends or distributions paid in
cash or other property out of net profits legally available therefor unless such
dividends or distributions shall constitute an "Extraordinary Dividend" (as
hereinafter defined)), any such nonexcluded event being referred to herein as a
"Special Dividend", the Warrant Price shall be adjusted by multiplying the
Warrant Price then in effect by a fraction, the numerator of which shall be the
Current Market Price of the Class B Common Stock as of the day prior to the
record date, less the fair market value (as determined by the Board) of the
evidences of indebtedness, securities, cash or property, or other assets issued
or distributed in such Special Dividend applicable to one share of Class B
Common Stock and the denominator of which shall be such Current Market Price. An
adjustment made pursuant to this paragraph (iii) shall become effective
immediately after the record date of any such Special Dividend. In the event
that such issuance or distribution is not so made, the Warrant Price shall again
be adjusted to be the Warrant Price which would then be in effect if such record
date had not been fixed.
For purposes of this paragraph (ii), the term "Extraordinary
-------------
Dividend" shall mean any dividend of cash or other property with respect to
--------
the Class B Common Stock the amount of which, together with the aggregate
amount of dividends on the Class B Common Stock to be aggregated with such
cash dividend in accordance with the provisions of this paragraph, equals
or exceeds the threshold percentages set forth in subparagraphs (A) or (B)
below:
(A) If, upon the date immediately prior to the ex-dividend
date with respect to a dividend in cash or property on the Class B
Common Stock, the aggregate amount of such dividend together with the
amounts of all such dividends on the Class B Common Stock with ex-
dividend dates occurring in the 85 consecutive day period ending on
the date prior to the ex-dividend date with respect to such dividend
to which this provision is being applied equals or exceeds 10% of the
Current Market Price of the Class B Common Stock as of the trading day
immediately prior to such ex-dividend date, such dividend together
with each other such dividend with an ex-dividend date occurring in
such 85 day period shall be deemed to be an Extraordinary Dividend and
for purposes of applying the formula set forth in this paragraph (ii),
the fair market value of such cash or property distributed as a
Special Dividend shall be equal to (w) the aggregate amount of such
dividend together with the amounts of the other dividends with ex-
dividend dates occurring in such period minus (x) the
-----
5
<PAGE>
aggregate amount of such other dividends with ex-dividend dates
occurring in such period for which a prior adjustment in the Warrant
Price was previously made under this paragraph (ii).
(B) If, upon the date immediately prior to the ex-dividend
date with respect to a dividend in cash or property on the Class B
Common Stock, the aggregate amount of such dividend together with the
amounts of all such dividends on the Class B Common Stock with ex-
dividend dates occurring in the 365 consecutive day period ending on
the date prior to the ex-dividend date with respect to such dividend
to which this provision is being applied equals or exceed 20% of the
Current Market Price of the Class B Common Stock as of the trading day
immediately prior to such ex-dividend date, such dividend together
with each other such dividend with an ex-dividend date occurring in
such 365 day period shall be deemed to be an Extraordinary Dividend
and for purposes of applying the formula set forth above in this
paragraph (ii), the fair market value of such cash or property
distributed as a Special Dividend shall be equal to (y) the aggregate
amount of such dividend together with the amounts of the other such
dividends with ex-dividend dates occurring in such period minus (z)
the aggregate-----amount of such other dividends with ex-dividend
dates occurring in such period for which a prior adjustment in the
Warrant Price was previously made under this paragraph (ii).
(d) Issuance of Class B Common Stock Equivalents. If the Company
--------------------------------------------
shall issue to all holders of its Class B Common Stock any Class B
Common Stock Equivalent and the price per share for which Additional
Shares of Class B Common Stock may be issuable thereafter pursuant to
such Class B Common Stock Equivalent shall be less than the Current
Market Price as of the date of issuance of such Class B Common Stock
Equivalents then the Warrant Price upon each such issuance shall be
adjusted as of the opening of business on the day following the date
fixed for the determination of stockholders entitled to receive such
Class B Common Stock Equivalents by multiplying such Warrant Price by
a fraction the numerator of which shall be the number of shares of
Class B Common Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of Class B
Common Stock which the aggregate consideration (determined in
accordance with subsection (e) of this Section 2) for the total number
of such Additional Shares of Class B Common Stock would purchase at
such Current Market Price and the denominator of which shall be the
number of shares of Class B Common Stock outstanding at the close of
business on the date fixed for such determination plus the total
number of such Additional Shares of Class B Common Stock, such
adjustment to become effective immediately after the opening of
business on the day following the date fixed for such determination.
In the event that such Class B Common Stock Equivalents are not so
issued, the Warrant Price shall again be adjusted to be the Warrant
Price which would then be in effect if such date fixed for
determination of stockholders entitled to receive such Class B Common
Stock Equivalents had not been fixed. No adjustment of the Warrant
Price shall be made under this subsection (d) upon the issuance of any
Convertible Security which is issued pursuant to the exercise of any
warrants or other subscription or purchase rights there for, if any
adjustment shall previously have been made in the Warrant Price then
in effect upon the issuance of such warrants or other rights pursuant
to this subsection (d).
(e) Computation of Consideration. For purposes of subsection (d)
----------------------------
above, the consideration for any Additional Shares of Class B Common Stock
issuable pursuant to any Class B Common Stock Equivalents shall be the
consideration received by the Company for issuing such Class B Common Stock
Equivalents, plus the additional consideration payable to the
6
<PAGE>
Company upon the Company upon exercise, conversion or exchange of such Class B
Common Stock Equivalents. In any case in which the consideration to be received
or paid shall be other than cash, the Board shall notify the holder of the
Warrants of its determination of the fair market value of such consideration
prior to payment or accepting receipt thereof. If within thirty days after
receipt of said notice, the holders of Warrants exercisable for at least a
majority of Class B Common Stock issuable under the Warrants, but then unissued,
shall notify the Board in writing of their objection to such determination, a
determination of fair market value of such consideration shall be made by
arbitration in accordance with the Rules of the American Arbitration
Association, by an arbitrator in the Borough of Manhattan, City of New York,
State of New York.
(f) Readjustment of Warrant Price. Upon the expiration of the right to
-----------------------------
convert, exchange or exercise any Class B Common Stock Equivalent the issuance
of which effected an adjustment in the Warrant Price, if any such Class B Common
Stock Equivalent shall not have been converted, exercised or exchanged, the
Warrant Price shall forthwith be readjusted and thereafter be the price which it
would have been (but reflecting any other adjustments in the Warrant Price made
pursuant to the provisions of this Section 2 after the issuance of such Class B
Common Stock Equivalent) had the adjustment of the Warrant Price been made on
the basis of the number of Additional Shares of Class B Common Stock actually
issued upon conversion, exchange or exercise of such Class B Common Stock
Equivalent.
(g) Other Action Affecting Class B Common Stock. In case after the
-------------------------------------------
date hereof the Company shall take any action affecting its Class B Common
Stock, other than an action described in any of the foregoing subsections (a)
through (e) of this Section 2, inclusive, and the failure to make any adjustment
would not fairly protect the purchase rights represented by the Warrants in
accordance with the essential intent and principle of this Section 2, then the
Warrant Price shall be adjusted in such manner and at such time as the holder
hereof and the Company shall jointly determine.
(h) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Warrant Price pursuant to any provision of this Section 2, the number of shares
of Class B Common Stock issuable upon exercise hereof shall be adjusted, to the
nearest one hundredth of a whole share, to the product obtained by multiplying
such number of shares purchasable immediately prior to such adjustment in the
Warrant Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price immediately thereafter. If the Company shall be in default under
any provision contained in Section 3 of the Warrants so that shares issued at
the Warrant Price adjusted in accordance with this Section 2 would not be
validly issued, the adjustment of number of shares provided for in the foregoing
sentence shall nonetheless be made and the holder of the Warrants shall be
entitled to purchase such greater number of shares at the lowest price at which
such shares may then be validly issued under applicable law. Such exercise shall
not constitute a waiver of any claim arising against the Company by reason of
its default under Section 3 of the Warrants.
(i) In any case in which this Section 2 shall require that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event (i) issuing to the
holder of the Warrants, if the Warrant is exercised after such record date and
before the occurrence of such event, the additional Class B Common Stock
issuable upon such exercise by reason of the adjustment required by such event
over and above the Class B Common Stock issuable upon such exercise before
giving effect to such adjustment and (ii) paying to such holder any amount in
cash in lieu of a fractional share of Class B Common Stock pursuant to Section
2.3.
7
<PAGE>
2.2 Notices to Holders.
------------------
(a) Whenever the Warrant Price or number of shares of Class B Common
Stock issuable upon exercise of the Warrants shall be adjusted pursuant to
Section 2 hereof, the Company shall cause the independent accounting firm then
regularly engaged by it to report on its financial statements to prepare and
execute a certificate setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board made any determination hereunder), and the Warrant Price and number of
shares of Class B Common Stock issuable hereunder after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (by first
class mail postage prepaid) to the holder hereof promptly after each adjustment.
(b) The holder hereof shall be entitled to the same rights to receive
notice of corporate action as any holder of Class B Common Stock and shall also
be entitled to 20 days prior written notice of the record date of any cash
dividend on Class B Common Stock or any of the events described in Section 2.1
hereof.
2.3 Fractional Shares. No fractional shares of Class B Common Stock
-----------------
will be issued in connection with any exercise hereof, but in lieu of such
fractional shares, the Company shall make a cash payment therefor equal in
amount to the product of the applicable fraction multiplied by the Warrant Price
then in effect.
2.4 Company to Reaffirm Obligations. The Company will, at the time of
-------------------------------
or at any time after the exercise of the Warrants, upon the request of the
holder of any shares of Class B Common Stock issued upon such exercise,
acknowledge in writing its continuing obligation to afford to such holder all
rights (if any) (including, without limitation, any rights to registration,
pursuant to Section 4, of the shares of Class C Common Stock issued upon
conversion of Class B Common Stock to Class C Common Stock) to which such holder
shall continue to be entitled after such exercise in accordance with the terms
of the Warrants, provided that, if any such holder shall fail to make any such
--------
request, such failure shall not affect the continuing obligation of the Company
to afford such rights to such holder.
8
<PAGE>
2.5 Covenant Regarding Class B Common Stock etc.
--------------------------------------------
(a) The Company covenants and agrees that all shares of Class B Common
Stock issuable upon exercise of the Warrants will, upon such issuance, be
validly issued, fully paid and non-assessable.
(b) The Company further covenants and agrees that, in the event of a
Cashless Exercise it shall take or cause to be taken such action as will permit
the exercise of the Warrants without any additional payment by the holder
hereof.
3. No Impairment.
-------------
The Company will not, by amendment of its certificate of incorporation
or through any consolidation, merger, reorganization, transfer of assets,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of the Warrants,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be reasonably necessary in order to
protect the rights of the holder of the Warrants against dilution or other
impairment. Without limiting the generality of the foregoing, the Company
(a) will not permit the par value of any shares of Class B Common
Stock receivable upon the exercise of the Warrants to exceed the amount payable
therefor upon such exercise,
(b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Class B Common Stock on the exercise of any Warrant from
time to time outstanding,
(c) will not take any action which would result in the total number of
shares of outstanding Class B Common Stock, plus those issuable upon the
exercise of all of the Warrants, exceeding the total number of shares of Class B
Common Stock then authorized by the Company's certificate of incorporation or
the total number of such shares available for the purpose of issue upon such
exercise being fewer than the number required to be issued upon such exercise,
and
(d) use its reasonable best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under the Warrants.
4. Registration Rights. In the event the board of directors of the
-------------------
Company converts Class B Common Stock to Class C Common Stock registration
rights shall be granted to holders of Warrants pursuant to the terms of a
Registration Rights Agreement dated as of December 1, 1995.
5. Restrictions on Transfer.
------------------------
5.1 Restrictive Legends. The holder hereof acknowledges that since
-------------------
neither the offer nor sale of the Warrant nor the shares of Class B Common Stock
issuable upon exercise of the Warrant have been registered under the Securities
Act or the securities laws of any State, the Warrants and shares of Class B
Common Stock issuable upon exercise of the Warrants may not be sold, transferred
or otherwise disposed of unless they are so registered or an exemption from
9
<PAGE>
such registration is available. Except as otherwise permitted by this Section 5,
the Warrants, and each Warrant issued upon direct or indirect transfer or in
substitution for any Warrant pursuant to Sections 1.4(a) and 6, shall be stamped
or otherwise imprinted with legends in substantially the following form:
"THE WARRANTS AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THE
WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT AND SUCH LAWS. IN ADDITION, THE
WARRANTS AND SUCH SHARES MAY BE TRANSFERRED ONLY ON COMPLIANCE WITH THE
RESTRICTIONS ON TRANSFER SPECIFIED IN SECTION 5 HEREOF."
Except as otherwise permitted by this Section 5, each certificate for Class B
Common Stock issued upon the exercise of the Warrants, and each certificate
issued upon the transfer of any such Class B Common Stock, shall be stamped or
otherwise imprinted with the following legends in substantially the following
form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED WITHOUT
REGISTRATION UNDER THAT ACT OR ANY APPLICABLE STATE SECURITIES LAWS UNLESS
AN EXEMPTION FROM REGISTRATION IS AVAILABLE. BY ITS PURCHASE OF SHARES OF
STOCK, THE PURCHASER AGREES THAT IT IS ACQUIRING SUCH SHARES FOR INVESTMENT
AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, THE PUBLIC
DISTRIBUTION THEREOF, AND THAT ANY RESALE OF ANY SHARES OF STOCK MAY BE
MADE ONLY IN ACCORDANCE WITH THE STOCKHOLDERS AGREEMENT.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED UNDER THE TERMS
OF A STOCKHOLDERS AGREEMENT, DATED AS OF DECEMBER 1, 1995, BY AND AMONG THE
COMPANY AND ITS STOCKHOLDERS, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY.
5.2 General Prohibition. Holders of Warrants will not, directly or
-------------------
indirectly, offer, sell, assign, transfer, grant a participation in, pledge or
otherwise dispose of or encumber any Warrant or Class B Common Stock (for
purposes of this Section 5, "Securities") or any interest therein (or solicit
any offers to buy or otherwise acquire or take a pledge of any of such
Securities) (each, a "Transfer"), except as expressly permitted hereby and in
compliance with the Securities Act, the Stockholders Agreement and the
provisions of this Article 5. Any attempt to Transfer any Securities not made
strictly in compliance with this Agreement and the Stockholders Agreement shall
be null and void and the Company shall not give any effect in the Company's
stock records to such Transfer.
5.3 FCC Restrictions on Transfer. The holder of the Warrants may
----------------------------
Transfer all or any portion of its Securities in the Company to any other person
only so long as such Transfer would not cause the Company or any other
Stockholder to violate any applicable laws or regulations or would not endanger
the Company's bidding or financing preferences for which it is eligible under
FCC regulations; provided that any transferee receiving Securities shall be
required to sign an undertaking agreeing to be bound by the terms of this
Agreement, if necessary to
10
<PAGE>
comply with FCC rules and regulations. The Company and the other Stockholders
shall provide such information as reasonably requested by any Stockholder in
connection with any determination as to whether such condition is met and the
Company shall otherwise cooperate with such Warrant holder in connection
therewith. Specifically, no Stockholder may Transfer any Securities if after
giving effect to such Transfer, (i) the Qualifying Investors (as defined in the
Stockholders Agreement) would own in the aggregate less than 15% of the
Company's total equity during the first three years and 10% of the Company's
total equity during the fourth through tenth years following the grant of PCS
licenses to the Company, (ii) any single Stockholder, other than a Qualifying
Investor, would own more than 25% of the Company's total equity and voting
interests or (iii) such Transfer would cause a violation of the foreign
ownership restrictions imposed by the Communications Act of 1934, as amended.
Such Stockholder shall cooperate with the Company in (i) determining the
Stockholder's compliance with this paragraph and (ii) in the event of
noncompliance, executing the measures reasonably necessary to cure such
noncompliance consistent with applicable FCC rules and policies.
5.4 Transfer to Permitted Affiliates. Transfers of Securities by the
--------------------------------
holder hereof to any Permitted Affiliate and from any Permitted Affiliate to
another Permitted Affiliate shall be exempt from the provisions hereof and be
permitted Transfers hereunder, but any Permitted Affiliate receiving Securities
shall be required to sign an undertaking agreeing to be bound by the terms of
this Agreement and the Stockholders Agreement. For purposes of this Agreement,
a "Permitted Affiliate" shall mean a person that is controlling, controlled by
or under common control with such Stockholder or, if the Stockholder is a trust,
to any successor or related trust or successor trustee.
5.5 Pledges. Notwithstanding the provisions of Section 5.2 hereof, a
-------
holder may not, directly or indirectly, pledge, hypothecate or grant a security
interest in any Securities of the Company other than through a bona fide pledge
of such Securities as security for indebtedness or obligations of such
Stockholder meeting all of the following criteria: (i) the pledgee is a
nationally or internationally recognized financial institution (a "Permitted
Pledg-ee"), (ii) the pledgee agrees with the Stockholders and the Company in
writing that, prior to and upon foreclosing or otherwise realizing upon the
shares of Class B Common Stock so pledged, the pledgee will comply with the
terms and conditions of this Agreement, and (iii) a majority of the Board of
Directors have consented to such pledge, which consent shall not be unreasonably
withheld.
6. Ownership Transfer and Substitution of Warrants.
-----------------------------------------------
6.1 Ownership of Warrants. The Company may treat the Person in whose
---------------------
name any Warrant is registered on the register kept at the principal office of
the Company as the owner and holder thereof for all purposes, notwithstanding
any notice to the contrary, except that, if and when any Warrant is properly
assigned in blank and the terms and provisions of Section 5 shall have been
complied with, the Company may (but shall not be obligated to) treat the bearer
thereof as the owner of such Warrant for all purposes, notwithstanding any
notice to the contrary. Subject to Section 1.1, a Warrant, if properly assigned
and the terms and provisions of Section 5 shall have been complied with, may be
exercised by a new holder without a new Warrant first having been issued.
6.2 Transfer and Exchange of Warrants. Upon the surrender of any
---------------------------------
Warrant, properly endorsed, for registration of transfer or for exchange at the
principal office of the Company, the Company at its expense will (subject to
compliance with Section 5, if applicable) execute and deliver to or upon the
order of the holder thereof a new Warrant or Warrants of like tenor, in the name
of such holder or as such holder (upon payment by such holder of any
11
<PAGE>
applicable transfer taxes) may direct, calling in the aggregate on the face or
faces thereof for the number of shares of Class B Common Stock called for on the
face or faces of the Warrant or Warrants so surrendered.
6.3 Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by any Person upon delivery of indemnity reasonably satisfactory to the
Company (the unsecured agreement of the holder of a Warrant or any institutional
investor to indemnify the Company being deemed or the purposes hereof to be
reasonably satisfactory to the Company) in form and amount or, in the case of
any such mutilation, upon surrender of such Warrant for cancellation at the
principal office of the Company, the Company at its expense will execute and
deliver, in lieu thereof a new Warrant of like tenor.
7. Definitions.
-----------
As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:
Additional Shares of Class B Common Stock: shall mean all shares of
-----------------------------------------
Class B Common Stock issued by the Company after the date hereof except the
Class B Common Stock issuable upon exercise of any Warrant.
Aggregate Warrant Price: The product of (a) the number of shares of
-----------------------
Class B Common Stock at any time subject to the Warrants and (b) the Warrant
Price in effect at such time.
Business Day: Any day other than a Saturday or a Sunday or a day on
------------
which commercial banking institutions in New York City are authorized by law to
be closed.
Class B Common Stock: The Class B Common Stock, par value $0.0001 per
--------------------
share of the Company, together with any stock of the Company into which such
common stock shall have been changed or any stock resulting from any
reclassification of such common stock, and all other Class B Common Stock that
the Company may issue from time to time.
Commission: The Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
Class B Common Stock Equivalent: shall mean any Convertible Security
-------------------------------
or warrant, option or other right to subscribe for or purchase any Additional
Shares of Class B Common Stock or any Convertible Security.
Company: As defined in the introduction to the Warrants, such term to
-------
include any corporation which shall succeed to or assume the obligations of the
Company hereunder.
Convertible Securities: Evidences of indebtedness or securities which
----------------------
are or may be at any time convertible into or exchangeable for Additional Shares
of Class B Common Stock. The term "Convertible Security" shall mean one of the
Convertible Securities.
Current Market Price: As defined in Section 1.2(b).
--------------------
12
<PAGE>
Exchange Act: The Securities Exchange Act of 1934, or any similar
------------
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Federal Communications Commission (FCC): Federal agency organized
---------------------------------------
pursuant to Communications Act of 1934, as amended, to regulate the
communications industry and manage the non-government electomagnetic spectrum,
or any successor agency thereto.
Person: A corporation, an association, a partnership, an organization,
------
a business, an individual, a government or political subdivision thereof or a
governmental agency.
Property: With respect to any Person, any interest in any kind of
--------
property or asset, whether real, personal or mixed, tangible or intangible, of
such Person.
Securities Act: The Securities Act of 1933, as amended, or any similar
--------------
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Warrant Price: As defined in the introduction to the Warrants.
-------------
Warrants: The Warrants and any warrants issued in substitution or
--------
exchange therefor or upon transfer thereof.
8. Remedies.
--------
The Company stipulates that the remedies available at law to the
holder of the Warrants in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of the
Warrants are not and will not be adequate and that, to the fullest extent
permitted by applicable law, such terms may be specifically enforced by a decree
for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
9. No Rights or Liabilities as Stockholder.
---------------------------------------
Except as expressly set forth in the Warrants, the holder hereof shall
not have any rights as a stockholder of the Company (including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights) or as imposing any obligation on such holder to
purchase any Class B Common Stock or as imposing any liabilities on such holder
as a stockholder of the Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
13
<PAGE>
10. Notices.
-------
All notices and other communications under the Warrants shall be in
writing and shall be delivered by hand or overnight courier mailed by registered
or certified mail, return receipt requested, or sent by telex or telecopier
addressed (a) if to any holder of any Warrant, at the registered address of such
holder as set forth in the register kept at the principal office of the Company,
or (b) if to the Company, to the attention of its President at 6668 North
Central Expressway, Suite 1170, Dallas, Texas 75206, provided that the exercise
--------
of any Warrant shall be effective in the manner provided in Section 1. Any such
notices and communications shall be deemed to have been given or made (i) on the
date delivered, if by hand or by overnight courier, or on the first Business Day
thereafter if such date of delivery is not a Business Day, (il) on the date
received if deposited in the mail, postage prep aid, (iii) if sent by telex,
when telex answer back is received or (iv) if telecopied, when telecopy receipt
is acknowledged.
11. Regulated Financial Institutions Compliance Obligations. Nothing
-------------------------------------------------------
in this Agreement shall diminish the continuing obligations of any financial
institution to comply with applicable requirements of law that it maintain
responsibility for the disposition of, and control over its admitted assets,
investments and property, including (without limiting
the generality of the foregoing) the provisions of Section 1411(v) of the New
York insurance law, as amended, and as hereinafter from time to time in effect.
12. Termination. The provisions of Sections 5.2-5.5 shall terminate
-----------
and be of no further force and effect in connection with the Company's initial
public offering at a price per share equal to or greater than $200 (as adjusted
in the event of a stock dividend, recapitalization, stock split, reorganization,
merger, or consolidation of the Company) and expected to generate gross proceeds
in an amount equal to $20 million.
13. Miscellaneous.
-------------
The Warrants and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. THE
WARRANTS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK. The section headings in the Warrants are for
purposes of convenience only and shall not constitute a part hereof.
14
<PAGE>
IN WITNESS WHEREOF, the Company and the holder hereof have caused this
Agreement to be duly executed as of the date first above written.
GENERAL WIRELESS, INC.
By:_______________________________
Roger D. Linquist, President
[CLASS B WARRANT SIGNATURE PAGE]
15
<PAGE>
EXHIBIT A
---------
CLASS B WARRANTHOLDERS NO. OF CLASS B WARRANTS
- ---------------------- -----------------------
<TABLE>
<CAPTION>
<S> <C>
The Hamilton Companies, LLC 5,000
John Sculley 2,500
C. Boyden Gray 1,000
Mitchell Kapor 1,000
Theodore H. Ashford 500
</TABLE>
16
<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
General Wireless, Inc.:
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
_______________________ shares of Class B Common Stock, as provided for therein,
and tenders herewith payment of the purchase price in full in the form of cash
or a certified or official bank check in the amount of $
Please issue a certificate or certificates for such Class B Common
Stock in the name of:
Name ___________________________
(Please Print Name, Address
and Social Security No.)
Signature ________________________
NOTE: The above signature should correspond exactly with
the name on the first page of the Warrants
Certificate or with the name of the assignee
appearing in the assignment form below.
And if said number of shares shall not be all the shares
purchasable under the within Warrant, a new Warrant of like tenor is to be
issued in the name of said undersigned for the balance remaining of the
shares purchasable thereunder.
17
<PAGE>
CASHLESS EXERCISE FORM
(To be executed upon a Cashless Exercise of Warrant)
General Wireless, Inc.:
The undersigned hereby irrevocably elects to surrender its
Warrant for __________ shares of Class B Common Stock or such lesser number
of shares of Class B Common Stock as may be purchased pursuant to the
Cashless Exercise provisions of the within Warrant.
Please issue a certificate or certificates for such Class B
Common Stock in the name of:
Name _____________________________
(Please Print Name, Address and Social Security No.)
Address ___________________________
____________________________________
____________________________________
Social Security Number
Signature _______________________________
NOTE: The above signature should correspond exactly with
the name on the first page of the Warrants or with
the name of the assignee appearing in the
assignment form below.
And if said number of shares shall not be all the shares
exchangeable or purchasable under the within Warrant, a new Warrant of like
tenor is to be issued in the name of the undersigned for the balance
remaining of the shares purchasable thereunder.
18
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells,
assigns and transfers unto _____________________________ the within Warrant
and all rights evidenced thereby and does irrevocably constitute and
appoint
_____________________________, attorney, to transfer the said
Warrant on the books of the within named Company.
Dated:_________ Signature:____________________________________
Address:_____________________________________
_____________________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________________ hereby sells, assigns
and transfers unto ________________________ the right to purchase
______________ shares of Class B Common Stock evidenced by the within
Warrant together with all rights therein, and does irrevocably constitute
and appoint
_____________________________________, attorney, to transfer that
part of the said Warrant on the books of the within named Company.
Dated:_________ Signature:____________________________________
Address:_____________________________________
_____________________________________
19
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells,
assigns and transfers unto _____________________________ the within Warrant
and all rights evidenced thereby and does irrevocably constitute and
appoint
_____________________________, attorney, to transfer the said
-----------------------------
Warrant on the books of the within named Company.
Dated: Signature:
Address:
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________________ hereby sells, assigns
and transfers unto ________________________ the right to purchase
______________ shares of Class B Common Stock evidenced by the within
Warrant together with all rights therein, and does irrevocably constitute
and appoint
_____________________________________, attorney, to transfer that
-------------------------------------
part of the said Warrant on the books of the within named Company.
Dated:_________ Signature:____________________________________
Address:_____________________________________
-------------------------------------
20
<PAGE>
EXHIBIT 4.7
AGREEMENTTHE WARRANTS AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THE WARRANTS
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION THEREFROM UNDER
SAID ACT, THE RULES AND REGULATIONS THEREUNDER AND APPLICABLE STATE LAWS. IN
ADDITION, THE WARRANTS AND SUCH SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE
WITH THE RESTRICTIONS ON TRANSFER SPECIFIED IN SECTION 5 HEREOF.
GENERAL WIRELESS, INC.
_______________________________
CLASS C COMMON STOCK PURCHASE WARRANT
_______________________________
Dated as of May ___, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
1. Exercise of Warrant..................................... 1
1.1 Time of Exercise.................................... 1
1.2 Manner of Exercise.................................. 1
1.3 When Exercise Effective............................. 3
1.4 Delivery of Stock Certificates etc.................. 3
1.5 FCC Restrictions on Exercise........................ 3
2. Certain Adjustments..................................... 4
2.1 Adjustment of Warrant Price and Number of Shares.... 4
2.2 Notices to Holders.................................. 10
2.3 Fractional Shares................................... 11
2.4 Company to Reaffirm Obligations..................... 11
2.5 Covenant Regarding Class C Common Stock, etc........ 11
3. No Impairment........................................... 11
4. Registration Rights..................................... 12
5. Restrictions on Transfer................................ 12
5.1 Restrictive Legends................................. 12
5.2 General Prohibition................................. 13
5.3 FCC Restrictions on Transfer........................ 13
55.4 Transfer to Permitted Affiliates................... 14
55.5 Pledges............................................ 14
6. Ownership Transfer and Substitution of Warrants......... 15
6.1 Ownership of Warrants............................... 15
6.2 Transfer and Exchange of Warrants................... 15
6.3 Replacement of Warrants............................. 15
7. Definitions............................................. 15
8. Remedies................................................ 17
9. No Rights or Liabilities as Stockholder................. 17
10. Notices................................................. 17
11. Termination............................................. 18
12. Miscellaneous........................................... 18
i
<PAGE>
GENERAL WIRELESS, INC.
Class C Common Stock Purchase Warrant
To Purchase __________ Shares of Class C Common Stock
Expiring May ___, 2006
New York, N.Y.
May ___, 1996
GENERAL WIRELESS, INC., a Delaware corporation (the "Company"), hereby
issues and delivers to ___________________ (the "Holder") a warrant (the
"Warrant") to purchase _____ shares of the Company's Class C Common Stock, par
value $0.0001 per share (the "Class C Common Stock").
This Warrant is being issued together with other warrants
(collectively, the "Warrants") to purchase shares of Class C Common Stock, in
connection with an offering by the Company of an aggregate of up to 375,000
Units, each Unit consisting of two shares of the Company's Class C Common Stock,
par value $0.0001 per share (the "Class C Common Stock"), and one Warrant, each
such Warrant entitling the registered owner thereof to purchase one share of
Class C Common Stock. The initial exercise price of a Warrant shall be equal to
$100 per share, subject, however, to the provisions and upon the terms and
conditions hereinafter set forth (such exercise price, as from time to time
adjusted in accordance with the terms hereof, being hereinafter referred to as
the "Warrant Price").
Certain capitalized terms used in the Warrants are defined in Section
7; references to a "Section" are, unless otherwise specified, to one of the
sections of the Warrants.
1. Exercise of Warrant.
-------------------
1.1 Time of Exercise. The Warrants may be exercised, in whole or in
----------------
part, any time from the date first set forth above until 5:00 p.m. New York City
time on May ___, 2006 (the "Expiration Date"). If the Warrants is not exercised
on or prior to the Expiration Date, it shall become null and void and all rights
hereunder shall cease as of that time.
1.2 Manner of Exercise. The Warrants may be exercised by the holder
------------------
hereof, in whole or in part, during normal business hours on any Business Day
prior to the Expiration Date, by surrender of the Warrants to the Company at the
principal office of the Company (or, if such exercise shall be in connection
with an underwritten public offering of shares of Class C Common Stock subject
to the Warrants, at the location at which the Company shall have agreed to
deliver the shares of Class C Common Stock subject to such offering),
accompanied by either:
(a) a Subscription Form in substantially the form attached to the
Warrants (or a reasonable facsimile thereof) duly executed by the holder hereof
and
<PAGE>
setting forth such holder's election to receive the number of shares of Class C
Common Stock specified in the Subscription Form. The Subscription Form shall be
accompanied by payment for the shares of Class C Common Stock to be purchased by
either (i) certified or official bank check payable to the order of the Company,
or (ii) delivery of equity securities of the Company with duly executed stock
powers and signature guarantees (provided that such securities, other than Class
C Common Stock, are admitted to trading or listed on a national securities
exchange, the Nasdaq National Market or the National Association of Securities
Dealers, Inc. Automated Quotations System) in either case in an amount or having
a value equal to the product of (x) the Warrant Price and (y) the number of
shares of Class C Common Stock specified in the Subscription Form; or
(b) a Cashless Exercise Form in substantially the form attached to the
Warrants (or a reasonable facsimile thereof) duly executed by the holder (such
exercise being referred to herein as a "Cashless Exercise") and setting forth
such holder's election to receive the number of shares of Class C Common Stock
specified in the Cashless Exercise Form. Such presentation and surrender shall
be deemed a waiver of the Class C holder's obligation to pay all or any portion
(as the case may be) of the Aggregate Warrant Price in connection with such
cashless exercise. In the event of a Cashless Exercise, the holder hereof shall
exchange the Warrants for that number of shares of Class C Common Stock
determined by multiplying the number of shares of Class C Common Stock for which
the holder hereof desires to exercise the Warrants by a fraction, the numerator
of which shall be the result (but not less than zero) obtained by subtracting
the Warrant Price then in effect from the current market price per share (the
"Current Market Price") of the Class C Common Stock as of the date of exercise,
and the denominator of which shall be such Current Market Price. For purposes of
any computation under this Section 1.2(b) or Section 2 hereof, the Current
Market Price of Class C Common Stock as of any date shall be deemed to be the
average for the ten consecutive Business Days immediately prior to such date of
the daily closing prices of the Class C Common Stock on the principal national
securities exchange on which the Class C Common Stock is admitted to trading or
listed, or if not listed or admitted to trading on any such exchange, the
closing prices as reported by the Nasdaq National Market, or if not then listed
on the Nasdaq National Market, the average of the highest reported bid and
lowest reported asked prices as reported by the National Association of
Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or if not then
publicly traded, the fair market price of the Class C Common Stock as determined
in good faith by the Board of Directors of the Company (the "Board"); and such
holder shall thereupon be entitled to receive such number of duly authorized,
validly issued, fully paid and nonassessable shares of Class C Common Stock in
respect of which the Warrants is so exercised.
1.3 When Exercise Effective. The exercise of the Warrants shall be
-----------------------
deemed to have been effected immediately prior to the close of business on the
Business Day on which the Warrants shall have been surrendered to the Company as
provided in Section 1.2, and upon such exercise the Person or Persons in whose
name or names any certificate or certificates for shares of Class C Common Stock
shall be issuable as provided in Section 1.4 shall be deemed to have become the
holder or holders of record of such Class C Common Stock.
1.4 Delivery of Stock Certificates etc.
----------------------------------
(a) As soon as practicable after the exercise of the Warrants and in
any event within five Business Days thereafter (unless such exercise shall be in
connection with an underwritten public offering of shares of Class C Common
Stock subject to the Warrants, in which event concurrently with such exercise),
the Company at its expense (including the
2
<PAGE>
payment by it of any applicable taxes) will cause to be issued in the name of
and delivered to the holder hereof or, subject to Section 5, any Person
designated by such holder (upon payment by such holder of any applicable
transfer taxes) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Class C Common Stock to
which such holder shall be entitled upon the exercise.
(b) The Company shall pay any and all documentary, stamp, transfer or
other transactional taxes attributable to the issuance of the Warrants or any
shares of Class C Common Stock issuable upon exercise of the Warrants, except as
set forth in Section 1.4(a) with respect to any applicable transfer taxes in the
case of exercise by a holder and issuance of Class C Common Stock upon such
exercise to another Person.
(c) In the event the holder of the Warrants shall exercise the
Warrants with respect to less than all of the shares of Class C Common Stock
issuable upon exercise of the Warrants, the Company shall execute a new warrant,
registered in the name of such holder, in the form of the Warrants for the
balance of the shares of Class C Common Stock remaining to be issued hereunder
and deliver such new warrant to the holder of the Warrants as soon as
practicable after exercise of the Warrants and in any event within five Business
Days thereafter.
3
<PAGE>
1.5 FCC Restrictions on Exercise. No holder shall exercise the
----------------------------
Warrants, acquire shares or otherwise be attributed with ownership of any shares
of capital stock (as such attribution is defined by the FCC) that would cause
the Company to lose its status as a Small Business, as that term is defined by
the FCC, or would otherwise subject the Company to financial or other penalties
imposed by the FCC. The Company shall provide such information as reasonably
requested by any Warrant holder in connection with any determination as to
whether such condition is met and shall otherwise cooperate with such Warrant
holder in connection therewith. Specifically, no Stockholder may exercise this
warrant, acquire shares or otherwise be attributed with ownership of any shares
in the Company if after giving effect to such actions, (i) the Qualifying
Investors (as defined in the Stockholders Agreement) would own in the aggregate
less than 15% of the Company's total equity during the first three years and 10%
of the Company's total equity during the fourth through tenth years following
the grant of PCS licenses to the Company or (ii) any single Stockholder, other
than a Qualifying Investor, would own more than 25% of the Company's total
equity and voting interests; provided, however that if the Expiration Date
occurs and the holder hereof is restricted from exercising the Warrants pursuant
to the terms of this Section 1.5, the Warrants shall continue in full force and
effect and all rights hereunder shall continue for a period of 30 days following
written notification by the Company that the terms of this Section 1.5 do not
restrict the exercise of the Warrants by the holder hereof; provided further
that any extension pursuant to the terms of this Section 1.5 shall equally
extend the exercise period applicable to other holders of Warrants. In addition,
except as provided for in the FCC's rules no Stockholder with an attributable
interest (as defined by the FCC) in shares in the Company will acquire shares or
otherwise be attributed interests attributable to the Company in other
Commercial or Private Mobile Radio Service (as defined by the FCC) applicants or
licenses in the same geographic market as licenses held by or applied for by the
Company if such Stockholder's attributable interests would cause the Company to
exceed the Company's applicable spectrum ownership limits (as defined by the
FCC) for any geographic market. Such Stockholder shall cooperate with the
Company in (i) determining the Stockholder's compliance with this paragraph and
(ii) in the event of noncompliance, executing the measures reasonably necessary
to cure such noncompliance consistent with applicable FCC rules and policies. As
of the date hereof, for example, the FCC defines attributable interests as
interests of five percent or more in a Commercial or Private Mobile Radio
Service licensee held by investors generally, and interests of ten percent or
more in such licensees held by entities defined as "institutional investors" by
the FCC (including, for example, venture capital firms, insurance companies and
pension funds).
2. Certain Adjustments.
-------------------
2.1 Adjustment of Warrant Price and Number of Shares. The number and
------------------------------------------------
kind of securities purchasable upon the exercise of the Warrants and the Warrant
Price shall be subject to adjustment from time to time upon the happening of any
of the following events after the date hereof:
(a) Recapitalization, Reorganization, Reclassification, Consolidation,
------------------------------------------------------------------
Merger or Sale. In case of any recapitalization or reorganization of the Company
- --------------
or any reclassification or change of outstanding securities issuable upon
exercise of the Warrants (other than a change in par value, or from par value to
no par
4
<PAGE>
value, or from no par value to par value or as a result of a subdivision
or combination) or in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with another corporation in which
the Company is the surviving corporation and which does not result in any
reclassification or change (other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a
subdivision or combination) of outstanding securities issuable upon exercise of
the Warrants), or in case of any sale or transfer to another corporation of the
Property of the Company as an entirety or substantially as an entirety, the
Company or such successor or purchasing corporation, as the case may be, shall,
without payment of any additional consideration therefor, issue a new Warrant,
providing that the holder of the Warrants shall have the right to exercise such
new Warrant and procure upon such exercise in lieu of each share of Class C
Common Stock theretofore issuable upon exercise of the Warrants the kind and the
highest amount of shares of capital stock, other securities, money and property
receivable upon such recapitalization, reorganization, reclassification, change,
consolidation, merger, sale or transfer by a holder of one share of Class C
Common Stock issuable upon exercise of the Warrants had it been exercised
immediately prior to such recapitalization, reorganization, reclassification,
change, consolidation, merger, sale or transfer. Such new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 2. The provisions of this subsection
(a) shall similarly apply to successive recapitalizations, reorganizations,
reclassifications, changes, consolidations, mergers, sales and transfers.
(b) Subdivision or Combination of Shares. If the Company, at any time
------------------------------------
while the Warrants is outstanding, shall subdivide or combine any class or
classes of its Class C Common Stock, (i) in case of subdivision of shares, the
Warrant Price shall be proportionately reduced (as at the effective date of such
subdivision or, if the Company shall take a record of holders of its Class C
Common Stock for the purpose of so subdividing, as at the applicable record
date, whichever is earlier) to reflect the increase in the total number of
shares of Class C Common Stock outstanding as a result of such subdivision, or
(ii) in the case of a combination of shares, shall be proportionately increased
(as at the effective date of such combination or, if the Company shall take a
record of holders of its Class C Common Stock for the purpose of so combining,
as at the applicable record date, whichever is earlier) to reflect the reduction
in the total number of shares of Class C Common Stock outstanding as a result of
such combination. In the event that an adjustment pursuant to this subsection
(b) is made as of the record date for purposes of any subdivision or combination
and such subdivision or combination is not so made, the Warrant Price shall
again be adjusted to be the Warrant Price which would then be in effect if such
record date had not been fixed.
(c) Certain Dividends and Distributions. If the Company shall:
-----------------------------------
(i) Stock Dividends. Pay a dividend in, or make any other distribution
---------------
of shares of any class or classes of Class C Common Stock, the Warrant Price
shall be adjusted, as at the date the Company shall take a record of the holders
of such class or classes of Class C Common Stock, for the purpose of receiving
such dividend or other distribution (or if no such record is taken, as at the
date of such payment or other distribution), to that price determined by
multiplying the Warrant Price in effect immediately prior to such record date
(or if no such record is taken, then immediately prior to such payment or other
distribution), by a fraction (1) the numerator of which shall be the total
number of shares of Class C Common Stock outstanding immediately prior to such
dividend or distribution, and (2) the denominator of which shall be the total
number of shares of Class C Common Stock outstanding immediately after such
dividend or distribution (plus in the event that the Company paid cash for
fractional shares, the number of additional shares which would have been
outstanding had the Company issued fractional shares in connection with said
dividends); provided, however, that in the event such dividend or distribution
is not so paid or made, the Warrant Price shall again be adjusted to be the
Warrant Price which would then be in effect if
5
<PAGE>
such record date had not been fixed; or
(ii) Special Dividend or Distribution. Issue or distribute to the
--------------------------------
holders of shares of Class C Common Stock evidences of indebtedness, any other
securities of the Company or any cash, property or other assets (excluding a
distribution referred to in subsection (a), (b) or (d) of this Section 2 or the
preceding paragraph (i) and also excluding dividends or distributions paid in
cash or other property out of net profits legally available therefor unless such
dividends or distributions shall constitute an "Extraordinary Dividend" (as
hereinafter defined)), any such nonexcluded event being referred to herein as a
"Special Dividend", the Warrant Price shall be adjusted by multiplying the
Warrant Price then in effect by a fraction, the numerator of which shall be the
Current Market Price of the Class C Common Stock as of the day prior to the
record date, less the fair market value (as determined by the Board) of the
evidences of indebtedness, securities, cash or property, or other assets issued
or distributed in such Special Dividend applicable to one share of Class C
Common Stock and the denominator of which shall be such Current Market Price. An
adjustment made pursuant to this paragraph (iii) shall become effective
immediately after the record date of any such Special Dividend. In the event
that such issuance or distribution is not so made, the Warrant Price shall again
be adjusted to be the Warrant Price which would then be in effect if such record
date had not been fixed.
For purposes of this paragraph (ii), the term "Extraordinary
-------------
Dividend" shall mean any dividend of cash or other property with respect to
--------
the Class C Common Stock the amount of which, together with the aggregate
amount of dividends on the Class C Common Stock to be aggregated with such
cash dividend in accordance with the provisions of this paragraph, equals
or exceeds the threshold percentages set forth in subparagraphs (A) or (B)
below:
(A) If, upon the date immediately prior to the ex-dividend date
with respect to a dividend in cash or property on the Class C Common Stock,
the aggregate amount of such dividend together with the amounts of all such
dividends on the Class C Common Stock with ex-dividend dates occurring in
the 85 consecutive day period ending on the date prior to the ex-dividend
date with respect to such dividend to which this provision is being applied
equals or exceeds 10% of the Current Market Price of the Class C Common
Stock as of the trading day immediately prior to such ex-dividend date,
such dividend together with each other such dividend with an ex-dividend
date occurring in such 85 day period shall be deemed to be an Extraordinary
Dividend and for purposes of applying the formula set forth in this
paragraph (ii), the fair market value of such cash or property distributed
as a Special Dividend shall be equal to (w) the aggregate amount of such
dividend together with the amounts of the other dividends with ex-dividend
dates occurring in such period minus (x) the aggregate amount of such other
-----
dividends with ex-dividend dates occurring in such
period for which a prior adjustment in the Warrant Price was previously
made under this paragraph (ii).
(B) If, upon the date immediately prior to the ex-dividend date
with respect to a dividend in cash or property on the Class C Common Stock,
the aggregate amount of such dividend together with the amounts of all such
dividends on the Class C Common Stock with ex-dividend dates occurring in
the 365 consecutive day period ending on the date prior to the ex-dividend
date with respect to such dividend to which this provision is being applied
equals or exceed 20% of the Current Market Price of the Class C Common
Stock as of the trading day immediately
6
<PAGE>
prior to such ex-dividend date, such dividend together with each other such
dividend with an ex-dividend date occurring in such 365 day period shall be
deemed to be an Extraordinary Dividend and for purposes of applying the
formula set forth above in this paragraph (ii), the fair market value of
such cash or property distributed as a Special Dividend shall be equal to
(y) the aggregate amount of such dividend together with the amounts of the
other such dividends with ex-dividend dates occurring in such period minus
-----
(z) the aggregate amount of such other dividends with ex-dividend dates
occurring in such period for which a prior adjustment in the Warrant Price
was previously made under this paragraph (ii).
(d) Issuance of Class C Common Stock Equivalents. If the Company
--------------------------------------------
shall issue to all holders of its Class C Common Stock any Class C Common Stock
Equivalent and the price per share for which Additional Shares of Class C Common
Stock may be issuable thereafter pursuant to such Class C Common Stock
Equivalent shall be less than the Current Market Price as of the date of
issuance of such Class C Common Stock Equivalents then the Warrant Price upon
each such issuance shall be adjusted as of the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such Class C Common Stock Equivalents by multiplying such Warrant Price
by a fraction the numerator of which shall be the number of shares of Class C
Common Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Class C Common Stock which the
aggregate consideration (determined in accordance with subsection (e) of this
Section 2) for the total number of such Additional Shares of Class C Common
Stock would purchase at such Current Market Price and the denominator of which
shall be the number of shares of Class C Common Stock outstanding at the close
of business on the date fixed for such determination plus the total number of
such Additional Shares of Class C Common Stock, such adjustment to become
effective immediately after the opening of business on the day following the
date fixed for such determination. In the event that such Class C Common Stock
Equivalents are not so issued, the Warrant Price shall again be adjusted to be
the Warrant Price which would then be in effect if such date fixed for
determination of stockholders entitled to receive such Class C Common Stock
Equivalents had not been fixed. No adjustment of the Warrant Price shall be
made under this subsection (d) upon the issuance of any Convertible Security
which is issued pursuant to the exercise of any warrants or other subscription
or purchase rights there for, if any adjustment shall previously have been made
in the Warrant Price then in effect upon the issuance of such warrants or other
rights pursuant to this subsection (d).
(e) Computation of Consideration. For purposes of subsection (d)
----------------------------
above, the consideration for any Additional Shares of Class C Common Stock
issuable pursuant to any Class C Common Stock Equivalents shall be the
consideration received by the Company for issuing such Class C Common Stock
Equivalents, plus the additional consideration payable to the Company upon the
exercise, conversion or exchange of such Class C Common Stock Equivalents. In
any case in which the consideration to be received or paid shall be other than
cash, the Board shall notify the holder of the Warrants of its determination of
the fair market value of such consideration prior to payment or accepting
receipt thereof. If within thirty days after receipt of said notice, the holders
of Warrants exercisable for at least a majority of Class C Common Stock issuable
under the Warrants, but then unissued, shall notify the Board in writing of
their objection to such determination, a determination of fair market value of
such consideration shall be made by arbitration in accordance with the Rules of
the American Arbitration Association, by an arbitrator in the Borough of
Manhattan, City of New York, State of New York.
7
<PAGE>
(f) Readjustment of Warrant Price. Upon the expiration of the right to
-----------------------------
convert, exchange or exercise any Class C Common Stock Equivalent the issuance
of which effected an adjustment in the Warrant Price, if any such Class C Common
Stock Equivalent shall not have been converted, exercised or exchanged, the
Warrant Price shall forthwith be readjusted and thereafter be the price which it
would have been (but reflecting any other adjustments in the Warrant Price made
pursuant to the provisions of this Section 2 after the issuance of such Class C
Common Stock Equivalent) had the adjustment of the Warrant Price been made on
the basis of the number of Additional Shares of Class C Common Stock actually
issued upon conversion, exchange or exercise of such Class C Common Stock
Equivalent.
(g) Other Action Affecting Class C Common Stock. In case after the
-------------------------------------------
date hereof the Company shall take any action affecting its Class C Common
Stock, other than an action described in any of the foregoing subsections (a)
through (e) of this Section 2, inclusive, and the failure to make any adjustment
would not fairly protect the purchase rights represented by the Warrants in
accordance with the essential intent and principle of this Section 2, then the
Warrant Price shall be adjusted in such manner and at such time as the holder
hereof and the Company shall jointly determine.
(h) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Warrant Price pursuant to any provision of this Section 2, the number of shares
of Class C Common Stock issuable upon exercise hereof shall be adjusted, to the
nearest one hundredth of a whole share, to the product obtained by multiplying
such number of shares purchasable immediately prior to such adjustment in the
Warrant Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price immediately thereafter. If the Company shall be in default under
any provision contained in Section 3 of the Warrants so that shares issued at
the Warrant Price adjusted in accordance with this Section 2 would not be
validly issued, the adjustment of number of shares provided for in the foregoing
sentence shall nonetheless be made and the holder of the Warrants shall be
entitled to purchase such greater number of shares at the lowest price at which
such shares may then be validly issued under applicable law. Such exercise shall
not constitute a waiver of any claim arising against the Company by reason of
its default under Section 3 of the Warrants.
(i) In any case in which this Section 2 shall require that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event (i) issuing to the
holder of the Warrants, if the Warrant is exercised after such record date and
before the occurrence of such event, the additional Class C Common Stock
issuable upon such exercise by reason of the adjustment required by such event
over and above the Class C Common Stock issuable upon such exercise before
giving effect to such adjustment and (ii) paying to such holder any amount in
cash in lieu of a fractional share of Class C Common Stock pursuant to Section
2.3.
2.2 Notices to Holders.
------------------
(a) Whenever the Warrant Price or number of shares of Class C Common
Stock issuable upon exercise of the Warrants shall be adjusted pursuant to
Section 2 hereof, the Company shall cause the independent accounting firm then
regularly engaged by it to report on its financial statements to prepare and
execute a certificate setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board made any determination hereunder), and the Warrant Price and number of
8
<PAGE>
shares of Class C Common Stock issuable hereunder after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (by first
class mail postage prepaid) to the holder hereof promptly after each adjustment.
(b) The holder hereof shall be entitled to the same rights to receive
notice of corporate action as any holder of Class C Common Stock and shall also
be entitled to 20 days prior written notice of the record date of any cash
dividend on Class C Common Stock or any of the events described in Section 2.1
hereof.
2.3 Fractional Shares. No fractional shares of Class C Common Stock
-----------------
will be issued in connection with any exercise hereof, but in lieu of such
fractional shares, the Company shall make a cash payment therefor equal in
amount to the product of the applicable fraction multiplied by the Warrant Price
then in effect.
2.4 Company to Reaffirm Obligations. The Company will, at the time of
-------------------------------
or at any time after the exercise of the Warrants, upon the request of the
holder of any shares of Class C Common Stock issued upon such exercise,
acknowledge in writing its continuing obligation to afford to such holder all
rights (if any) (including, without limitation, any rights to registration,
pursuant to Section 4, of the shares of Class C Common Stock issued upon such
exercise) to which such holder shall continue to be entitled after such exercise
in accordance with the terms of the Warrants, provided that, if any such holder
--------
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford such rights to such holder.
2.5 Covenant Regarding Class C Common Stock etc.
--------------------------------------------
(a) The Company covenants and agrees that all shares of Class C Common
Stock issuable upon exercise of the Warrants will, upon such issuance, be
validly issued, fully paid and non-assessable.
(b) The Company further covenants and agrees that, in the event of a
Cashless Exercise it shall take or cause to be taken such action as will permit
the exercise of the Warrants without any additional payment by the holder
hereof.
3. No Impairment.
-------------
The Company will not, by amendment of its certificate of incorporation
or through any consolidation, merger, reorganization, transfer of assets,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of the Warrants,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be reasonably necessary in order to
protect the rights of the holder of the Warrants against dilution or other
impairment. Without limiting the generality of the foregoing, the Company
(a) will not permit the par value of any shares of Class C Common
Stock receivable upon the exercise of the Warrants to exceed the amount payable
therefor upon such exercise,
(b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Class C Common Stock on the exercise of any Warrant from
time to time outstanding,
9
<PAGE>
(c) will not take any action which would result in the total number of
shares of outstanding Class C Common Stock, plus those issuable upon the
exercise of all of the Warrants, exceeding the total number of shares of Class C
Common Stock then authorized by the Company's certificate of incorporation or
the total number of such shares available for the purpose of issue upon such
exercise being fewer than the number required to be issued upon such exercise,
and
(d) use its reasonable best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under the Warrants.
4. Registration Rights. Registration rights shall be granted to
-------------------
holders of Warrants pursuant to a Registration Rights Agreement dated as of
December 1, 1995.
5. Restrictions on Transfer.
------------------------
5.1 Restrictive Legends. The holder hereof acknowledges that since
-------------------
neither the offer nor sale of the Warrant nor the shares of Class C Common Stock
issuable upon exercise of the Warrant have been registered under the Securities
Act or the securities laws of any State, the Warrants and shares of Class C
Common Stock issuable upon exercise of the Warrants may not be sold, transferred
or otherwise disposed of unless they are so registered or an exemption from such
registration is available. Except as otherwise permitted by this Section 5, the
Warrants, and each Warrant issued upon direct or indirect transfer or in
substitution for any Warrant pursuant to Sections 1.4(a) and 6, shall be stamped
or otherwise imprinted with legends in substantially the following form:
"THE WARRANTS AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THE
WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT AND SUCH LAWS. IN ADDITION, THE
WARRANTS AND SUCH SHARES MAY BE TRANSFERRED ONLY ON COMPLIANCE WITH THE
RESTRICTIONS ON TRANSFER SPECIFIED IN SECTION 5 HEREOF."
Except as otherwise permitted by this Section 5, each certificate for Class C
Common Stock issued upon the exercise of the Warrants, and each certificate
issued upon the transfer of any such Class C Common Stock, shall be stamped or
otherwise imprinted with the following legends in substantially the following
form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED WITHOUT
REGISTRATION UNDER THAT ACT OR ANY APPLICABLE STATE SECURITIES LAWS UNLESS
AN EXEMPTION FROM REGISTRATION IS AVAILABLE. BY ITS PURCHASE OF SHARES OF
STOCK, THE PURCHASER AGREES THAT IT IS ACQUIRING SUCH SHARES FOR INVESTMENT
AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, THE PUBLIC
DISTRIBUTION THEREOF, AND THAT ANY RESALE OF ANY SHARES OF STOCK MAY BE
MADE ONLY IN ACCORDANCE WITH THE STOCKHOLDERS
10
<PAGE>
AGREEMENT.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED UNDER THE TERMS
OF A STOCKHOLDERS AGREEMENT, DATED AS OF DECEMBER 1, 1995, BY AND AMONG THE
COMPANY AND ITS STOCKHOLDERS, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY.
5.2 General Prohibition. Holders of Warrants will not, directly or
-------------------
indirectly, offer, sell, assign, transfer, grant a participation in, pledge or
otherwise dispose of or encumber any Warrant or Class C Common Stock (for
purposes of this Section 5, "Securities") or any interest therein (or solicit
any offers to buy or otherwise acquire or take a pledge of any of such
Securities) (each, a "Transfer"), except as expressly permitted hereby and in
compliance with the Securities Act, the Stockholders Agreement and the
provisions of this Article 5. Any attempt to Transfer any Securities not made
strictly in compliance with this Agreement and the Stockholders Agreement shall
be null and void and the Company shall not give any effect in the Company's
stock records to such Transfer.
5.3 FCC Restrictions on Transfer. The holder of the Warrants may
----------------------------
Transfer all or any portion of its Securities in the Company to any other person
only so long as such Transfer would not cause the Company or any other
Stockholder to violate any applicable laws or regulations or would not endanger
the Company's bidding or financing preferences for which it is eligible under
FCC regulations; provided that any transferee receiving Securities shall be
required to sign an undertaking agreeing to be bound by the terms of this
Agreement, if necessary to comply with FCC rules and regulations. The Company
and the other Stockholders shall provide such information as reasonably
requested by any Stockholder in connection with any determination as to whether
such condition is met and the Company shall otherwise cooperate with such
Warrant holder in connection therewith. Specifically, no Stockholder may
Transfer any Securities if after giving effect to such Transfer, (i) the
Qualifying Investors (as defined in the Stockholders Agreement) would own in the
aggregate less than 15% of the Company's total equity during the first three
years and 10% of the Company's total equity during the fourth through tenth
years following the grant of PCS licenses to the Company, (ii) any single
Stockholder, other than a Qualifying Investor, would own more than 25% of the
Company's total equity and voting interests or (iii) such Transfer would cause a
violation of the foreign ownership restrictions imposed by the Communications
Act of 1934, as amended. Such Stockholder shall cooperate with the Company in
(i) determining the Stockholder's compliance with this paragraph and (ii) in the
event of noncompliance, executing the measures reasonably necessary to cure such
noncompliance consistent with applicable FCC rules and policies.
5.4 Transfer to Permitted Affiliates. Transfers of Securities by the
--------------------------------
holder hereof to any Permitted Affiliate and from any Permitted Affiliate to
another Permitted Affiliate shall be exempt from the provisions hereof and be
permitted Transfers hereunder, but any Permitted Affiliate receiving Securities
shall be required to sign an undertaking agreeing to be bound by the terms of
this Agreement and the Stockholders Agreement. For purposes of this Agreement,
a "Permitted Affiliate" shall mean a person that is controlling, controlled by
or under common control with such Stockholder or, if the Stockholder is a trust,
to any successor or related trust or successor trustee.
11
<PAGE>
5.5 Pledges. Notwithstanding the provisions of Section 5.2 hereof, a
-------
holder may not, directly or indirectly, pledge, hypothecate or grant a security
interest in any Securities of the Company other than through a bona fide pledge
of such Securities as security for indebtedness or obligations of such
Stockholder meeting all of the following criteria: (i) the pledgee is a
nationally or internationally recognized financial institution (a "Permitted
Pledgee"), (ii) the pledgee agrees with the Stockholders and the Company in
writing that, prior to and upon foreclosing or otherwise realizing upon the
shares of Class C Common Stock so pledged, the pledgee will comply with the
terms and conditions of this Agreement, and (iii) a majority of the Board of
Directors have consented to such pledge, which consent shall not be unreasonably
withheld.
6. Ownership Transfer and Substitution of Warrants.
-----------------------------------------------
6.1 Ownership of Warrants. The Company may treat the Person in whose
---------------------
name any Warrant is registered on the register kept at the principal office of
the Company as the owner and holder thereof for all purposes, notwithstanding
any notice to the contrary, except that, if and when any Warrant is properly
assigned in blank and the terms and provisions of Section 5 shall have been
complied with, the Company may (but shall not be obligated to) treat the bearer
thereof as the owner of such Warrant for all purposes, notwithstanding any
notice to the contrary. Subject to Section 1.1, a Warrant, if properly assigned
and the terms and provisions of Section 5 shall have been complied with, may be
exercised by a new holder without a new Warrant first having been issued.
6.2 Transfer and Exchange of Warrants. Upon the surrender of any
---------------------------------
Warrant, properly endorsed, for registration of transfer or for exchange at the
principal office of the Company, the Company at its expense will (subject to
compliance with Section 5, if applicable) execute and deliver to or upon the
order of the holder thereof a new Warrant or Warrants of like tenor, in the name
of such holder or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Class C Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
6.3 Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by any Person upon delivery of indemnity reasonably satisfactory to the
Company (the unsecured agreement of the holder of a Warrant or any institutional
investor to indemnify the Company being deemed or the purposes hereof to be
reasonably satisfactory to the Company) in form and amount or, in the case of
any such mutilation, upon surrender of such Warrant for cancellation at the
principal office of the Company, the Company at its expense will execute and
deliver, in lieu thereof a new Warrant of like tenor.
12
<PAGE>
7. Definitions.
-----------
As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:
Additional Shares of Class C Common Stock: shall mean all shares of
-----------------------------------------
Class C Common Stock issued by the Company after the date hereof except the
Class C Common Stock issuable upon exercise of any Warrant.
Aggregate Warrant Price: The product of (a) the number of shares of
-----------------------
Class C Common Stock at any time subject to the Warrants and (b) the Warrant
Price in effect at such time.
Business Day: Any day other than a Saturday or a Sunday or a day on
------------
which commercial banking institutions in New York City are authorized by law to
be closed.
Class C Common Stock: The Class C Common Stock, par value $0.0001 per
--------------------
share of the Company, together with any stock of the Company into which such
common stock shall have been changed or any stock resulting from any
reclassification of such common stock, and all other Class C Common Stock that
the Company may issue from time to time.
Commission: The Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
Class C Common Stock Equivalent: shall mean any Convertible Security
-------------------------------
or warrant, option or other right to subscribe for or purchase any Additional
Shares of Class C Common Stock or any Convertible Security.
Company: As defined in the introduction to the Warrants, such term to
-------
include any corporation which shall succeed to or assume the obligations of the
Company hereunder.
Convertible Securities: Evidences of indebtedness or securities which
----------------------
are or may be at any time convertible into or exchangeable for Additional Shares
of Class C Common Stock. The term "Convertible Security" shall mean one of the
Convertible Securities.
Current Market Price: As defined in Section 1.2(b).
--------------------
Exchange Act: The Securities Exchange Act of 1934, or any similar
------------
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Federal Communications Commission (FCC): Federal agency organized
---------------------------------------
pursuant to Communications Act of 1934, as amended, to regulate the
communications industry and manage the non-government electomagnetic spectrum,
or any successor agency thereto.
Person: A corporation, an association, a partnership, an organization,
------
a business, an individual, a government or political subdivision thereof or a
governmental agency.
Property: With respect to any Person, any interest in any kind of
--------
property or asset, whether real, personal or mixed, tangible or intangible, of
such Person.
13
<PAGE>
Securities Act: The Securities Act of 1933, as amended, or any similar
--------------
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Warrant Price: As defined in the introduction to the Warrants.
-------------
Warrants: The Warrants and any warrants issued in substitution or
--------
exchange therefor or upon transfer thereof.
8. Remedies.
--------
The Company stipulates that the remedies available at law to the
holder of the Warrants in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of the
Warrants are not and will not be adequate and that, to the fullest extent
permitted by applicable law, such terms may be specifically enforced by a decree
for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
9. No Rights or Liabilities as Stockholder.
---------------------------------------
Except as expressly set forth in the Warrants, the holder hereof shall
not have any rights as a stockholder of the Company (including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights) or as imposing any obligation on such holder to
purchase any Class C Common Stock or as imposing any liabilities on such holder
as a stockholder of the Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
10. Notices.
-------
All notices and other communications under the Warrants shall be in
writing and shall be delivered by hand or overnight courier mailed by registered
or certified mail, return receipt requested, or sent by telex or telecopier
addressed (a) if to any holder of any Warrant, at the registered address of such
holder as set forth in the register kept at the principal office of the Company,
or (b) if to the Company, to the attention of its President at 6668 North
Central Expressway, Suite 1170, Dallas, Texas 75206, provided that the exercise
--------
of any Warrant shall be effective in the manner provided in Section 1. Any such
notices and communications shall be deemed to have been given or made (i) on the
date delivered, if by hand or by overnight courier, or on the first Business Day
thereafter if such date of delivery is not a Business Day, (il) on the date
received if deposited in the mail, postage prep aid, (iii) if sent by telex,
when telex answer back is received or (iv) if telecopied, when telecopy receipt
is acknowledged.
11. Termination. The provisions of Sections 5.2-5.5 shall terminate
-----------
and be of no further force and effect in connection with the Company's initial
public offering at a price per share equal to or greater than $200 (as adjusted
in the event of a stock dividend, recapitalization, stock split, reorganization,
merger, or consolidation of the Company) and expected to generate gross proceeds
in an amount equal to $20 million.
12. Miscellaneous.
-------------
14
<PAGE>
The Warrants and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. THE
WARRANTS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK. The section headings in the Warrants are for
purposes of convenience only and shall not constitute a part hereof.
15
<PAGE>
IN WITNESS WHEREOF, the Company and the holder hereof have caused this
Agreement to be duly executed as of the date first above written.
GENERAL WIRELESS, INC.
By:_________________________________
Roger D. Linquist, President
[CLASS C WARRANT SIGNATURE PAGE]
<PAGE>
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant)
General Wireless, Inc.:
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
_______________________ shares of Class C Common Stock, as provided for therein,
and tenders herewith payment of the purchase price in full in the form of cash
or a certified or official bank check in the amount of $
Please issue a certificate or certificates for such Class C Common
Stock in the name of:
Name ___________________________
(Please Print Name, Address
and Social Security No.)
Signature ________________________
NOTE: The above signature should correspond exactly with
the name on the first page of the Warrants
Certificate or with the name of the assignee
appearing in the assignment form below.
And if said number of shares shall not be all the shares
purchasable under the within Warrant, a new Warrant of like tenor is to be
issued in the name of said undersigned for the balance remaining of the
shares purchasable thereunder.
17
<PAGE>
CASHLESS EXERCISE FORM
(To be executed upon a Cashless Exercise of Warrant)
General Wireless, Inc.:
The undersigned hereby irrevocably elects to surrender its
Warrant for __________ shares of Class C Common Stock or such lesser number
of shares of Class C Common Stock as may be purchased pursuant to the
Cashless Exercise provisions of the within Warrant.
Please issue a certificate or certificates for such Class C
Common Stock in the name of:
Name _____________________________
(Please Print Name, Address and Social Security No.)
Address ___________________________
____________________________________
____________________________________
Social Security Number
Signature _______________________________
NOTE: The above signature should correspond exactly with
the name on the first page of the Warrants or with
the name of the assignee appearing in the
assignment form below.
And if said number of shares shall not be all the shares
exchangeable or purchasable under the within Warrant, a new Warrant of like
tenor is to be issued in the name of the undersigned for the balance
remaining of the shares purchasable thereunder.
18
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells,
assigns and transfers unto _____________________________ the within Warrant
and all rights evidenced thereby and does irrevocably constitute and
appoint
_____________________________, attorney, to transfer the said
Warrant on the books of the within named Company.
Dated: _______ Signature: __________________________
Address: _________________________
_________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________________ hereby sells, assigns
and transfers unto ________________________ the right to purchase
______________ shares of Class C Common Stock evidenced by the within
Warrant together with all rights therein, and does irrevocably constitute
and appoint
_____________________________________, attorney, to transfer that
part of the said Warrant on the books of the within named Company.
Dated: _______ Signature: __________________________
Address: _________________________
_________________________
19
<PAGE>
EXHIBIT 4.7(a)
GENERAL WIRELESS, INC.
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered into
this ______ day of ________________, 199__ between General Wireless, Inc., a
Delaware corporation (the "Company"), and 1~ ("Indemnitee").
WHEREAS, Indemnitee, a member of the Board of Directors or an officer,
employee or agent of the Company, performs a valuable service in such capacity
for the Company;
WHEREAS, the stockholders of the Company have adopted Bylaws (the "Bylaws")
providing for the indemnification of the officers, directors, employees and
agents of the Company to the maximum extent authorized by Section 145 of the
Delaware General Corporation Law, as amended (the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Company and the members of its Board of Directors,
officers, employees or agents with respect to indemnification of such directors,
officers, employees or agents;
WHEREAS, in accordance with the authorization as provided by the Code, the
Company either has purchased and presently maintains or intends to purchase and
maintain a policy or policies of Directors and Officers Liability Insurance ("D
& O Insurance") covering certain liabilities which may be incurred by its
directors and officers in the performance of their duties as directors and
officers of the Company;
WHEREAS, as a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent of protection afforded members of the Board of Directors or officers,
employees or agents by such D & O Insurance and by statutory and bylaw
indemnification provisions; and
WHEREAS, in order to induce Indemnitee to continue to serve as a member of
the Board of Directors, officer, employee or agent of the Company, the Company
has determined and agreed to enter into this contract with Indemnitee.
NOW, THEREFORE, in consideration of Indemnitee's continued service as a
director, officer, employee or agent after the date hereof, and for other good
and valid consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. Indemnification of Indemnitee. The Company hereby agrees to hold
-----------------------------
harmless and indemnify Indemnitee to the fullest extent authorized or permitted
by the provisions of the Code, as may be amended from time to time.
2. Additional Indemnity. Subject only to the exclusions set forth in
--------------------
Sections 3 and 6(c) hereof, the Company hereby further agrees to hold harmless
and indemnify
<PAGE>
Indemnitee:
(a) against any and all expenses (including attorneys' fees), witness fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by Indemnitee in connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including an action by or in the right of the Company) to which Indemnitee is,
was or at any time becomes a party, or is threatened to be made a party, by
reason of the fact that Indemnitee is, was or at any time becomes a director,
officer, employee or agent of the Company or any subsidiary of the Company, or
is or was serving or at any time serves at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Indemnitee by the
Company under the non-exclusivity provisions of Article VII, Section 6 of the
Bylaws of the Company and the Code.
3. Limitations on Additional Indemnity.
-----------------------------------
(a) No indemnity pursuant to Section 2 hereof shall be paid by the Company:
1) in respect to remuneration paid to Indemnitee if it shall be determined
by a final judgment or other final adjudication that such remuneration was in
violation of law;
ii) on account of any suit in which judgment is rendered against Indemnitee
for an accounting of profits made from the purchase or sale by Indemnitee of
securities of the Company pursuant to the provisions of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law;
iii) on account of Indemnitee's conduct which is finally adjudged to have
been knowingly fraudulent or deliberately dishonest or to constitute willful
misconduct;
iv) on account of Indemnitee's conduct which is the subject of an action,
suit or proceeding described in Section 6(c)(ii) hereof;
v) on account of any action, claim or proceeding (other than a proceeding
referred to in Section 7(b) hereof) initiated by the Indemnitee unless such
action, claim or proceeding was authorized in the specific case by action of the
Board of Directors;
vi) if a final decision by a Court having jurisdiction in the matter shall
determine that such indemnification is not lawful (and, in this respect, both
the Company and Indemnitee have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); and
vii) except to the extent the aggregate of losses to be
2.
<PAGE>
indemnified thereunder exceeds the sum of (a) such losses for which the
Indemnitee is indemnified pursuant to Section 1 hereof and (b) any additional
amount paid to the Indemnitee pursuant to any D & O Insurance purchased and
maintained by the Company.
(b) No indemnity pursuant to Section 1 or 2 hereof shall be paid by the
Company if the action, suit or proceeding with respect to which a claim for
indemnity hereunder is made arose from or is based upon any of the following:
i) Any solicitation of proxies by Indemnitee, or by a group of which he
was or became a member consisting of two or more persons that had agreed
(whether formally or informally and whether or not in writing) to act together
for the purpose of soliciting proxies, in opposition to any solicitation of
proxies approved by the Board of Directors.
ii) Any activities by Indemnitee that constitute a breach of or default
under any agreement between Indemnitee and the Company.
4. Contribution. If the indemnification provided in Sections 1 and 2
------------
hereof is unavailable by reason of a Court decision described in Section
3(a)(vi) hereof based on grounds other than any of those set forth in paragraphs
(i) through (v) of Section 3 (a) hereof, then in respect of any threatened,
pending or completed action, suit or proceeding in which the Company is jointly
liable with Indemnitee (or would be if joined in such action, suit or
proceeding), the Company shall contribute to the amount of expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred and paid or payable by Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand and Indemnitee on the other hand from the transaction from which such
action, suit or proceeding arose, and (ii) the relative fault of the Company on
the one hand and of Indemnitee on the other in connection with the events which
resulted in such expenses, judgments, fines or settlement amounts, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and of Indemnitee on the other shall be determined by reference
to, among other things, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent the circumstances resulting in
such expenses, judgments, fines or settlement amounts. The Company agrees that
it would not be just and equitable if contribution pursuant to this Section 4
were determined by pro rata allocation or any other method of allocation which
does not take account of the foregoing equitable considerations.
5. Notification and Defense of Claim. Not later than thirty (30) days
---------------------------------
after receipt by Indemnitee of notice of the commencement of any action, suit or
proceeding, Indemnitee shall, if a claim in respect thereof is to be made
against the Company under this Agreement, notify the Company of the commencement
thereof; but Indemnitee's omission so to notify the Company will not relieve the
Company from any liability which it may have to Indemnitee otherwise than under
this Agreement. With respect to any such action, suit or proceeding as to which
Indemnitee notifies the Company of the commencement thereof:
(a) The Company will be entitled to participate therein at its own expense.
(b) Except as otherwise provided below, to the extent that it may wish, the
Company shall, jointly with any other indemnifying party similarly notified, be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
Indemnitee.
3.
<PAGE>
After notice from the Company to Indemnitee of its election to assume the
defense thereof, the Company will not be liable to Indemnitee under this
Agreement for any legal or other expenses subsequently incurred by Indemnitee in
connection with the defense thereof, other than reasonable costs of
investigation or as otherwise provided below. Indemnitee shall have the right to
employ its own counsel in such action, suit or proceeding, but the fees and
expenses of such counsel incurred after notice from the Company of the Company's
assumption of the defense thereof shall be at the expense of Indemnitee unless
(i) the employment of counsel by Indemnitee has been authorized by the Company;
(ii) Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of the defense of
such action; or (iii) the Company shall not in fact have employed counsel to
assume the defense of such action; in each of which cases the fees and expenses
of Indemnitee's separate counsel shall be paid by the Company. The Company shall
not be entitled to assume the defense of any action, suit or proceeding brought
by or on behalf of the Company or as to which Indemnitee shall have made the
conclusion provided for in (ii) above.
(c) The Company shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. The Company shall be permitted to settle any
action except that it shall not settle any action or claim in any manner which
would impose any penalty or limitation on Indemnitee without Indemnitee's
written consent. Neither the Company nor Indemnitee will unreasonably withhold
its consent to any proposed settlement.
6. Advancement and Repayment of Expenses.
-------------------------------------
(a) In the event that Indemnitee employs his or her own counsel pursuant to
Sections 5(b)(i) through (iii) above, the Company shall advance to Indemnitee,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or investigative, any and
all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving from Indemnitee copies of invoices presented to Indemnitee
for such expenses.
(b) Indemnitee agrees that Indemnitee will reimburse the Company for all
reasonable expenses paid by the Company in investigating or defending any civil
or criminal action, suit or proceeding against Indemnitee in the event and only
to the extent it shall be ultimately determined by a final judicial decision
(from which there is no right of appeal) that Indemnitee is not entitled, under
the provisions of the Code, the Bylaws, this Agreement or otherwise, to be
indemnified by the Company for such expenses.
(c) Notwithstanding the foregoing, the Company shall not be required to
advance such expenses to Indemnitee in respect of any action arising from or
based upon any of the matters set forth in subsection (b) of Section 3 or if
Indemnitee (i) commences any action, suit or proceeding as a plaintiff unless
such advance is specifically approved by a majority of the Board of Directors or
(ii) is a party to an action, suit or proceeding brought by the Company and
approved by a majority of the Board which alleges willful misappropriation of
corporate assets by Indemnitee, disclosure of confidential information in
violation of Indemnitee's fiduciary or contractual obligations to the Company,
or any other willful and deliberate breach in bad faith of Indemnitee's duty to
the Company or its shareholders.
7. Enforcement.
-----------
4.
<PAGE>
(a) The Company expressly confirms and agrees that it has entered into this
Agreement and assumed the obligations imposed on the Company hereby in order to
induce Indemnitee to continue as a director, officer, employee or other agent of
the Company, and acknowledges that Indemnitee is relying upon this Agreement in
continuing in such capacity.
(b) In the event Indemnitee is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, the Company shall reimburse Indemnitee for all Indemnitee's reasonable
fees and expenses, including attorney's fees, in bringing and pursuing such
action.
8. Subrogation. In the event of payment under this agreement, the Company
-----------
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
9. Continuation of Obligations. All agreements and obligations of the
---------------------------
Company contained herein shall commence upon the date that Indemnitee first
became a member of the Board of Directors or an officer, employee or agent of
the Company, as the case may be, and shall continue during the period Indemnitee
is a director, officer, employee or agent of the Company (or is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise) and shall continue thereafter so long as Indemnitee shall be
subject to any possible claim or threatened, pending or completed action, suit
or proceeding, whether civil, criminal or investigative, by reason of the fact
that Indemnitee was a director, officer, employee or agent of the Company or
serving in any other capacity referred to herein.
10. Survival of Rights. The rights conferred on Indemnitee by this
------------------
Agreement shall continue after Indemnitee has ceased to be a director, officer,
employee or other agent of the Company and shall inure to the benefit of
Indemnitee's heirs, executors and administrators.
11. Non-Exclusivity of Rights. The rights conferred on Indemnitee by this
-------------------------
Agreement shall not be exclusive of any other right which Indemnitee may have
or hereafter acquire under any statute, provision of the Company's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office; provided, however, that this Agreement
shall supersede and replace any prior indemnification agreements entered into by
and between the Company and Indemnitee and that any such prior indemnification
agreement shall be terminated upon the execution of this Agreement.
12. Separability. Each of the provisions of this Agreement is a separate
------------
and distinct agreement and independent of the others, so that if any or all of
the provisions hereof shall be held to be invalid or unenforceable for any
reason, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof or the obligation of the Company
to indemnify the Indemnitee to the full extent provided by the Bylaws or the
Code.
13. Governing Law. This Agreement shall be interpreted and enforced in
-------------
accordance with the laws of the State of Delaware.
5.
<PAGE>
14. Binding Effect. This Agreement shall be binding upon Indemnitee and
--------------
upon the Company, its successors and assigns, and shall inure to the benefit of
Indemnitee, his or her heirs, personal representatives and assigns and to the
benefit of the Company, its successors and assigns.
15. Amendment and Termination. No amendment, modification, termination or
-------------------------
cancellation of this Agreement shall be effective unless it is in writing and is
signed by both parties hereto.
6.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
GENERAL WIRELESS, INC.
a Delaware corporation
By:____________________________
Roger D. Linquist
President
INDEMNITEE
_________________________________
~1~
Address:_________________________
_________________________________
_________________________________
7.
<PAGE>
EXHIBIT 10.2
BEAR, STEARNS
BEAR, STEARNS & CO. INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
(212) 272-2000
ATLANTA - BOSTON
CHICAGO - DALLAS - LOS ANGELES
NEW YORK - SAN FRANCISCO
AMSTERDAM - GENEVA - HONG KONG
LONDON - PARIS - TOKYO
DECEMBER 9, 1994
GENERAL WIRELESS, INC.
6688 N. CENTRAL EXPRESSWAY
SUITE 1170
DALLAS, TX 75206
Attention: ROGER D. LINQUIST
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dear Sirs:
We are pleased to set forth the terms of the retention of Bear, Stearns &
Co. Inc. ("Bear Stearns") by General Wireless, Inc. (collectively with its
affiliates, the "Company").
1. Bear Stearns will assist the Company as its exclusive financial
advisor and placement agent in connection with any Financing (as such term is
defined below). We have been advised by the Company that the Company will
require an aggregate of up to approximately $100,000,000 to finance the
purchase, financing and initial development of broadband personal communications
services ("PCS") licenses in the upcoming Federal Communications Commission
("FCC") auctions of the Entrepreneur's Blocks (as defined in FCC PP Docket No.
93-253) in the 2 GHz band ( the "Use of Proceeds"). We are further advised that
such amount is expected to be obtained from the proceeds of privately placed
equity and/or debt securities of the Company (the "Financing"). Subject to the
approval of Bear Stearns' Commitment Committee and the execution of a mutually
acceptable Agency Agreement, Bear Stearns will assist the Company in the
Company's efforts to structure and obtain the Financing. Bear Stearns agrees
that it will not assist other potential PCS bidders in raising funding for the
acquisition of PCS licenses in the FCC auctions of the Entrepreneurs's Blocks.
In connection with our assignment as financial advisor, we would expect our
services to involve: (i) assisting in the structuring of the securities to be
offered, (ii) assisting in the drafting of a private placement memorandum and
other marketing materials, (iii) identifying and contacting strategic and
financial investors, (iv) assisting the Company in negotiations with potential
investors, (v) if necessary, assisting the Company in its efforts to secure
interim bank financing to fund bidding deposits required by the FCC, (vi)
assisting the Company in its aucton planning and bidding strategy, (vii)
assisting the Company with financial planning associated with the Financing and
a contemplated initial public offering of common stock, and (viii)
<PAGE>
GENERAL WIRELESS, INC.
JUNE 21, 1996
Page 2
assisting the Company in the identification and selection of petential members
of its Board of Directors.
2. In connection with Bear Stearns' activities on the Company's behalf,
the Company agrees to cooperate with Bear Stearns and will furnish to, or cause
to be furnished to, Bear Stearns any and all information and data concerning the
Company, the Financing and the Use of Proceeds (the "Information") which Bear
Stearns deems appropriate and will provide Bear Stearns and any potential
investors with reasonable access to the Company's officers, directors,
employees, appraisers, independent accountants, legal counsel and other
consultants and advisors. The Company represents and warrants that all
Information (a) made available to Bear Stearns or any potential investors by the
Company, (b) contained in any private placement memorandum prepared by the
Company with respect to the Financing (the "Memorandum") or (c) contained in any
filing by the Company with any court or governmental regulatory agency,
commission or instrumentality (an "Agency") with respect to the Financing will,
at all times during the period of the engagement of Bear Stearns hereunder, be
complete and correct in all material respects and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein not misleading in the light of the circumstances
under which such statements are made. The Company further represents and
warrants that any projections and other Information provided by it to Bear
Stearns or any potential investor or contained in the Memorandum will have been
prepared in good faith and will be based upon assumptions which, in light of the
circumstances under which they are made, are reasonable. The Company
acknowledges and agrees that in rendering its services hereunder, Bear Stearns
will be using and relying on the Information (and information available from
public sources and other sources deemed reliable by Bear Stearns) without
independent verification thereof by Bear Stearns or independent appraisal by
Bear Stearns of any of the Company's assets. Bear Stearns does not assume
responsibility for the accuracy or completeness of the Information or any other
information regarding the Company, the Financing, any potential investor or the
Use of Proceeds. Any advice rendered by Bear Stearns pursuant to this Agreement
may not be disclosed publicly without, and any reference to Bear Stearns in any
public communication by the Company shall be subject to, Bear Stearns' prior
written consent. Bear Stearns will not distribute any written materials or make
any representations specifically regarding the Company that are not contained in
or consistent with the Memorandum or approved by the Company in advance.
3. In consideration of our services pursuant to this Agreement, Bear
Stearns shall be entitled to receive, and the Company agrees to pay Bear
Stearns, the following compensation:
(a) Upon execution of this Agreement, the Company shall pay to Bear Stearns
an initial cash fee in the amount of $100,000, which shall be credited
against the fees enumerated in subparagraph 3(c).
<PAGE>
GENERAL WIRELESS, INC.
JUNE 21, 1996
Page 3
(b) Upon the distribution of the Memorandum, the Company shall pay to Bear
Stearns an additional cash fee in the amount of $100,000, which shall be
credited against the fees enumerated in subparagraph 3(c).
(c) Upon the first closing of any part of the Financing (and upon each
subsequent closing, if any), the Company shall pay to Bear Stearns a
cash fee equal to:
(i) 5.00% of any preferred or common equity Financing raised from any
operating companies actively engaged in the provision of
telecommunication services or equipment, computer software or
hardware, or any business generally involved in the operation of a
communications business ("Strategic Investors") (other than (x) up
to $1,000,000 of preferred or common equity shares or options on up
to $1,000,000 of preferred or common equity shares to be issued to
or held for members of the Board of Directors and (y) the Excepted
Strategic Investors described in paragraph 3(b)(ii) below), one half
of which fee (i.e., 2.50% of the proceeds of such Financing), shall
be paid as described below in paragraph 3(c); plus
(ii) 2.50% of any preferred or common equity Financing raised from
Telecom Italia or Alcatel (the "Excepted Strategic Investors") which
shall be paid in cash; plus
(iii) 7.00% of any preferred or common equity Financing raised from any
investors engaged principally in the management or investment of
capital ("Financial Investors"), other than the Excepted Financial
Investor described in paragraph 3(b)(iv) below and Accel Partners,
one half of which fee, (i.e., 3.50% of the proceeds of such
Financing), shall be paid as described below in paragraph 3(c); plus
(iv) 3.50% of any preferred or common equity Financing raised from the
pension fund of General Motors (the "Excepted Financial Investor")
of which 1.50% shall be paid as described below in paragraph 3(c)
and 2.00% shall be paid in cash; plus
(v) 3.50% of the aggregate face amount of any letters of credit, standby
letters of credit or other third party guarantees arranged; plus
(vi) 3.50% of the aggregate principal amount of any debt Financing
raised (other than (a) interim bank funding for the initial deposit
with the FCC, (b) any debt
<PAGE>
GENERAL WIRELESS, INC.
JUNE 21, 1996
Page 4
Financing provided by suppliers to the Company or (c) the U. S.
Government debt to be provided to the Company pursuant to the FCC
rules).
<PAGE>
GENERAL WIRELESS, INC.
JUNE 21, 1996
Page 5
(d) Upon the first closing of any part of the equity Financing described in
subparagraphs 3(b)(i), (iii) and (iv) above (and upon each subsequent
closing, if any), the Company shall issue to Bear Stearns, dollar-for-
dollar, the same equity securities of the Company having identical terms
to those issued in any Financing in an amount equal to (i) 3.50% of the
aggregate of any funds raised from Financial Investors, (ii) 2.50% of
the aggregate of any funds raised from any Strategic Investors, (iii)
1.50% of the aggregate of any funds raised from the Excepted Financial
Investor (together, the "Equity Compensation").
(e) Bear Stearns shall be entitled to the fees enumerated in any preceding
subparagraph of this paragraph 3 (i) upon the occurrence during the
term, or within two years after the date of termination, of this
Agreement, of any event specified in any such subparagraph or (ii) upon
the occurrence of any event specified in any such subparagraph with
respect to which an agreement was executed by the Company during the
term or within two years after the date of termination of this
Agreement.
4. If, at any time prior to two years after the date hereof, the Company
determines to retain an investment bank or other similar agent in connection
with any related or unrelated investment banking services for the Company, the
Company shall offer to retain Bear Stearns as its exclusive investment bank or
agent for such services on customary and mutually acceptable terms and
conditions.
5. The fees set forth in paragraph 3 above shall be in addition to any
other fees that the Company may be required to pay directly to any prospective
Strategic or Financial Investors to secure its financing commitment. This
Agreement does not constitute a commitment or undertaking on the part of Bear
Stearns to provide any part of the Financing and does not ensure the successful
arrangement or completion of the Financing or any portion thereof.
6. In addition to the fees described in paragraph 3 above, the Company
agrees to promptly reimburse Bear Stearns, upon request from time to time, for
all reasonable out-of-pocket expenses incurred by Bear Stearns (including fees
and disbursements of counsel up to a maximum of $50,000 (other than pursuant to
the Indemnification Provisions hereof), and of other consultants and advisors
retained by Bear Stearns, provided such consultants and advisors are retained
with the Company's consent) in connection with the matters contemplated by this
Agreement. Upon request, Bear Stearns will provide you with its customary
summary of such out-of -pocket expenses.
7. The Company shall not, directly or indirectly (except through Bear
Stearns), sell or offer to sell any equity securities of the Company (or
otherwise raise the Financing) during the
<PAGE>
GENERAL WIRELESS, INC.
JUNE 21, 1996
Page 6
term of this Agreement without the specific consent of Bear Stearns. The Company
shall promptly inform Bear Stearns of all contacts or indications of interest it
or anyone on its behalf receives from any potential Strategic or Financial
Investors.
8. The Company agrees to indemnify Bear Stearns in accordance with the
indemnification provisions (the "Indemnification Provisions") attached to this
Agreement, which Indemnification Provisions are incorporated herein and made a
part hereof and which shall survive the termination, expiration, or supersession
of this Agreement.
9. Either party hereto may terminate this Agreement at any time upon
written notice, without liability or continuing obligation, except as set forth
in the following sentence. Neither termination of this Agreement, except as
provided in the preceeding sentence, nor completion of the assignment
contemplated hereby shall affect: (i) any compensation earned by Bear Stearns
up to the date of termination or completion, as the case may be, (ii) any
compensation to be earned by Bear Stearns after termination pursuant to
paragraph 3 hereof, (iii) the reimbursement of expenses incurred by Bear Stearns
up to the date of termination or completion, as the case may be, (iv) the
provisions of paragraphs 3-16 (excluding paragraph 7), inclusive, of this
Agreement and (v) the attached Indemnification Provisions which are incorporated
herein, all of which shall remain operative and in full force and effect. If
Bear Stearns terminates this Agreement without cause it will be entitled to the
fee set forth in paragraph 3(a), out-of-pocket expenses incurred up to the date
of termination and the benefits of the Indemnification Provisions hereof.
10. The validity and interpretation of this Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of New York
applicable to agreements made and to be fully performed therein (excluding the
conflicts of laws rules). The Company hereby irrevocably submits to the
jurisdiction of any court of the State of New York or the United States District
Court for the Southern District of the State of New York for the purpose of any
suit, action or other proceeding arising out of this Agreement, or any of the
agreements or transactions contemplated hereby, which is brought by or against
the Company and (i) hereby irrevocably agrees that all claims in respect of any
such suit, action or proceeding may be heard and determined in any such court,
(ii) to the extent that the Company has acquired, or hereafter may acquire, any
immunity from jurisdiction of any such court or from any legal process therein,
the Company hereby waives, to the fullest extent permitted by law, such immunity
and (iii) agrees not to commence any action, suit or proceeding relating to this
Agreement other than in such court. The Company hereby waives and agrees not to
assert in any such suit, action or proceeding, in each case, to the fullest
extent permitted by applicable law, any claim that (a) the Company is not
personally subject to the jurisdiction of any such court, (b) the Company is
immune from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution, execution or otherwise) with
respect to the Company or its property or (c) any such suit, action or
proceeding is brought in an inconvenient forum.
<PAGE>
GENERAL WIRELESS, INC.
JUNE 21, 1996
Page 7
11. The benefits of this Agreement shall inure to the parties hereto, their
respective successors and assigns, and to the indemnified parties hereunder and
their respective successors and assigns and representatives, and the obligations
and liabilities assumed in this Agreement by the parties hereto shall be binding
upon their respective successors and assigns.
12. Each of the Company and Bear Stearns (and, to the extent permitted by
law, on behalf of their respective equity holders and creditors) hereby
knowingly, voluntarily and irrevocably waives any right it may have to a trial
by jury in respect of any claim based upon, arising out of or in connection with
this Agreement, the Financing or the Use of Proceeds. Each of the Company and
Bear Stearns hereby certifies that no representative or agent of the other party
has represented expressly or otherwise that such party would not seek to enforce
the provisions of this waiver. Further, each of the Company and Bear Stearns
acknowledges that each party has been induced to enter this Agreement by, inter
-----
alia, the provisions of this paragraph.
- ----
13. If it is found in a final judgment by a court of competent jurisdiction
(not subject to further appeal) that any term or provision hereof is invalid or
unenforceable, (i) the remaining terms and provisions hereof shall be unimpaired
and shall remain in full force and effect and (ii) the invalid or unenforceable
provision or term shall be replaced by a term or provision that is valid and
enforceable and that comes closest to expressing the intention of such invalid
or unenforceable term or provision.
14. This Agreement embodies the entire agreement and understanding of the
parties hereto and supersedes any and all prior agreements, arrangements and
understanding relating to the matters provided for herein. No alteration,
waiver, amendment, change or supplement hereto shall be binding or effective
unless the same is set forth in writing signed by a duly authorized
representative of each party.
15. The Company has all requisite corporate power and authority to enter
into this Agreement and the transactions contemplated hereby (including, without
limitation, the Financing and the Use of Proceeds). This Agreement has been
duly and validly authorized by all necessary corporate action on the part of the
Company and has duly executed and delivered by the Company and constitutes a
legal, valid and binding agreement of the Company, enforceable in accordance
with its terms.
16. This Agreement does not create, and shall not be construed as creating,
rights enforceable by any person or entity not a party hereto, except those
entitled thereto by virtue of paragraph 9 and the Indemnification Provisions
hereof. The Company acknowledges and agrees that (i) Bear Stearns is being
retained solely to assist the Company in its efforts to structure and
<PAGE>
GENERAL WIRELESS, INC.
JUNE 21, 1996
Page 8
obtain the Financing and that Bear Stearns is not being retained to advise the
Company on, or to express any opinion as to, the wisdom, desirability or
prudence of consummating the Financing or the Use of Proceeds and, (ii) Bear
Stearns is not and shall not be construed as a fiduciary of the Company and
shall have no duties or liabilities to the equity holders or creditors of the
Company or any other person by virtue of this Agreement or the retention of Bear
Stearns hereunder, all of which are hereby expressly waived. The Company also
agrees that Bear Stearns shall not have any liability (including without
limitation, liability for any losses, claims, damages, obligations, penalties,
judgments, awards, liabilities, costs, expenses or disbursements resulting from
any negligent act or omission of Bear Stearns) (whether direct or indirect, in
contract, tort or otherwise) to the Company or to any person (including, without
limitation, equity holders and creditors of the Company) claiming through the
Company for or in connection with the engagement of Bear Stearns, this Agreement
and the transactions contemplated hereby (including, without limitation, the
Financing and the Use of Proceeds). The Company acknowledges that Bear Stearns
was induced to enter into this Agreement by, inter alia, the provisions of this
paragraph.
17. For the convenience of the parties, any number of counterparts of this
Agreement may be executed by the parties hereto. Each such counterpart shall
be, and shall be deemed to be, an original instrument, but all such counterparts
taken together shall constitute one and the same Agreement.
<PAGE>
GENERAL WIRELESS, INC.
JUNE 21, 1996
Page 9
If the foregoing correctly sets forth our Agreement, please sign the
enclosed copy of this letter in the space provided and return it to us.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: ________________
Richard De Rose
Managing Director
Confirmed and Agreed to
this _____________ day of November 1994:
GENERAL WIRELESS, INC.
By: __________________
Name: Roger D. Linquist
Title: President and Chief Executive Officer
<PAGE>
GENERAL WIRELESS, INC.
JUNE 21, 1996
Page 10
INDEMNIFICATION PROVISIONS
The Company (as such term is defined in the Agreement (as such term is
defined below)) agrees to indemnify and hold harmless Bear Stearns, to the
fullest extent permitted by law, from and against any and all losses, claims,
damages, obligations, penalties, judgments, awards, liabilities, costs, expenses
and disbursements (and any and all actions, suits, proceedings and
investigations in respect thereof and any and all legal and other costs,
expenses or disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including, without limitation, the costs,
expenses and disbursements, as and when incurred, of investigating, preparing or
defending any such action, suit, proceeding or investigation (whether or not in
connection with litigation in which Bear Stearns is a party), directly or
indirectly, caused by, relating to, based upon, arising out of or in connection
with (a) Bear Stearns' acting for the Company, including, without limitation,
any act or omission by Bear Stearns in connection with its acceptance of or the
performance or non-performance of its obligations under the agreement dated
June 23, 1996 between Bear Stearns and General Wireless, Inc., as it may be
amended from time to time (the "Agreement"), (b) any Financing (as such term is
defined in the Agreement); (c) any untrue statement or alleged untrue statement
of a material fact contained in, or omissions or alleged omissions from, the
Memorandum (as such term is defined in the Agreement) or similar statements or
omissions in or from any other information furnished by the Company to Bear
Stearns or any Prospective Financier (as such term is defined in the Agreement)
or Agency (as such term is defined in the Agreement), or (d) any Use of Proceeds
(as such term is defined in the Agreement); provided, however, such indemnity
-------- -------
agreement shall not apply to any portion of any such loss, claim, damage,
obligation, penalty, judgment, award, liability, cost, expense or disbursement
to the extent it is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) to have resulted primarily and
directly from the gross negligence or willful misconduct of Bear Stearns.
These Indemnification Provisions shall be in addition to any liability
which the Company may otherwise have to Bear Stearns or the persons indemnified
below in this sentence and shall extend to the following: The Bear Stearns
Companies Inc., Bear, Stearns & Co. Inc., their respective affiliated entities,
directors, officers, employees, legal counsel, agents and controlling persons
(within the meaning of the federal securities laws). All references to Bear
Stearns in these Indemnification Provisions shall be understood to include any
and all of the foregoing.
If any action, suit, proceeding or investigation is commenced, as to
which Bear Stearns proposes to demand indemnification, it shall notify the
Company with reasonable promptness; provided, however, that any failure by Bear
-------- -------
Stearns to notify the Company shall not
<PAGE>
GENERAL WIRELESS, INC.
JUNE 21, 1996
Page 11
relieve the Company from its obligations hereunder. Bear Stearns shall have the
right to retain counsel of its own choice to represent it, and the Company shall
pay the fees, expenses and disbursements of such counsel; and such counsel
shall, to the extent consistent with its professional responsibilities,
cooperate with the Company and any counsel designated by the Company. The
Company shall be liable for any settlement of any claim against Bear Stearns
made with the Company's written consent, which consent shall not be unreasonably
withheld. The Company shall not, without the prior written consent of Bear
Stearns, settle or compromise any claim, or permit a default or consent to the
entry of any judgment in respect thereof, unless such settlement, compromise or
consent includes, as an unconditional term thereof, the giving by the claimant
to Bear Stearns of an unconditional and irrevocable release from all liability
in respect of such claim.
In order to provide for just and equitable contribution, if a claim
for indemnification pursuant to these Indemnification Provisions is made but it
is found in a final judgment by a court of competent jurisdiction (not subject
to further appeal) that such indemnification may not be enforced in such case,
even though the express provisions hereof provide for indemnification in such
case, then the Company, on the one hand, and Bear Stearns, on the other hand,
shall contribute to the losses, claims, damages, obligations, penalties,
judgments, awards, liabilities, costs, expenses and disbursements to which the
indemnified persons may be subject in accordance with the relative benefits
received by the Company, on the one hand, and Bear Stearns, on the other hand,
and also the relative fault of the Company, on the one hand, and Bear Stearns,
on the other hand, in connection with the statements, acts or omissions which
resulted in such losses, claims, damages, obligations, penalties, judgments,
awards, liabilities, costs, expenses and disbursements and the relevant
equitable considerations shall also be considered. No person found liable for a
fraudulent misrepresentation shall be entitled to contribution from any person
who is not also found liable for such fraudulent misrepresentation.
Notwithstanding the foregoing, Bear Stearns shall not be obligated to contribute
any amount hereunder that exceeds the amount of fees previously received by Bear
Stearns pursuant to the Agreement.
Neither termination nor completion of the engagement of Bear Stearns
referred to above shall affect these Indemnifications Provisions which shall
then remain operative and in full force and effect.
<PAGE>
AGENCY AGREEMENT
November 20, 1995
General Wireless, Inc.
6688 N. Central Expressway
Suite 1170
Dallas, TX 75206
Dear Sirs:
We understand that General Wireless, Inc., a Delaware corporation
(collectively with its affiliates, the "Company"), proposes to issue and sell
privately up to 375,000 Units, each Unit consisting of two shares of Class C
Common Stock and one Class C Common Stock Purchase Warrant (collectively, and
including shares of, and warrants to purchase shares of, the Company's Class B
Common Stock that may be sold to members (including advisory members) of the
Company's Board of Directors as well as certain other warrants that may be sold
to GM Investment Management Corp. or related entities, the "Securities"), for
gross proceeds of up to $75,000,000 in reliance upon an exemption from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act"), by means of the Private Placement Memorandum dated
November 1995 (such Private Placement Memorandum, as it may be amended or
supplemented from time to time, including any addenda, exhibits or other
attachments thereto, being hereinafter referred to as the "Private Placement
Memorandum"). The Securities are proposed to be issued and sold for the purpose
of raising capital to be used by the Company to fund the Company's participation
in the upcoming auction of broadband personal communications services licenses
("PCS Licenses") in the Entrepreneurs' Blocks (as defined in FCC PP Docket No.
93-253) in the 2 Ghz band and for certain related purposes, including pre-
construction operating activities (as more fully described in the Private
Placement Memorandum in the section entitled "Use of Proceeds," the "Use of
Proceeds").
Pursuant to an agreement dated December 9, 1994 between the Company
and Bear, Stearns & Co. Inc. ("Bear Stearns") (as amended pursuant to a letter
dated the date hereof and as amended from time to time hereafter, the
"Engagement Agreement"), Bear Stearns has been engaged as the exclusive
placement agent through which the Company will privately offer and sell the
Securities. The Company now proposes to confirm the appointment of Bear Stearns
as the exclusive placement agent through which the Company will offer and sell
the Securities and to provide for certain additional matters respecting such
appointment.
The Company and Bear Stearns agree as follows:
1. Appointment. On the basis of the representations, warranties and covenants
-----------
contained in this Agreement, but subject to the terms and conditions set
forth herein, the Company hereby confirms its appointment of Bear Stearns
as the Company's exclusive placement agent during the Offering Period (as
such term is defined below) for the purpose of
1.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 2
finding purchasers for the Securities (the "Purchasers"), for the account
and risk of the Company, through the private placement herein contemplated
(the "Offering"). Subject to the performance by the Company of its
obligations under this Agreement and the completeness and accuracy of all
the representations and warranties contained herein, Bear Stearns confirms
its acceptance of such appointment and agrees, on the terms and conditions
herein set forth, to use its reasonable best efforts, in accordance with
its customary practice, during the period (the "Offering Period") which
commenced on January 3, 1995 and which shall terminate on the Offering
Termination Date (as such term is defined below) to find prospective
Purchasers of the Securities. The Company expressly acknowledges and
agrees that Bear Stearns' obligations hereunder are on a reasonable best
efforts basis only and that the execution of this Agreement does not in any
way constitute a commitment by Bear Stearns to purchase the Securities and
does not ensure the successful placement of the Securities or any portion
thereof.
2. Term. Bear Stearns' appointment and agency under this Agreement shall be
----
deemed to have commenced on the first day of the Offering Period and shall
continue through and including the earlier of (i) the final closing of the
sale of the Securities contemplated hereby (the "Closing") or (ii) the date
that either the Company shall have given written notice to Bear Stearns of
the termination of either this Agreement or the Engagement Agreement in
accordance with its terms, or Bear Stearns shall have given written notice
to the Company of termination of either this Agreement or the Engagement
Agreement in accordance with its terms (the date on which such agency is
terminated being hereinafter referred to as the "Offering Termination
Date"). Upon the Offering Termination Date, the agency created by this
Agreement shall terminate without obligation on the Company's part or on
the part of Bear Stearns, except for the obligation of the Company to pay
fees and expenses in accordance with the Engagement Agreement and Section 7
of this Agreement, and to provide indemnities in accordance with the terms
of the Engagement Agreement and Section 8 of this Agreement and the
attached Indemnification Provisions, all of which shall continue in effect
after such Offering Termination Date.
3. Furnishing of Offering Memorandum and Other Information. The Company
-------------------------------------------------------
authorizes and directs Bear Stearns to furnish, and to continue during the
Offering Period to furnish, to prospective Purchasers, the Private
Placement Memorandum. In connection with Bear Stearns' activities pursuant
to this Agreement, the Company agrees to cooperate with Bear Stearns and
shall furnish to, or cause to be furnished to, Bear Stearns any and all
information concerning the Company, the Securities and the Use of Proceeds
(the "Information") which Bear Stearns reasonably deems appropriate and
shall provide Bear Stearns with access to the Company's officers,
directors, employees, appraisers, independent accountants, legal counsel
and other consultants and advisors. The Company
2.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 3
acknowledges and agrees that, in rendering its services hereunder, Bear
Stearns will be using and relying on the Information (and information
available from public sources and other sources deemed reliable by Bear
Stearns) without independent verification thereof by Bear Stearns or
independent appraisal by Bear Stearns of any of the Company's assets,
business or prospects. Bear Stearns does not assume responsibility for the
accuracy or completeness of the Information or any other information
regarding the Company, the Securities, the Offering, the Purchasers or the
Use of Proceeds.
4. Representations and Warranties. The Company represents, warrants and
------------------------------
agrees with Bear Stearns as follows:
(i) Each of the Company and its subsidiaries (individually, a
"Subsidiary" and, collectively, the "Subsidiaries") (a) is duly
incorporated, validly existing and in good standing under the laws
of the State of Delaware, with full power and authority (corporate
and other), to own or lease its properties and assets and to
conduct its business, all as described in the Private Placement
Memorandum, (b) has good and marketable title to, or valid,
subsisting and enforceable leasehold estates in, all properties
material to the conduct of its business, free and clear in each
case of any lien, encumbrance, claim or other restriction, except
for liens, encumbrances, claims and other restrictions which,
considering all such items individually and in the aggregate, would
not have a material adverse effect on the condition (financial or
otherwise), operating results, business affairs and prospects of
the Company and the Subsidiaries, taken as a whole (a "Material
Adverse Effect"), (c) is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction wherein
the character of the properties or assets owned or leased by it or
the nature of its activities requires such qualification, except
where, considering all such cases individually and in the
aggregate, the failure to be so qualified would not have a Material
Adverse Effect and (d) is not in breach or violation of any
statute, judgment, decree, order, rule or regulation of any court,
regulatory body or administrative agency or other governmental
body, domestic or foreign, having jurisdiction over the Company or
any of its Subsidiaries or any of their respective activities or
properties, except for breaches and violations which, individually
and in the aggregate, would not have a Material Adverse Effect.
(ii) Upon the consummation of the Recapitalization (as defined in the
Private Placement Memorandum in the section entitled "Certain
Investments"), the Company will have duly authorized and validly
outstanding equity capitalization as described in the Private
Placement Memorandum and will
3.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 4
have the adjusted equity capitalization described therein at the
Closing (based on the assumptions set forth in the Private
Placement Memorandum). The outstanding shares of each class of the
Company's capital stock are validly issued, fully paid and non-
assessable and were not issued in violation of or subject to any
preemptive or other similar rights. There are no existing plans or
obligations to issue equity securities (or options, rights,
warrants or other securities or indebtedness convertible into
equity securities) or incur indebtedness of the Company, except as
described in the Private Placement Memorandum.
(iii) The Company and each of its Subsidiaries have all requisite
power and authority, and all consents, approvals, authorizations,
orders, registrations, filings, qualifications, licenses and
permits of and from all public, regulatory or governmental agencies
and bodies, required to own, lease and operate its properties and
conduct its business as now being conducted and as described in the
Private Placement Memorandum, other than the PCS Licenses on which
the Company proposes to bid as described in the Private Placement
Memorandum, and no such consent, approval, authorization, order,
registration, qualification, license or permit contains, or, in the
case of the PCS Licenses, is expected to contain, a materially
burdensome restriction that is not disclosed in the Private
Placement Memorandum. All of the issued and outstanding capital
stock of each Subsidiary has been duly and validly issued and is
fully paid and non-assessable and free of pre-emptive rights and is
owned by the Company or another Subsidiary free and clear of any
lien, adverse claim, security interest, restriction on transfer,
shareholder's agreement, voting trust or encumbrance whatsoever,
except as disclosed in the Private Placement Memorandum. Each of
the Subsidiaries and its jurisdiction of incorporation or formation
is listed on Schedule 4(iii) hereto.
(iv) The Company has all requisite corporate power and authority to
(a) enter into this Agreement and all other legal documentation
pursuant to which the Securities are to be issued and sold (such
other documentation being referred to herein as the "Purchase
Documents"), (b) issue and sell the Securities as contemplated
hereby and in the Private Placement Memorandum and (c) effect the
Use of Proceeds as described in the Private Placement Memorandum.
This Agreement has been duly and validly authorized by all
necessary corporate action on the part of the Company and has been
duly executed and delivered by the Company and constitutes a legal,
valid and binding agreement of the Company, enforceable in
accordance with its terms, except to the extent that enforcement
hereof may be limited by (x) bankruptcy,
4.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 5
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, (y)
general principles of equity (regardless of whether enforceability
is considered in a proceeding at law or in equity) and (z) the
unenforceability under certain circumstances under law or court
decisions of provisions providing for the indemnification of or
contribution to a party, where such indemnification or contribution
is contrary to public policy. The Use of Proceeds and the issuance
and sale of the Securities have been or will be, prior to the
Closing, duly and validly authorized by all necessary corporate
action on the part of the Company.
(v) Before the Closing, the Purchase Documents will have been duly and
validly authorized by all necessary corporate action on the part of
the Company and will have been duly executed and delivered by the
Company. When duly executed and delivered by the Company, the
Purchase Documents will constitute legal, valid and binding
agreements of the Company, enforceable in accordance with their
respective terms, except to the extent that enforcement thereof may
be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, (b) general principles of
equity (regardless of whether enforceability is considered in a
proceeding at law or in equity) and (c) the unenforceability under
certain circumstances under law or court decisions of provisions
providing for the indemnification of or contribution to a party,
where such indemnification or contribution is contrary to public
policy. When duly issued pursuant to the terms of the Purchase
Documents, the Securities shall be duly and validly authorized,
issued and outstanding (and, in the case of equity Securities,
shall be fully paid and nonassessable). Before the Closing, any
capital stock issuable upon exercise of the Class C Common Stock
Purchase Warrants will have been duly authorized and reserved for
issuance upon such exercise, and such capital stock shall be, when
so issued, validly issued and will not be issued in violation of
preemptive or other similar rights.
(vi) Since the date as of which information is given in the Private
Placement Memorandum and, except as disclosed in the Private
Placement Memorandum, there has not been (a) any material adverse
change in the condition (financial or otherwise), earnings,
business, affairs, prospects or properties of the Company, whether
or not arising in the ordinary course of business, (b) any
transaction entered into, or any liabilities or obligations
undertaken or incurred, by the Company or any Subsidiary, whether
or not in the ordinary course of business, that is material to the
Company, or (c) any dividend or
5.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 6
distribution of any kind declared, paid or made by the Company on
its capital stock or any other payment or investment made by the
Company.
(vii) The Private Placement Memorandum as of its date, and each
amendment, addendum and supplement thereto, as of their respective
dates, will be complete and correct in all material respects and
will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein not misleading in light of the circumstances under which
they are made; provided that the Company makes no representation or
warranty as to statements in, or omissions from, the Private
Placement Memorandum in reliance upon and in conformity with
written information furnished to the Company by or on behalf of
Bear Stearns expressly for use therein. Any projections and other
Information contained in the Private Placement Memorandum or
provided to Bear Stearns or any prospective Purchaser will have
been prepared in good faith and will be based upon assumptions
which, in light of the circumstances under which they are made,
were reasonable.
(viii) Neither the Company nor any of its Subsidiaries is in
violation of its Certificate of Incorporation or bylaws or in
default (nor has an event, act or condition occurred which with
notice, lapse or time or both could constitute a default) in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which it
is a party or by which it may be bound or to which any of its
properties may be subject, except for such violations or defaults
that would not have a Material Adverse Effect, or that would not
adversely affect the consummation of this Agreement or the Purchase
Documents or the transactions contemplated thereby and by the
Private Placement Memorandum. The execution and delivery of this
Agreement and the Purchase Documents, the incurrence of the
obligations herein and therein set forth, the consummation of the
transactions described or contemplated herein, therein or in the
Private Placement Memorandum and compliance with the terms hereof
and thereof by the Company (including without limitation, the
issuance and sale of the Securities) do not and will not result in
any violation of the Certificate of Incorporation or bylaws of the
Company or any of its Subsidiaries, and do not and will not
conflict with, or result in a breach of any of the terms or
provisions of, or constitute a default (or an event which with
notice or lapse of time or both could constitute a default), or
require consent or waiver under, or result in the creation or
imposition of any lien, charge or encumbrance
6.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 7
upon any property or assets of the Company under (a) any contract,
indenture, mortgage, loan agreement, note, lease or other agreement
or instrument to which the Company or any such Subsidiary is a
party or by which it may be bound or to which any of its properties
may be subject or (b) any existing applicable law, rule,
regulation, judgment, order or decree of any government,
governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Company, any of its Subsidiaries or any of
their respective properties.
(ix) There is not pending or, to the knowledge of the Company,
threatened or contemplated, any action, suit or proceeding, at law
or in equity, to which the Company or any Subsidiary is a party or
of which any property or assets of the Company or any Subsidiary is
the subject, before or by any court, arbitrator, governmental
official, commission, board or other governmental or administrative
body which could have a Material Adverse Effect, or upon the
ability of the Company to conduct its operations as described in
the Private Placement Memorandum, or that could adversely affect
the consummation of the transactions contemplated by the Purchase
Documents, this Agreement or the Private Placement Memorandum.
(x) No permit, consent, approval, authorization or, declaration to or
filing with any governmental or regulatory authority, or court is
required in connection with the execution, delivery and performance
of the Purchase Documents and this Agreement, the consummation by
the Company of the transactions contemplated in the Private
Placement Memorandum, this Agreement and the Purchase Documents or
the offer, sale and delivery of the Securities as contemplated
hereby except for the filing on Form D with the Securities and
Exchange Commission (the "Commission") and as may be required under
state securities or "blue sky" laws or the laws of any foreign
jurisdiction and except for filings with the FCC that may be
required in connection with the Company's bidding on the PCS
licenses.
(xi) Neither the Company nor any person authorized to act on the
Company's behalf (other than Bear Stearns or Mr. Ugo Assi, pursuant
to that certain Consulting Agreement between Mr. Assi and the
Company, executed by the Company on December 15, 1995, a true and
correct copy of which has been provided to Bear Stearns (the
"Consulting Agreement")) has, directly or indirectly, offered the
Securities for sale to, or solicited any offers to purchase the
Securities from, or otherwise approached or negotiated in respect
thereof with any person or persons. Neither the Company nor any
person authorized
7.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 8
to act on the Company's behalf has, directly or indirectly, taken
any action that would prevent the offering and sale of the
Securities from complying with the requirements of all applicable
securities laws or render unavailable any exemption from the
registration provisions of the Securities Act relied upon in making
any offer or sale of the Securities, or the state securities or
"blue sky" laws or jurisdictions in which the Securities will be
offered.
(xii) The offer and sale of the Securities, in the manner and under
the circumstances contemplated by the Private Placement Memorandum,
do not require registration of the Securities under the Securities
Act.
(xiii) The Company is not, and will not be as of the Closing, an
"investment company" within the meaning of the Investment Company
Act of 1940, as amended.
(xiv) The Company is not required to have made, and has not made, any
filing or report with the Commission pursuant to the Securities Act
and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Company's financial statements included in the Private
Placement Memorandum present fairly the consolidated financial
condition of the Company as of the date of such statement. All
such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with generally
accepted accounting principles, applied consistently throughout the
period involved.
(xv) (a) The execution and delivery of the Purchase Documents and
the sale of the Securities to the Purchasers do not involve any
non-exempt prohibited transaction within the meaning of Section 406
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Internal Revenue Code of 1954, as
amended (the "Code") on the part of the Company.
(b) Neither the Company nor any of its Subsidiaries has established
or maintained, or made any contribution to, any employee pension
benefit plan within the meaning of Section 3(2) of ERISA or any
"multiemployer plan" within the meaning of Section 3(37) of ERISA.
(xvi) All tax returns required to be filed by the Company or any of
its Subsidiaries in any jurisdiction (including foreign
jurisdictions) have been so filed and all taxes, assessments, fees
and other charges including, without limitation, withholding taxes,
penalties, and interest ("Taxes") due or claimed to be due
8.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 9
have been paid, other than those Taxes being contested in good
faith and those Taxes for which adequate reserves or accruals have
been established in accordance with generally accepted accounting
principles, except where the failure to file such returns or to pay
such Taxes is not reasonably likely to have, singly or in the
aggregate, a Material Adverse Effect. The Company knows of no
actual or proposed additional tax assessments for any fiscal period
against the Company or any of its Subsidiaries.
(xvii) Except as disclosed in the Private Placement Memorandum, (i)
each of the Company and its Subsidiaries is in compliance with the
provisions of all applicable environmental laws relating to its
business, properties, assets and facilities, or the ownership, use,
control, management, operation or occupancy thereof, where the
failure to be in such compliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect; (ii)
neither the Company nor any of its Subsidiaries has violated any
provision of any applicable environmental laws, which violation is
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect; (iii) neither the Company nor any of its
Subsidiaries has any liability, absolute or contingent, under any
applicable environmental law, which liability is reasonably likely
to have, individually or in the aggregate, a Material Adverse
Effect.
(xviii) The Company is the sole and exclusive owner of licensee of
all trade names, unregistered trademarks and service marks, brand
names, patents, registered and unregistered copyrights, registered
trademarks and service marks, and all applications for any of the
foregoing, and all permits, grants and licenses or other rights
with respect thereto, the absence of which would have or could
reasonably be expected to have a Material Adverse Effect. The
Company has not been charged with any infringement of any
intangible property of the character described above or been
notified or advised of any claim of any other person relating to
any of the intangible property which infringements or claims
(individually or in the aggregates, would have a Material Adverse
Effect.
(xix) Except for fees and expenses payable to Bear Stearns, there are
no other fees and expenses payable by the Company to a broker,
dealer, finder or agent in connection with the placement and sale
of the Securities.
(xx) Upon consummation of the Recapitalization, the Company will meet
all requirements necessary to qualify as a "Small Business" for
purposes of the FCC's rules and regulations applicable to the
auction of the PCS Licenses and
9.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 10
will be eligible to bid as such on the 30 MHz "C" and "F" frequency
blocks to be auctioned in the "entrepreneurs' auction" of PCS
Licenses to be held by the FCC.
5. Covenants of the Company. The Company covenants and agrees with Bear Stearns
------------------------
that:
(i) At the Closing, the Company will deliver or cause to be delivered to Bear
Stearns, in addition to the documents referred to in Section 9 of this
Agreement, copies of any other opinion or opinions of counsel to the
Company, certificates of the Company and such other documents as are
delivered to the prospective Purchasers at the Closing and will obtain
appropriate letters or assurances from the persons delivering such
opinions, certificates and other documents to the effect that Bear
Stearns is entitled to rely thereon as if they were addressed to Bear
Stearns.
(ii) The Company will endeavor in good faith and in cooperation with Bear
Stearns, to qualify, to the extent required by applicable law, the sale
of the Securities for offering and sale under the applicable securities
or "blue sky" laws of such jurisdictions as Bear Stearns may designate
and the Company will use its best efforts to maintain such
qualifications in effect for as long as may be required for the
distribution of the Securities. In each jurisdiction where the
Securities shall have been qualified as above provided, the Company will
make and file such statements and reports in each year as are or may be
required by the laws of such jurisdiction.
(iii) The Company will, so long as any Securities remain outstanding,
furnish directly to Bear Stearns one copy of any annual or interim
financial statements or other financial information required to be sent,
and any other communications sent to holders of the Securities at the
same time as such financial statements or other financial information
shall be required to be sent, or such other communications are sent to
such holders.
(iv) The Company will file with the Commission all notices and other
documents required pursuant to Section 4 of the Securities Act,
including notices on Form D in accordance with Rule 503 contained in
Regulation D under the Securities Act.
(v) The Company will deliver to Bear Stearns, from time to time, such number
of copies of the Private Placement Memorandum, the addenda and exhibits
thereto and the agreements and documents referred to therein, including,
without limitation, the Purchase Documents, as Bear Stearns may
reasonably request.
(vi) If any event relating to or affecting the Company shall occur as a
result of which it is necessary or advisable, in the reasonable opinion
of Bear Stearns or Latham &
10.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 11
Watkins, counsel for Bear Stearns, to amend or supplement the Private
Placement Memorandum in order to make the Private Placement Memorandum
not misleading in the light of the circumstances existing at the time it
is delivered to a prospective Purchaser or in order to comply with any
applicable state securities or "blue sky" laws, the Company will
forthwith prepare and furnish to Bear Stearns a reasonable number of
copies of an amendment or amendments of, a supplement or supplements to,
or an addendum or addenda to, the Private Placement Memorandum (in form
and substance reasonably satisfactory to Bear Stearns) which will amend
or supplement the Private Placement Memorandum so that as amended or
supplemented it will not contain an untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the
time the Private Placement Memorandum is delivered to a prospective
Purchaser, not misleading and it will comply with any applicable state
securities or "blue sky" laws. The Company will advise Bear Stearns of
the occurrence of any such event known to it, will advise Bear Stearns
promptly after it receives knowledge or notice thereof, of any
communication with the Commission or any state securities commissioner
concerning the initiation of any proceeding concerning the offering of
the Securities, and will advise Bear Stearns promptly after it receives
knowledge or notice thereof, of the commencement of any lawsuit or
proceeding relating to the offering of the Securities. The Company
agrees not to make any amendments, supplements or addenda to the Private
Placement Memorandum to which Bear Stearns shall reasonably object.
(vii) The Company shall, at all times upon request from the date hereof
through the Closing, (a) make available to each prospective Purchaser, or
its advisers or both, such information (in addition to that contained in
the Private Placement Memorandum) concerning the Offering and the
Company, and any other relevant matters, as they possess or can acquire
without unreasonable effort or expense and (b) provide each prospective
Purchaser, or its advisers or both, the opportunity to ask questions of,
and receive answers from, the Company concerning the Offering.
(viii) Subject to mutual agreement as to times and locations, the Company
shall make such members of the Company's management available to
participate in sales meetings with prospective Purchasers as Bear Stearns
may reasonably request.
(ix) Neither the Company nor any of its subsidiaries will offer and sell
securities of the Company if, as a result of the doctrine of
"integration" referred to in Rule 502 of the rules and regulations under
the Securities Act, such offer and sale would render invalid the sale of
the Securities under the exemption from the registration requirements of
the Securities Act provided by Section 4(2) thereof.
11.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 12
(x) The Company will timely and fully comply with all of its covenants and other
obligations under the Purchase Documents.
(xi) The Company shall cause Arthur Andersen LLP to deliver to Bear Stearns,
prior to the Closing, any financial statements of the Company audited or
reviewed by Arthur Andersen LLP for any period subsequent to October 31,
1994 together with any related consent delivered by Arthur Andersen LLP
in connection therewith, but only to the extent that such financial
statements or consents are delivered to Purchasers or prospective
Purchasers of the Securities.
(xii) The Company agrees that during the terms of Bear Stearns' agency
hereunder neither the Company nor any person authorized to act on the
Company's behalf (other than Bear Stearns) will, without the consent of
Bear Stearns, directly or indirectly, offer the Securities for sale to,
or solicit any offers to purchase the Securities from, or except as Bear
Stearns may specifically request, otherwise approach or negotiate in
respect thereof with, any other person or persons. In the event any
person or persons contacts the Company or any such authorized person with
respect to the purchase of the Securities, the Company will refer such
person or persons to Bear Stearns. Neither the Company nor any person
authorized to act on the Company's behalf will, directly or indirectly,
take any action that would prevent the offering and sale of the
Securities from complying in all respects with the requirements of all
applicable securities laws or render unavailable any exemption from the
registration provisions of the Securities Act relied upon in making any
offer or sale of the Securities, or the state securities or "blue sky"
laws of jurisdiction in which the Securities will be offered.
(xiii) The Company agrees to indemnify Bear Stearns in connection with any
claim or demand for commission or other compensation by any broker,
finder, agent or similar intermediary claiming to have been employed by
or on behalf of the Company, and to bear the cost of reasonable legal
expenses incurred in defending against any such claim.
(xiv) At all times during the Offering Period, the Company shall provide
each prospective Purchaser, at a reasonable time or times prior to such
purchase, the opportunity to ask questions and obtain such information
about the Company, its businesses, financial condition and prospects, and
about the Securities and the Use of Proceeds, as such prospective
Purchaser may reasonably request.
(xv) The Use of Proceeds shall be as described in the Private Placement
Memorandum.
12.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 13
(xvi) Concurrently with any issuance of Securities to Bear Stearns as
compensation for its services under the Engagement Agreement, the Company
shall extend to Bear Stearns the opportunity to become a party to any
registration rights agreement and stockholders agreement entered into
between the Company and the Purchasers with respect to the Securities,
such that Bear Stearns will have, with respect to any Securities acquired
by Bear Stearns as compensation for its services under the Engagement
Agreement, the same rights and obligations as the other Purchasers have
as parties to such registration rights agreement and stockholders
agreement.
6. Representations, Warranties and Covenants of Bear Stearns.
---------------------------------------------------------
(a) Bear Stearns represents and warrants that it is a member of the National
Association of Securities Dealers, Inc., and a broker-dealer registered
as such under the Exchange Act, and under the securities laws of the
jurisdictions in which the Securities were offered or sold by it, and
Bear Stearns has all corporate power and authority to perform its
obligations under this Agreement in connection with the Offering.
(b) Bear Stearns agrees that:
(i) insofar as its actions are concerned, offers and sales of the
Securities will be made in compliance with state "blue sky" laws;
(ii) it will offer the Securities only to persons, believed by Bear
Stearns, based solely upon its existing business relationships with
such persons, to be qualified, at the time of such offer, as an
"accredited investor" within the meaning of Rule 501
(a)(1),(2),(3),(7) or (8) under the Securities Act (each an
"Accredited Investor"), or a "qualified institutional buyer" within
the meaning of Rule 144A of the Securities Act;
(iii) it will not use any offering or selling materials in connection
with the offer or sale of the Securities other than materials approved
by the Company and that it will provide to each of the prospective
Purchasers all materials provided to it by the Company for
distribution to such prospective Purchasers;
(iv) it will not offer the Securities by means of any form of general
solicitation or general advertising, including, but not limited to (a)
any advertisement, article, notice or other communication published in
any newspaper, magazine or similar medium or any broadcast over
television or radio or (b) any seminar or meeting whose attendees have
been invited by any general solicitation or general advertising;
13.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 14
(v) it will not offer the Securities for sale in such a manner or under
such circumstances as would require qualification of the Securities under the
state securities or "blue sky" laws of any jurisdiction other than those
jurisdictions designated in writing by Bear Stearns to the Company prior to
Closing;
(vi) at the direction of the Company, Bear Stearns will furnish each
prospective Purchaser and its representative, if any, with such
information in addition to the Private Placement Memorandum as such
prospective Purchaser reasonably requests in connection with the
offering and sale of the Securities; and
(vii) At the Closing, Bear Stearns will deliver to the Company a
Placement Certificate in the form annexed hereto as Exhibit E.
7. Fees and Expenses. The Company hereby confirms that the Engagement Agreement
-----------------
remains in full force and effect in accordance with its terms, including,
without limitation, the provisions regarding the payment of fees to Bear
Stearns and the reimbursement of Bear Stearns' expenses. In furtherance of
the Engagement Agreement, the Company hereby confirms that it will pay or
cause to be paid the following notwithstanding a termination of this
Agreement, including termination pursuant to Sections 2 and 10 hereof,
subject, however, to the aggregate limitation on the fees, disbursements and
expenses of Latham & Watkins set forth in the Engagement Agreement: (a) the
fees, disbursements and expenses of Latham & Watkins in connection with the
review of the Private Placement Memorandum and the placement of the
Securities and the negotiation and execution of the Purchase Documents and
all related agreements and documentation; (b) the expenses incurred in
connection with th e qualification of the Securities under the securities or
"blue sky" laws of the jurisdictions designated by Bear Stearns in accordance
with Section 5(ii) hereof, including filing fees and the fees and
disbursements of Latham & Watkins, if any, in connection therewith; and (c)
any other direct out-of-pocket expenses of Bear Stearns that Bear Stearns may
incur in connection with the Offering or that are otherwise incident to the
performance of the obligations of Bear Stearns under this Agreement and the
Engagement Agreement, including, but not limited to, legal, printing,
qualification and travel expenses incurred in connection with the offering
for sale of the Securities.
8. Indemnification. The Company agrees to indemnify Bear Stearns in accordance
---------------
with the indemnification provisions attached hereto (the "Indemnification
Provisions"), which provisions are incorporated by reference herein and made
a part hereof and which shall survive the termination, expiration or
supersession of this Agreement.
9. Conditions of Closing. The Company agrees that the sale of the Securities
---------------------
and the release of funds on the date of the Closing shall be conditioned on
and subject to the accuracy of
14.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 15
its representations and warranties as of the Closing, performance of its
covenants and other obligations hereunder, delivery of the Securities and
your notification to the effect that the following conditions have been met
on the date of the Closing or have been waived by Bear Stearns:
(a) The definitive Purchase Documents shall have been duly executed and
delivered by the parties thereto, on substantially the terms and
conditions described in the Private Placement Memorandum, and shall be in
full force and effect.
(b) The representations and warranties made by the Company herein, shall be
true and correct in all material respects at and as of the date of the
Closing with the same effects as though such representations and
warranties had been made on and as of the date of the Closing. The
Company shall have complied in all material respects with its covenants
and other obligations hereunder. Bear Stearns shall have received a
certificate, dated the date of the Closing, signed by the Chief Financial
Officer of the Company, to the effect that (i) he has examined the
Private Placement Memorandum and such Private Placement Memorandum did
not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, it being understood that the foregoing
representation and warranty shall not apply to any statement or omission
contained in the Private Placement Memorandum as originally issued or in
any amendment, addendum or supplement thereto to the extent the same is
superseded by a subsequent such amendment, addendum or supplement; (ii)
the Company has performed in all material respects all obligations
required to be performed by it hereunder prior to or on the date of the
Closing; and (iii) the representations and warranties contained in
Section 4 of this Agreement are true and correct in all material respects
at the Closing with the same effect as though expressly made at and as of
the Closing.
(c) Bear Stearns shall have received a satisfactory opinion, addressed to it
and dated the date of the Closing, of Brobeck, Phleger & Harrison LLP
with respect to the matters set forth on Exhibit B hereto, and of
Skadden, Arps, Slate, Meagher & Flom with respect to the matters set
forth in Exhibit B and Exhibit C hereto, and each such opinion to the
effect that Bear Stearns may rely upon the opinion delivered by the
applicable law firm to the Purchasers pursuant to the Purchase Documents
as if it were addressed to Bear Stearns.
(d) Bear Stearns shall have received a satisfactory opinion, dated the date
of the Closing, of Latham & Watkins addressed to Bear Stearns, with
respect to the matters set forth in Exhibit D hereto.
15.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 16
(e) Bear Stearns shall have received copies of the Purchase Documents and all
agreements, opinions and certificates related thereto, each duly executed by
the parties thereto, and appropriate letters or assurances from the persons
delivering such opinions, certificates and other documents to the effect that
Bear Stearns and its counsel is entitled to rely thereon as if they were
addressed to Bear Stearns and its counsel.
(f) Since November 1, 1995, there shall not have occurred a material adverse
change in the financial condition, earnings, prospects, business, affairs
or properties of the Company, or in regulations or other legal
restrictions applicable to, entities engaged, or proposing to be engaged,
in the business of wireless data or voice transmission.
(g) The issuance and sale of the Securities by the Company shall not be
enjoined under the laws of any jurisdiction to which the Company is
subject (temporarily or permanently) at the date of the Closing.
(h) The Company shall have paid all costs, fees and expenses required to be
paid by them hereunder and pursuant to the Purchase Documents and the
Engagement Agreement.
(i) The Purchasers shall have accepted delivery of not less than 150,000
Units in the aggregate and paid the purchase price therefor, which
purchase price shall not be less than $200.00 per Unit, in full.
(j) Bear Stearns shall have been furnished with such additional information,
opinions and documents as Bear Stearns or its counsel may reasonably
require in order to evidence the accuracy or completeness of any of the
representations or warranties or the fulfillment of any of the covenants
and conditions herein contained and in order to qualify the Securities
under the securities or "blue sky" laws of the jurisdictions designated
by Bear Stearns in accordance with the provisions of Section 5(ii)
hereof.
If any of the conditions specified in this Section 9 shall not have been
fulfilled when and as required by this Agreement to be fulfilled or waived,
Bear Stearns shall inform the Company in writing of each condition that has
not been fulfilled or waived and shall permit the Company a reasonable time
under the circumstances to fulfill such condition, after which time this
Agreement and all Bear Stearns' obligations hereunder may be canceled by Bear
Stearns by notifying the Company of such cancellation in writing at any time
at or prior to the Closing, and the sale of the Securities shall not take
place. Any such cancellation or termination shall be without liability of
any party to any other party except that the provisions of Section 8 and the
Indemnification Provisions hereof shall continue after such termination of
the Agreement.
16.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 17
10. Termination. Notwithstanding any other provisions hereof or of the
-----------
Engagement Letter, this Agreement may be terminated by Bear Stearns at any
time prior to the Closing if Bear Stearns shall determine, in its sole
discretion, that there has been (a) a materially adverse change in either (i)
the business, financial condition, results of operations or prospects of the
Company, (ii) the financial, political, or market conditions or circumstances
in the United States or in any jurisdiction in which the Securities will be
offered so as to make it undesirable, impractical, or inadvisable to proceed
with this Agreement or the private offering contemplated hereby or (iii)
regulations or other legal restrictions applicable to entities engaged, or
proposing to be engaged, in the business of wireless data or voice
transmission; (b) a new legal or regulatory restriction not in effect on the
date hereof has been proposed or becomes effective that adversely affects the
distribution of securities generally or of the Securities; (c) an outbreak of
national hostilities in which the United States is involved or there has been
some other substantial national or international calamity; (d) any action by
any government in any jurisdiction in which the Securities will be offered in
respect of its monetary affairs which has or would have a materially adverse
effect on the securities markets of those jurisdictions in which the
Securities will be offered; (e) there has been a suspension of the sale of
the Securities by any governmental authority in any jurisdiction in which the
Securities will be offered or there has been proceedings for that purpose
instituted or known to be contemplated; (f) if trading on the New York or
American Stock Exchanges shall have been suspended, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for prices for
securities shall have been required, on the New York or American Stock
Exchanges by the New York or American Stock Exchanges or by order of the
Commission or any other governmental authority having jurisdiction; or (g) if
a banking moratorium has been declared by a state or federal authority, or if
a moratorium in foreign exchanges trading by major international banks or
persons has been declared.
11. GOVERNING LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT SHALL BE
-------------
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO THE AGREEMENTS MADE AND TO BE FULLY
PERFORMED THEREIN (EXCLUDING THE CONFLICTS OF LAWS RULES). THE COMPANY
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY COURT OF THE STATE OF
NEW YORK OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
THE STATE OF NEW YORK FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER
PROCEEDING ARISING OUT OF THIS AGREEMENT, OR ANY OF THE AGREEMENTS OR
TRANSACTIONS CONTEMPLATED HEREBY, WHICH IS BROUGHT BY OR AGAINST THE
COMPANY, AND (I) HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUCH SUIT, ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT, (II) TO THE EXTENT THAT THE COMPANY HAS ACQUIRED, OR HEREAFTER MAY
ACQUIRE, ANY IMMUNITY FROM JURISDICTION OF ANY SUCH COURT OR FROM ANY LEGAL
PROCESS THEREIN, THE COMPANY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, SUCH IMMUNITY AND (III) AGREES NOT TO COMMENCE ANY ACTION, SUIT OR
17.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 18
PROCEEDING RELATING TO THIS AGREEMENT OTHER THAN IN SUCH COURT. THE COMPANY
HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH SUIT, ACTION OR
PROCEEDING, IN EACH CASE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY CLAIM THAT (A) THE COMPANY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION
OF ANY SUCH COURT, (B) THE COMPANY IS IMMUNE FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID
OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO THE COMPANY OR ITS
PROPERTY OR (C) ANY SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM.
12. Successors and Assigns. The benefits of this Agreement shall inure to the
----------------------
parties hereto, their respective successors and assigns, and to the
indemnified parties hereunder and their successors and representatives, and
the obligations and liabilities assumed in this Agreement by the parties
hereto shall be binding upon their respective successors and assigns.
13. Partial Invalidity. If it is found in a final judgment of a court of
------------------
competent jurisdiction (not subject to a further appeal) that any term or
provision hereof is invalid or unenforceable, (i) the remaining terms and
provisions hereof shall be unimpaired and shall remain in full force and
effect and (ii) the invalid or unenforceable provision or term shall be
replaced by a term or provision that is valid and enforceable and that come
closest to expressing the intention of the invalid or unenforceable term or
provision.
14. Survival. All representations, warranties and agreements contained herein
--------
or contained in certificates of the Company submitted pursuant hereto, shall
remain operative and in full force and effect regardless of any
investigation made by or on behalf of Bear Stearns, and shall survive the
Closing.
15. Entire Agreement; Amendments. This Agreement and the exhibits hereto embody
----------------------------
the entire agreement and understanding of the parties and supersede any and
all prior agreements, arrangements and understandings (other than the
Engagement Agreement) relating to matters provided for herein. The parties
hereby confirm that, notwithstanding the execution and delivery of this
Agreement, they intend for the Engagement Agreement to continue in full
force and effect hereafter until terminated in accordance with its terms;
provided, however, that in the event of an inconsistency between the
Engagement Agreement and this Agreement, this Agreement shall control. No
alteration, waiver, amendment, change or supplement hereto shall be binding
or effective unless the same is set forth in writing, signed by a duly
authorized representative of each party.
16. WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND BEAR STEARNS (AND, TO THE
--------------------
EXTENT PERMITTED BY LAW, ON BEHALF OF THEIR RESPECTIVE EQUITY HOLDERS AND
CREDITORS) HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY
18.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 19
IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT, THE OFFERING OR THE USE OF PROCEEDS. EACH OF THE COMPANY
AND BEAR STEARNS HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE
OTHER PARTY HAS REPRESENTED EXPRESSLY OR OTHERWISE THAT SUCH PARTY WOULD NOT
SEEK TO ENFORCE THE PROVISIONS OF THIS WAIVER. FURTHER, EACH OF THE COMPANY
AND BEAR STEARNS ACKNOWLEDGES THAT EACH PARTY HAS BEEN INDUCED TO ENTER THIS
AGREEMENT BY, INTER ALIA, THE PROVISIONS OF THIS PARAGRAPH.
----- ----
17. No Creation of Third Party Rights. This Agreement does not create, and
---------------------------------
shall not be construed as creating, rights enforceable by any person not a
party hereto, except those entitled thereto by virtue of the Indemnification
Provisions hereof. The Company acknowledges and agrees that (i) Bear
Stearns is being retained solely to assist the Company in its efforts to
obtain and structure the Offering and that Bear Stearns is not being
retained to advise the Company on, or to express any opinion on, the wisdom,
desirability or prudence of consummating the Offering or the Use of
Proceeds; and (ii) Bear Stearns is not and shall not be construed as a
fiduciary of the Company and shall have no duties or liabilities to the
equity holders or creditors of the Company or any other person by virtue of
this Agreement and the retention of Bear Stearns hereunder, all of which is
hereby expressly waived. The Company also agrees that Bear Stearns shall
not have any liability (including without limitation, liability for any
losses, claims, damages, obligations, penalties, judgments, awards,
liabilities, costs, expenses or disbursements (collectively, "Losses")
resulting from any act or omission of Bear Stearns) (whether direct or
indirect, in contract, tort or otherwise) to the Company or to any person
(including, without limitation, equity holders and creditors of the Company)
claiming through the Company for or in connection with the engagement of
Bear Stearns, this Agreement and the transactions contemplated hereby
(including, without limitation, the Offering and the Use of Proceeds), other
than liability to the Company for a breach by Bear Stearns of the express
contractual obligations created by this Agreement and the Engagement
Agreement or liability to the Company for Losses to the extent that such
Losses are found in a final judgment by a court of competent jurisdiction
(not subject to further appeal) to have resulted primarily and directly from
the gross negligence or willful misconduct of Bear Stearns. The Company
acknowledges that Bear Stearns was induced to enter into this Agreement by,
inter alia, the provisions of this paragraph.
----- ----
18. Information Provided by Bear Stearns. The Company acknowledges that the
------------------------------------
statements set forth in the Private Placement Memorandum under "Other
Matters--Plan of Distribution" constitutes the only information furnished in
writing by or on behalf of Bear Stearns expressly for use in the Private
Placement Memorandum.
19. Counterparts. This Agreement may be executed in one or more counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
19.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 20
20. Notices. All communications under this Agreement shall be in writing and
-------
either delivered personally or sent by certified mail, return receipt requested,
as follows:
If to Bear Stearns:
Bear, Stearns & Co. Inc.
245 Park Avenue
New York New York 10167
Attention: Norman Frost
If to the Company:
General Wireless, Inc.
6688 N. Central Expressway
Suite 1170
Dallas, TX 75206
Attention: Roger Linquist
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attention: Ronald C. Barusch
21. Captions. The Paragraph titles herein are for reference purposes only and
--------
do not control or affect the meaning or interpretation of any term or
provision hereof.
20.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 21
If the foregoing correctly sets forth our agreement, please sign the
enclosed copy of this Agreement in the space provided below and return it to us,
whereupon this instrument along with all counterparts will become a binding
agreement between us.
Very truly yours,
BEAR, STEARNS & CO. INC.
By:______________________________
Managing Director
Confirmed and Agreed to as of
the ____ day November, 1995
GENERAL WIRELESS, INC.
By:______________________________
Name:____________________________
Title:___________________________
21.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 22
If the foregoing correctly sets forth our agreement, please sign the
enclosed copy of this Agreement in the space provided below and return it to us,
whereupon this instrument along with all counterparts will become a binding
agreement between us.
Very truly yours,
BEAR, STEARNS & CO. INC.
By:__________________________
Managing Director
Confirmed and Agreed to as of
the ____ day November, 1995
GENERAL WIRELESS, INC.
By:__________________________
Name:________________________
Title:_______________________
22.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 1
EXHIBIT A
INDEMNIFICATION PROVISIONS
The Company (as such term is defined in the Agency Agreement (as such
term is defined below)) agrees to indemnify and hold harmless Bear Stearns, to
the fullest extent permitted by law, from and against any and all losses,
claims, damages, obligations, penalties, judgments, liabilities, costs, expenses
and disbursements (and any and all actions, suits, proceedings and
investigations in respect thereof and any and all legal and other costs,
expenses and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including, without limitation, the costs,
expenses and disbursements, as and when incurred, of investigating, preparing or
defending any such action, suit, proceeding or investigation (whether or not in
connection with litigation in which.Bear Stearns is a party), as and when
incurred, directly or indirectly, caused by, relating to, based upon, arising
out of or in connection with (a) Bear Stearns' acting for the Company,
including, without limitation, any act or omission by Bear Stearns in connection
with its acceptance of or the performance or nonperformance of its obligations
under the Agency Agreement dated November 20, 1995, between Bear Stearns and
General Wireless, Inc., as it may be amended for time to time (the "Agency
Agreement"); (b) the Offering; (c) any untrue statement or alleged untrue
statement of a material fact contained in, or omissions or alleged omissions
from, the Private Placement Memorandum (as such terms is defined in the Agency
Agreement), including any amendment thereof or supplement or addendum thereto,
or similar statements or omissions in or from any other information furnished by
the Company to Bear Stearns or to any prospective Purchaser (as such term is
defined in the Agreement), including any amendment thereof or supplement or
addendum thereto, or similar statements or omissions in or from any other
information furnished by the Company to Bear Stearns or to any prospective
Purchaser (as such term is defined in the Agreement); provided, however, that
-------- -------
the Company shall not be liable in any such case to the extent, but only to the
extent, (i) that any such losses, claims, damages, obligations, penalties,
judgements, liabilities, costs, expenses and disbursements arise out of or are
based upon any such untrue statement or alleged untrue statements or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of Bear Stearns expressly
for use therein; (d) breaches by the Company of any of its representations,
warranties or agreements contained in or incorporated into the Agency Agreement;
or (e) the Use of Proceeds; provided, however, such indemnify agreement shall
-------- -------
not apply to any portion of any such loss, claim, damage, obligation, penalty,
judgment, liability cost, disbursement or expense to the extent it is found in a
final judgment by a court of competent jurisdiction (not subject to further
appeal) to have resulted primarily and directly from the gross negligence or
willful misconduct of Bear Stearns.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 2
These Indemnification Provisions shall be in addition to any liability
which the Company may otherwise have to Bear Stearns or the persons indemnified
below in this sentence and shall extend to the following: The Bear Stearns
Companies Inc., Bear, Stearns & Co. Inc., and their respective affiliated
entities, directors, officers, employees, legal counsel, agents and controlling
persons of Bear Stearns within the meaning of the federal securities laws. All
references to Bear Stearns in these Indemnification Provisions shall be
understood to include any and all of the foregoing.
If any action, suit, proceeding or investigation is commenced, as to
which Bear Stearns proposes to demand indemnification, it shall notify the
Company in writing with reasonable promptness; provided, however, that any
-------- -------
failure by Bear Stearns to notify the Company shall not relieve the Company from
its obligations hereunder, except to the extent that the Company has been
materially prejudiced by such failure. The Company shall pay the reasonable
fees, expenses and disbursements ("Legal Costs") of counsel chosen and retained
by Bear Stearns to represent it in connection with any such action, suit,
proceeding or investigation provided that such counsel shall be reasonably
acceptable to the Company; and further provided, however, that following such
receipt of notice from Bear Stearns that Bear Stearns proposes to demand
indemnification hereunder, the Company may elect in writing to assume the
defense of such action, suit, proceeding or investigation, and, upon such
election, the Company shall not be liable for any Legal Costs subsequently
incurred by Bear Stearns (other than reasonable costs of investigation and
providing evidence) in connection therewith, unless (i) the Company has failed
to provide counsel reasonably satisfactory to Bear Stearns in a timely manner,
(ii) counsel which has been provided by the Company reasonably determines that
its representation of Bear Stearns would present it with a conflict of interest
or (iii) Bear Stearns reasonably determines that there may be legal defenses
available to it which are different from or in addition to those available to
the Company. The Company shall not be responsible for the Legal Costs of more
than one separate law firm in any one jurisdiction for Bear Stearns. Counsel
representing Bear Stearns hereunder shall to the extent consistent with its
professional responsibilities cooperate with the Company and any counsel
designated by the Company. The Company shall be liable for any settlement of
any claim against Bear Stearns made with the Company's written consent, which
consent shall not be unreasonably withheld. The Company shall not, without the
written consent of Bear Stearns, settle or compromise any claim or permit a
default or consent to entry of any judgment in respect thereof unless such
settlement, compromise or consent includes as an unconditional term thereof the
giving by the claimant to Bear Stearns of an unconditional and irrevocable
release from all liability in respect of such claim.
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these Indemnification Provisions is made but it is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 3
in such case, then the Company, on the one hand, and Bear Stearns, on the other
hand, shall contribute to the losses, claims, damages, obligations, penalties,
judgments, liabilities, costs, expenses and disbursements to which the
indemnified persona may be subject in accordance with the relative benefits
received by the Company, on the one hand, and Bear Stearns, on the other hand,
and also the relative fault of the Company, on the one hand, and Bear Stearns,
on the other hand, in connection with the statements, acts or omissions which
resulted in such losses, claims, damages, obligations, penalties, judgments,
liabilities, costs, expenses and disbursements and the relevant equitable
considerations shall also be considered. No person found liable for a
fraudulent misrepresentation shall be entitled to contribution from any person
who is not also found liable for such fraudulent misrepresentation.
Notwithstanding the foregoing, Bear Stearns shall not be obligated to contribute
any amount hereunder that exceeds the amount of fees previously received by Bear
Stearns pursuant to the Agreement and the Engagement Agreement.
Neither termination nor completion of the engagement of Bear Stearns
referred to above shall affect these Indemnification Provisions which shall then
remain operative and in full force and effect.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 4
EXHIBIT B AND EXHIBIT C
Substance of Opinion of Brobeck, Phleger & Harrison LLP and
Skadden, Arps, Slate, Meagher & Flom
------------------------------------
1. Each of the Company and the Subsidiaries has been duly incorporated
and is validly existing and in good standing under the laws of the State of
Delaware. The Company has all requisite power and authority under the Purchase
Documents and such laws to enter into and carry out the terms of the Purchase
Documents, to conduct its business and to issue and sell the Securities. The
Company is the record owner of all of the issued and outstanding capital stock
of the Subsidiaries.
2. This Agreement has been duly authorized, executed and delivered by the
Company and constitute valid and binding agreement of the Company, enforceable
in accordance with its terms, except as may be limited by bankruptcy, insolvency
or other similar laws affecting creditors' rights generally and subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and to court decisions holding
that rights of indemnification or contribution may be unenforceable as contrary
to public policy.
3. The Securities have been duly authorized and validly issued and are
fully paid and non-assessable, and the stockholders of the Company have no
preemptive rights with respect to the Securities.
4. The Warrants are exercisable for shares of Class C Common Stock of the
Company in accordance with their terms, and the shares of Class C Common Stock
initially issuable upon exercise of the Warrants have been duly authorized and
reserved for issuance upon such exercise and, when so issued, will be validly
issued, fully paid and non-assessable.
5. The Company has an authorized capitalization as set forth in an
attachment to such opinion; and all of the issued shares of capital stock of the
Company and each of the Subsidiaries have been duly and validly authorized and
issued, and are fully paid and non-assessable.
6. To such counsel's knowledge, the execution and delivery of this
Agreement and the Purchase Documents do not result in the violation of,
constitute a default under or conflict with any contract, indenture, agreement,
instrument, mortgage, judgment, decree, or order applicable to the Company, or
result in the creation of any mortgage, lien, encumbrance or charge upon any of
the properties or assets of the Company.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 5
7. Based upon the prospective Purchasers' representations contained in
the Purchase Documents and assuming the offer and sale of the Securities has
been conducted in the manner prescribed by this Agreement, the offer and sale of
the Securities is exempt from the registration requirements of the Securities
Act of 1933.
8. To such counsel's knowledge, after due inquiry, there are no actions,
proceedings or investigations pending or threatened against the Company.
9. The Company is not required to be registered as an investment company
within the meaning of the Investment Company Act of 1940, as amended.
10. No consent, approval, authorization, order, registration or
qualification of or with any governmental agency or body or, to such counsel's
knowledge, any court, is required for the issue and sale of the Securities by
the Company and the consummation of the transactions to occur at the Closing
contemplated by the Purchase Documents.
11. The description in the Private Placement Memorandum of matters
relating to the Communications Act of 1934 and the rules and regulations
thereunder, and any rules and regulations of, and administrative proceedings
before, the FCC (collectively, "Communication Matters") is accurate and does not
omit to state a material fact necessary to make such description not misleading;
and such counsel do not know of any statutes or legal or governmental
proceedings relating to Communication Matters that are necessary to be described
in the Private Placement Memorandum that are not described in the Private
Placement Memorandum.
12. To such counsel's knowledge, the Company meets all requirements
necessary to qualify as a "Small Business" for purposes of the FCC's rules and
regulations applicable to the auction of the PCS Licenses and is eligible to bid
as such on the 30 MHz "C" and "F" frequency blocks to be auctioned in the
"entrepreneurs' auction" of PCS Licenses to be held by the FCC.
In addition, such counsel shall state that no facts have come to such
counsel's attention which has caused them to believe that the Private Placement
Memorandum (except for or any financial statements or other financial or
statistical data contained therein or omitted therefrom, and except for any
statement or omission contained in the Private Placement Memorandum as
originally issued or in any amendment, supplement or addendum thereto to the
extent the same is superseded by a subsequent such amendment, supplement or
addendum, in respect of all of which such counsel need express no opinion), from
the date it was first distributed to investors to the date of such opinion,
contained any untrue statement of a material fact or omitted to state any
material fact necessary to make the statements contained therein, in the light
of the circumstances under which they were made, not misleading (it being
understood that in giving such opinion such counsel may state that they have
participated in the preparation of the Private
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 6
Placement Memorandum but have not verified and do not assume responsibility for
the accuracy, completeness or fairness of the statements contained therein,
although they have generally reviewed and discussed such statements with the
Company and the representatives of Bear Stearns).
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 7
EXHIBIT D
Opinion of Latham & Watkins
---------------------------
1. The Company is duly and validly formed and validly existing as a
corporation under the laws of the State of Delaware, and has all requisite
corporate power and authority to carry out the terms of the Purchase Documents.
2. The Purchase Documents have been duly authorized, executed and
delivered by the Company and constitute the valid and binding agreement of the
Company, enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally and subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law and to
court decisions holding that rights of indemnification or contribution may be
unenforceable as contrary to public policy).
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 8
EXHIBIT E
PLACEMENT CERTIFICATE
---------------------
The undersigned, Bear Stearns & Co. Inc. (the "Agent"), and General
Wireless, Inc. (the "Company"), hereby agree and certify as follows in
connection with that certain placement (the "Placement") of the Units (as
defined in the Private Placement Memorandum, dated November 1995 (the "Private
Placement Memorandum")) pursuant to that certain Agency Agreement, dated
November 20, 1995, between the Agent and the Company.
1. The Agent hereby acknowledges and certified to and for the benefit of the
Company as follows:
(i) The Agent is a member of the National Association of Securities
Dealers, Inc. and a broker-dealer registered as such under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and under the securities
laws of the jurisdictions in which the Units were offered or sold by it, and the
Agent has all corporate power and authority to perform its obligations under the
Agency Agreement in connection with the Placement.
(ii) Insofar as the actions of the Agent were concerned, offers and sales
of the Units were made in compliance with applicable state "blue sky" laws.
(iii) The Agent did not solicit offers to purchase the Units from any
persons other than persons, believed by Bear Stearns, based solely upon its
existing business relationships with such persons, to be qualified, both at the
time of such offer and the date hereof, as qualified institutional buyers, as
such term is defined in Rule 144 under the Securities Act (such persons are
hereinafter referred to as "QIBs"), or as accredited investors, as such term is
defined in Rule 501(a)(1),(2),(3),(7) or (8) under the Act ("Accredited
Investors"). The Agent did not solicit offers to purchase the Units from
offerees other than the purchasers of such Securities set forth in the Purchase
Agreement referred to below and not more than ________ other investors, all of
whom were either QIB's or Accredited Investors.
(iv) The Agent used no offering or selling materials in connection with
the offer or sale of the Units other than materials approved by the Company, and
the Agent provided to each of the offerees all materials provided to it by the
Company for distribution to such offerees.
(v) At the direction of the Company, the Agent furnished each offeree and
its representative, if any, with such information in addition to the Private
Placement Memorandum as such offeree reasonably requested in connection with the
offering and sale of the Units.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 9
(vi) The Agent did not offer the Units by means of any form of general
solicitation or general advertising, including, without limitation, (a) any
advertisement, article, notice or other communications published in any
newspaper, magazine or similar medium, or any broadcast over television or
radio, (b) any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.
2. The Company hereby acknowledges and certifies to and for the benefit of
the Agent, in addition to any other representations and warranties of the
Company contained in the Agency Agreement, as follows:
(i) The information contained in the Private Placement Memorandum (other
than information relating to the Agent), as of the date thereof and as of the
date hereof, does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which made, not misleading. No representation or warranty is
made as to any projections, estimates or any other analyses dependent upon
future events contained in the Private Placement Memorandum, or any amendment or
supplement thereto, if any, except that they have been prepared in good faith
and are based upon assumptions which management, in light of the circumstances
under which they are made, has no reason to believe are not reasonable.
(ii) Sales of the Units by the Company were limited to persons who signed
the Subscription Agreement dated as of November, 1995 (the "Purchase
Agreement") among the Company and the purchasers named therein and/or from which
the Company and the Agent obtained a Managed Accounts Representation Letter.
(iii) The Company furnished to the Agent for dissemination to each
offeree and his or her representative, if any, such information as such offeree
reasonably requested in connection with the offer and sale of the Units.
(iv) The Company did not offer the Units by any means of any form of
general solicitation or general advertising, including without limitation (a)
any advertisement, article, notice or other communication published in any
newspaper, magazine or similar medium, or any broadcast over television or
radio, (b) any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.
<PAGE>
General Wireless, Inc.
November 20, 1995
Page 10
The undersigned consent to the use of the representations contained
herein as to factual matters by Skadden, Arps, Slate, Meagher & Flom and Cooley
Godward Castro Huddleson & Tatum, counsel to the purchasers, in rendering legal
opinions in connection with the Closing.
Dated: November __, 1995 BEAR, STEARNS & CO. INC.
By:_____________________________
Name:___________________________
Managing Director
GENERAL WIRELESS, INC.
By:_____________________________
Name:___________________________
Title:__________________________
<PAGE>
PLACEMENT CERTIFICATE
---------------------
The undersigned, Bear, Stearns & Co. Inc. (the "Agent"), and General
Wireless, Inc. (the "Company"), hereby agree and certify as follows in
connection with that certain placement (the "Placement") of the Units (as
defined in the Private Placement Memorandum, dated November 1995 (including
Supplement No. 1 thereto dated December 1, 1995, the "Private Placement
Memorandum") pursuant to that certain Agency Agreement, dated November 20, 1995,
between the Agent and the Company.
1. The Agent hereby acknowledges and certified to and for the benefit of the
Company as follows:
(i) The Agent is a member of the National Association of Securities
Dealers, Inc. and a broker-dealer registered as such under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and under the securities
laws of the jurisdictions in which the Units were offered or sold by it, and the
Agent has all corporate power and authority to perform its obligations under the
Agency Agreement in connection with the Placement.
(ii) Insofar as the actions of the Agent were concerned, offers and sales
of the Units were made in compliance with applicable state "blue sky" laws.
(iii) The Agent did not solicit offers to purchase the Units from any
persons other than persons, believed by Bear Stearns, based solely upon its
existing business or employment relationships with such persons, to be
qualified, both at the time of such offer and the date hereof, as qualified
institutional buyers, as such term is defined in Rule 144 under the Securities
Act (such persons are hereinafter referred to as "QIBs"), or as accredited
investors, as such term is defined in Rule 501(a)(1), (2), (3), (7) or (8) under
the Act ("Accredited Investors"). The Agent did not solicit offers to purchase
the Units from offerees other than the purchasers of such Units set forth in the
Purchase Agreement referred to below and not more than 450 other investors, (of
which approximately 250 offerees were senior managing directors or managing
directors employed by the Agent or its affiliates) all of whom were either QIB's
or Accredited Investors.
(iv) The Agent used no offering or selling materials in connection with
the offer or sale of the Units other than materials approved by the Company, and
the Agent provided to each of the offerees all materials provided to it by the
Company for distribution to such offerees.
(v) At the direction of the Company, the Agent furnished each offeree and
its representative, if any, with such information in addition to the Private
Placement Memorandum as such offeree reasonably requested in connection with the
offering and sale of the Units.
(vi) The Agent did not offer the Units by means of any form of general
solicitation or general advertising, including, without limitation, (a) any
advertisement, article, notice or other communications published in any
newspaper, magazine or similar medium, or any broadcast over
<PAGE>
television or radio, (b) any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.
2. The Company hereby acknowledges and certifies to and for the benefit of
the Agent, in addition to any other representations and warranties of the
Company contained in the Agency Agreement, as follows:
(i) The information contained in the Private Placement memorandum (other
than information relating to the Agent), as of the date thereof and as of the
date hereof, does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which made, not misleading. No representation or warranty is
made as to any projections, estimates or any other analyses dependent upon
future events contained in the Private Placement Memorandum, or any amendment or
supplement thereto, if any, except that they have been prepared in good faith
and are based upon assumptions which management, in light of the circumstances
under which they are made, has no reason to believe are not reasonable.
(ii) Sales of the Units by the Company were limited to persons who signed
the Subscription Agreement dated as of December 1, 1995 among the Company and
the purchasers named therein and/or from which the Company and the Agent
obtained a Managed Accounts Representation Letter.
(iii) The Company furnished to the Agent for dissemination to each
offeree and his or her representative, if any, such information as such offeree
reasonably requested in connection with the offer and sale of the Units.
(iv) The Company did not offer the Units by any means of any form of
general solicitation or general advertising, including without limitation (a)
any advertisement, article, notice or other communication published in any
newspaper, magazine or similar medium, or any broadcast over television or
radio, (b) any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising.
2.
<PAGE>
The undersigned consent to the use of the representations contained
herein as to factual matters by Skadden, Arps, Slate, Meagher & Flom and Cooley
Godward Castro Huddleson & Tatum, counsel to the purchasers, in rendering legal
opinions in connection with the Closing.
Dated: December 1, 1995 BEAR, STEARNS & CO. INC.
By:__________________________
Name:________________________
Managing Director
GENERAL WIRELESS, INC.
By:__________________________
Name:_________________
Title:________________
3.
<PAGE>
The undersigned consent to the use of the representations contained
herein as to factual matters by Skadden, Arps, Slate, Meagher & Flom and Cooley
Godward Castro Huddleson & Tatum, counsel to the purchasers, in rendering legal
opinions in connection with the Closing.
Dated: December 1, 1995 BEAR, STEARNS & CO. INC.
By:__________________________
Name:________________________
Managing Director
GENERAL WIRELESS, INC.
By:__________________________
Name:_________________
Title:________________
3.
<PAGE>
The undersigned consent to the use of the representations contained
herein as to factual matters by Skadden, Arps, Slate, Meagher & Flom and Cooley
Godward Castro Huddleson & Tatum, counsel to the purchasers, in rendering legal
opinions in connection with the Closing.
Dated: December 1, 1995 BEAR, STEARNS & CO. INC.
By:__________________________
Name:________________________
Managing Director
GENERAL WIRELESS, INC.
By:__________________________
Name:_________________
Title:________________
3.
<PAGE>
The undersigned consent to the use of the representations contained
herein as to factual matters by Skadden, Arps, Slate, Meagher & Flom and Cooley
Godward Castro Huddleson & Tatum, counsel to the purchasers, in rendering legal
opinions in connection with the Closing.
Dated: December 1, 1995 BEAR, STEARNS & CO. INC.
By:__________________________
Name:________________________
Managing Director
GENERAL WIRELESS, INC.
By:__________________________
Name:_________________
Title:________________
3.
<PAGE>
EXHIBIT 10.7
EMPLOYEE TRAINING AGREEMENT
THIS EMPLOYEE TRAINING AGREEMENT (including any attachments hereto, the
"Agreement") is entered into as of March 15, 1996 by and between General
Wireless, Inc., a Delaware corporation (the "Company"), and Hyundai Electronics
Industries Co., Ltd., a Korean corporation ("HEI").
A. This Agreement is being entered into in order to induce HEI's subsidiary
Hyundai Electronics America ("HEA") to enter into a stock purchase agreement
(the "Stock Purchase Agreement") of even date herewith.
B. HEI desires to have the Company provide training to certain HEI employees
(the "Employees") designated by HEI in the Company's operations and the Company
desires to provide such training to Employees on the terms and conditions set
forth herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree
as follows:
1. EFFECTIVE DATE. This Agreement shall become effective on the date specified
for the first Closing under the Stock Purchase Agreement (the "Effective Date")
if HEA notifies the Company, on or before such date, that it waives all
unsatisfied conditions, if any, to its obligation to purchase the Maximum Equity
Amount on that date. If such notice is thus given, this Agreement shall become
effective on such date, whether or not any Authorized Securities are in fact
issued on such date.
2. EMPLOYEE TRAINING. Subject to the terms of this Agreement, the Company
agrees to train at least 10 and up to 18 HEI-designated technical personnel each
year for the positions specified in Schedule 1 or such other positions as may be
mutually agreed by the parties. The purpose of this program is to provide
Employees with the business knowledge and skills necessary to work in the
personal communication services field.
The Company shall consult with HEI in order to establish a mutually-satisfactory
training program and schedule which specifies the training to be provided to
each Employee. It is understood that each Employee shall remain HEI employees
and is expected to return to HEI following his/her training period. Further,
the Company understands that Employees may not be as familiar with the language,
customs and business practices of the U.S. as the Company's U.S. employees. The
parties will work together in good faith to make the employee training program a
success, taking these factors into account, so that HEI will receive the
benefits of its employees' increased know-how and experience. Without limiting
the generality of the foregoing, the parties will mutually review the status of
the program as required, and at least every 6 months, to identify potential
problems and opportunities for improvement.
3. TRAINING TERM. Each Employee will participate in the training program for a
period of at least one year. (Employee training period of longer than one year
requires the concurrence of both the Company and HEI.) Subject to the terms and
conditions set forth in this Agreement, the Company agrees to provide training
to Employees for a period of 2 years.
The Company shall specify a starting date (not earlier than the Effective Date)
for each Employee and notify HEI at least 30 days before such starting date. If
HEI determines that such starting date is not feasible, the parties shall
mutually agree on a new starting date. It is the intent of the parties that (i)
the training period will be generally timed (a) to start at such time as the
Company has in good faith begun to develop an infrastructure in the fields
listed in Schedule 1 that would permit the efficient integration of the
Employees into the Company's operations and (b) to maximize its value in terms
of familiarizing the Employees with the respective fields listed in Schedule 1
and (ii) the training of members of the 2nd Group will begin when the training
of the corresponding members of the 1st Group ends (provided that either party
can reasonably request an overlap period of up to 3 months).
1
<PAGE>
4. ACTIVE PARTICIPATION. The Company shall create a training program which will
enable each Employee to participate actively in the designated operations of the
Company and to acquire knowledge and experience in such operations. The Company
agrees to supervise and assist Employees during the training program in order to
effectuate the intent of the parties stated herein.
5. BENEFITS AND EXPENSES. During the term of the employee training program, HEI
shall pay the salaries, benefits and living expenses of the Employees and the
Company shall pay for supervision of the Employees and the training facilities.
6. PREPARATION. The Company shall use its best efforts to prepare its
facilities and personnel for the Employee training program at the earliest
possible date.
7. MISCELLANEOUS. The rights and obligations of the Company and HEI under this
Agreement shall be governed by the laws of the State of New York. It may be
amended, waived or terminated only by a writing signed by both parties. The
headings are for reference purposes only and shall not affect in any way its
meaning or interpretation.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by persons
duly authorized as of the date and year first above written.
GENERAL WIRELESS, INC.
By:
-------------------------------------------
Roger D. Linquist
President and Chief Executive Officer
HYUNDAI ELECTRONICS
INDUSTRIES CO., LTD.
By:
-------------------------------------------
Name:
Title:
3
<PAGE>
SCHEDULE 1
- ----------
ENGINEER TRAINING SCHEDULE
- --------------------------
HEI Employee training at General Wireless will take place as follows:
1. Term: Participating HEI Employee will be divided into two groups. Each
group will participate for a term of at least one year.
2. Training Field
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
DESC. SYSTEM TRAINING 1ST 2ND
FIELD GROUP GROUP
(maximum (maximum
no. of no. of
Employees) Employees)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MSC H/W Subscriber, 2 2
Signal
Processing,
Switching,
Processor
Operation S/W Operating 3 3
Structure,
Operating
S/W,
and Maintenance
S/W,
Signaling
S/W,
LR/DBMS,
Maintenance Network
BSC H/W RF, 3 3
Network,
TSB,
Processor,
DU
BTC S/W Operating, 2 2
Maintenance,
Signaling (BSC,
BTS) Common S/W
- -----------------------------------------------------------------------------------------------
Test MSC, MSC, BSC, BTS 3 3
BSC,
BTS
- -----------------------------------------------------------------------------------------------
Production MSC, Production & 2 2
BSC, Test
BTS
- -----------------------------------------------------------------------------------------------
Installation MSC, Installation 1 1
BSC, & Test
BTS
- -----------------------------------------------------------------------------------------------
Marketing 2 2
- -----------------------------------------------------------------------------------------------
TTL 18 18
- -----------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION
---- ---------------
<S> <C>
GWI PCS, Inc. .................................................. Delaware
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMMARY FINANCIAL INFORMATION EXTRACTED
FROM CONSOLIDATED FINANCIAL STATEMENTS OF GENERAL WIRELESS, INC. AND SUBSIDIARY
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 2,688 2,415
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,688 2,415
<PP&E> 33 33
<DEPRECIATION> 10 13
<TOTAL-ASSETS> 56,693 56,463
<CURRENT-LIABILITIES> 1,716 1,643
<BONDS> 0 0
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 54,976 54,819
<TOTAL-LIABILITY-AND-EQUITY> 56,693 56,463
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 791 185
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (54) (32)
<INCOME-PRETAX> (737) (153)
<INCOME-TAX> 7 4
<INCOME-CONTINUING> (744) (157)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (744) (157)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
